CHRISTOPHER CALISE; ANASTASIA GROSCHEN v. META PLATFORMS, INC.
No. 22-15910
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
June 4, 2024
D.C. No. 4:21-cv-06186-JSW
Before: Eugene E. Siler, Jacqueline H. Nguyen, and Ryan D. Nelson, Circuit Judges.
FOR PUBLICATION
Argued and Submitted October 17, 2023 San Francisco, California
Filed June 4, 2024
Opinion by Judge R. Nelson; Concurrence by Judge R. Nelson
The Honorable Eugene E. Siler, United States Circuit Judge for the U.S. Court of Appeals for the Sixth Circuit, sitting by designation.
SUMMARY**
Communications Decency Act
The panel affirmed the district court‘s order dismissing plaintiffs’ non-contract claims against social media company Meta Platforms, Inc., commonly known as Facebook, as barred by
Meta user plaintiffs alleged that they were harmed by fraudulent third-party advertisements posted on Meta‘s website in violation of Meta‘s terms of service. Meta claimed that it was immune from liability under
The parties agree that Meta is an interactive computer service provider under the first prong of
With respect to plaintiffs’ two contract claims—breach of contract and breach of the covenant of good faith and fair dealing—the panel held that Meta‘s duty arising from its promise to moderate third-party advertisements was unrelated to Meta‘s status as a “publisher or speaker” of third-party advertisements, and therefore
However, with respect to plaintiffs’ three non-contract claims—unjust enrichment, negligence, and a UCL claim—the panel held that these claims derived from Meta‘s status as a “publisher or speaker” of third-party advertisements. And because Meta did not “materially contribute” to the third-party advertisements, Meta falls within the scope of
Concurring, Judge R. Nelson wrote separately to encourage the court to revisit its precedent that if the threat of liability requires an internet company to “monitor third-party content,” this is barred by
COUNSEL
Mark Reich (argued), and Adam M. Apton, Levi Korsinksy LLP, New York, New York, for Plaintiff-Appellant.
Theodore J. Boutrous, Jr., (argued), Christopher Chorba, Samuel Eckman, and Jeremy A. Weese, Gibson Dunn & Crutcher LLP, Los Angeles, California; Rosemarie T. Ring, Gibson Dunn & Crutcher LLP, San Francisco, California; for Defendant-Appellee.
R. NELSON, Circuit Judge:
Meta user plaintiffs allege that they were harmed by fraudulent third-party advertisements posted on Meta‘s website in violation of Meta‘s terms of service. Meta claims that
The district court correctly determined that Plaintiffs’ non-contract claims are barred by
I
A
Appellee Meta Platforms, Inc. (Meta), commonly known as Facebook, is the world‘s largest social media company. Meta does not charge users for its services. Instead, it largely makes money through advertising. Meta‘s model is simple in concept. Meta 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. Meta‘s data collection software allows it to “show ads to the right people.”
That said, not all of Meta‘s advertisers use the platform in good faith. Scammers have realized that they can use Meta‘s user data to run more effective deceptive ad campaigns. Plaintiffs claim that these scammers deliberately target Meta‘s more vulnerable users, and they identify themselves as victims of this deception. The ability to exploit Meta users has, in the words of scammers themselves, “revolutionized scamming.”
Meta purports to curtail false or deceptive advertising on its platform. Meta users agree to Meta‘s Terms of Service (TOS), in which Meta promises to “[c]ombat harmful conduct.” This includes removing any “content that purposefully deceives, willfully misrepresents or otherwise defrauds or exploits others for money or property.” Meta‘s Advertising Policies also prohibit ads that are deceptive or misleading.
Plaintiffs cry foul. They contend that although Meta outwardly claims that it tries to combat scam ads, it instead affirmatively invites them by “actively soliciting, encouraging, and assisting scammers it knows, or should know, are using its platform to defraud Facebook users with
Plaintiffs’ main concern is with Meta‘s relationship with scammers in China. Meta has allegedly been “aggressively soliciting ad sales in China and providing extensive training services and materials to China-based advertisers,” even though Meta knows “nearly thirty percent” of ads placed by these advertisers “violated at least one of [Meta‘s] own ad policies.” On the enforcement side, Plaintiffs claim that Meta directs its employees to “ignore violations of [its ad policies], especially by China-based advertisers.” Plaintiffs cite internal company documents, as well as investigative reports published by the New York Times, Reuters, and Time that discuss Meta‘s solicitation and (lack of) enforcement efforts.
