A federal appeals court has thrown out one of the most unusual class-action settlements in recent memory, ruling that Clearview AI’s deal to hand plaintiffs equity in the company instead of cash suffered from procedural problems that undermined the entire approval process.
The Seventh Circuit Court of Appeals vacated the settlement on July 13, 2026, sending the case back to the lower court and reopening a legal saga that has become a bellwether for biometric privacy rights in the US.
The deal that was too creative for its own good
Rather than writing checks to millions of class members, Clearview AI agreed to give plaintiffs a 23% equity stake in the company. The stake was potentially worth $51.75 million, but only if Clearview eventually hit a valuation of $225 million through an IPO or sale.
District Judge Sharon Johnson Coleman approved the deal on March 20, 2025, dismissing objections from groups like Public Citizen. The consumer advocacy organization had argued that the settlement was fundamentally inequitable because it required class members to essentially root for Clearview’s core business, the very business built on harvesting their biometric data, to thrive.
After oral arguments on January 28, 2026, the Seventh Circuit found procedural deficiencies in how the lower court handled the approval process.
Why Clearview AI keeps ending up in court
The company built a facial recognition database by scraping billions of photos from social media platforms, news sites, and other corners of the internet, all without the consent of the people in those photos. It then sold access to this database primarily to law enforcement agencies.
Clearview has faced multiple privacy lawsuits since at least 2020, with litigation concentrated in Illinois, which has the country’s strictest biometric privacy law, the Biometric Information Privacy Act (BIPA). That statute is one of the few in the US that gives individuals a private right of action for biometric data violations, meaning regular people can sue, not just regulators.
Clearview previously settled with the ACLU in Illinois state court back in 2022, a separate case from the federal class action that just got overturned.