DZ RESERVE; CAIN MAXWELL, DBA Max Martialis, Plaintiffs-Appellees, v. META PLATFORMS, INC., FKA Facebook, Inc., Defendant-Appellant.
No. 22-15916
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
March 21, 2024
D.C. No. 3:18-cv-04978-JD
FOR PUBLICATION
OPINION
James Donato, District Judge, Presiding
Argued and Submitted September 12, 2023 San Francisco, California
Filed March 21, 2024
Before: J. Clifford Wallace, Sidney R. Thomas, and Danielle J. Forrest, Circuit Judges.
Opinion by Judge Sidney R. Thomas; Partial Dissent by Judge Forrest
SUMMARY*
Class Certification
The panel affirmed the district court‘s order certifying one class of advertisers who paid Meta Platforms, Inc. (Meta) to place advertisements on its social media platforms—the damages class, and vacated the district court‘s order certifying another class of advertisers—the injunction class.
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 panel affirmed the district court‘s certification under
The panel vacated the certification of the Rule 23(b)(2) injunction class for the district court to reconsider whether the named Plaintiff Cain Maxwell had Article III standing to seek an injunction. The district court had no occasion to consider the record or to analyze Meta‘s argument against Maxwell‘s standing to seek injunctive relief.
Dissenting in part, Judge Forrest agreed that the district court‘s certification of the injunction class must be vacated and remanded for the district court to reconsider whether Plaintiff Cain Maxwell had standing to pursue that claim. She disagreed that the district court properly certified the damages class because Plaintiffs cannot satisfy the predominance requirement where there were individual questions that must be answered related to multiple elements of Plaintiffs’ fraud-based claims.
COUNSEL
Geoffrey Graber (argued), Andrew N. Friedman, Karina G. Puttieva, and Madelyn Petersen, Cohen Milstein Sellers & Toll PLLC, Washington, D.C.; Eric Kafka, Cohen Milstein Sellers & Toll PLLC, New York, New York; Charles Reichmann, Law Offices of Charles Reichmann, Kensington, California; for Plaintiffs-Appellees.
Andrew B. Clubok (argued), Susan E. Engel, and Margaret A. Upshaw, Latham & Watkins LLP, Washington, D.C.; Elizabeth L. Deeley, Melanie M. Blunschi, Nicholas Rosellini, and Nicole Valco, Latham & Watkins LLP, San Francisco, California; Samir Deger-Sen, Latham & Watkins LLP, New York, New York; for Defendant-Appellant.
Jennifer B. Dickey and Jordan L. Von Bokern, U.S. Chamber Litigation Center, Washington, D.C.; Erik R. Zimmerman, Jazzmin M. Romero, and Jordan T. DeJaco, Robinson Bradshaw & Hinson PA, Chapel Hill, North Carolina; for Amicus Curiae Chamber of Commerce of the United States of America.
David M. Berger, Gibbs Law Group LLP, Oakland, California, for Amicus Curiae Digital Content Next.
OPINION
S.R. THOMAS, Circuit Judge:
Meta Platforms, Inc. (Meta), formerly known as Facebook, appeals the district court‘s order certifying two classes of advertisers who paid Meta to place advertisements on its social media platforms—a damages class and an injunction class. The advertisers allege 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. As to the damages class, the primary issue on appeal is whether that misrepresentation constitutes a “common course of conduct” under our test for determining whether common issues predominate among the class. We conclude that it does. Because the district court did not abuse its discretion in determining that
I
Meta owns and operates several online social media and messaging platforms and applications, including Facebook, Instagram, and WhatsApp. As with many social media companies, Meta “generates substantially
In 2018, a nationwide class of advertisers (“Plaintiffs”) filed this action against Meta, alleging that Meta had misrepresented the Potential Reach of advertisements on its platforms. Meta tells advertisers that “Potential Reach estimates how many people your ad could potentially reach depending on the targeting and ad placement options you select while creating an ad.” Each time that an advertiser designs a Meta advertising campaign, Meta‘s self-service advertisement creation interface, known as the Ads Manager, displays the campaign‘s Potential Reach.
Plaintiffs assert that Potential Reach is misleading because it actually measures social media accounts, not living humans. Meta has taken steps to increase the accuracy of Potential Reach by working to remove fake and duplicate accounts, as well as by updating the calculation of Potential Reach to include only accounts that were shown an advertisement in the last thirty days. Nevertheless, throughout the class period, the number of accounts was always larger than the number of people because non-human entities like businesses and clubs have accounts, some people have multiple accounts, and some people and bots create fake accounts.
Each advertiser views a different Potential Reach for each campaign dependent on that campaign‘s unique targeting criteria, so the discrepancy between people and accounts varies by campaign. The parties disagree as to the size of this discrepancy. The district court noted this evidentiary dispute but concluded that Meta‘s criticism of Plaintiffs’ expert evidence “does not foreclose classwide proof of injury.” Plaintiffs allege that because of the misrepresentation of Potential Reach, they purchased more Meta advertisements and paid more for those advertisements than they would have with accurate information.
The named Plaintiffs are two former Meta advertisers, DZ Reserve and Cain Maxwell. DZ Reserve was an e-commerce business that spent over $1 million on 740 Meta advertising campaigns. Maxwell operated an online firearm mount store and spent approximately $379 on 11 Meta advertising campaigns. DZ Reserve has ceased operations since the filing of the complaint, and it is unclear from the record whether Maxwell‘s business is still operating.
Following motion practice and the filing of several amended complaints, the district court sustained three of Plaintiffs’ claims under California state law: fraudulent misrepresentation, fraudulent concealment, and violation of California‘s Unfair Competition Law (“UCL”). Plaintiffs then moved to certify the following class under
II
We have jurisdiction pursuant to
III
A
Before certifying a class, the district court must ensure that the plaintiffs have made two showings, one under Rule 23(a) and one under Rule 23(b). Olean, 31 F.4th at 663.
First, the proposed class action must satisfy four prerequisites under Rule 23(a):
(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests of the class.
