DZ Reserve v. Meta Platforms, Inc.

96 F.4th 1223

DZ RESERVE; Cain Maxwell, DBA Max Martialis, Plaintiffs-Appellees, v. META PLATFORMS, INC., FKA Facebook, Inc., Defendant-Appellant.

No. 22-15916

United States Court of Appeals, Ninth Circuit

Argued and Submitted September 12, 2023 San Francisco, California

Filed March 21, 2024

Appeal from the United States District Court for the Northern District of California James Donato, District Judge, Presiding, D.C. No. 3:18-cv-04978-JD

Geoffrey Graber (argued), Andrew N. Friedman, Karina G. Puttieva, and Madelyn Petersen, Cohen Milstein Sellers & Toll PLLC, Washington, D.C.; Eric Kafka, Cohen Milstein Sellers & Toll PLLC, New York, New York; Charles Reichmann, Law Offices of Charles Reichmann, Kensington, California; for Plaintiffs-Appellees.

Andrew B. Clubok (argued), Susan E. Engel, and Margaret A. Upshaw, Latham & Watkins LLP, Washington, D.C.; Elizabeth L. Deeley, Melanie M. Blunschi, Nicholas Rosellini, and Nicole Valco, Latham & Watkins LLP, San Francisco, California; Samir Deger-Sen, Latham & Watkins LLP, New York, New York; for Defendant-Appellant.

Jennifer B. Dickey and Jordan L. Von Bokern, U.S. Chamber Litigation Center, Washington, D.C.; Erik R. Zimmerman, Jazzmin M. Romero, and Jordan T. DeJaco, Robinson Bradshaw & Hinson PA, Chapel Hill, North Carolina; for Amicus Curiae Chamber of Commerce of the United States of America.

David M. Berger, Gibbs Law Group LLP, Oakland, California, for Amicus Curiae Digital Content Next.

Before: J. Clifford Wallace, Sidney R. Thomas, and Danielle J. Forrest, Circuit Judges.

Opinion by Judge Sidney R. Thomas;

Partial Dissent by Judge Forrest

OPINION

S.R. THOMAS, Circuit Judge:

Meta Platforms, Inc. (Meta), formerly known as Facebook, appeals the district court's order certifying two classes of advertisers who paid Meta to place advertisements on its social media platforms—a damages class and an injunction class. The advertisers allege that Meta fraudulently misrepresented the "Potential Reach" of advertisements on its platforms by stating that Potential Reach was an estimate of people, although it was actually an estimate of accounts. As to the damages class, the primary issue on appeal is whether that misrepresentation constitutes a "common course of conduct" under our test for determining whether common issues predominate among the class. We conclude that it does. Because the district court did not abuse its discretion in determining that Federal Rule of Civil Procedure 23(b)(3) was satisfied, we affirm the certification of the damages class. However, we vacate the certification of the Rule 23(b)(2) injunction class for the district court to reconsider whether the named Plaintiffs have standing to seek an injunction.

I

Meta owns and operates several online social media and messaging platforms and applications, including Facebook, Instagram, and WhatsApp. As with many social media companies, Meta "generates substantially all of its revenue from advertising."

In 2018, a nationwide class of advertisers ("Plaintiffs") filed this action against Meta, alleging that Meta had misrepresented the Potential Reach of advertisements on its platforms. Meta tells advertisers that "Potential Reach estimates how many people your ad could potentially reach depending on the targeting and ad placement options you select while creating an ad." Each time that an advertiser designs a Meta advertising campaign, Meta's self-service advertisement creation interface, known as the Ads Manager, displays the campaign's Potential Reach.

Plaintiffs assert that Potential Reach is misleading because it actually measures social media accounts, not living humans. Meta has taken steps to increase the accuracy of Potential Reach by working to remove fake and duplicate accounts, as well as by updating the calculation of Potential Reach to include only accounts that were shown an advertisement in the last thirty days. Nevertheless, throughout the class period, the number of accounts was always larger than the number of people because non-human entities like businesses and clubs have accounts, some people have multiple accounts, and some people and bots create fake accounts.

