Dangaard v. Instagram, LLC

Background

Dawn Dangaard, Kelly Gilbert, and Jennifer Allbaugh alleged that they are adult entertainment performers who use social media to promote paid content on adult entertainment websites. They alleged that defendants associated with Fenix International, Ltd., Fenix Internet, LLC, and Leonid Radvinsky—collectively, the Fenix defendants—paid unnamed employees of Meta Platforms, Inc., Instagram, LLC, and Facebook Operations, LLC—collectively, the Meta defendants—to demote or delete the plaintiffs’ accounts and posts.

According to the allegations, the conduct reduced traffic to websites competing with OnlyFans, reduced the plaintiffs’ viewership and revenue, and increased traffic and revenue for OnlyFans. The plaintiffs also alleged that Meta employees manipulated Facebook and Instagram databases to place their accounts or content on lists identifying “dangerous individuals or organizations.” They called this conduct “blacklisting” and alleged that the content was also demoted or removed on other social-media platforms through a shared database.

The plaintiffs asserted claims for unfair competition and tortious interference with contracts and business relationships. They sought to hold the Meta defendants responsible for their employees’ conduct and the Fenix defendants responsible through a civil-conspiracy theory.

Motions and plausibility of the claims

The defendants moved to dismiss the second amended complaint under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. The Meta defendants also moved to strike under California’s anti-SLAPP statute, a law allowing early challenges to claims based on protected speech or petitioning activity. The Fenix defendants had previously raised other grounds, but the opinion states that their Rule 9(b) motion was not renewed and that their jurisdiction motion remained on hold pending jurisdictional discovery.

The court held that the plaintiffs’ allegations were plausible. It relied on an email that purported to show transfers from Fenix accounts through an intermediary account to trust accounts of Meta employees, with competing adult entertainment websites listed in a memo line. The court also considered allegations and supporting materials concerning changes in traffic to OnlyFans and its competitors, a news article reporting content removals from more than 100 Instagram accounts, and a Facebook whistleblower report.

The court found that the plaintiffs adequately alleged damages, including decreased revenue and one plaintiff’s alleged $13,000 annual revenue decrease from 2020 to 2021. It also found that they alleged harm to competition in the broader adult entertainment market and that their claims against Radvinsky were plausible because they alleged that competitors’ traffic declined around the time he acquired OnlyFans.

Leave to amend

The plaintiffs submitted the whistleblower report and a related news article after opposing the motions. The court treated their request to add those materials as a motion for leave to amend under Rule 15(a)(2), which generally allows amendment when justice requires it. The court found that amendment would not be futile because the report supported the plaintiffs’ allegations, and it granted the motion to add the report and related article as Exhibits L and M.

Communications Decency Act

The Meta defendants argued that Section 230(c)(1) of the Communications Decency Act protected them from liability. That provision generally limits treating an interactive computer service as the publisher or speaker of information supplied by another content provider.

The court rejected the defense at the dismissal stage. It accepted the allegation that the Meta defendants did more than merely remove or demote user content: they allegedly designed or used filtering systems to facilitate anticompetitive conduct directed at competitors of OnlyFans. Based on those allegations, the court concluded that the Meta defendants could be treated as information content providers responsible in part for developing the allegedly unlawful content or filtering process, so Section 230(c)(1) did not immunize them.

The court also stated that the Communications Decency Act’s policy favoring a competitive internet market weighed against applying immunity to the alleged conduct. It distinguished or discussed appellate decisions involving Section 230 and concluded that the alleged anticompetitive filtering practices could not be shielded through the defense asserted by the Meta defendants.

First Amendment defense

The Meta defendants also argued that the First Amendment protected their decisions to remove the plaintiffs’ content. The court rejected that argument, reasoning that the First Amendment does not provide immunity for alleged anticompetitive conduct. The court stated that removing posts and accounts may involve speech, but that conduct does not become constitutionally protected from generally applicable competition laws merely because speech is used to carry it out.

Vicarious liability

The court rejected the Meta defendants’ argument that they could not be held responsible for their employees’ conduct. It found it premature to conclude that employees who allegedly accepted bribes acted entirely outside their employment. The court held that the alleged roles of the employees in content moderation and security plausibly created a foreseeable risk that they could intentionally misuse their authority.

The court also rejected the argument that vicarious liability could not apply to unfair-competition claims. It explained that a company may be liable for violations by its employees, while an individual owner must have personally participated in the unlawful practices to be held individually liable.

Anti-SLAPP motion

The Meta defendants’ anti-SLAPP motion failed because the court had already found the plaintiffs’ claims plausible and determined that they survived the defendants’ other defenses. The court therefore found that the plaintiffs had established a reasonable probability of prevailing for purposes of the motion and denied the motion to strike.

Sealing and redaction

The court denied the plaintiffs’ request to redact the identities of individuals identified in paragraphs 74 and 75 of the second amended complaint because the allegations came from public webpages. It granted only limited protection for Exhibit D and related information. Under Federal Rule of Civil Procedure 5.2, the court ordered that all but the last four digits of financial-account numbers be redacted and that the name of a minor be redacted. Other information was to remain public, and the same treatment applied to the remaining exhibits, complaint paragraphs, and information in the defendants’ briefs.

Disposition

The court denied the motions to dismiss and strike. It granted the plaintiffs’ motion for leave to amend the complaint to include the whistleblower report and related news article, Exhibits L and M. It granted in part and denied in part the parties’ motions to seal.

Classification note

This is classified as a procedural order because the principal motions were motions to dismiss under Rule 12(b)(6) and an anti-SLAPP motion. Although the court assessed whether the allegations were plausible and rejected several defenses, it did not enter a merits judgment deciding whether the alleged misconduct actually occurred or whether the plaintiffs ultimately prevail.