The district court must perform a “rigorous analysis” of these prerequisites, which frequently “will entail some overlap with the merits of the plaintiff‘s underlying claim.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 (2011). That being said, “[m]erits questions may be considered to the extent—but only to the extent—that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied.” Amgen Inc. v. Connecticut Ret. Plans & Tr. Funds, 568 U.S. 455, 466 (2013).
Second, the class must fit into at least one of three categories outlined in Rule 23(b). Olean, 31 F.4th at 663. Here, the district court certified the class under
B
We need not analyze all of the criteria required for certification of a damages class, because Meta challenges only the district court‘s findings regarding the predominance of common factual or legal issues under Rule 23(b)(3) and typicality and adequacy of representation under Rule 23(a)(3) and (4). The district court did not abuse its discretion in concluding that Plaintiffs have sufficiently demonstrated predominance, typicality, and adequacy, and so we affirm certification of the damages class under Rule 23(b)(3).
1
The requirement under
The predominance inquiry is “more demanding” than the commonality inquiry. Id. at 624. Contrary to Meta‘s contentions, predominance is not more demanding because the common issues must in some way be “more common” than would be required under Rule 23(a)(2). Rather, predominance is more demanding because not only must there be common issues, but the common issues must predominate. “The requirements of Rule 23(b)(3) overlap with the requirements of Rule 23(a): the plaintiffs must prove that there are questions of law or fact common to class members that can be determined in one stroke, in order to prove that such common questions predominate over individualized ones.” Olean, 31 F.4th at 664 (cleaned up).
To clarify the inquiry, we proceed with the predominance analysis in three steps. First, we identify which questions are central to the plaintiffs’ claim. Second, we determine which of these questions are common to the class and which present individualized issues. Third, we analyze whether the common questions predominate over the individual questions.
Under step one, we must identify which questions are central to the plaintiffs’ claim, which “begins, of course, with the elements of the underlying cause of action.” Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804, 809 (2011). The proposed class under
Under step two, we determine which of those elements are “common”—which means they are “capable of being established through a common body of evidence, applicable to the whole class.” Olean, 31 F.4th at 666. Because this standard is identical to the analysis under Rule 23(a)(2)‘s commonality requirement, “courts must consider cases examining both subsections in performing a Rule 23(b)(3) analysis.” Id. at 664.
The district court properly determined that each of the five elements of fraud under California law is capable of classwide resolution. Meta has only legitimately challenged the district court‘s findings regarding misrepresentation and justifiable reliance. On appeal, Meta does not dispute the district court‘s conclusion that the knowledge and intent elements present common issues. Although Meta does appeal the district court‘s damages finding, we decline to consider Meta‘s damages argument because it was not raised before the district court.1 Accordingly, we concentrate
i
Where, as in this case, a defendant has uniformly represented that a certain metric means something that it does not, the element of misrepresentation presents a common question. See In re Hyundai & Kia Fuel Econ. Litig., 926 F.3d 539, 557–65 (9th Cir. 2019) (en banc); In re First All. Mortg. Co. (First Alliance), 471 F.3d 977, 990–91 (9th Cir. 2006); Blackie v. Barrack, 524 F.2d 891, 902–05 (9th Cir. 1975).
Class action fraud claims often involve similar misrepresentations that cause a large number of victims to each suffer a small financial loss. Fraud claims are thus particularly well suited to class treatment under Rule 23(b)(3), which was designed “to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights.” Amchem, 521 U.S. at 617 (quoting Mace v. Van Ru Credit Corp., 109 F.3d 338, 344 (7th Cir. 1997)). We have “consistently upheld” the availability of the class action to address mass frauds perpetrated through similar misrepresentations in the securities context “in large part because of the substantial role that the deterrent effect of class actions plays in accomplishing the objectives of the securities laws.” Blackie, 524 F.2d at 903. That reasoning applies equally well to consumer protection laws, and we have explained that consumer fraud victims often present a “cohesive group” because “[i]n many consumer fraud cases, the crux of each consumer‘s claim is that a company‘s mass marketing efforts, common to all consumers, misrepresented the company‘s product....” Hyundai, 926 F.3d at 559. In sum, “[p]redominance is a test readily met in certain cases alleging consumer or securities fraud....” Amchem, 521 U.S. at 625.
In determining whether a misrepresentation presents a common question, we generally categorize the misrepresentation as falling into one of two groups. On the one hand, a “fraud perpetrated on numerous persons by the use of similar misrepresentations may be an appealing situation for a class action....” First Alliance, 471 F.3d at 990 (quoting
In this case, the claimed misrepresentation is the one that the district court described in its certification order: “[T]he ability of Potential Reach to reach ‘people,’ namely unique individuals” when the metric was “actually...an estimate of ‘accounts’ reached.”
Meta misstates the misrepresentation at issue, insisting that the misrepresentation is the numerical discrepancy between people and accounts, rather than the fact that Meta substituted people for accounts. Under its theory, Meta contends the misrepresentations
In Blackie, we rejected a similar strategy to create the illusion of variation in a claimed misrepresentation by mischaracterizing the nature of the misrepresentation at issue. See Blackie, 524 F.2d at n.20. There, a class of stockholders alleged that the Ampex Corporation uniformly misapplied an accounting principle, which resulted in overstatements of various financial estimates. Id. at 902–05. Like Meta, Ampex argued that the misrepresentation was the numerical discrepancy in each financial estimate, such that there was material variation in the exact numerical discrepancies. Id. at 904 n.20. We rejected that argument and affirmed class certification, stating that “plaintiffs are complaining of abuses of accounting principles, not estimates.” Id. Likewise, we will not opine on the viability of Meta‘s alternative misrepresentation theory—the numerical discrepancy between people and accounts—because it is not the theory presented to us.
Meta‘s insistence that the misrepresentation must be the numerical discrepancy between people and accounts is based partly on its suggestion that the substitution of people for accounts is not itself material. However, we have previously affirmed both class certification and ultimate liability based on similar facts. In First Alliance, we affirmed class certification and a finding of class-wide fraud where a bank induced borrowers to agree to unconscionable loan terms by having loan officers “point to the ‘amount financed’ and represent it as the ‘loan amount.‘” See 471 F.3d at 985, 990–92. We did not focus on the numerical difference between the amount financed and the loan amount for each individual borrower, but instead concluded that the overall scheme was fraudulent. Id.