B
Plaintiffs, Christopher Calise and Anastasia Groschen, are Meta users. They each encountered fraudulent ads on Meta, and they each believed that these ads were legitimate.
Groschen, for example, saw an ad for a toy she thought her toddler might like. She bought the toy, but when it arrived, it looked completely different from the item advertised. Groschen then tried to get a refund from the scam vendor, located in China, but failed.
Calise fell victim to a similar scam. He saw an ad for a car engine assembly kit. He bought the kit, but it was never delivered. Like Groschen, he unsuccessfully tried to get a refund.
Calise and Groschen sued, seeking to represent classes of 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. Plaintiffs sought damages and declaratory and injunctive relief.
The district court dismissed each of these claims. Calise v. Meta Platforms, Inc., 2022 WL 1240860, at *4 (N.D. Cal. Apr. 27, 2022). We have explained that
The district court also considered Plaintiffs’ argument that
The district court held that “because all of Plaintiffs’ claims are premised on Meta‘s publication of third-party advertisements . . . Meta is entitled to CDA immunity as to each of Plaintiffs’ claims.” Id. It thus granted the motion to dismiss without deciding whether, in the absence of
II
We review de novo a district court‘s order of dismissal under
III
The threshold issue is whether or how much Meta enjoys immunity under
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.” Barnes, 570 F.3d at 1100–01. All agree that Meta is an interactive computer service provider under the statute.
Thus, we turn first to the second part of
A
We first revisit principles of statutory interpretation. “[W]hen the statutory language is plain, we must enforce it according to its terms.” Jimenez v. Quarterman, 555 U.S. 113, 118 (2009). “[U]nless otherwise defined, words will be interpreted as taking their ordinary . . . meaning . . . at the time Congress enacted the statute.” Perrin v. United States, 444 U.S. 37, 42 (1979). That said, the text‘s objective meaning may depend on the “backdrop against which Congress enacted” it. Stewart v. Dutra Constr. Co., 543 U.S. 481, 487 (2005). Looking to the statute‘s contemporaneous context helps courts construe “term[s] of art” consistently with their “established meaning[s]” in the law. Id. For example, we must presume that when Congress uses “common-law terms,” it intended to incorporate their “well-settled meaning[s].” Neder v. United States, 527 U.S. 1, 23 (1999).
Subsection 230(c)(1)‘s key word—publisher—has a well-defined meaning at common law. Publication is defined broadly as “[a]ny act by which [unlawful] matter is intentionally or negligently communicated to a third person.” Restatement (Second) of Torts § 577 cmt. a (Am. L. Inst. 1938); see also id. § 630. Communication could be by written or printed words. Id. § 577.
In 1995, a New York state court treated Prodigy, an internet service provider, as if it were the “publisher,” rather than a mere “distributor,” of a libelous message posted by a third party. Stratton Oakmont, Inc. v. Prodigy Servs. Co., No. 31063/94, 1995 WL 323710, at *4 (N.Y. Sup. Ct. May 24, 1995) (unpublished). The court reached this finding because Prodigy was voluntarily removing some messages as offensive. Id. at *3–4. The court thought this content moderation opened Prodigy up to liability for all messages on its site. Id. The court thus rejected a finding that Prodigy acted only as a “distributor.” Id. at *4.
Stratton Oakmont‘s rule created a perverse incentive not to moderate any offensive content, and Congress was concerned. See Barnes, 570 F.3d at 1101; see also Roommates.com, 521 F.3d at 1163. So in 1996, Congress enacted
Congress expressly designed this statute both to help the internet grow,
Since its enactment, courts have interpreted
We have weighed in several times on what it means to “treat[]” an interactive computer service “as [a] publisher or speaker.”
