Court Revives Lawsuit Against Facebook Over Scammy Crypto Ads–Forrest v. Meta

Andrew Forrest is an Australian billionaire. “Beginning in 2019, Dr. Forrest learned that ads using his name and likeness to endorse cryptocurrency and other fraudulent investment products were appearing on Facebook.” Forrest contacted Facebook multiple times over the years asking them to curb the activity and even wrote an open letter to Zuckerberg. Unsatisfied with the responses, Forrest sued Facebook in California state court in 2021.

In 2022, the California superior court dismissed the complaint based primarily on Section 230 grounds. Prior blog post. After Forrest amended the complaint, Facebook removed the case to the Northern District of California. That led to this surprising and troubling opinion partially denying Facebook’s motion to dismiss.

[Note: befitting a billionaire-plaintiff who plays to win, the caption lists 9 plaintiff’s lawyers across 3 different law firms. It’s rare to see Facebook’s legal team quantitatively “outgunned” like this (it only lists 3 defense lawyers from a single firm). Forrest’s victory lap on this ruling reinforces that money is no object: “I am prepared to spend whatever it takes to hold Facebook’s Directors and its leaders responsible. I don’t care what it costs. I want to see them in the witness stand explaining their actions.”]

Section 230

Extraterritorial Application of Section 230. “Section 230 establishes a liability rule for litigation in U.S. courts rather than a conduct rule that applies to actions taken outside the United States…This case is being litigated in the United States, so applying Section 230 as a defense to liability involves a domestic application of Section 230, even if the actions that might otherwise create liability occurred elsewhere.” Compare Anupam Chander, Section 230 and the International Law of Facebook. Also, the uncited SPEECH Act partially addresses Section 230-related litigation in foreign courts.

ICS Provider. This factor is rarely contested because it will be satisfied in every Internet Law case. Nevertheless, this court has a lot more to say about this element (much more than normal):

whether an entity is an interactive computer service provider depends on context; there is no permanent all-encompassing “provider” status that indefinitely immunizes any entity deemed in a particular case to be one…That Meta may have been acting in an interactive-computer-service-provider capacity in the context of one case—or that the parties conceded as much—does not establish that Meta is always acting in that capacity in all other contexts

This is true, but with a service like Facebook, any claim related to their website will automatically involve their function as an ICS provider. So is this really worth contesting?

Maybe–at least before this judge. This judge emphasizes repeatedly that 230 is an affirmative defense, and “Meta can only succeed on its Section 230 defense if Dr. Forrest’s allegations establish beyond dispute that Meta, in the context of these allegations, was in fact acting as such a provider.”

OK, I guess. Apparently this judge wouldn’t take judicial notice that a website is a website…? Nevertheless, the moment the plaintiff calls Facebook a website, we should move past this element, right? The court says:

The complaint alleges that “Meta Ads” “market[s] and sell[s] advertising to advertisers targeting the user community.” Through Meta’s “Audience Network,” according to the complaint, advertisers can pay to run ads even on “non-Facebook channels, including ‘partner’ sites, and third-party affiliated websites or mobile applications.” The complaint specifically alleges that Meta Ads makes it possible for multiple “[c]ustomers advertising in Australia” to “run” ads on Meta’s own social media platforms as well as third-party websites and mobile applications. These allegations establish that Meta “provide[d] or enable[d] computer access by multiple users to a computer server” in operating its ad business, making it an interactive computer service for the purposes of Section 230.

Phew, that was closer than expected. I guess if you’re a billionaire and you litigate every point to death, you buy yourself the right to have a judge spend 500 words discussing an issue that could have been handled in 50.

Information Provided by Another Information Content Provider. The court says the pleadings raise fact questions about this element:

Dr. Forrest’s complaint alleges that Meta “produces …ads using basic material supplied by criminal scammers to its automated Ads Manager application.” It alleges that “Meta’s Ads Manager software drives and ultimately determines what the completed, paid-for ads will look like.” The complaint also alleges that Meta offers several additional tools that can automatically adjust the appearance and content of an ad, including by “mix[ing] and match[ing]” ad components like images, videos, text, and audio and by using generative artificial intelligence to “automatically optimize[ ] ads to versions the audience is more likely to interact with.”

Facebook responded that this is all hogwash, but Facebook can’t introduce contrary facts on its motion to dismiss, so the fact dispute must wait to a later stage in the case.