More importantly, proof of materiality “is not a prerequisite to class certification.” Amgen, 568 U.S. at 459. As the Supreme Court has instructed:
Rule 23(b)(3) requires a showing that questions common to the class predominate, not that those questions will be answered, on
the merits, in favor of the class. Because materiality is judged according to an objective standard, the materiality of [defendant‘s] alleged misrepresentations and omissions is a question common to all members of the class [named plaintiffs] would represent. . . . As to materiality, therefore, the class is entirely cohesive: It will prevail or fail in unison.
Because materiality is an objective inquiry, differences in the size and sophistication of the advertisers in the class are irrelevant. Here, the question is the same for every class member: Would substituting people for accounts in Potential Reach be material to the reasonable consumer? At the class certification stage, identification of a common question is all that is required. The district court properly concluded that issue was a matter for trial.
Given the claimed misrepresentation to be the substitution of people for accounts, Plaintiffs have clearly satisfied our “common course of conduct” test. It is undisputed that Potential Reach was shown to every advertiser on Meta‘s Ads Manager, Potential Reach was always expressed as a number of people, and Potential Reach always estimated a number of accounts. Class members were thus exposed to uniform misrepresentations about the potential reach of their advertisements.
These slight differences do not defeat commonality under our “common course of conduct” test. As we have previously explained, “[t]he class action mechanism would be impotent if a defendant could escape much of his potential liability for fraud by simply altering the wording or format of his misrepresentations across the class of victims.” First Alliance, 471 F.3d at 992. Consequently, “[c]onfronted with a class of purchasers allegedly defrauded over a period of time by similar misrepresentations, courts have taken the common sense approach that the class is united by a common interest in determining whether a defendant‘s course of conduct is in its broad outlines actionable, which is not defeated by slight differences in class members’ positions....” Blackie, 524 F.2d at 902 (collecting cases).
We have consistently held that similar contextual differences do not constitute material variations. In Blackie, we held that there was commonality where defendants uniformly misapplied an accounting principle in some forty-five different documents, even though the resulting financial estimates fluctuated over time. Id. In First Alliance, we applied Blackie to hold that borrowers exposed to similarly misleading sales presentations represented a cohesive class, even though the exact wording of the sales presentations and individual loan specifics varied. First Alliance, 471 F.3d at 990-91. Most recently, we affirmed a class of car purchasers exposed to uniform fuel economy misrepresentations, even though some purchasers viewed the misrepresentations on stickers placed on the vehicles, while others were only exposed to the misrepresentations through nationwide marketing. Hyundai, 926 F.3d at 560–61.
Here, the variations in Estimated Daily Reach and disclosures accompanying Potential Reach are no more material than the fluctuating estimates, differently worded sales pitches, and disparate modes of exposure considered in our prior cases.
Second, Meta contends that any misrepresentations differed among class members because it updated its disclosures about Potential Reach twice during the class period. In September 2017, Meta disclosed that Potential Reach “[e]stimates are based on the placements and targeting criteria you select,” and are “not designed to match population or census estimates.” In June 2020, Meta disclosed that “[t]hese metrics are considered estimated and sampled, and depend on factors such as how many accounts are used by each person on Facebook Company Products.”
We have determined that there were individualized questions where “explicit signs or explicit verbal advice would negate the claimed misrepresentation” for some class members. Berger v. Home Depot USA, Inc., 741 F.3d 1061, 1070 (9th Cir. 2014), abrogated on other grounds by Microsoft Corp. v. Baker, 582 U.S. 23 (2017). However, unlike the situation in Berger, none of the disclosures here negated the misrepresentation, which would have required a clear statement that Potential Reach measures accounts. Instead, Meta essentially argues that Plaintiffs should have known better than to rely on Potential Reach. But as the district court found, several documents offered by Plaintiffs show that Meta intended for advertisers to
In support of its disclosure argument, Meta also relies on Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), overruled on other grounds by Olean, 31 F.4th 651. Disclosures were not at issue in Mazza. Instead, Mazza held that an inference of reliance was inappropriate because “it is likely that many class members were never exposed to the allegedly misleading advertisements.” Id. at 595. Unlike Mazza, here it is undisputed that all class members were exposed to Potential Reach.
Given that all class members encountered the same misrepresentation about Potential Reach—the nucleus of the fraud—the slight variations in the other information available on the Ads Manager do not defeat the commonality of the misrepresentation.
ii
The district court properly determined that the element of justifiable reliance is capable of classwide resolution. Under California law, “when the same material misrepresentations have actually been communicated to each member of a class, an inference of reliance arises as to the entire class.” Mirkin v. Wasserman, 5 Cal. 4th 1082, 1095 (1993). Because Meta communicated the same misrepresentation to all class members—that Potential Reach measures people when it really measures accounts—the class is entitled to an inference of reliance. Meta‘s argument to the contrary rests on its theory that Plaintiffs were not exposed to a uniform misrepresentation, which we have rejected.
Despite California‘s presumption of reliance, Meta argues that reliance is always an individualized inquiry because defendants have a right to rebut the presumption of reliance. As a practical matter, Meta‘s argument that reliance can never be a common question is incompatible with the voluminous caselaw from both the United States and California Supreme Court certifying fraud class actions. See Basic Inc. v. Levinson, 485 U.S. 224, 242 (1988) (explaining the utility of the presumption of reliance in the federal security fraud context and stating that “[r]equiring proof of individualized reliance...effectively would have prevented respondents from proceeding with a class action....”); see also Vasquez v. Superior Ct., 4 Cal. 3d 800, 814–15 (1971) (discussing California‘s presumption of reliance for common law fraud and analogizing to the presumption in federal securities fraud cases). The purpose of the presumption of reliance is to avoid precluding all fraud class actions. See Basic, 485 U.S. at 242. Accordingly, if the availability of rebuttal defeated commonality, the presumption would be pointless. While rebuttal “has the effect of leaving individualized questions of reliance in the case, there is no reason to think that these questions will overwhelm common ones and render class certification inappropriate under
Meta finally argues that the Rules Enabling Act prohibits application of California‘s presumption of reliance here. The Rules Enabling Act instructs that rules of procedure “shall not abridge, enlarge or modify any substantive right.”
