• by Wendy Davis  @wendyndavis, June 23, 2023

A federal appellate court has revived a lawsuit by users who claim Meta's former ad-targeting options violated laws against discrimination.

In a ruling issued Friday, a three-judge panel of the 9th Circuit Court of Appeals rejected Meta's argument that it was protected from liability by Section 230 of the Communications Decency Act, which broadly immunizes web companies from content created by third parties.

Instead, the panel essentially said the allegations in the lawsuit, if proven true, could show that Facebook was a “co-developer” of the ads, not simply their host.

“Taking the allegations in the complaint as true, plaintiffs’ claims challenge Facebook’s conduct as a co-developer of content and not merely as a publisher of information provided by another,” a majority of the judges wrote in an unsigned decision.

The ruling comes in a class-action complaint brought in 2019 by Facebook by New York resident Rosemarie Vargas and other Facebook users. They alleged that company's ad-targeting platform violated civil rights laws by allowing advertisers to block housing ads from users based on factors such as race, sex or age.

The case was one of several lawsuits against Facebook over allegedly discriminatory ads.

By the time Vargas and the others sued, Facebook had already agreed to revise its targeting options to prohibit advertisers of housing, employment or credit offers from targeting ads based on age, gender, ZIP code and ethnic affinity.

U.S. District Court Judge William Orrick in the Northern District of California dismissed the complaint in 2021. He ruled that the Facebook users' allegations, even if true, wouldn't show how they were affected by Facebook's former ad-targeting options.

Orrick described the complaint as “the sort of generalized grievance” that doesn't give people the right to sue in federal court.

“In sum, what the plaintiffs have alleged is that they each used Facebook to search for housing based on identified criteria and that no results were returned that met their criteria,” Orrick wrote. “They assume (but plead no facts to support) that no results were returned because unidentified advertisers theoretically used Facebook’s targeting ad tools to exclude them.”

The judge also ruled that Facebook was also protected by Section 230 for any illegal ads posted by outside parties, noting that the company's former ad-targeting tools were neutral.

“Use of the tools was neither mandated nor inherently discriminatory given the design of the tools for use by a wide variety of advertisers,” he wrote.

Vargas and the others then appealed to the 9th Circuit, which sided with them on Friday.

The panel majority said both that Vargas's allegations were specific enough to warrant further proceedings, and that Facebook wasn't entitled to rely on Section 230.

The judges based the portion of their ruling dealing with Section 230 on a 2008 decision that revived a discrimination lawsuit against housing matching service Roommates.com, which also was sued over roommate ads posted by users. In that case, the appellate court said Section 230 didn't protect companies that actively developed unlawful material, and found that Roommates.com developed the ads because it offered filtering tools that enabled discrimination. (Roommates.com later prevailed in that dispute, because anti-discrimination laws don't apply to people who live in the same home.)

The appellate court said Friday that Facebook was comparable to Roommates.cm because Facebook's ad platform “allowed advertisers to target specific audiences, both by including categories of persons and by excluding categories of persons, through the use of drop-down menus and toggle buttons."

The judges added: “Facebook created the categories, used its own methodologies to assign users to the categories, and provided simple drop-down menus and toggle buttons to allow housing advertisers to exclude protected categories of persons.”