Ninth Circuit Does More Damage to Section 230–Calise v. Meta

This is a lawsuit over scammy ads from Chinese advertisers. The plaintiffs claim Facebook “affirmatively invites” scammy ads by “actively soliciting, encouraging, and assisting scammers it knows, or should know, are using its platform to defraud Facebook users with deceptive ads,” all to goose its profits. Specifically, the plaintiffs allege that Facebook solicits Chinese advertisers knowing that allegedly 30% of such advertisers violate Facebook’s policies. Further, “Plaintiffs claim that Meta directs its employees to ‘ignore violations of [its ad policies], especially by China-based advertisers.'”

Section 230 has applied for many years to scammy third-party ads (see, e.g., Goddard v. Google, Ynfante v. Google), and the district court ruled for Facebook. On appeal, the panel affirms Section 230’s application to the non-contract claims–but reverses Section 230’s application to the contract claims. Judge Nelson then adds a self-concurrence (he wrote the panel opinion too) saying he wished he could have gone further to destroy Section 230. Grab a box of tissues before reading this blog post.

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The panel starts off with the always-chilling invocation that it will do a first-principles review of the word “publisher.” Seriously, are we doing this again??? Oh yes, we are, and in the characteristically often-wrong-but-never-in-doubt style of a TAFS judge (TAFS = Trump-appointed Federalist Society judge). Some examples:

Example 1: after a standard recitation of Stratton Oakmont, the panel says Section 230 “was meant to bring traditional ‘distributor’ immunity online.” No. NO NO NO. The idea that Section 230 just codifies distributor liability is a bogus meme that will never die. It has been debunked countless times, none of which Judge Nelson engages with. Nor does the opinion consider the import and meaning of “speaker,” a noun equal in prominence to “publisher.” Instead, the panel supports its “analysis” of the publisher/distributor distinction with two citations: (1) the 2011 Shiamili case (which, in its only reference to “distributor,” says “we took note of the Fourth Circuit’s opinion in Zeran and its robust understanding of CDA immunity as encompassing both publisher and distributor liability“–emphasis added), and (2) an obscure 2013 West Virginia Law Review article written by a general practice lawyer who focuses on business law, personal injury, and family law. These two citations sound like an impeccable foundation to ignore dozens of precedent cases, hundreds of law review articles by media law and Internet law experts, and the words of the statute’s drafters themselves. 🙃

Example 2: Judge Nelson cites Justice Thomas’ two anti-Section 230 screeds (1, 2) a total of SIX times. Other than to show off your Justice Thomas fandom, there is never a good reason to cite those ill-informed and non-precedential statements in a non-mocking way. EVER.

Example 3: Judge Nelson invoked one of the standard anti-230 strawman tropes, the Roommates “lawless no-man’s-land on the Internet” phrase.

Having gotten his ya-yas out, Judge Nelson feels emboldened to put decades of Section 230 jurisprudence into play:

The Supreme Court has not yet weighed in on this issue, but because this is a difficult and complex issue that requires case-specific, and indeed claim-specific, analysis, we take the opportunity to clarify the scope of § 230(c)(1) immunity

Translation: When judges say they are going to “take the opportunity to clarify” the law, they mean that they have self-authorized to engage in judicial activism and change the law.

The majority puts all of Section 230 jurisprudence in a blender and says the proper technique is to apply the legal concept of “duty,” leading to this recap:

If [the legal duty] 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 § 230(c)(1) does not apply. Second, we ask what is this duty requiring the defendant to do? If it obliges the defendant to “monitor third-party content”—or else face liability—then that too is barred by § 230(c)(1). [cite to HomeAway]

Traditionally, a Section 230 defendant must establish the following three elements: (1) the defendant is an ICS provider/user, (2) the claim treats the defendant as a publisher or speaker, and (3) the claim is based on third-party content. Where does the duty-based analysis fit into the 3-element test? I think the panel is repackaging the distinctions between claims over first-party content/conduct and third-party content, but in a more abstract and error-prone way.

You can see the problems with this “duty”-based analysis in the panel’s own opinion. As I’ve explained before, HomeAway absolutely requires the affected online marketplaces to monitor third-party content to avoid falsely marketing unavailable options, so the panel’s squib is disconnected from the actual case holding. Similarly, Barnes absolutely did relate to Yahoo’s status as a publisher–it failed its promise by continuing to publish the content it promised to remove (this is the same reason why AOL’s failure to remove the Zeran spoofs was a publishing decision). So basically, the panel’s shift to a “duty” analysis doesn’t help at all, answers no questions, and simply gives the panel a way to remix the caselaw however it wants.

