Sponsored stories on Facebook has got the company into hot water in California. U.S. District Judge Lucy Koh has allowed the lawsuit to proceed and rejected Facebook’s bid to dismiss it stating:

Plaintiffs have articulated a coherent theory of how they were economically injured by the misappropriation of their names, photographs and likeness

According to MarketingLand: The basis of the lawsuit is that the sponsored stories are paid ads that pull in personal posts, pictures and names without consent. By displaying this personal information, Facebook is violating California Law regarding commercial endorsements. Here is an excerpt from California Civil Code Section 3344:

(a) Any person who knowingly uses another’s name, voice, signature, photograph, or likeness, in any manner on or in products, merchandise, or goods, or for purposes of advertising or selling, or soliciting purchases of products, merchandise, goods or services, without such person’s prior consent, or, in the case of a minor, the prior consent of his parent or legal guardian, shall be liable for any damages sustained by the person or persons injured as a result thereof.

ComputerWorld has a great article on how Facebook sponsored ads violate your privacy.