By Dan Levine
SAN FRANCISCO (Reuters) - Facebook Inc has agreed to settle a lawsuit that alleged the site's "Sponsored Stories" feature publicized users' "likes" without compensation or the ability to opt out, according to a court document filed on Tuesday.
The proposed class action lawsuit, filed in a San Jose, California federal court, could have included nearly one of every three Americans, with billions of dollars in damages, court documents say.
The terms of the settlement are not spelled out in court filings. A Facebook representative declined to comment on the settlement, while plaintiff lawyers could not immediately be reached.
Facebook shares closed at $31 on Tuesday, after the company's initial public offering last week.
A "Sponsored Story" is an ad that appears on a member's Facebook page, and generally consists of another friend's name, profile picture and an assertion that the person "likes" the advertiser.
Five Facebook members sued the social networking site last year, alleging that the "Sponsored Stories" feature violates their right to publicity under California law.
U.S. District Judge Lucy Koh had rejected Facebook's attempt last year to dismiss parts of the lawsuit, and a hearing on class action certification had been scheduled to take place on Thursday.
Facebook and the plaintiffs have executed a term sheet memorializing the settlement "in principle," according to a Facebook court filing on Tuesday.
The case in U.S. District Court, Northern District of California is Angel Fraley et al., individually and on behalf of all others similarly situated vs. Facebook Inc., 11-cv-1726.
(Additional reporting by Nate Raymond in New York; Editing by Gary Hill, Bernard Orr)