Having established…something…the panel then does a claim-by-claim analysis that made my head hurt. Remember, I’m just the messenger.

Breach of Contract/Implied Covenant of Good Faith and Fair Dealing. “These [claims] both rely on the same ‘enforceable promises’ allegedly made by Meta to Plaintiffs—the same duty. Barnes controls here….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.”

I’ll discuss more implications below, but a few points for now:

• The panel expressly sidesteps if Facebook made any enforceable promises because the lower court hadn’t reached that issue yet. I’m pretty sure Facebook says in many different ways that it doesn’t promise any freedom from scammy ads, so the plaintiffs have to stitch together decontextualized disparate statements to try to overcome that. As a result of Facebook’s non-definitive “promises”/puffery, the contract claim is almost certainly going to fall apart on remand when the court digs into the actual TOS.
• If Facebook promised to “take appropriate action” to combat scammy ads, isn’t the “appropriate action” the non-publication/depublication of the ads? In other words, the panel is trying to get around the obvious “publication” problems with the remedy the plaintiffs wants from Facebook, which is to exercise a different level of editorial control. The Barnes case navigated this conundrum by only bypassing promissory estoppel from Section 230, and we know it’s almost never promissory estoppel (and certainly there’s no way the plaintiffs can establish promissory estoppel here).
• Plaintiffs can always find something in a service’s disclosures that they can read tendentiously to “promise to moderate third-party” content. The panel opens the door for every plaintiff to get past Section 230 using a contract breach claim, whether it’s a legitimate or bogus claim.

Most problematically, California state courts have reached the directly opposite conclusion as this panel and instead held that Section 230 applies to contract breach claims in many circumstances, including an opinion this week from the California Appeals Court. That opinion said:

Lady Freethinker’s claims ultimately seek to treat Google as the publisher or speaker of content provided by another information content provider. Both the breach of contract and breach of implied covenant of good faith and fair dealing causes of action, for instance, are predicated on YouTube “allowing hundreds of animal abuse videos.” [to apply these principles to the Calise case, substitute “scammy ads” for “animal abuse videos”]…

Google’s actions allowing the animal abuse videos to be shown on YouTube thus fall squarely within the scope of a publisher’s traditional editorial functions—deciding whether to publish, withdraw, postpone or alter content….Google’s actions in allowing the animal abuse videos to be shown and failing to remove them amount to publishing decisions not to prevent or remove the videos—that is, “ ‘deciding whether to exclude material that third parties seek to post online.’ ”…

numerous courts have recognized the limited scope of [the Barnes] holding on this issue and have rejected attempts to evade section 230 liability by asserting distinguishable contract-based causes of action….

merely because a cause of action is framed and labeled as a breach of contract or related claim does not remove it from the scope of section 230 immunity. Instead, a court must evaluate a cause of action to determine whether it seeks to treat an interactive computer service as a publisher or speaker of third-party information. That may include assessing what a plaintiff’s claim “amounts to” or identifying the gravamen of a complaint and the nature of the alleged injurious conduct, notwithstanding the plaintiff’s labels and characterization of its own causes of action. It may also include assessing the sufficiency of a cause of action as pleaded from a contract standpoint, including whether it is based on general policies or a personal, well-defined, enforceable promise…

Publishing the animal abuse videos is more egregious to plaintiffs than the scammy ads because YouTube can determine the TOS violation from the four corners of the video, while Facebook cannot determine if an ad is scammy solely from the ad copy. Also, note at the end how the California court says the 230 application “may also include assessing the sufficiency of a cause of action as pleaded from a contract standpoint, including whether it is based on general policies or a personal, well-defined, enforceable promise.” The bolded language is the Barnes case. The “general policies” situation is the Calise and YouTube cases.

As usual, this TAFS judge doesn’t care about or discuss any of the (extensive) contrary precedent, including the many cases that have qualified or limited the reach of Barnes. Further, normally federal courts are supposed to apply the state law as interpreted by state courts. Instead, this opinion sets up an obvious conflict between the federal and state courts in California. That needs resolution, and pronto.