Each advertiser views a different Potential Reach for each campaign dependent on that campaign's unique targeting criteria, so the discrepancy between people and accounts varies by campaign. The parties disagree as to the size of this discrepancy. The district court noted this evidentiary dispute but concluded that Meta's criticism of Plaintiffs' expert evidence "does not foreclose classwide proof of injury." Plaintiffs allege that because of the misrepresentation of Potential Reach, they purchased more Meta advertisements and paid more for those advertisements than they would have with accurate information.

The named Plaintiffs are two former Meta advertisers, DZ Reserve and Cain Maxwell. DZ Reserve was an e-commerce business that spent over $1 million on 740 Meta advertising campaigns. Maxwell operated an online firearm mount store and spent approximately $379 on 11 Meta advertising campaigns. DZ Reserve has ceased operations since the filing of the complaint, and it is unclear from the record whether Maxwell's business is still operating.

Following motion practice and the filing of several amended complaints, the district court sustained three of Plaintiffs' claims under California state law: fraudulent misrepresentation, fraudulent concealment, and violation of California's Unfair Competition Law ("UCL"). Plaintiffs then moved to certify the following class under Federal Rule of Civil Procedure 23: United States residents who purchased at least one advertisement on Meta's platforms from August 15, 2014 to the present, excluding advertisers who used certain specialized purchasing methods or who were shown a Potential Reach lower than 1,000. The district court certified the class under Rule 23(b)(3) seeking damages for fraudulent misrepresentation and concealment, and under Rule 23(b)(2) seeking injunctive relief under the UCL.

II

We have jurisdiction pursuant to 28 U.S.C. § 1292(e) and Rule 23(f) of the Federal Rules of Civil Procedure. We review a district court's decision to certify a class for abuse of discretion. Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, 31 F.4th 651, 663 (9th Cir. 2022) (en banc). "A class certification order is an abuse of discretion if the district court applied an incorrect legal rule or if its application of the correct legal rule was based on a factual finding that was illogical, implausible, or without support in inferences that may be drawn from the facts in the record." Van v. LLR, Inc., 61 F.4th 1053, 1062 (9th Cir. 2023) (internal quotation marks and citation omitted). "When reviewing an order granting class certification, we accord the district court noticeably more deference than when we review a denial." Jabbari v. Farmer, 965 F.3d 1001, 1005 (9th Cir. 2020). "We review the district court's determination of underlying legal questions de novo, and its determination of underlying factual questions for clear error." Olean, 31 F.4th at 663 (citations omitted).

III

A

Before certifying a class, the district court must ensure that the plaintiffs have made two showings, one under Rule 23(a) and one under Rule 23(b). Olean, 31 F.4th at 663.

First, the proposed class action must satisfy four prerequisites under Rule 23(a):

(1) the class is so numerous that joinder of all members is impracticable;

(2) there are questions of law or fact common to the class;

(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and

(4) the representative parties will fairly and adequately protect the interests of the class.

Fed. R. Civ. P. 23(a).

The district court must perform a "rigorous analysis" of these prerequisites, which frequently "will entail some overlap with the merits of the plaintiff's underlying claim." Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011). That being said, "[m]erits questions may be considered to the extent—but only to the extent—that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied." Amgen Inc. v. Connecticut Ret. Plans & Tr. Funds, 568 U.S. 455, 466, 133 S.Ct. 1184, 185 L.Ed.2d 308 (2013).

Second, the class must fit into at least one of three categories outlined in Rule 23(b). Olean, 31 F.4th at 663. Here, the district court certified the class under Rule 23(b)(3), which enables the potential recovery of damages and requires both that "questions of law or fact common to class members predominate over any questions affecting only individual members," and that a class action be "superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). The district court also certified the class under Rule 23(b)(2), which requires "the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole." Fed. R. Civ. P. 23(b)(2). We address certification of the damages class under Rule 23(b)(3) and certification of the injunction class under Rule 23(b)(2) in turn.

B

We need not analyze all of the criteria required for certification of a damages class, because Meta challenges only the district court's findings regarding the predominance of common factual or legal issues under Rule 23(b)(3) and typicality and adequacy of representation under Rule 23(a)(3) and (4). The district court did not abuse its discretion in concluding that Plaintiffs have sufficiently demonstrated predominance, typicality, and adequacy, and so we affirm certification of the damages class under Rule 23(b)(3).

The requirement under Rule 23(b)(3) that common questions predominate over individual ones "tests whether proposed classes are sufficiently cohesive to...