The court should have stopped there. Instead, we get this passage (with cites to Calise v. Meta):

Although Dr. Forrest does not clearly allege how Meta’s ad tools work or contribute to the challenged ads, he does allege that the tools affect ad content in a manner that could at least potentially contribute to their illegality. Dr. Forrest alleges not simply that Meta provided “neutral tools” which may have been used by other parties for “unlawful purposes,” but that Meta has “active involvement” in deciding what ads look like and who they are shown to and that its automated tools “supercharge Meta’s ability to produce and drive the Scam Ads to vulnerable viewers,” which has “been a substantial factor in the continuing production, dissemination, and success” of the challenged ads. These allegations present a factual dispute regarding whether Meta’s ad systems were neutral tools that anyone could use (or misuse) or whether the tools themselves contributed to the content of the ads, including to the aspects of the content that are allegedly illegal. Meta has not demonstrated that there can be no dispute, based on the allegations in the complaint, that all of the scam ads are in fact exclusively provided by another information content provider or that Meta’s only contributions to the ads are entirely unrelated to the aspects of the ads that allegedly make them illegal.

All of this may sound superficially persuasive, but to me, these allegations sound similar to the 15-year-old Goddard v. Google decision. In that case, the plaintiff argued that Google added to the scammy ads by making various suggestions about the third-party ads, but Section 230 applied anyway. As it should here too.

When the complaint “does not clearly allege” the key facts at issue, I think some judges would require the plaintiff should be clearer and more specific about exactly what Facebook added and why that gets around Section 230. Instead, this judge locked into Section 230 as an “affirmative defense” and puts all of the burden on Facebook to disprove the element without adding any new facts. Murky pleadings + a credulous judge = a case that survives a motion to dismiss, bogus or legitimate.

So kudos, I guess, to the plaintiff’s legal team for getting past Section 230. They did better this time than in the 2022 state court dismissal. But we’ll see if the judge finds their facts persuasive. If the facts don’t pan out, then this ruling will have burned up Facebook’s money on discovery and further proceedings when it shouldn’t have. See this paper.

Prima Facie Elements

With Section 230 out of the way, the door is open to claims courts rarely address because they are based on third-party ads, including:

Publicity Rights. In the 9th Circuit, Section 230 would normally preempt publicity rights claims based on third-party content. With Section 230 sidelined, the court credits the plaintiff’s allegations that Facebook produced the ads and therefore could take responsibility for the publicity rights issues. Furthermore: “Dr. Forrest claims that Meta profited more from ads that included his likeness than it would have if the ads had not. This is enough to adequately plead that the alleged misappropriation was to Meta’s advantage.”

Negligence. “Meta again argues that the complaint establishes that the challenged ads were entirely created by third parties, and that Meta is under no duty to control the conduct of third parties except in the presence of a special relationship. But this is again a premature factual retort to Dr. Forrest’s allegation that Meta did play an active role in creating the ads he challenges. Meta provides no other basis for dismissing Dr. Forrest’s general negligence claim.” I wonder how the negligence claim interacts with the First Amendment? After all, Facebook’s “negligence” relates directly to the publication of third-party content.


This opinion was issued by Judge Pitts, who took over for Judge Koh when she was elevated to the Ninth Circuit. I’m wondering if the Section 230 winds will start blowing in a different way in the San Jose federal courthouse.

It also made me wonder about Facebook’s decision to remove the case from state court, where it won, to federal court, where it ran into a buzzsaw. I’d love to know more about Facebook’s removal decision and if it would make the same choice again.

In the past, if this ruling was appealed to the Ninth Circuit, I’d say that Facebook had a good chance of reversal. However, in the post-Calise world, the Ninth Circuit has become even more dangerous to Section 230 defendants. I’ll note that Calise dismissed the non-contract claims against Facebook on Section 230 grounds–so nominally this result conflicts with Calise. However, because the court unskeptically credited the plaintiff’s murky arguments about Facebook’s involvement in the ad production, the legal questions at issue here were different than in Calise. Hence the different result.

This opinion is a good example of how the term “neutral tools” vexes courts. The phrase traces back to the case, where it was used five times but never defined. Since then, courts have repeatedly referenced the phrase but have never officially defined it. As a result, it remains this amorphous legal concept that can be twisted and stretched in any direction. (And as I’ve complained before, tools are never “neutral,” so the entire concept is incoherent).

If the plaintiff’s allegations succeed, then Facebook faces potentially ruinous liability for third-party ads because many plaintiffs can make similar/identical arguments about how Facebook contributes to third-party ads. That exposure makes this a must-win case for Facebook. That means we’re likely to find out what happens when one of the most highly capitalized companies in human history collides with one of the world’s wealthiest men. (Don’t forget, the lawyers are almost always the only winners from litigation. In this case, both litigants have big bucks and an incentive to spend them on legal fees. 🤑).

Case Citation: Forrest v. Meta Platforms, LLC, 2024 WL 3024642 (N.D. Cal. June 17, 2024)