Negligence, Unjust Enrichment, and UCL. The panel says “Each of these [claims] involves a similar duty: the duty to prevent fraud by third parties.” (So too do the contract claims–it’s the exact same duty in each circumstance). In a footnote, the panel says “an unjust-enrichment claim does not rely on a formal agreement between the parties from which a duty springs—to the contrary, it relies on the absence of such an agreement—this claim is more appropriately considered with the non-contract claims.”

The panel then marches through these non-contract claims. Again, I’m just the messenger.

With respect to unjust enrichment:

the obligation in an unjust enrichment claim—the relevant part of our duty analysis—is the “return of benefit.” 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 the defendant knew certain perpetrators were posting content on its website to lure and rape women. We held there that warning users about this third-party use of its website, of which Internet Brands was on notice, did not trigger § 230(c)(1).

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. 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 § 230(c)(1) bars Plaintiffs’ unjust enrichment claim as pleaded.

Psst, plaintiffs…want a get-out-of-Section-230-free card? Just plead failure to warn. And breach of contract. Judge Nelson says it’s 👌.

Note that in both the Calise and Internet Brands cases, the alleged harm took place totally off-network, i.e., outside the defendants’ purview. The only thing Facebook and Internet Brands could “see” was the content published on their network, and vetting that content for safety wouldn’t be sufficient. The court also steps over this crucial fact difference.

With respect to negligence:

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 § 230(c)(1) shields Meta from liability stemming from Plaintiffs’ negligence claim

To me, this is indistinguishable from the social media addiction cases because the users are allegedly addicted to engaging with third-party content. But this panel would surely distinguish those cases by saying that the “duty” would be to not do product marketing to make products more attractive to users.

It also catches my eye how this panel breezed past the “special relationship” allegations. The failure-to-warn cases have failed because there was no special relationship, so that issue casts an important but ignored shadow on the case.

The UCL discussion:

“The predicate duty [under the state unfair competition law] is to not engage
in unfair competition by advertising illegal conduct.” 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.

By this point, you are probably stunned or howling. How can the contract promise-based “duty” be excluded from Section 230 but a false advertising-based “duty”–also a promise-based duty–be “the very conduct that § 230(c)(1) addresses”??? The panel’s theory is incoherent and internally inconsistent with itself. And the panel is right that Section 230 is a “dead letter” if advertising-based claims are excluded….and yet the same logic applies to breach of contract…? Sounds like a recipe for chaos.

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Having done a claims-based sorting of the Section 230 defenses (contract claims excluded, non-contract claims included), the panel isn’t done yet. It says it now must ask if Facebook “materially contributed” to the ads. The panel says Facebook doesn’t, because “neutral tools”:

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 § 230(c)(1)’s protections just because it could be misused by third parties.

The panel gets to the right place. Every service can be used both for legal and illegal purposes, and that fact alone should not create liability or disqualify a service from Section 230. If Judge Nelson wanted to stan for Justice Thomas, the Taamneh decision would have been an appropriate analogy here. Indeed, this panel gives defendants pretty wide berth: it’s suggesting that if the ratio of legal to illegal ads is 2:1, still no problem with Section 230.

Yet, I still have questions. First, what are the “tools” at issue? Apparently, the plaintiff asserted vague nouns like “solicitation” and “assistance” to describe Facebook’s culpable behavior. But those nouns aren’t “tools” at all, so why is the panel invoking the “neutral tools” framing to resolve the question?

Second, what made Facebook’s “tools” “neutral”? The panel says the unlawful activity “does not result from Meta’s efforts.” This just restates the first-party/third-party distinction the panel mucked in its “duty” analysis. Or better yet, the panel could have stuck more closely to the Roommates.com case, which defined “material contribution” as adding the alleged unlawfulness (i.e., turning the statement “Joe is not a thief” to “Joe is a thief”). Facebook didn’t add any alleged unlawfulness of the scammy ads (especially because any scams took place outside of the Facebook network), so it would have been easy for the panel to resolve the issue that way.

The plaintiffs’ “but the algorithms” argument didn’t change the material contribution analysis:

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.

Note two things here:

• the Ninth Circuit’s (uncited–it was non-precedential) Vargas ruling denied Section 230 for ad targeting. Does this ruling conflict with Vargas?
• the panel says Section 230 applies even if Facebook intentionally skewed the algorithm to increase its profits from scammy ads.

