• by Wendy Davis  @wendyndavis, March 21, 2024

Siding against Meta Platforms, a federal appeals court on Thursday upheld a lower court decision allowing advertisers to proceed with a class-action fraud lawsuit over inflated metrics.

In a 2-1 decision, a panel of the 9th Circuit Court of Appeals rejected Meta's argument that the advertisers didn't have enough in common to justify a class-action.

“Where, as in this case, a defendant has uniformly represented that a certain metric means something that it does not, the element of misrepresentation presents a common question,” Circuit Judge Sidney Thomas wrote in an opinion joined by J.Clifford Wallace.

The decision stemmed from a battle dating to 2018, when business owner Danielle Singer alleged in a class-action complaint that Facebook induced advertisers to purchase more ads, and pay more for them, by overstating the number of users who might see the ads. (Singer later dropped out of the litigation, and DZ Reserve, which operated an e-commerce store, and Max Martialis, which sold weapons accessories, became the lead plaintiffs.

DZ Reserve, now out of business, spent around $1 million on Meta advertising campaigns and Max Martialis spent around $379 on Meta ads, according to the court's opinion.

The initial complaint against the tech platform drew on a report by the industry organization Video Advertising Bureau, which said in 2017 that Facebook's estimates of audience reach in every U.S. state were higher than the states' populations.

The advertisers added in an amended complaint filed in 2020 that Facebook employees were aware of complaints about the potential reach metric since September of 2015.

Meta argued to U.S. District Court Judge James Donato in San Francisco that the case shouldn't proceed as a class action because the advertisers were too different from each other.

Donato rejected that position and allowed DZ Reserve and Max Martialis to proceed could proceed on behalf of all U.S. advertisers who used Facebook's Ad Manager or Power Editor to purchase ads on Facebook or Instagram after August 15, 2014.

Meta then appealed to the 9th Circuit, arguing that the class certified by Donato included advertisers that range from “sole proprietors to multinational corporations to governments.”

The company added that it would be impossible “to collectively adjudicate the unique mix of information seen by each advertiser.”

The panel majority rejected Meta's argument, writing that fraud claims are “particularly well suited to class treatment.”

“It is undisputed that potential reach was shown to every advertiser on Meta’s Ads Manager, potential reach was always expressed as a number of people, and potential reach always estimated a number of accounts,” Thomas wrote. “Class members were thus exposed to uniform misrepresentations about the potential reach of their advertisements.”

Circuit Judge Danielle Forrest dissented, writing that the issues in the case involve “individualized questions,” including whether every advertiser in the class relied on misrepresentations by the company.