Antitrust Law Daily Wrap Up, PRIVACY—Ind. App.: Court reverses dismissal of two State of Indiana complaints against TikTok over misrepresentations, data collection, (Oct 1, 2024)

By Justin Marcus Smith, J.D.

Personal jurisdiction over TikTok was not a close call, and the Indiana consumer protection statute applied to exchanges of content for personal data without an exchange of money.

In two actions over alleged misrepresentations and data collection practices brought by the State of Indiana against TikTok, Inc., the Indiana Court of Appeals reversed a state trial court’s dismissal of TikTok, Inc. (TikTok) in both actions because: 1) Indiana courts certainly had personal jurisdiction over TikTok; and, 2) the State of Indiana stated a plausible claim for relief under Indiana’s Deceptive Consumer Sales Act (DCSA). Personal jurisdiction over TikTok applied where TikTok was continuously interacting with millions of Indiana residents. There was also no reason to question the applicability of the DCSA to an exchange of content for personal data that did not involve the exchange of money. The DCSA additionally applied to Indiana’s case against TikTok with respect to alleged misrepresentations about whether or not the government of China would have access to TikTok users’ personal data. The Indiana legislature had amended the DCSA to account for an Indiana Supreme court decision that would have otherwise called for affirming that the DCSA did not apply to statements of opinion. The appellate court did affirm the trial court’s dismissal of defendants ByteDance, Ltd., ByteDance, Inc., and TikTok Pte., Ltd., however, concluding that the State’s arguments on appeal failed to sufficiently challenge the dismissals of those three related businesses, and it thereafter limited the review on appeal to the trial court’s judgments vis-à-vis TikTok, Inc. (State of Indiana v. TikTok Inc., No. 23A-PL-3110 (Ind. App. Sept. 30, 2024)).

Background. The State of Indiana (Indiana) filed two complaints against TikTok, a California corporation, alleging that it engaged in deceptive acts under the DCSA, Ind. Code §§ 24-5-0.5-0.1 to 12 (2024). In one complaint, Indiana essentially objected to TikTok’s collection of location and device-usage data pertaining to child users on the basis that it involved allegedly deceptive acts under the DCSA. In the other complaint, Indiana focused on TikTok’s relationship to its Chinese parent company, Byte Dance, Ltd. (Byte Dance), and whether TikTok failed to warn Indiana end-users about the alleged risk of Chinese government access to the personal data TikTok was allegedly collecting.

The trial court dismissed both complaints for lack of specific jurisdiction, or, in the alternative, that the complaints failed to state a claim under the DCSA. The Court of Appeals of Indiana applied de novo review on appeal. The court considered Indiana’s two appeals together because the facts and law substantially overlapped.

Specific jurisdiction. The court said it had “little trouble” in concluding that the trial court had specific personal jurisdiction and reversed the trial court dismissal on that basis. The court found applicable precedent about specific personal jurisdiction in the context of internet-based contacts in Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997). TikTok’s contacts within Indiana were well beyond the minimum to satisfy Fourteenth Amendment due process. It had millions of end-users of its app in Indiana. TikTok’s engagement with them was “neither passive nor fleeting[.]” TikTok knowingly and repeatedly transmitted data to and from each of its millions of Indiana end-users around-the-clock. TikTok purposely availed itself of those Indiana contacts as part of its business model consisting of the exchange of content for end-user personal data. It monetizes that personal data and reported $46 million in Indiana -based income in 2021. Any reasonable business could have and should have anticipated being haled into Indiana court based on TikTok’s alleged inducement of Indiana end-users to download its app. This was not a close call.

The court rejected TikTok’s argument that it did not direct its business or engage in allegedly deceptive acts at Indiana in particular because TikTok’s contacts were substantial and continuous. Another TikTok argument about the mobility of the app was merely speculative.

Turning to reasonableness, the court did not find any unusual burden on TikTok. Indiana’s interest in adjudicating its claims was not marginal, and TikTok’s arguments here amounted to a perverse demand that states “divest themselves of personal jurisdiction over the largest companies with the greatest reach.” The court reversed the trial court’s dismissal for lack of personal jurisdiction accordingly.

DCSA applicable. As a matter of first impression, the court concluded the DCSA was applicable because TikTok’s business model of exchanging content access for end-user personal data qualified as a DCSA “consumer transaction.” TikTok contended a DCSA consumer transaction would require the exchange of money, whereas its app was free. The DCSA did not mention money, and the court held the DCSA did not require an exchange of money. The DCSA did not define “sale,” but the dictionary definition of “sale” can include an exchange of one thing for another where the “price” is the quantity involved. Thus the DCSA could include any consideration for transfer, not just the exchange of money, whereas TikTok argued for a narrowing of DCSA scope not found in its plain terms. The court concluded the trial court erred when it dismissed both complaints on the theory that Indiana failed to identify a requisite DCSA transaction.

Kesling inapplicable. The court rejected TikTok’s argument that the Indiana complaint impermissibly attempted to hold TikTok liable under the DCSA for nonactionable “statements of opinion” about mature content information that may have induced parents and young audiences to use TikTok. The court concluded that the Indiana Supreme Court’s distinction between actionable representations of fact and nonactionable assertions of opinion in Kesling was no longer good law under the DCSA. See Kesling v. Hubler Nissan, Inc., 997 N.E.2d 327, 332 (Ind. 2013). After Kesling, the Indiana legislature amended the DCSA to apply to any implicit misrepresentations that are unfair, abusive, or deceptive. Accordingly, the trial court erred when it relied on Kesling. The court said the DCSA amendments did not disturb that aspect of Kesling which held statements that do not cause reliance are not actionable.

Pertinent here, Indiana’s complaint alleged that TikTok acted in ways that caused the nature of available content on its app to be expressly or implicitly misrepresented in various app stores; expressly or implicitly misrepresented enforcement of Community Guidelines; and expressly or implicitly misrepresented the effectiveness of its Restricted Mode; all allegedly done so as to induce parents and younger audiences to use the app.

As to the Indiana complaint focusing on TikTok’s parent company, and what, if any, information the government of China might access, the court again disagreed with the trial court’s holding that the DCSA did not apply. The complaint alleged that TikTok omitted information on which reasonable persons would likely rely on in deciding whether or not to use the app, namely, that the government of China would allegedly have access. Indiana alleged that TikTok affirmatively made false public statements that the government of China would not have access. The court agreed with Indiana that reasonable persons might have relied on such alleged representations and omissions. The court held the allegations accordingly stated a claim under the DCSA.

The Case is No. 23A-PL-3110.

Judge: DeGroote, J.

Attorneys: Theodore E. Rokita, Office of the Attorney General, for State of Indiana. Daniel E. Pulliam (Faegre Drinker Biddle & Reath LLP) for TikTok Inc.

Companies: TikTok Inc.

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