Barnes involved pornography posted online for revenge. Id. The plaintiff‘s ex-boyfriend, posing as Barnes, created profiles on Yahoo, where he posted nude photographs of Barnes without her consent. Id. Barnes complained to Yahoo, asking it to remove the material. Id. Yahoo promised to do so but did not. Id. at 1099. So Barnes sued, alleging two state law causes of action: negligent undertaking and promissory estoppel. Id. Yahoo moved to dismiss, invoking
We first “analyz[ed] the structure and reach” of
Thus, Barnes requires courts to examine each claim to determine whether a plaintiff‘s “theory of liability would treat a defendant as a publisher or speaker of third-party content.” Id. at 1101 (emphasis added). “To put it another way, courts must ask whether the duty that the plaintiff alleges the defendant violated derives from the defendant‘s status or conduct as a ‘publisher or speaker.‘” Id. at 1102. “If it does,
Barnes illustrates this distinction. We held that
In contrast, Barnes held the opposite for the promissory estoppel claim, even though that claim hinged on the same conduct—Yahoo‘s failure to remove the offending content. Id. at 1106-09. This is because, Barnes recognized, promissory estoppel is a quasi-contract claim that relied on an agreement between the parties. Id. at 1107. Yahoo specifically promised that it would remove the indecent profiles, and Barnes relied on that promise to her
Our post-Barnes decisions faithfully applied its holding. One such case was Doe v. Internet Brands, Inc., 824 F.3d 846 (9th Cir. 2016). There, the plaintiff brought a negligent failure to warn claim against the defendant. Id. at 849. She had been lured to a fake audition using a networking website, Model Mayhem, where she was drugged, raped, and recorded for a pornographic video. Id. at 848. Internet Brands, which owned the website, allegedly knew about the rapists, but did not warn her or the other users. Id. Applying
We began by analyzing the underlying duty in the cause of action. Id. at 850. In California, there is a “duty to warn a potential victim of third-party harm when a person has a special relationship to either the person whose conduct needs to be controlled or . . . to the foreseeable victim of that conduct.” Id. (citation omitted). We then held that
Next, we decided HomeAway.com, Inc. v. City of Santa Monica, 918 F.3d 676 (9th Cir. 2019). There, the plaintiffs, HomeAway.com and Airbnb, were internet businesses that rely on third parties advertising short-term rentals on their websites. Id. at 679–80. They challenged a city ordinance that regulated “home-sharing” in its jurisdiction, arguing it was preempted by
We rejected this argument. Id. at 682. The ordinance at issue prohibited the plaintiffs from “processing transactions for unregistered properties“—it did not require the plaintiffs “to review the content provided by [third parties].” Id.. That some monitoring of content “resulting from the third-party listings” may be required could not bring the ordinance within CDA immunity. Id.. We explained that the plaintiffs’ view “that CDA immunity follows whenever a legal duty ‘affects’ how an internet company ‘monitors’ a website” relied on an improperly broad reading of the CDA. Id..
Applying Internet Brands, we explained that it is “not enough that third party content is involved.” Id. The relevant question is whether the duty would “necessarily require an internet company to monitor third-party content.” Id.
Finally, we decided Lemmon v. Snap, Inc., 995 F.3d 1085 (9th Cir. 2021). Plaintiff
Putting these cases together, it is not enough that a claim, including its underlying facts, stems from third-party content for
Our cases instead require us to look to the legal “duty.” “Duty” is “that which one is bound to do, and for which somebody else has a corresponding right.” Duty, BLACK‘S LAW DICTIONARY (11th ed. 2019). We must therefore examine two things in looking at duty. First, what is the “right” from which the duty springs? See Barnes, 570 F.3d at 1107; Lemmon, 995 F.3d at 1092. If it springs from something separate from the defendant‘s status as a publisher, such as from an agreement, see Barnes, 570 F.3d at 1107, or from obligations the defendant has in a different capacity, see Lemmon, 995 F.3d at 1092, then
C
We now walk through each of Plaintiffs’ claims, applying the principles we first established in Barnes. We start with Plaintiffs’ contract-related claims because Barnes itself directly applies. We then apply Barnes‘s same reasoning to the other claims.
1
Plaintiffs assert two contract claims: breach of contract and a breach of the covenant of good faith and fair dealing
Thus, Meta‘s “[c]ontract liability” would “come not from [its] publishing conduct, but from [its] manifest intention to be legally obligated to do something.” Id. This is because “[c]ontract law treats the outwardly manifested intention to create an expectation on the part of another as a legally significant event.” Id. “That event generates a legal duty distinct from the conduct at hand.” Id.5 To the extent that Meta manifested its intent to be legally obligated to “take appropriate action” to combat scam advertisements, it became bound by a contractual duty separate from its status as a publisher. We thus hold that Meta‘s duty arising from its promise to moderate third-party advertisements is unrelated to Meta‘s publisher status, and
2
Plaintiffs bring three other claims: unjust enrichment, negligence, and a UCL claim (the non-contract claims). Each of these involves a similar duty: the duty to prevent fraud by third parties. We first walk through each to explain why.
