By Chuck Gallagher — Business Ethics Keynote Speaker and Trainer
TL;DR: Chuck Gallagher, AI ethics speaker and author, argues that the Seventh Circuit’s July 2026 decision vacating Clearview AI’s equity-based privacy settlement is less a story about facial recognition than about what happens when an organization tries to solve an ethical problem with a clever structure and forgets to ask who at the table is speaking for the people who lose.
Eight people said no.
They were the named class representatives in a sprawling federal privacy case against Clearview AI, the company that scraped billions of photographs off the open internet and turned human faces into searchable math. These eight had put their names on the complaint. They stood in for millions of Americans who never agreed to any of it. And when the proposed settlement came back from mediation, every last one of them refused to sign.
So they were replaced. All eight. Lead Class Counsel brought in four new representatives, and every one of those four happened to belong to a state subclass positioned to collect a bigger share of the money.
On July 13, 2026, the Seventh Circuit Court of Appeals threw the settlement out. Judge David Hamilton, writing for a three-judge panel, held that the deal lacked the structural assurances of fair and adequate representation that Rule 23 demands. That’s the legal language for it. Put simply, nobody at that table was speaking for the people who got the least.
What Made the Clearview Settlement So Unusual?
Clearview was a startup that couldn’t write a check. Wayne Andersen, the retired federal judge who mediated, attested that the company could not pay any judgment in the tens of millions, never mind the hundreds. The first round of talks collapsed over exactly that.
The second round got creative. No cash. Instead, the class would receive what amounted to a 23% equity stake in Clearview, payable only if the company went public or hit a liquidation event like a merger or sale. The district court credited a valuation of roughly $225 million as of January 2024, putting the stake near $51.75 million. Alternatively, a court-appointed settlement master could sell the stake or demand cash equal to 17% of Clearview’s GAAP-recognized revenue, an option that expires September 30, 2027.
Stop. You may want to reread that last part. The people whose faces were harvested would collect only if the harvesting business did well.
As an AI ethics speaker and author, I’ve sat in rooms where that kind of thinking gets built. You have no idea the number of companies that reach for structure when they can’t reach for a checkbook. It gets sold as a win-win. No cash out the door, and the victims become shareholders. Clever.
Clever is not the same thing as fair.
Why Did the Seventh Circuit Throw the Deal Out?
Here’s what surprised me. The panel didn’t object to the equity. It didn’t object to the missing injunction either, and there was one to miss: Clearview committed to no new limits on its business whatsoever. The court found no inherent substantive problem with either feature.
The problem was the arithmetic. Each member of the Illinois subclass got ten shares. California, New York, and Virginia members got five. Anyone who was only in the nationwide class, meaning everyone else in America, got one.
Maybe that’s defensible. Illinois has the Biometric Information Privacy Act, which authorizes $5,000 for a reckless violation and produced a $650 million settlement against Facebook. The nationwide class had a thin unjust-enrichment claim and little else. The rank order may well be correct.
But the court couldn’t tell. Because nobody holding only the weak claim sat at the table. Every representative who approved the deal also belonged to a favored subclass, and no attorney was responsible for advancing the nationwide class’s interests alone. Sixteen objections came in, and a coalition of state attorneys general filed against the deal as well. The district court approved it anyway on March 20, 2025. Two objectors from Public Citizen, Robert Weissman and Rick Claypool, appealed. The panel called the wholesale substitution of the original eight a potential red flag.
Has Anything Actually Changed at Clearview?
Not much. That’s the uncomfortable part.
The ACLU settled a separate Illinois case in May 2022, and that deal did the real work. It permanently barred Clearview from selling database access to private parties except in compliance with BIPA and required an opt-out program for Illinois residents. Since then, its customers have been government agencies and their contractors.
The rest has held. Clearview extended opt-out programs to California and Virginia, or exited states, when a new biometric law forced the issue. Not New York, though a New York biometric bill passed the state senate on June 3, 2026. The database grew rather than shrank, now claimed at more than 60 billion images. Regulators in France, Italy, Greece, and the Netherlands assessed roughly 100 million euros in penalties. Reporting indicates Clearview hasn’t paid, arguing it has no EU presence and no EU customers. A UK tribunal overturned a 7.5 million pound fine in 2023 on jurisdictional grounds. Leadership turned over: co-founder Hoan Ton-That stepped down as CEO in December 2024 and was voted off the board in April 2025. Federal business grew.