Because the presumption of reliance applies to each member of the class, reliance presents a common question provable by common evidence. See Vasquez, 4 Cal. 3d at 814 (“If [Plaintiffs] can establish without individual testimony that the representations were made to each plaintiff and that they were false, it should not be unduly complicated to sustain their burden of proving reliance thereon as a common element.”).
iii
Having arrived at step three, our analysis in this case is a simple one. “The predominance inquiry asks whether the common, aggregation-enabling, issues in the case are more prevalent or important than the non-common, aggregation-defeating, individual issues.” Tyson Foods, Inc. v. Bouaphakeo, 577 U.S. 442, 453 (2016) (internal quotation marks and citation omitted). Although predominance does not require that all questions be common, Hyundai, 926 F.3d at 557, predominance is necessarily satisfied if all questions are common. Because the district court properly concluded that each of the five elements of fraud presents a common question, the district court did not abuse its discretion in holding that common issues predominated.
2
Meta argues the named Plaintiffs are not typical or adequate because they suffer from credibility problems that expose them to individualized defenses related to reliance. The district court did not clearly err in finding that the named Plaintiffs’ credibility was not vulnerable to attack. Accordingly, we affirm the district court‘s holding that the requirements of typicality and adequacy are satisfied.
Although Meta names both typicality and adequacy in its argument, its contention that Plaintiffs will be preoccupied with unique defenses falls within our typicality caselaw. Under
The district court did not clearly err in finding no danger that the named Plaintiffs would be preoccupied with unique defenses. Meta insists that the
Meta argues that DZ Reserve‘s owner dishonestly testified that the Potential Reach misrepresentation deterred him from buying Meta advertisements, and that Maxwell dishonestly claimed to have relied on Potential Reach. The district court rejected these contentions by pointing to evidence that DZ Reserve had been deterred from using Meta advertisements, Maxwell relied on Potential Reach, and both named Plaintiffs would have spent less money on Meta advertisements had they known that Potential Reach was a misrepresentation. The record supports the district court‘s conclusion that the named Plaintiffs have no credibility issues that would destroy their typicality.
Even if DZ Reserve and Maxwell faced credibility questions, those issues would not destroy typicality. Credibility issues only destroy typicality in “unique situation[s]” where “it is predictable that a major focus of the litigation will be on a defense unique” to the named plaintiff. Id. at 509. We have found such unique situations where a named plaintiff in a securities action was a serial litigant who purchased stock solely to facilitate litigation, id. at 508, or where the named plaintiff insisted that he was not really deceived by the alleged misrepresentation. Stearns v. Ticketmaster Corp., 655 F.3d 1013, 1019 (9th Cir. 2011), abrogated on other grounds by Comcast Corp. v. Behrend, 569 U.S. 27 (2013). Neither of those situations apply here, where the named Plaintiffs are not serial litigants and presented evidence that they both actually received and relied upon the alleged misrepresentation.
3
In sum, for the foregoing reasons, we conclude that the district court did not abuse its discretion in certifying the damages class under
C
Meta appeals the district court‘s order certifying an injunction class under
“In a class action, standing is satisfied if at least one named plaintiff meets the requirements.” Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007). In order to establish Article III standing, “the plaintiff must have suffered an injury in fact—a concrete and imminent harm to a legally protected interest, like property or money—that is fairly traceable
In order to establish standing for injunctive relief, “a plaintiff must show that he is under threat of suffering ‘injury in fact’ that is concrete and particularized; the threat must be actual and imminent, not conjectural or hypothetical; it must be fairly traceable to the challenged action of the defendant; and it must be likely that a favorable judicial decision will prevent or redress the injury.” Summers v. Earth Island Inst., 555 U.S. 488, 493 (2009) (citing Friends of Earth, 528 U.S. at 180–81). “The plaintiff must demonstrate that he has suffered or is threatened with a concrete and particularized legal harm, coupled with a sufficient likelihood that he will again be wronged in a similar way.” Bates, 511 F.3d at 985 (citations and quotation marks omitted). “Past exposure to harmful or illegal conduct does not necessarily confer standing to seek injunctive relief if the plaintiff does not continue to suffer adverse effects.” States” cite=“599 F.3d 964” pinpoint=“970” court=“9th Cir.” date=“2010“>Mayfield v. United States, 599 F.3d 964, 970 (9th Cir. 2010). “Nor does speculation or ‘subjective apprehension’ about future harm support standing.” Id. (quoting Friends of the Earth, 528 U.S. at 184 and citing Lujan, 504 U.S. at 564).
Consumer fraud plaintiffs can satisfy the imminent injury requirement by showing they “will be unable to rely on the product‘s advertising or labeling in the future, and so will not purchase the product although [they] would like to.” Davidson v. Kimberly-Clark Corp., 889 F.3d 956, 970 (9th Cir. 2018).
The plaintiff bears the burden of establishing the elements of standing. See Lujan, 504 U.S. at 561. A plaintiff must also demonstrate Article III standing at each stage of the litigation, including on appeal. Bain v. Cal. Teachers Ass‘n, 891 F.3d 1206, 1211–12 (9th Cir. 2018). Standing must be proven, “with the manner and degree of evidence required at the successive stages of the litigation.” Lujan, 504 U.S. at 561. Thus, although standing may be established at the pleading stage through allegations in the complaint, the plaintiff must prove the elements of standing at each successive stage. Id. Because the preponderance of the evidence standard applies at the class certification stage, standing at the time of class certification must be established by a preponderance of the evidence. See Olean, 31 F.4th at 664–65.
With these general principles in mind, we examine the standing of the named Plaintiffs to assert claims for injunctive relief.
1
DZ Reserve does not have standing to seek injunctive relief. DZ Reserve did not submit any evidence of a threat of suffering “actual and imminent” future injury that was concrete and particularized,
2
We remand the question of whether Maxwell has adequately pled an injury sufficient to confer standing to seek injunctive relief. In so doing, we note that there are two issues for the district court to consider.
