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Ninth Circuit:
Breach of Contract Claims Survive Publisher Immunity
Opinion Says Meta Platform’s Promise to Moderate Third-Party Ads Is Independent of Role as Publisher
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals held yesterday that a social media platform could be held liable for breach of contract relating to its failure to moderate third-party fraudulent advertisements—notwithstanding an assertion of Internet publisher immunity—because its duty to moderate arose from contractual promises to do so and not from its status as a publisher of the content.
The dispute arose in a putative class action against Meta Platforms, Inc. brought under 47 U.S.C. §230(c)(1), a portion of the Communications Decency Act. The claims relate to the presence of advertisements by alleged “scammers” on the website in violation of terms of service promising that Meta will “[c]ombat harmful conduct” and remove “content that purposefully deceives, willfully misrepresents or otherwise defrauds or exploits others for money or property.”
In his opinion vacating the judgment of dismissal by Senior District Judge Jeffrey S. White of the Northern District of California as to the breach of contract claims, Circuit Judge Ryan D. Nelson wrote:
“[D]istrict courts have struggled to determine the outer limits of § 230(c)(1) immunity, partly because our own case law has yielded mixed results as to the application of that immunity….The Supreme Court has never delineated the scope of §230(c)(1) immunity. We clarify it today.”
The opinion leaves undisturbed the dismissal by White of non-contractual claims relating to the advertisements.
Circuit Judge Jacqueline H. Nguyen and Senior Circuit Judge Eugene E. Siler of the Sixth Circuit, sitting by designation, joined in the opinion.
Nelson also authored a concurring opinion noting that the decision is required by precedent but urging a “revisit[ing]” of “our statutory interpretation” of §230(c)(1) “in an appropriate case.”
Fraudulent Advertisements
Appealing the dismissal were plaintiffs Christopher Calise and Anastasia Groschen who sued the Internet giant after encountering allegedly fraudulent advertisements on the platform. Believing the advertisements to be legitimate, they asserted, both plaintiffs purchased items—Calise bought a car assembly kit that was never delivered and Groschen ordered a toy for her child but the item that arrived looked completely different from the one advertised.
Both plaintiffs requested, but failed to receive, a refund for the products. They sued Meta in August 2021, seeking to represent classes of similarly situated plaintiffs, asserting claims for breach of contract, breach of the covenant of good faith and fair dealing, negligence, unjust enrichment, and violation of California’s Unfair Competition Law (“UCL”).
Meta filed a motion to dismiss, arguing that §230(c)(1) affords the company immunity against all claims. The section provides that “[n]o 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.”
Plaintiffs asserted that the affirmative defense does not apply, citing case law holding that immunity does not attach where a defendant “materially contributed” to the content, saying that they allege such contribution through theor averment that Meta has been “aggressively soliciting ad sales in China and providing extensive training services and materials” knowing “nearly thirty percent” of such advertisements violate their policies.
White dismissed all claims on Meta’s motion, with leave to amend.
When Calise and Groschen failed to file an amended complaint, White on May 18, 2022 ordered entry of a judgment of dismissal.
Barnes Case
Nelson noted that §230(c)(1) has been interpreted to confer broad immunity, but explained that “this immunity is not limitless.” He pointed to the 2009 Ninth Circuit decision in Barnes v. Yahoo!, Inc. as guiding the application of the immunity section.
In the Barnes opinion, Circuit Judge Diramuid F. O’Scannalin, now on senior status, wrote that §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.”
As to the second prong of the analysis, Nelson wrote:
“Subsection 230(c)(1)’s key word—publisher—has a well-defined meaning at common law….’Publishers’ are treated differently under common law than ‘distributors,’ such as bookstores or newspapers, who usually cannot be held liable for repeating unlawful content, such as advertisements, unless they knew or had reason to know that the content was unlawful.”
He explained that, following Barnes, a court must ask whether the duty that the defendant is alleged to have violated derives from the defendant’s status or conduct as a publisher or speaker and, if it does, the section precludes liability. On the other hand, Nelson said, “where the duty springs from another source—for example, a contract—the plaintiff is not seeking to hold the defendant as a publisher or speaker, and § 230 does not apply.”
Contract Claims
Nelson noted that the plaintiffs asserted two contract claims— breach of contract and breach of the covenant of good faith and fair dealing—and neither is protected by §230(c)(1). He wrote, quoting from Barnes:
“These both rely on the same ‘enforceable promises’ allegedly made by Meta to Plaintiffs—the same duty. Barnes controls here. As we explained, the difference between contract claims and a tort such as defamation is that the latter ‘derive[s] liability from behavior that is identical to publishing or speaking: publishing defamatory material’….‘Promising,’ on the other hand, ‘is different because it is not synonymous with the performance of the action promised.’”
He continued:
“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 § 230(c)(1) does not apply to Plaintiffs’ contract claims.”
Remaining Claims
Nelson reasoned that each of the remaining claims “involves a similar duty: the duty to prevent fraud by third parties.” Finding that such claims are barred by §230(c)(1) immunity, he wrote:
“Such a duty not only touches on quintessential publishing conduct, but it is also indeed the very conduct that § 230(c)(1) addresses. After all, if Plaintiffs are correct that they can recover for Meta’s third-party advertising, then § 230(c)(1) is a dead letter.”
Having found that tort claims passed the second prong of the Barnes test for coverage by §230(c)(1) immunity, he considered whether the advertisements were made by a third-party or could be attributed to the platform. He opined: “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 § 230(c)(1)’s protections just because it could be misused by third parties.”
He declared that “Meta is…entitled to §230(c)(1) immunity…as to the non-contract claims.”
Concurring Opinion
Nelson, in his concurring opinion, cited U.S. Supreme Court Justice Clarence Thomas’ statement made in his 2020 dissent from the denial of certiorari in Malwarebytes, Inc. v. Enigma Software Group USA, LLC. Nelson said:
“Justice Thomas has identified several…examples of how this expansive view of § 230(c)(1) has created perverse effects. These include protecting Internet companies facilitating terrorism,…and harassment….These applications stretch the statute’s plain meaning beyond recognition. And they will continue to occur unless we consider a more limited interpretation of § 230(c)(1)’s scope of immunity. In a world ever-evolving and with artificial intelligence raising the specter of lawless and limitless protections under § 230(c)(1), we should revisit our precedent and ensure we have grounded its application.”
The case is Calise v. Meta Platforms, Inc., 22-15910.
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