The lawsuits kept coming. The scraping kept going. The database got bigger. Trust me, that pattern isn’t unique to Clearview.
What Happens When Ethics Becomes a Spreadsheet?
Every choice has a consequence. But consequences don’t land evenly, and somebody always draws the short end. The question that separates an ethical organization from a merely clever one is whether anyone in the room was assigned to notice.
That’s what Rule 23 is really about. Since Amchem Products v. Windsor in 1997, courts have insisted that when groups inside a class hold fundamentally conflicting interests, each group needs its own representative and its own counsel. Judges didn’t dream that up out of a love of procedure. Strip it out and the people holding the weakest hand get traded away by people who’ll never feel the loss.
You already know where this shows up in your own business. The remediation plan. The severance package. Data-retention policy. That one customer tier that quietly absorbs the cost of a fix, because somebody has to. As an AI ethics speaker and author, I put a downright simple question to leadership teams: who at this table loses if we do this, and who is speaking for them?
If the answer is nobody, you don’t have a governance problem yet. You have one coming.
Frequently Asked Questions
Why did the appeals court throw out the Clearview AI settlement?
Because nobody at that table spoke solely for the nationwide class, the group allocated the smallest share of the recovery. The Seventh Circuit vacated the settlement on July 13, 2026, on exactly that ground. Every representative who approved the deal also belonged to a state subclass receiving more. Rule 23, the court held, requires separate representatives with separate counsel where groups inside a class have fundamentally conflicting interests. The case went back for further proceedings.
What was the Clearview AI settlement actually worth?
On paper, about $51.75 million. Nobody was getting a check, though. Class members were promised what amounted to a 23% equity stake in Clearview, payable only upon an IPO or a liquidation event such as a merger or sale, and that $51.75 million figure comes off a roughly $225 million valuation the district court credited as of January 2024. A settlement master could instead sell the stake or demand cash equal to 17% of Clearview’s recognized revenue. That option expires September 30, 2027.
Why did Illinois residents get more money than everyone else?
Illinois has the Biometric Information Privacy Act. BIPA authorizes $1,000 for a negligent violation and $5,000 for a reckless or intentional one, plus fees and injunctive relief, which is far stronger medicine than the unjust-enrichment claim available to the nationwide class. So under the vacated deal, Illinois members received ten shares. California, New York, and Virginia members five. Nationwide-only members one. The court never said those ratios were wrong. What bothered the panel was that no one had been assigned to argue against them.
Is Clearview AI still collecting photos and selling facial recognition?
Yes. A separate 2022 ACLU settlement bars Clearview from selling database access to private parties except in compliance with Illinois BIPA, so its customers are now government agencies and their contractors. The company has added opt-out programs in states with new biometric laws, including California and Virginia. Its image database has continued to grow and is now claimed at more than 60 billion photos.
What should companies learn from the Clearview settlement ruling?
That a remediation structure can be substantively reasonable and still fail on the strength of who wasn’t in the room. As an AI ethics speaker and author, here’s what I tell leadership teams. Identify every group materially affected by a decision. Quantify who absorbs the cost. Then give the disadvantaged group independent representation before the deal is struck. Waiting until a court unwinds it for you is the expensive version.
Let’s Talk
Corruption is rarely what does it. Most organizations get caught because everyone in the room was optimizing, and no one was assigned to speak for the people who’d absorb the cost. That’s a design flaw. Fixable, too, before a judge fixes it for you. I work with boards, executive teams, and compliance leaders on exactly this question: how AI systems, settlements, and remediation programs get built so the human variable doesn’t get lost in the structure. If your team is deploying AI, handling biometric or customer data, or building a program that decides who wins and who eats the loss, let’s have that conversation before the filing deadline. Learn more at ChuckGallagher.com.
Five Questions for Reflection
- In your last major decision, which group absorbed the cost — and was anyone in the room assigned to represent them?
- When your organization gets creative to avoid a painful expense, who tends to benefit from the cleverness, and who tends to pay for it?
- The Seventh Circuit found no substantive problem with the deal itself, only with who negotiated it. Where in your business is the process the real risk rather than the outcome?
- Clearview has paid essentially none of roughly 100 million euros in European penalties. What does it tell your team when a rule carries a price but no consequence?
- If every representative at your table stands to gain from the same outcome, what have you actually built — consensus, or a conflict of interest with better manners?