First, an unjust enrichment claim is “grounded in equitable principles of restitution,” rather than “breach of a legal duty.” Hirsch v. Bank of Am., 132 Cal. Rptr. 2d 220, 229 (Cal. Ct. App. 2003). That said, understanding duty as a two-way street of obligations and rights, Duty, BLACK‘S LAW DICTIONARY (11th ed. 2019), we can parse out what duty Plaintiffs are invoking. At common law, unjust enrichment “require[s] a party to return a benefit when the retention of such benefit would unjustly enrich the recipient.” Munoz v. MacMillan, 124 Cal. Rptr. 3d 664, 675 (Cal. Ct. App. 2011).
Thus, the obligation in an unjust enrichment claim—the relevant part of our duty analysis—is the “return of benefit.” See id. And what is the benefit Plaintiffs are seeking return of? It is the profits Meta has obtained through an alleged scheme of knowingly permitting third parties to advertise on their website. Thus, the next question is how Meta would comply with this obligation. Put differently, how could Meta avoid infringing on Plaintiffs’ purported rights?
Plaintiffs allege that Meta is (at least constructively) aware that certain parties are profiting by posting fraudulent third-party ads on its website. This factual situation resembles Internet Brands, in which
But to avoid liability here, Meta—unlike Internet Brands—would need to actively vet and evaluate third party ads. In Internet Brands, the platform faced liability not because it failed to remove the ads, but because it failed to warn about their content. Id. Thus, Plaintiffs’ claims may fare better if they sought to impose liability on Meta for failing to warn about fraudulent content—but that is not what their unjust enrichment claim seeks. We hold therefore that
On their negligence claim, Plaintiffs assert that Meta had a “special relationship” with them, imposing a duty to protect them from fraud. We accept as true that Meta had such a duty at this stage. On that assumption, we examine the implications of such a duty in the context of Barnes. The duty this claim imposes on Meta is identical to the one for an unjust enrichment claim: it would require Meta to actively vet and evaluate third-party ads. We hold therefore that
Finally, Plaintiffs bring a UCL claim. “The predicate duty [under the state unfair competition law] is to not engage in unfair competition by advertising illegal conduct.” In re Tobacco Cases II, 163 P.3d 106, 113 (Cal. 2007) (alteration in original). Such a duty not only touches on quintessential publishing conduct, but it is also indeed the very conduct that
IV
Because we hold that some of Plaintiffs’ claims derive from Meta‘s status as a “publisher or speaker” of third-party ads, we must evaluate whether Meta has “materially contributed” to the creation of these ads. Section 230(c)(1) limits liability to “information provided by another information content provider.” (emphasis added). Section 230(f)(3) defines an “information content provider” as “any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service.” In other words, Meta would lose
We have interpreted the phrase “creation or development in whole or in part” in
In Roommates, we considered whether the company‘s roommate-matching service violated the federal Fair Housing Act and California discrimination laws. Id. Roommate “operate[d] a website designed to match people renting out spare rooms with people looking for a place to live.” Id. at 1161. To sign up, users created profiles, which included providing basic information, and one‘s “sex, sexual orientation and whether [they] would bring children to a household.” Id. Each user could then display their own preferences in others. Id.
The plaintiffs sued, arguing that “requiring subscribers to disclose their sex, family status and sexual orientation ‘indicates’ an intent to discriminate against them.” Id. at 1164. Roommate invoked
We clarified in Roommates, however, that an internet company providing tools that can be manipulated by third parties for unlawful purposes does not always defeat
The “tools” Plaintiffs complain about are Meta‘s “solicitation” and “assistance” for third-party advertisers. But Plaintiffs tacitly admit that not all of Meta‘s third-party ads are fraudulent. Even among third-party advertisers based in China, Plaintiffs allege that only around thirty percent post fraudulent advertisements. Plaintiffs provide no significant data or allegations about scammers outside of China. They complain about Meta‘s “solicitation” and “assistance” efforts on a global scale. But Plaintiffs do not allege, nor could they credibly allege here, that all these efforts result in fraudulent behavior.
