Antitrust Law Daily Wrap Up, ADVERTISING—9th Cir.: Facebook/Meta advertisers’ damages class certified, but injunction class certification vacated and remanded, (Mar 25, 2024)

By Kenneth H. Ryesky, M.B.A., J.D.

Named plaintiff that has ceased to operate as a business did not have standing to pursue injunctive relief against future injuries.

The Ninth Circuit has partially affirmed a California district court’s class certifications in a putative class action brought by advertisers against Meta. The advertisers alleged that Meta fraudulently misrepresented the “Potential Reach” of advertisements on its platforms by stating that Potential Reach was an estimate of people, although it was actually an estimate of accounts. The appeals court affirmed the certification of the damages class, but remanded the case back to the district court for further development of the certification issues associated with the injunction class (DZ Reserve v. Meta Platforms, Inc., March 21, 2024, Thomas, S.).

Background. In order to promote student integration into its social system, Harvard University had regularly distributed to its students a printed “Face Book” that featured photographs and personal information of each student. Harvard student Mark Zuckerberg realized that the technology was available to take Harvard’s “Face Book” to an interactive, real time electronic format entailing more socialization features than offered by the ink-on-paper version. In 2004, Zuckerberg and some other Harvard students developed such an electronic version of Harvard’s “Face Book,” a social media and social networking platform in which the online user accounts effectively replaced the printed pages of the Harvard publication. This cyberspace platform rapidly expanded from Harvard University to other United States colleges and universities under ownership of Facebook, Inc.

In 2012, Facebook, Inc. went public with an Initial Public Offering that was at the time the third largest IPO in United States history. Facebook, Inc. then ventured into other social media platforms and messaging services. In 2021, Facebook, Inc. changed its name to Meta Platforms, Inc. (Meta) to reflect its expansion into those additional ventures.

Meta has a business model whereby substantially all of its revenue is derived from paid advertising, thereby enabling user accounts to be opened and maintained at no cost to the users. In order to sell its advertising, Meta has a tool called “Potential Reach” which enables potential advertisers to tailor their advertising campaigns per Meta’s ad placement options to targeted audiences of users. Many Facebook account users are entities and not individuals; many entities and individuals have more than one Facebook account; and many facebook accounts are faked and/or opened by robots.

In 2018, some advertisers filed a putative class action suit against Meta (when it was still known as Facebook, Inc.) in a California federal district court, alleging California state law claims that Potential Reach is deceptively touted by Meta as an estimator of the number of people who could potentially be reached under the selected options, when in fact Potential Reach’s actual metric is the number of accounts that can potentially be reached. The district court granted class certification for a damages class and for an injunction class. Meta appealed the district court decision to the Ninth Circuit.

Class certification-damages class. The appellate court affirmed the district court’s certification of the damages class of advertisers who paid Meta for the placement of ads. Here, the proposed class alleged the requisite (1) misrepresentation; (2) scienter; (3) intent; (4) justifiable reliance; and (5) resulting damages to support its allegation of fraudulent concealment and fraudulent misrepresentation under California law. Each of these requisite elements could be shown by “a common body of evidence” to pertain to the entire class. Although “the numerical value of the discrepancy differed for each individual advertiser” based upon how the advertiser tailored its advertising placements, Meta’s claim that Potential Reach was a metric of people when it was actually a metric of accounts was common to all advertisers. This claim predominated over whatever individual claims the class members might have against Meta regarding Potential Reach. The district court accordingly did not abuse its discretion in certifying the damages class.

Class certification-injunction class. The appellate court vacated the district court’s certification of the injunction class, finding that questions remained as to whether injunctive relief was appropriate for the class as a whole [Fed. R. Civ. P. 23b)(2)].

One of the named plaintiffs, DZ Reserve, was found to lack standing to claim injunctive relief; its owner testified regarding his past decisions to place advertising on Meta platforms such as Facebook but did not adequately address any potential future injuries that necessitated injunction in order to forestall additional harm.

The other testimony of the other named plaintiff, Cain Maxwell d/b/a Max Martialis (Maxwell), was speculative as to whether he would or would not purchase advertising from Meta in the future. He also testified that he had ceased to operate in 2019 because he “ran out of inventory,” yet there was evidence in the record that he had not officially dissolved the business and that his business tax identification number remained active. Additionally, the district court failed to give adequate consideration to other issues regarding Maxwell’s standing to seek injunctive relief on behalf of the injunction class. The circuit court accordingly remanded the case to the district court for further development and consideration regarding the injunction class certification.

The case is No. 22-15916.

Attorneys: Andrew Neil Friedman (Cohen Milstein Sellers & Toll, PLLC) for DZ Reserve and Cain Maxwell d/b/a Max Martialis. Melanie Blunschi (Latham & Watkins, LLP) for Meta Platforms, Inc. f/k/a Facebook, Inc.

Companies: DZ Reserve; Max Martialis; Meta Platforms, Inc. f/k/a Facebook, Inc.

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