The first question is whether Maxwell‘s testimony that he “think[s] [he] would” purchase Meta advertisements in the future satisfies Davidson, which relied on a plaintiff‘s more direct assertion that she “desires to purchase” and “would purchase” a product if she was able to trust the product‘s advertising. 889 F.3d at 970–71.
The second question is how to square Maxwell‘s testimony with the evidence suggesting that Maxwell no longer has a business to advertise. A plaintiff typically loses standing to challenge a policy affecting businesses when the plaintiff has ceased operating an affected business, unless the challenged policy caused the business‘s closure. See City News & Novelty, Inc. v. City of Waukesha, 531 U.S. 278, 283 (2001); see also San Lazaro Ass‘n, Inc. v. Connell, 286 F.3d 1088, 1096 (9th Cir. 2002); F.3d 996” pinpoint=“1007-08” court=“9th Cir.” date=“2001“>Clark v. City of Lakewood, 259 F.3d 996, 1007–08 (9th Cir. 2001). Maxwell‘s business ceased operations sometime in 2019. He testified that he stopped operations because he “ran out of inventory.” The record does indicate that Maxwell has not officially dissolved the business and that his associated tax ID remains active. The record does not indicate whether Maxwell has continued to pay taxes associated with the business. It will be difficult for Maxwell to establish an imminent injury if he has no business to advertise, or in the alternative, if he does not offer a compelling explanation for why he would purchase advertisements without a business.
The district court has had no occasion to consider the record or to analyze Meta‘s argument against Maxwell‘s standing to seek injunctive relief. Moreover, Maxwell did not have the opportunity to present arguments concerning his standing to seek injunctive relief directly to the district court. Therefore, we remand the question of standing to seek injunctive relief to the district court for its consideration in the first instance.
D
In sum, we affirm the district court‘s certification of the damages class. We vacate the district court‘s certification of the injunction class and remand for further proceedings consistent with this opinion. Each party should bear its own costs on appeal.
AFFIRMED in part; VACATED AND REMANDED in part.
FORREST, J., dissenting in part:
I agree that the district court‘s certification of Plaintiffs’
I. BACKGROUND
Defendant-Appellant Meta Platforms, Inc. (Meta), one of the world‘s largest social media companies, owns and operates Facebook and Instagram, among other platforms. Meta claims that more than two billion people use Facebook every month, with over 200 million monthly active users in the United States alone. Because of its large user base, Meta‘s platforms are attractive to prospective advertisers, ranging from Fortune 500 companies and government agencies to small businesses and individual proprietors. And Meta “generates substantially all of its revenue from advertising.”
A. Meta‘s Advertising System
Most advertisers purchase ads from Meta through its online self-service ad creation interface, known as “Ads Manager.” Advertisers “have a wide range of different advertising objectives, which influences how they set up their ads and assess ad performance.” When developing an ad campaign in Ads Manager, advertisers specify their objective. Advertisers who want to generate awareness of their product or service, and who want Meta to show their ad “the largest number of times to the largest number of people in a given audience,” may choose “brand awareness” or “reach” as their advertising objective. Other advertisers “are interested in ‘performance advertising,’ or driving specific actions with their ads, such as clicks and conversions“—i.e., prompting users to visit a website or purchase a product. These advertisers “are typically focused on trying to identify or have their ads delivered to specific users likely to take a desired action,” and a large audience size is less important.
Ads Manager provides several planning tools to help advertisers design their ad campaigns and target their desired audience. First (and relevant here) is Potential Reach, which is defined as “an estimation of how many people are in an ad set‘s target audience” based on statistical sampling and modeling. A default Potential Reach automatically displays in Ads Manager, and it updates dynamically in real time as an advertiser tailors its ad campaign using numerous targeting and placement criteria, such a demographics (e.g., age, gender, location, education), interests (e.g., sports teams, dogs), and the platform where the ads will be shown (Facebook, Instagram, etc.). The “default” Potential Reach displayed to each advertiser during the class period was between 200 to 250 million, purportedly reflecting the number of people in the United States between 18 and 65 years old who use Meta‘s platforms. As an advertiser selects targeting criteria, the Potential Reach recalculates, and a color-coded dial shows whether the target audience is “fairly broad,” “defined,” or “too specific.” Each advertiser sees a different Potential Reach estimate for each ad campaign they run because the non-default—or targeted—Potential Reach estimate is calculated based on the advertiser‘s selected criteria.
Potential Reach is “not an estimate of how many people will actually see [an advertiser‘s] ad” or how many people may click on an ad or take any other action with respect to an ad. That data is provided in separate Estimated Daily Results metrics, which are displayed adjacent to Potential Reach in Ads Manager. Estimated Daily Reach is part of the Estimated Daily Results and is the estimated number of people that an ad actually will reach per day based on the advertiser‘s selected criteria,
Once an ad launches, advertisers can track their results in real time. Based on detailed performance data, such as the number of times an ad was shown and clicked on, advertisers can assess the success of their campaign and return on investment and adjust their campaign and budget as they see fit. Advertisers are not shown Potential Reach as part of the post-ad purchase results.
B. Changes to Potential Reach Calculation
Potential Reach has always been displayed to advertisers as an estimate, but during the class period Meta changed how it calculates Potential Reach and updated its disclosures in Ads Manager accordingly. In September 2017, Meta introduced an “information” icon in Ads Manager explaining that Potential Reach “[e]stimates are based on the placements and targeting criteria you select,” and are “not designed to match population or census estimates.” A year and a half later in March 2019, Meta changed its calculation methodology to count only those people who had actually seen an ad on Meta‘s platforms in the last 30 days, rather than those who were active on a Meta platform and could have seen an ad. Lastly, in June 2020, Meta “added disclosures to explain that ‘people’ is an ‘estimated and sampled’ metric, which depends on ‘factors such as how many accounts are used by each person on [Meta‘s products].‘” Throughout the class period, Meta also undertook efforts to remove fake accounts and de-duplicate accounts across platforms—i.e., counting separate Instagram and Facebook accounts belonging to the same person as only one person in Potential Reach estimates.
