PUTIAN AUTHENTIC ENTERPRISE MANAGEMENT CO., LTD v. Meta Platforms, Inc.

Background

Putian Authentic Enterprise Management Co., Ltd., Fuzhou Haina Hongyi Network Technology Co., Ltd., Fuzhou Baidai Network Technology Co., Ltd., Nanchang Huimeng Network Technology Co., Ltd., and Suzhou Chenghe Network Technology Co., Ltd. sued Meta Platforms, Inc. and Does 1–10. The complaint asserted claims for declaratory judgment, intentional interference with a contract, intentional interference with prospective economic advantage, promissory estoppel, breach of contract, breach of the implied covenant of good faith and fair dealing, violation of California’s Unfair Competition Law, and negligence.

The plaintiffs described themselves as social media marketing companies that provided clients access to Meta’s marketing tools and Facebook audience. They purchased advertising space from Meta and resold it to e-commerce vendors. In December 2021, they learned that Meta intended to ban their Facebook Business Manager accounts for what Meta called misleading e-commerce, celebrity-bait, and business-impersonation activity through an abuse pattern called agency scaling. The plaintiffs’ counsel sent Meta a demand letter seeking review of the planned enforcement, but the plaintiffs received no response. On March 14, 2022, Meta told counsel that it had completed its investigation and determined that the plaintiffs were responsible for deceptive and misleading Facebook advertisements violating Meta’s terms and policies. Meta shut down the plaintiffs’ Business Manager accounts on March 22, 2022.

Motion and legal standard

The plaintiffs moved for a temporary restraining order and preliminary injunction barring Meta from denying them access to their Business Manager accounts. The court stated that both forms of relief use the same standard. A party seeking this extraordinary relief must show a likelihood of success on the merits, likely irreparable harm without the relief, that the balance of hardships favors the party seeking relief, and that the injunction would serve the public interest. The court also stated that each factor requires a threshold showing.

Court’s analysis

The court focused on irreparable harm and held that the plaintiffs had not made the required showing. The plaintiffs argued that losing access would drive them out of business and cause them to lose current and prospective customers.

As to the alleged risk of business failure, the plaintiffs relied mainly on a declaration from Chen Xin, identified as the Chief Operating Officer for all plaintiffs. Chen stated that the plaintiffs expected to lose an estimated $1.12 million per day and that their businesses would immediately and entirely shut down. The court found those statements conclusory and unsupported by sufficient financial information. It noted that the plaintiffs collectively reported approximately $68 million in gross revenue in 2021 and provided services beyond using Facebook advertising space. The court found that the evidence showed a loss of revenue but did not show that the plaintiffs had been driven out of business or faced immediate financial destitution.

As to lost customers, the court found that Chen did not identify any specific current or prospective customer the plaintiffs had lost because of Meta’s actions. The court therefore concluded that the plaintiffs had not shown that this alleged harm was likely to occur.

Disposition

The court held that the plaintiffs had not demonstrated a likelihood of irreparable harm without emergency relief. Because that requirement was not met, the court did not consider the remaining requirements. Judge Edward J. Davila therefore denied the motion for a temporary restraining order and preliminary injunction. The order addressed only the requested emergency injunction and did not state a ruling on the complaint’s underlying claims.