CDA Doesn’t Bar Breach of Contract Claims in Connection with Posting of Fraudulent Ads


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Published
Jun 25th '24
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What is Meta’s liability for fraudulent ads that run on Facebook?  Does Section 230 of the Communications Decency Act provide complete immunity to Meta?  That was the issue in a recent decision issued by the 9th Circuit. 

 

In this case, two consumers sued, alleging that they were deceived by fraudulent ads that appeared on Facebook.  For example, one of the consumers alleged that she ordered a toy advertised on the platform, but when it arrived, it looked completely different than the toy that was shown.  And, when she complained to the company, she was unable to get a refund.  The consumers alleged a variety of claims in the lawsuit, including claims for breach of contract and claims for false advertising.

 

The district court dismissed the case, holding that Section 230 immunity applies.  Section 230 provides that, “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”  The court found that the immunity provided by the CDA covers not only false advertising claims, but extends to cover the breach of contract claims as well.  That’s because, “Plaintiffs’ contract claim is based on Meta’s alleged solicitation and publication of deceptive third-party advertisements and therefore stems from Met’s role as publisher.”

 

Meta appealed the portion of the decision that allowed the breach of contract (and related claims) to survive, and the 9th Circuit reversed.  Here’s why.

 

The plaintiffs’ breach of contract claim is based on Meta’s alleged non-compliance with its terms of service and related policies, which make statements such as, “We employ dedicated teams around the world and develop advanced technical systems to detect misuse of our Products, harmful conduct toward others, and situations where we may be able to help support or protect our community” and “In an effort to prevent fraudulent activity that can harm people or businesses, we remove content that purposefully deceives, willfully misrepresents or otherwise defrauds or exploits others for money or property.”  The plaintiffs argued that Meta’s non-compliance with its terms caused them harm, since it allowed for the deceptive ads to be published.

 

The 9th Circuit held that the plaintiffs failed to demonstrate that Meta’s alleged breaches of contract derived from Meta’s conduct as a publisher.  The court explained, “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.” The court explained, “it is not enough that a claim, including its underlying facts, stems from third-party content for §230 immunity to apply. ”

 

Calise v. Meta Platforms, 103 F.4th 732 (9th Cir. 2024).

 

Reposted: Frankfurt Kurnit Klein & Selz . By Jeff Greenbaum.

 

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