C. Plaintiffs’ Lawsuit
In 2018, Plaintiffs sued Meta alleging the Potential Reach calculation is materially misleading because it exceeds the actual number of people in an ad‘s target audience, causing advertisers to purchase more ads and pay higher prices for ads than they otherwise would have. Named Plaintiffs DZ Reserve, an e-commerce business, and Cain Maxwell are former Meta advertisers. Between December 2017 and December 2018, DZ Reserve spent over $1 million on 740 ad campaigns comprising approximately 26,000 ads. Maxwell (d/b/a Max Martialis) operated an online store and spent approximately $400 on 11 ad campaigns comprising 28 ads between September 2018 and May 2019. Named Plaintiffs alleged that they viewed and relied on Potential Reach in purchasing Meta ads.
Plaintiffs proceeded on three California state-law claims: (1) fraudulent misrepresentation, (2) fraudulent concealment, and (3) injunctive relief under California‘s
Meta opposed class certification, arguing, among other things, that Plaintiffs could not satisfy
Over Meta‘s objection, the district court certified two classes: a
This court granted review of the district court‘s class certification decision under
II. ANALYSIS
We review the district court‘s class certification decision for abuse of discretion. Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC (Olean), 31 F.4th 651, 663 (9th Cir. 2022) (en banc). The district court “abuses its discretion only if it (1) relies on an improper factor, (2) omits a substantial factor, or (3) commits a clear error of judgment in weighing the correct mix of factors.” B.K. ex rel. Tinsley v. Snyder, 922 F.3d 957, 965 (9th Cir. 2019). The district court‘s determination of underlying legal questions is reviewed de novo, and its determination of underlying factual questions is reviewed for clear error. Olean, 31 F.4th at 663. “An error of law is a per se abuse of discretion.” B.K., 922 F.3d at 965. A factual finding is clearly erroneous if it is illogical, implausible, or “without support in inferences that may be drawn from the record.” Id. at 965–66.
Relevant here, Plaintiffs must satisfy the requirements of
Plaintiffs must establish that the predominance requirement is met by a preponderance of the evidence. Id. at 665.
In considering predominance, the court begins “with the elements of the underlying cause of action.” Olean, 31 F.4th at 665. Plaintiffs must show that a common question relating to an essential element predominates. Id. at 666. A class may fail to establish predominance where even one essential element requires individualized determination and this individualized issue outweighs “common, aggregation-enabling issues.” See Lara v. First Nat‘l Ins. Co. of Am., 25 F.4th 1134, 1138 (9th Cir. 2022). The district court certified a
The plaintiffs’ ability to prove each element of their claim must be considered in light of the class-action mechanism, which often is ill-suited to fraud claims. As the 1966 Advisory Committee on Rule 23
A. Misrepresentation
To assess whether predominance is satisfied regarding the misrepresentation element, we must first be specific in identifying Plaintiffs’ claimed misrepresentation. On appeal, Plaintiffs argue that Meta categorically misrepresented its Potential Reach metric presented to advertisers by characterizing it as a metric of “people” rather than “accounts.” The majority accepts this characterization of Plaintiffs’ claims. But Plaintiffs’ complaint alleged that Meta failed to provide “accurate Potential Reach” because this calculation “is inflated.” Core to Plaintiffs’ claims is the degree of discrepancy between the number of people and the number of accounts (not just the characterization of Potential Reach as a calculation of people), which the Plaintiffs explicitly attempt to prove.3
Meta does not dispute that Potential Reach calculated accounts as a proxy for people. But contrary to the majority‘s suggestion, this proxy is not inherently misleading like the accounting practices challenged in Blackie v. Barrack, 524 F.2d 891 (9th Cir. 1975), discussed more below. Potential Reach as described is misleading only if there is a significant deviation between the number of accounts and the number of people that may see ads.4 If
Properly framed, Plaintiffs’ assertion that there is a cohesive class for which common questions predominate begins to unravel. Consistent with the
Plaintiffs assert that Meta made a common misrepresentation that fits “comfortably” within the “common course of conduct” principle, first established in Blackie, and applied again in First Alliance, because Meta uniformly represented that Potential Reach was a measurement of people. This argument is unavailing. At issue in First Alliance was a challenge to certification based on
In Blackie, we analyzed whether financial reports that “uniformly misrepresent a particular item” presented a common question, again for purposes of the
further noted that “plaintiffs are complaining of abuses of accounting principles, not estimates.” Id. at 904 n.20.
But this case is about estimates. Meta represented to the advertiser class that Potential Reach is an estimate of people who could potentially view a given ad based on the advertiser‘s targeting criteria. That Meta provided a common description of Potential Reach does not automatically establish that this description was a misrepresentation as to all class members. Cf. Blackie, 524 F.2d at 903 n.19 (noting that even where a common course of conduct exists in a fraud class that satisfies
As discussed, targeted Potential Reach estimates are tailored to each advertiser‘s choices. Advertisers can narrow their estimates with standard demographics (age, education, gender, etc.) and by location and interests. Altogether, the available targeting criteria provide thousands of options. How this targeting criteria impacts the accuracy of each estimate is apparent considering, for example, duplicate counts. One Facebook user may have two or more accounts—take, for example, one professional and one personal. So, if an advertiser selects only geographic criteria, both accounts may be counted. But if the advertiser selects both geography and interests criteria, the work account may be excluded and only the personal account counted or vice versa. Given the variability at play in targeted Potential Reach calculations, their degree of accuracy relative to the number of people is not uniform—one Potential Reach calculation may be an accurate “estimate” of the people who may see an advertisement based on the selected criteria while another is not.
