By David Thomas

July 13 (Reuters) - The Chicago-based 7th U.S. Circuit Court of Appeals on Monday threw out for now a class action settlement crafted in 2024 to resolve nationwide privacy claims against facial recognition company Clearview AI.

Here are the details:

• The panel did not object to the settlement's unique structure, which gave consumers a potential stake in Clearview's future value, but ruled that a segment of class members were inadequately represented.

• Under the deal's terms, if Clearview went public or was liquidated through a merger or sale, the settlement fund would be set at 23% of the company's valuation.

• But the court said nationwide class members, who had no counsel separate from individual state-based classes, would each get one share of the settlement fund, while Illinois, California, New York and Virginia residents were poised to receive five or 10 shares each.

• Circuit Judge David Hamilton wrote that class members from the four states and their lawyers cannot also represent members of the nationwide Clearview class who are poised to receive less money under the settlement.

• The panel returned the case to the federal district court in Illinois that approved the deal. The parties can seek approval for an amended settlement.

• Clearview faced allegations that it scraped billions of facial images from the internet and sold the information without consent, violating an Illinois biometric privacy law. Clearview denied any misconduct.

• Michael Kirkpatrick, an attorney at Public Citizen Litigation Group who represented objectors to the settlement, said they "look forward to working with the parties on remand to improve the terms of the settlement."

• Michael Kanovitz, a lawyer for the plaintiffs at Loevy & Loevy, called the ruling a "vindication of our solution to give class members a stake in the company when the class claims are worth more than the company can pay."

• Attorneys for Clearview did not immediately respond to a request for comment.