Stackla, Inc. v. Facebook Inc.

Background

Stackla, Inc., Stackla, Ltd., and Stackla Pty Ltd. sued Facebook Inc. and Instagram, LLC. Stackla operates a software-subscription business that helps clients find social-media content, obtain approval to use it, and reuse it in advertising and marketing. Stackla previously used Facebook’s application programming interface, or API, to identify content posted by Facebook users.

Facebook accepted Stackla into its Facebook Marketing Partner program in May 2019. After media reports concerning misuse of Instagram and third-party advertising, Facebook sent Stackla a cease-and-desist letter on August 30, 2019. The letter stated that Stackla had breached a master subscription agreement and had been suspended as a marketing partner. Facebook also ended Stackla’s access to Facebook and Instagram systems, and accounts associated with Stackla officers and some employees were barred.

Stackla filed the lawsuit on September 19, 2019, asserting nine causes of action, and moved for a temporary restraining order. Stackla argued that approximately 80 percent of the content collected by its clients came from Facebook and Instagram and that continued loss of access would cause clients to terminate contracts, prevent it from obtaining prospective clients, and eventually destroy its business.

Legal standard

A temporary restraining order is emergency relief intended to address harm likely to occur before a preliminary-injunction hearing. The court applied the same standard used for a preliminary injunction. Stackla had to show that it was likely to succeed on the merits, likely to suffer irreparable harm without immediate relief, that the balance of hardships favored an injunction, and that an injunction would serve the public interest. Under an alternative version of the test, serious questions about the merits and a sharply favorable hardship balance could suffice, but Stackla still had to show likely irreparable harm and that an injunction was in the public interest.

Analysis

The court focused on irreparable harm and the public interest. Because a party seeking emergency relief must satisfy all required factors, the court said it did not need to decide the balance of hardships or whether Stackla had raised serious questions about the merits.

On irreparable harm, the court found Stackla’s evidence speculative. Stackla relied primarily on a declaration from Damien William Mahoney, who was identified as the chief executive officer, director, and shareholder of Stackla Pty Ltd. The declaration said that clients depended heavily on Facebook and Instagram content, that some clients had raised concerns or sent notices claiming material breach, and that Stackla would soon reach a point where it could no longer operate.

The court concluded that these statements did not demonstrate imminent harm. Stackla did not identify a client it was likely to lose, provide a contract it was likely to breach, identify a contractual term it would breach, or identify a client likely to give notice of material breach. It also did not provide financial information or a specific timeframe showing that it faced imminent destruction as a business. The court therefore found that Stackla had not established the irreparable harm required for emergency relief.

On the public interest, the court recognized an interest in preventing companies from dissolving and employees from losing their jobs. But it found that, on the abbreviated briefing schedule, the public interest favored allowing Facebook to continue policing its platforms, protecting user privacy, and excluding entities suspected of abusive data collection. The court also reasoned that an injunction could impair Facebook’s ability to enforce its platform rules before judicial review.

Disposition

Judge Hamilton denied Stackla’s motion for a temporary restraining order. The order kept Facebook’s ban in effect pending at least a motion for a preliminary injunction. It stated that Stackla could file that motion by October 9, 2019, under the court’s normal briefing schedule. The opinion did not decide the underlying claims on their merits.