To make up for the lack of uniformity in the millions of Potential Reach calculations that Meta provided, Plaintiffs first assert that the district court found that Potential Reach estimates were always “significantly inflated.” This misconstrues the record.
point—that because Meta‘s expert failed to establish that no inflation occurred, characterizing Potential Reach as a calculation of people was inaccurate, regardless of the degree of inaccuracy. This means the class includes advertisers who received targeted Potential Reach estimates with a discrepancy between people and accounts that could range from 1% to 50%. Cf. Thrifty Payless, Inc. v. The Americana at Brand, LLC, 218 Cal. App. 4th 1230, 1242 & n.7 (2013) (holding fraud action may be based on an estimate after considering the disparity and finding “the huge disparity between the estimates and the ultimate costs supports an inference of misrepresentation” (emphasis added)).
Plaintiffs’ reliance on In re U.S. Foodservice Inc. Pricing Litig., 729 F.3d 108 (2d Cir. 2013), in arguing that a uniform misrepresentation was made regardless of any variation in Potential Reach inflation, is unavailing. In that case, the degree of difference between what the plaintiffs were charged and the “cost-plus” pricing they were entitled to pay was irrelevant to liability because any difference—one cent or a thousand dollars—was proof that plaintiffs were harmed. 729 F.3d at 118, 123. The same is not true here. Meta did not charge advertisers based on its Potential Reach estimates. And the degree of inflation in the Potential Reach calculation is the crux of whether Meta misrepresented the estimated number of people who could potentially see a given ad.
Determining whether the Potential Reach calculations were misrepresentations is further challenged by Meta‘s evolving disclosures over the class period. Early on, Meta‘s disclosures stated that Potential Reach was “not designed to match population or census estimates.” Then in 2019, Meta changed its disclosure to state that Potential Reach depends on “[h]ow many accounts are used per person.” Meta changed the disclosure again in 2021 to state that “the presence of fake accounts” could impact the Potential Reach calculation. I disagree that the impact of these changes goes only to class-wide merits issues. The court must determine whether individual or common questions will predominate in assessing whether Meta‘s Potential Reach calculations were fraudulent misrepresentations. The disclosures that Meta provided regarding the nature of its calculated estimate are important to this analysis. The reasoning in Berger v. Home Depot USA, Inc. is particularly persuasive. 741 F.3d at 1067-69. There, the district court denied certification of a fraud claim brought against Home Depot related to its tool-rental contracts over a multi-year period. Id. at 1066. We affirmed on predominance grounds because the class period covered five different versions of the contract, each with different language requiring an “independent legal analysis.” Id. at 1069. The varying disclosures that Meta provided about the limitations of Potential Reach estimates likewise present individualized issues in determining whether Meta made fraudulent misrepresentations. Cf. Mazza v. Am. Honda Motor Co., 666 F.3d 581, 596 (9th Cir. 2012) (holding a class definition as fatally overbroad where many class members learned that the advertising was misleading before purchase).
In the cases where we have upheld certification of a fraud class based on misrepresentation of an estimate, the class members were given the same estimate. See In re Hyundai, 926 F.3d at 553, 559 (upholding certification based on “inflated fuel economy standards” that were uniformly disseminated). That is not what happened here, and the evidence does not establish that the millions of unique Potential Reach calculations that Meta provided to the class had the same degree of inflation. Is a Potential Reach calculation with a 2% deviation a misrepresentation where the targeted population includes millions of people? What about a Potential Reach calculation with an 8% deviation where the targeted population includes only 1,000 people? Where a class claim “prevail[s] or fail[s] in unison,” it satisfies predominance. Amgen, 568 U.S. at 460. That standard is not met here because the factfinder could conclude that some, but not all, Potential Reach calculations presented to the class members were fraudulently misleading. See Lara, 25 F.4th at 1139 (affirming denial of class certification because “figuring out whether each individual putative class member was harmed would involve an inquiry specific to that person“).8
B. Materiality
Because this case does not involve a uniform misrepresentation, many of the problems discussed in relation to the misrepresentation element of Plaintiffs’ claim also apply to the materiality-of-the-misrepresentation element. Under California law, a misrepresentation is material if “a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question.” Engalla, 15 Cal. 4th at 977 (quoting Restatement (Second) of Torts § 538 (1977)). Materiality is generally a fact question unless the “fact misrepresented is so obviously unimportant that the jury could not reasonably find that a reasonable man would have been influenced by it.” Id. Our focus here is whether common or individual issues will predominate in determining whether a misrepresentation is material, not whether Plaintiffs can prove materiality. See Amgen, 568 U.S. at 469; Olean, 31 F.4th at 667.
In the majority‘s view, Amgen established that materiality always satisfies predominance because it is governed by an objective standard. I disagree. In Amgen, the Court concluded that the class had a “fatal similarity.” 568 U.S. at 470. If materiality failed for one, it failed
Additionally, while Amgen addressed a claim arising under federal law, the Plaintiffs’ claims here are governed by California law. California courts applying that state‘s law have recognized that materiality cannot be resolved on a class-wide basis where this issue inevitably depended on individualized questions. See, e.g., In re Vioxx Class Cases, 180 Cal. App. 4th 116, 129 (2009) (stating that “if the issue of materiality is a matter that would vary from consumer to consumer, the issue is not subject to common proof, and the action is properly not certified as a class action“).9 And federal courts applying California law likewise have found
Here, plaintiffs primarily rely on two pieces of evidence in arguing that materiality is susceptible to class-wide proof:
Dr. Cowan‘s statistical analysis and Dr. Allenby‘s conjoint survey. Plaintiffs assert that Dr. Cowan can establish that all Potential Reach estimates were inflated by at least 10%. The Supreme Court has held that “proving classwide liability” through statistical sampling is appropriate if “each class member could have relied on that sample to establish liability” in an individual action. Tyson Foods, Inc. v. Bouaphakeo, 577 U.S. 442, 455 (2016). But here, it is unclear that materiality can be established based on just the percentage of deviation. As discussed above, the degree of inflation in the Potential Reach estimate informs whether a misrepresentation has occurred, let alone a material misrepresentation. The degree of inflation relative to the total number of people within the targeted audience may
Turning to Dr. Allenby‘s conjoint survey, the district court assessed this evidence in analyzing damages, not materiality. This survey included only small-to-medium businesses, not the full breadth of entities that compose the class. It also did not mirror Meta‘s varying disclosures during the class period. And lastly, this survey is representative of only 7% of the class.11 While the survey shows that some respondents would increase their spending if an audience size was increased 10% in the abstract, Plaintiffs have not pointed to any evidence that the reasonable ad purchaser in this class would understand the estimated Potential Reach to not have any inflation or deviation. Nor is there any evidence addressing how reasonable advertisers would understand Potential Reach in light of Meta‘s evolving disclosures.