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Judge Nelson then adds a concurrence to his own panel opinion. The concurrence is magalicious in the same vein as Justice Thomas’ anti-230 screeds, including more afactual and ahistorical discussion about the publisher/distributor distinction, so there’s no point in stressing over its details. As just one example, he mentions that Facebook’s constructive knowledge of the scammy ads should have negated its Section 230 protection–even though knowledge-based exclusions to Section 230 would undermine Section 230’s critical procedural benefits. Thus, my takeaways from the concurrence: First, Judge Nelson is ready to eviscerate Section 230 just like Justice Thomas. Second, the other two panelists were not there (yet).

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Implications

TAFS Judges Are a Wrecking Ball for the Rule of Law. Judicial activism comes in several forms. TAFS judges engage in judicial activism often by cherrypicking precedent. They pick the outcome they want, find supporting citations (which may be dubious, like obscure law review articles or non-precedential statements from Justice Thomas), and disregard or unpersuasively distinguish any adverse precedent. Superficially, the opinions may look like they maintain fidelity to the law, but selective citations are being weaponized to reverse the law.

The Ninth Circuit’s Ongoing Swiss-Cheesing of Section 230. Section 230 has been on a long decline trend in the Ninth Circuit. Take a look at this history of the Ninth Circuit adding exclusions to Section 230 (I’m sure I’m forgetting some):

• Batzel v. Smith: exclusion for third-party content not intended for publication
• Roommates.com: exclusions for (1) encouraging illegal content, (2) requiring the input of illegal content, and (3) materially contributing to content illegality. Recall the tortured history of that case: the initial panel decision prompted en banc review and a new en banc opinion, which was later rendered dicta by further proceedings.
• Barnes v. Yahoo: exclusion for promissory estoppel (expanded in this case to all contract claims). The panel had to amend its initial opinion.
• Doe v. Internet Brands and Beckman v. Match.com: exclusion for failure-to-warn. The panel had to completely replace its initial Internet Brands opinion.
• HomeAway v. Santa Monica: exclusion for consummating third-party transactions.
• Enigma v. Malwarebytes: exclusion when the plaintiffs allege “anti-competitive animus.” This case went back to the Ninth Circuit.
• Gonzalez v. Google: exclusion for funding third-party content. I’m not sure what’s left of this exclusion after the Supreme Court ruling.
• Lemmon v. Snap: exclusion for “negligent design” (when not based on third-party content, though the plaintiffs are conveniently ignoring that).
• Vargas v. Facebook: exclusion for discriminatory ad targeting. Non-precedential opinion.
• Quinteros v. Innogames: exclusion for moderators’ activities. Non-precedential opinion.
• Diep v. Apple: exclusion for first-party marketing representations (did this case survive the Calise case?). Non-precedential opinion.
• Now, Calise v. Facebook: exclusion for contract-based claims.

As you can see, the Ninth Circuit’s exceptions to Section 230 are extensive and multiplying rapidly (the last 3 are from the last 6 months). I wonder if the exceptions are getting perilously close to swallowing up the rule. In other words, if you’re a plaintiff in the Ninth Circuit and you can’t get around Section 230, at this point, isn’t that kind of on you?

(Of course, getting around Section 230 and actually winning the case are two very different things, as the plaintiffs alleging failure-to-warn have found out first-hand).

What’s Next? This opinion could benefit from a rehearing en banc; or if that’s denied, the panel should issue a corrected opinion fixing some of its obvious flaws (like removing the line about 230 extending distributor liability). However, a rehearing en banc would come with significant risk, as Judge Nelson and surely other Ninth Circuit judges would use it as an opportunity to do even more damage to Section 230. Another possibility would be for the Ninth Circuit to certify the contract/230 question to the California Supreme Court so that the state and federal jurisprudence could be harmonized. Rather than further appellate proceedings, Facebook might decide to win the contract claims on remand.

Also, this opinion is a preclude to the appeals in the social media addiction cases. This ruling neatly provides a path for affirming Section 230’s inapplicability to those cases because they involve a different “duty” than “publishing.” If the social media addiction 230 ruling gets affirmed, Section 230 really will be dead in all relevant respects.

Case Citation: Calise v. Meta Platforms, Inc., 2024 WL 2826231 (9th Cir. June 4, 2024)