• by Wendy Davis  @wendyndavis, August 12, 2024

In a defeat for Meta Platforms, a federal appellate court late last week left in place a recent decision allowing Facebook and Instagram advertisers to proceed with a class-action fraud lawsuit over inflated metrics.

Unless the Supreme Court intervenes, Meta must now face a class-action 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 hasn't yet said whether it will ask the Supreme Court to hear an appeal.

The battle between Meta and the advertisers dates 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 appellate court.

The initial complaint cited 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 brought in 2020 that Facebook employees were aware of complaints about the potential reach metric since September 2015.

Meta had 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 the company's argument on that point and allowed the matter to move forward as a class-action.

Meta then appealed to the 9th Circuit Court of Appeals, 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.”

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

“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.

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.

In May, Meta sought a new hearing at the 9th Circuit. The company argued that the critical question for class certification isn't whether it made misrepresentations, but how the alleged misrepresentations affected advertisers.

“If simply identifying the purported fraud were enough to certify a class, then all fraud class actions would be certified,” Meta writes.

The U.S. Chamber of Commerce backed that request, arguing in a friend-of-the-court brief that Meta's advertisers received individualized metrics, and therefore don't have enough in common to be able to proceed as a class.

“Deciding whether Meta made material misrepresentations to each class member and whether each class member relied on those alleged misrepresentations would thus require millions of individualized inquiries,” the Chamber of Commerce wrote.