IP Law Daily, TECHNOLOGY/INTERNET—9th Cir.: Meta users win partial victory against Meta advertising practices, (Jun 5, 2024)

By Thomas K. Lauletta, J.D.

The users’ non-contract claims against Met were barred under the CDA; their contract-related claims were not barred.

The Court of Appeals for the Ninth Circuit overturned, in part, a district court decision holding that all of Facebook users’ claims against Meta relating to fraudulent third-party advertisements posted on the Meta website by others were barred by the Communications and Decency Act (CDA) § 230(c)(1). The appellate court upheld the district court’s immunity holding under the CDA for the users’ non-contract claims for negligence, violation of California’s Unfair Competition Law (UCL) and unjust enrichment. To the contrary, the appellate court reversed the holding of the district court based on its dismissal of the users’ contract-related claims for breach of contract and breach of the covenant of good faith and fair dealing. The appellate court concluded that Meta’s promises to remove any “content that purposefully deceives, willfully misrepresents or otherwise defrauds others” was a contractual promise that fell outside of the CDA immunity granted to publishers of information content from another information content provider (Calise v. Meta Platforms, Inc., No. 22-15910 (9th Cir. June 4, 2024)).

Appellee Meta Platforms, Inc. (Meta), commonly known as Facebook, does not charge users for its services, but largely makes money through advertising. Under Meta’s model, it collects data from its users, and then sells targeted ads to third parties. These third parties then post their ads on Meta’s platform, promoting their products and services to Meta’s users.

The plaintiffs alleged that they were harmed by fraudulent ads on Meta. They sued, seeking to represent similarly situated plaintiffs. They asserted five claims against Meta: (1) negligence, (2) breach of contract, (3) breach of the covenant of good faith and fair dealing, (4) violation of California’s Unfair Competition Law (UCL), and (5) unjust enrichment. The district court dismissed all of these claims on the basis that the plaintiffs did not establish that Meta materially contributed to the illegality of the specific advertisements in question. Further, the district court held that the plaintiffs’ claims based on Meta’s alleged solicitation and publication of deceptive third-party advertisements stemmed from Meta’s role as a publisher and were therefore immunized by the CDA.

Contract-related claims. The appellate court first noted that Section 230(c)(1) immunity applies to “(1) a provider or user of an interactive computer service, (2) whom a plaintiff seeks to treat, under a state law cause of action, as a publisher or speaker, (3) of information provided by another information content provider.” Looking at the second prong of this test, the appellate court held that Meta had not met its burden of proving that the plaintiffs’ contract-related claims arose from Meta’s status as “a publisher or speaker.”

Analyzing complex and conflicting court decisions, the appellate court held that the plaintiffs’ contract related claims—breach of contract and breach of covenant of good faith and fair dealing—were not related to Meta’s role as a publisher. Meta’s liability under these claims arose from the legal duty that it created when it promised to moderate third-party advertising.

Non-contract claims. The court upheld dismissal of the plaintiffs’ non-contract claims for unjust enrichment, negligence, and a claim under the California UCL as stemming from its publishing duties, and therefore immunized by the CDA.

Contribution to the creation of fraudulent ads? The plaintiffs argued that under § 230(f) Meta would lose its immunity to the extent that it could be seen as the publisher or speaker of its own content—or content that it created or developed in whole or in part—rather than the publisher or speaker of entirely third-party content. Under this theory, a website operator can be both a service provider and a content provider, depending on whether they “materially contributed” to the unlawfulness of content.

On the evidence presented, the appellate court rejected the plaintiffs’ contention that Meta materially contributed to the creation of the fraudulent third party ads.

Concurring opinion. Judge Nelson wrote a concurring opinion encouraging the court to reconsider its precedent related to the question of whether a threat of liability requires an internet company to monitor third-party content under the CDA.

The Case is No. 22-15910.

Judge: Nelson, R.

Attorneys: Adam M. Apton (Levi & Korsinsky, LLP) for Christopher Calise and Anastasia Groschen. Theodore J. Boutrous, Jr. (Gibson, Dunn & Crutcher, LLP) for Meta Platforms, Inc.

Companies: Meta Platforms, Inc.

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