Ninth Circuit Affirms Certification of Damages Class and Vacates Certification of Injunction Class in UCL Suit Against Meta

By Wesley Sweger

DZ Rsrv. v. Meta Platforms, Inc., 96 F.4th 1223 (9th Cir. 2024)

On March 21, 2024, the Ninth Circuit affirmed a N.D. Cal. (Judge Donato) order certifying a Rule 23(b)(3) damages class and vacated and remanded certification of a 23(b)(2) injunction class in a case against Meta Platforms, Inc. (“Meta”) (f/k/a Facebook).

In 2018, a nationwide class of advertisers (“Plaintiffs”) filed this action against Meta, alleging that Meta had misrepresented the “Potential Reach” of advertisements on its platforms. “Meta owns and operates several online social media and messaging platforms and applications, including Facebook, Instagram, and WhatsApp.” (p. 1231.) “Meta tells advertisers that ‘Potential Reach estimates how many people your ad could potentially reach depending on the targeting and ad placement options you select while creating an ad.’” (Id.) Advertisers allege that Meta fraudulently misrepresented the Potential Reach of advertisements on its platforms because Meta claimed Potential Reach was an estimate of people, although it was an estimate of accounts. “[T]hroughout the class period, the number of accounts was always larger than the number of people because non-human entities like businesses and clubs have accounts, some people have multiple accounts, and some people and bots create fake accounts.” (Id.) “Plaintiffs allege that because of the misrepresentation of Potential Reach, they purchased more Meta advertisements and paid more for those advertisements than they would have with accurate information.” (Id.)

The district court sustained three of Plaintiffs’ claims under California state law: fraudulent misrepresentation, fraudulent concealment, and violation of California’s Unfair Competition Law (“UCL”). The district court certified two classes—a damages class and an injunction class—both composed of U.S. residents who purchased at least one advertisement on Meta’s platforms from August 15, 2014 to the present, excluding advertisers who used certain specialized purchasing methods or who were shown a Potential Reach lower than 1,000. Meta appealed certification of both classes of advertisers—a damages class and an injunction class.

Damages Class. Meta challenged only the district court’s findings regarding the predominance of common factual or legal issues under Rule 23(b)(3) and typicality and adequacy of representation under Rule 23(a)(3) and (4).

Predominance

The Court found Meta only legitimately challenged the district court’s findings that misrepresentation and justifiable reliance—both elements of Plaintiffs’ fraudulent concealment and fraudulent misrepresentation claims—are common issues that predominate among the class.

First, misrepresentation. The Court noted it generally categorizes a misrepresentation as falling into one of two groups to determine whether the misrepresentation presents a common question: (1) misrepresentation stemming from a common course of conduct, or (2) if there was material variation in the representations made or in the kinds or degrees of reliance by the persons to whom they were addressed.

Meta raised three arguments for why misrepresentation did not constitute a common course of conduct. First, it argued “the misrepresentation is the numerical discrepancy between people and accounts, rather than the fact that [it] substituted people for accounts.” (p. 1234.) Thus, Meta argued, the misrepresentation materially varied because the numerical discrepancy differed for each advertiser. The Court found Meta misstated the nature of the misrepresentation at issue and found the common issue to be: “Would substituting people for accounts in Potential Range be material to the reasonable consumer?” (p. 1235.)

Second, Meta also argued the misrepresentation was not uniform because Plaintiffs viewed Potential Reach alongside other metrics. The Court was not persuaded, pointing to a series of decisions finding class treatment appropriate despite similar, if not larger, contextual differences between members.

Lastly, Meta argued that “any misrepresentations differed among class members because it updated its disclosures about Potential Reach twice during the class period.” (p. 1236.) The Court found that “none of the disclosures here negated the misrepresentation, which would have required a clear statement that Potential Reach measures accounts.” (Id.)

Therefore, the Court found the misrepresentation to constitute a common course of conduct and was thus fit for class treatment.

Next, justifiable reliance. The Court noted California presumes reliance when the same material misrepresentations are communicated to each member of the class. Meta argued that, despite this presumption, reliance is always an individual inquiry. The Court rejected this argument, noting the purpose of the presumption is to “avoid precluding all fraud class actions.” (p. 1237.) Thus, the Court found reliance presents a common question provable by common evidence.

Typicality and Adequacy of Representation

Meta argued “the named Plaintiffs are not typical or adequate because they suffer from credibility problems that expose them to individualized defenses related to reliance.” (p. 1238.) The Court noted its standard of view here is clear error, and the record supports the district court’s conclusion that the named Plaintiffs have no credibility issues that would destroy their typicality.

Accordingly, the Court affirmed class certification.

Injunction Class. Meta appealed the district court’s order certifying an injunction class on the basis that the named Plaintiffs lack Article III standing to seek injunctive relief under California’s UCL. The named Plaintiffs are two former Meta advertisers, DZ Reserve (an e-commerce business) and Cain Maxwell (who operated an online firearm mount store). Meta argued lack of subject-matter jurisdiction for the first time on appeal.

DZ Reserve is no longer in business. Thus, DZ Reserve did not submit any evidence of a threat of suffering “actual and imminent” future injury that was concrete and particularized, and that could be redressed by injunctive relief. Nor did DZ Reserve demonstrate a sufficient likelihood that it would again be wronged in a similar way. The Court found DZ Reserve lacks standing to assert a claim for injunctive relief.

The Court found Maxwell’s standing to be a closer call and may require additional factual development. Specifically, the Court remanded questions as to how the district court would square Maxwell’s testimony that he “think[s] [he] would” purchase Meta ads in the future, with evidence suggesting Maxwell no longer has a business to advertise. (p. 1241.)

Therefore, the Court vacated and remanded certification of the injunction class.