Meta‘s “solicitation” and “assistance” efforts are, on their face, neutral. They are allegedly used for unlawful purposes, but that does not result from Meta‘s efforts. Without more allegations of Meta‘s contribution, its “solicitation” or “assistance” for advertisers—a fundamental part of Meta‘s business model and that of countless other internet companies—does not undo
Indeed, we rejected a similar, but perhaps even more compelling, argument in Dyroff, 934 F.3d 1093. There, the defendant, Ultimate Software Group, operated a social networking website, Experience Project. Id. at 1094. Users registered with the site anonymously—an intentional design to encourage users to “share more personal and authentic experiences without inhibition.” Id. at 1095. The site also engaged a machine learning algorithm that recommended groups for users to join based on their posts and other attributes. Id.
Given such a model, it was not unforeseeable that such a platform could and would be misused for unlawful purposes. Unfortunately, it was in fact used to facilitate illegal drug sales. See id. One user asked in a group about purchasing heroin and was then recommended by the site to another user‘s post, who later sold him what he believed to be heroin. Id. He
Ultimate Software Group invoked
Plaintiffs, at best, argue that Meta “manipulated” its third-party ads to skew fraudulent content (because it could make more money) by targeting certain advertisers. According to Plaintiffs, Meta materially contributed to the content that way. But Plaintiffs’ argument is no different from the one we considered in Dyroff. The plaintiff argued that Ultimate Software Group “manipulated” its recommendations, connecting users for improper purposes, and thus contributed to their content. Just as we rejected this argument in Dyroff, we reject it now. Meta did not “materially contribute” to the third-party ads. Meta is thus entitled to
V
Plaintiffs’ contract claims are not barred by
AFFIRMED IN PART, VACATED IN PART, AND REMANDED.
R. NELSON, J., concurring:
Following precedent, we hold that if the threat of liability requires an internet company to “monitor third-party content,” this is barred by
As explained in the majority opinion,
In California, constructive knowledge “is measured by an objective standard: ‘whether a reasonable man under the same or similar circumstances as those faced by the actor would be aware of the [nature] of his conduct.‘” Rost v. United States, 803 F.2d 448, 451 (9th Cir. 1986) (quoting Chappell v. Palmer, 45 Cal. Rptr. 686, 688 (1965)). Plaintiffs allege that Meta had (at least) constructive—if not actual—knowledge that third-party advertisers were posting fraudulent content. For example, Plaintiffs allege that Meta encouraged affiliates of known scam accounts to “buy more ads.” Plaintiffs also allege that Meta targeted Chinese-based
Our precedent, and that of our sister circuits, has expanded § 230(c)‘s scope to provide functional immunity to internet companies, even when they are aware (or should be aware) of unlawful content on their websites. As Justice Thomas explained, “Courts have discarded the longstanding distinction between ‘publisher’ liability and ‘distributor’ liability.” Malwarebytes, 141 S. Ct. at 15. Indeed, “the first appellate court to consider the statute held that it eliminates distributor liability too—that is § 230 confers immunity even when a company distributes content that it knows is illegal.” Id. (citing Zeran v. Am. Online, Inc., 129 F.3d 327, 331–34 (4th Cir. 1997)) (emphasis in original). Thus, “subsequent decisions, citing Zeran, have adopted this holding as a categorical rule across all contexts.” Id. (collecting cases). These courts argue that this rule encourages “self[-]regulation.” See, e.g., Zeran, 129 F.3d at 331, 334. But as Plaintiffs have plausibly pled, when an internet company has an economic incentive to permit unlawful content to be posted by third parties, it seems to encourage the opposite—willful blindness.
Our precedent, and the incentives it can create, conflicts with the statutory scheme. As the majority explains, it is inconsistent with the statutory timing—right after Stratton Oakmont, Inc. v. Prodigy Servs. Co., No. 31063/94, 1995 WL 323710, at *4 (N.Y. Sup. Ct. May 24, 1995) (unpublished)—and the plain statutory text, which incorporates common law terms.
Our precedent also contradicts other parts of the statutory scheme. For example,
Justice Thomas has identified several other examples of how this expansive view of