Sudderth v. Platforms

Background

This proposed class action concerns an alleged scheme involving advertisements on Facebook and Instagram that directed victims to investment-focused WhatsApp and Messenger groups. The scammers allegedly impersonated the plaintiffs, including John Suddeth and Sara Perkins, and encouraged victims to buy shares of Pheton Holdings Ltd. The plaintiffs said they did not consent to the use of their identities and sought to hold Meta responsible for harm to their identities and professional reputations.

The amended complaint alleged that scammers supplied generic foreign-language inputs to Meta’s Design Creative and Advantage+ tools, which then produced advertisements with new text, images, and audio. The complaint did not clearly allege, however, that the plaintiffs were impersonated in those Facebook and Instagram advertisements. Instead, the alleged impersonation was clearly described in the later WhatsApp and Messenger posts and messages.

The plaintiffs asserted eight claims: false endorsement and false association under the Lanham Act; unfair competition under California’s Unfair Competition Law; California and Florida claims for invasion of publicity rights and misappropriation of name and likeness; unjust enrichment; breach of contract; negligence; and a claim under the Florida Deceptive and Unfair Trade Practices Act.

Section 230 analysis

Meta moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which asks whether the complaint alleges enough facts to state a legally plausible claim. Meta also argued that Section 230(c)(1) of the Communications Decency Act barred the claims. Section 230 generally prevents treating an interactive computer service as the publisher or speaker of information supplied by another content provider.

The court identified the allegedly harmful content as the WhatsApp and Messenger posts and messages in which scammers impersonated the plaintiffs and promoted Pheton Holdings shares. The court found that the amended complaint did not plausibly allege that the plaintiffs were impersonated in the Facebook and Instagram advertisements that Meta allegedly helped create. The complaint also did not allege that Meta materially contributed to creating the impersonating content in the messaging groups.

The plaintiffs argued that Meta could be liable because its advertisements acted as a gateway to the messaging groups. The court rejected that facilitation theory. It held that the theory still treated Meta as responsible for third-party content because the plaintiffs’ injuries were caused by the scammers’ later posts and messages, and preventing the harm would have required Meta to monitor or prevent that third-party content.

The court therefore held that Section 230 barred the Lanham Act claim, the California Unfair Competition Law claims under the unlawful and unfair prongs, the California and Florida publicity and name-and-likeness claims, the Florida deceptive-trade-practices claim, and the negligence claim. Those claims were dismissed.

Remaining claims

The court separately considered the breach-of-contract claim and the California Unfair Competition Law claim under the fraudulent prong. The plaintiffs relied on language in Meta’s Terms of Service stating that, if a user’s content violated the Community Standards, Meta would remove it.

The court held that this language was a warning to users who created offending content, not an enforceable promise to protect other users or remove content after receiving reports. The breach-of-contract claim therefore failed. The court also rejected the related claim for breach of the implied covenant of good faith and fair dealing because it depended on the same alleged promise.

The court treated the fraudulent-prong unfair-competition claim as either a repackaged contract claim or, based on the complaint’s alternative theory, another attempt to impose liability for the messaging-group content. The claim failed under either theory. The court also held that unjust enrichment could not survive because none of the other substantive claims survived.

Disposition

Judge Richard Seeborg granted Meta’s motion to dismiss the amended complaint. The opinion states that the breach-of-contract claim and the fraudulent-prong California Unfair Competition Law claim were dismissed without leave to amend. In the conclusion, the court nevertheless gave the plaintiffs 21 days to file an amended complaint to address the remaining ambiguity about whether they alleged impersonation in the Facebook and Instagram advertisements, and stated that no further amendment would be permitted. The conclusion does not add a with-prejudice or without-prejudice designation to the dismissals.