Federal Appeals Court Rules Facebook Must Face Lawsuit Over Breach of Contract Claims
In a recent ruling, a federal appeals court has determined that a federal law granting broad immunity to Big Tech companies does not cover breach of contract claims. The case involves Facebook’s parent company, Meta, and plaintiffs Christopher Calise and Anastasia Groschen, who purchased items advertised on Facebook in 2022.
According to the plaintiffs, Facebook unjustly enriched itself and was negligent by not only accepting but soliciting ads from scammers. They argued that Facebook breached its contract with users by soliciting fraudulent advertisements from Chinese companies, despite internal data showing that nearly 30% of these ads violated Facebook’s policies.
Initially, U.S. District Judge Jeffrey White dismissed the entire case, citing Section 230 of the Communications Decency Act. Section 230 provides immunity to providers of interactive computer services for information provided by another content provider. However, the appeals court disagreed with Judge White’s decision and stated that the breach allegations should not have been dismissed.
U.S. Circuit Judge Ryan Nelson, writing for the majority, explained that Meta failed to show that Section 230 applied to the contract-related claims because these claims did not seek to treat Meta as a publisher or speaker. The court held that Meta’s duty to moderate third-party advertisements stemmed from its promise in its terms of service and was unrelated to its status as a publisher.
While claims of unjust enrichment, negligence, and state business law were deemed immune under Section 230 due to insufficient evidence of Meta’s contribution to the ads, Judge Nelson expressed the need to reevaluate the broad immunity granted to Facebook and other Big Tech companies under Section 230.
He referenced Supreme Court Justice Clarence Thomas’s statement in 2020 that courts have stretched the protection from publishers and speakers to distributors, granting immunity even when a company distributes illegal content. Judge Nelson argued that this interpretation of Section 230 encourages willful blindness when internet companies have an economic incentive to permit unlawful content.
He further pointed out conflicts between the broad immunity and other laws, such as those imposing liability for knowingly displaying obscene material to children. Judge Nelson emphasized the importance of revisiting the precedent and ensuring a more limited interpretation of Section 230’s scope of immunity.
The court’s ruling sends the case back to Judge White for further proceedings. Meta and the plaintiffs’ lawyer have not yet commented on the decision.
This ruling highlights the ongoing debate surrounding the responsibilities and liabilities of Big Tech companies. While Section 230 has been instrumental in protecting these companies from certain legal claims, there is growing concern that it may shield them from accountability in cases involving breach of contract and other harmful conduct. As technology continues to evolve, it becomes crucial to strike a balance between ensuring online platforms’ freedom to moderate content and holding them accountable for their actions.