In sum, there are two primary reasons why predominance is not satisfied as to materiality. First, determining the objective perspective of a reasonable advertiser is made difficult by the breadth of Plaintiffs’ proposed class, which includes millions of advertisers of all types conducting advertising campaigns ranging from millions of dollars to tens of dollars. Cf. Webb v. Carter‘s Inc., 272 F.R.D. 489, 502 (C.D. Cal. 2011) (declining to apply the objective “reasonable consumer standard” where materiality would “vary from consumer to consumer“).
Second, Meta told advertisers that Potential Reach is an estimate, and Meta provided evolving disclosures about the limitations of this estimate. A false estimate undoubtedly can
be the basis for a fraud claim, see Aloe Vera of Am., Inc. v. United States, 699 F.3d 1153, 1164 (9th Cir. 2012), but what a reasonable purchaser believes about the precision of information necessarily is impacted by what they are told about precision. This case is a far cry from the objective class-wide materiality analysis that was appropriate in Amgen. Because securities fraud impacts the market, “fantastic scenarios in which an individual investor might rely on immaterial information (think of the superstitious investor who sells her securities based on a CEO‘s statement that a black cat crossed the CEO‘s path that morning)” do not establish that materiality is an individualized issue. Amgen, 568 U.S. at 469. But here, the ability to establish materiality based on class-wide proof
The Named Plaintiffs’ own actions help demonstrate the point. Taking a “peek at the merits,” Dancel v. Groupon, Inc., 949 F.3d 999, 1005 (7th Cir. 2019) (citation omitted), the owner of DZ Reserve made statements online that inflation in the Potential Reach calculation “should . . . not deter anyone from doing [Facebook] ads for [e-commerce].” Cf. Johnson v. Harley-Davidson Motor Co. Grp., LLC, 285 F.R.D. 573, 581 (E.D. Cal. 2012) (finding materiality lacking, in part, because the former named plaintiffs, even with full knowledge of a product‘s defect, “would still buy and recommend the [product]“). And Maxwell set an advertising budget of $20 regardless of whether the Potential Reach estimate was one million or 50 million. Contrary to the district court‘s assertion otherwise, this evidence suggests that ad buyers as a group may not have “attach[ed] importance” to Potential Reach in choosing to buy Facebook ads. Engalla, 15 Cal. 4th at 977.
The district court‘s assertion that materiality is provable on a class-wide basis because “Potential Reach is an important number for advertisers,” improperly conflates the importance of the subject matter with the importance of the claimed misrepresentation and also fails to meet the rigors of
Here, the district court‘s and the majority‘s framing of Plaintiffs’ case derails their analyses. Cf. Gonzalez v. Corning, 885 F.3d 186, 201 (3d Cir. 2018), as amended (Apr. 4, 2018) (“[T]he ‘question of defect’ they propose is only superficially a ‘common question,’ just as any question becomes universal when it includes the word ‘all.‘“); In re Vioxx, 180 Cal. App. 4th at 133-34 (rejecting an argument, as an “oversimplification,” where plaintiffs argued there was nothing more material than “risk of death” because some patients and doctors would still use the medicine regardless of the risk). The proper focus is on how advertisers in the class would view the Potential Reach estimates they received in specific transactions, based on the total mix of information available at the time of purchase. See Engalla, 15 Cal. 4th at 977-78 (assessing materiality based on the explicit and implicit representations made in the context of the transaction). Facebook provided advertisers with individualized information beyond Potential Reach. For example, the “Estimated Daily Reach” calculation—viewed alongside Potential Reach—estimated how many people might see an ad each day based on the buyer‘s advertising budget. The Estimated Daily Reach was part of the calculus informing the buyers’ reasonable expectations in purchasing ads. Cf. Algarin v. Maybelline, LLC, 300 F.R.D. 444, 457 (S.D. Cal. 2014) (looking at consumer expectations for a product in determining that materiality was not susceptible to common proof).
For all these reasons, the materiality analysis required in this case centers on
C. Reliance
Finally, actual reliance is an essential element of fraud under California law. Conroy v. Regents of Univ. of Cal., 45 Cal. 4th 1244, 1256 (2009). Actual reliance does not require proving the alleged misrepresentation was the “sole” or “decisive” cause of the plaintiff entering into the transaction. Id. A plaintiff need only prove the misrepresentation was an “immediate cause” or “played a substantial part” in entering the transaction. Id. A plaintiff meets this burden by showing that, absent the misrepresentation, the plaintiff “would not, in all reasonable probability, have entered into the transaction.” Id. (internal quotation marks and citation omitted). California law recognizes that “when the same material misrepresentations have actually been communicated to each member of a class, an inference of reliance arises as to the entire class.” Kaldenbach v. Mutual of Omaha Life Insurance Co., 178 Cal. App. 4th 830, 851 (2009), as modified (Oct. 26, 2009) (citation and emphasis omitted). But the presumption of reliance does not apply where uniformity of representation is lacking, or at least does not predominate. Id.
The seminal California case applying this presumption involved salesmen that “memorized a standard statement” that was “recited by rote to every member of the class.” Vasquez v. Superior Ct., 4 Cal. 3d 800, 812 (1971); see also Occidental Land, Inc. v. Superior Ct., 18 Cal. 3d 355, 358-59, 363 (1976) (applying presumption where the class read the same document containing the misrepresentation and was required to state in writing that they had read it). On the other hand, the Kaldenbach court did not apply the presumption of reliance where the case involved individualized sales presentations because the plaintiff had not overcome the “significant individual issues” of whether misrepresentations were made to each class member. 178 Cal. App. 4th at 851.
Here, the district court erred by applying the presumption of reliance as a basis for granting class certification of Plaintiffs’
For these reasons, I would reverse the district court‘s certification of Plaintiffs’