*[author: Naomi Lopez]

Last month, the Ninth Circuit reeled back protections for digital media platforms on which scam ads are found. Calise v. Meta Platforms, Inc., 103 F.4th 732 (9th Cir. 2024)

Section 230(c)(1) of the Communications Decency Act is a defense companies utilize when faced with liability for third-party fraudulent advertisements published on their online platforms. To qualify for this defense, companies must meet three criteria: 1) They must be a provider or user of an interactive computer service, 2) whom a plaintiff seeks to treat, under a state law cause of action, as a publisher or speaker, 3) of information provided by another information content provider.

In Calise, consumers impacted by foreign third-party scams on the Meta platform argued Meta was liable for damages caused by the scams. Meta’s stance was that the Communications Decency Act granted it immunity against assuming liability for fraudulent information created and posted by others.

The Ninth Circuit held that Section 230 did not shield Meta from the consumers’ breach of contract claims because Meta did not satisfy the second requirement of the defense. For purposes of the breach of contract actions, Meta was not treated as “a publisher or speaker.” The breach of contract claims arose from the company’s promises in their terms of service to prevent fraud, not the company’s “status as a speaker or publisher.” Calise, 103 F.4th at 743. In its decision, the court reaffirmed that companies seeking to access the Section 230 defense must prove they meet all its criteria.

With social media scam ads on the rise, the Circuit’s decision is especially relevant and impactful. In the last three years, scams published on social media sites have resulted in billions of dollars in damages to consumers. See Fed. Trade Comm’n, FTC Data Shows Consumers Report Losing $2.7 Billion to Social Media Scams Since 2021 (October 6, 2023). The FTC states that social media fraud schemes are particularly harmful because “scammers who place ads can even use tools available to advertisers to methodically target you based on personal details, such as your age, interests, or past purchases.” Id.

The Calise case offers important learnings for social media platforms and other companies that facilitate online advertisements. Section 230 is not an all-encompassing defense for lawsuits on third party ads, so companies should monitor the content published on their sites. Moreover, companies should carefully review their terms of service regarding fraudulent advertising to ensure they are not creating unrealistic obligations that make them vulnerable to breach of contract suits.

*Note: Naomi Lopez drafted this post while a Summer Associate at Fox Rothschild’s Minneapolis Office this summer.

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