District Court Tosses $15 Billion Facebook Tracking Class Action

Cruz-Alvarez_FFeatured Expert Contributor – Civil Justice/Class Actions

By Frank Cruz-Alvarez, Shook, Hardy & Bacon L.L.P. (co-authored with Rachel A. Canfield, an associate with the firm)

After nearly three years, United States District Judge Edward J. Davila issued an order granting Facebook, Inc.’s (Facebook’s) motion to dismiss a $15 billion lawsuit accusing the social media company of improperly embedding cookies on Plaintiffs’ computers to collect and transmit their web browsing history. Order Granting Defendant’s Motion to Dismiss at 1-2, 19, In re Facebook Internet Tracking Litigation, Case No. 5:12-md-02314-EJD (N.D. Cal. Oct. 23, 2015).

The multi-district lawsuit arose from numerous cases challenging Facebook’s tracking practices. These cases were filed in various districts and subsequently transferred to the Northern District of California where they were consolidated. Id. at 6. Plaintiffs filed the lawsuit on behalf of Facebook members in ten different states that had active accounts from May 2010 through September 2011. Id. 

In their 2012 complaint, Plaintiffs claimed that Facebook’s use of “tracking” or “persistent” cookies to track and transmit a user’s browsing history without the user’s consent after the user logged off of Facebook violated numerous state and federal laws, including the Federal Wiretap Act, the Stored Communications Act (SCA), the Computer Fraud and Abuse Act (CFAA) (withdrawn from the complaint), California’s Unfair Competition Law (UCL), the California Computer Crime Law (CCCL), the California Invasion of Privacy Act (CIPA), and California’s Consumer Legal Remedies Act (CLRA). Plaintiffs also raised common-law claims that Facebook’s tracking practices amounted to an invasion of privacy, intrusion upon seclusion, trespass to chattels, and conversion. Id. at 2-3, 7. Arguing that Facebook wrongly profited from its improper tracking practices, Plaintiffs asserted that the data has massive economic value, that a market exists for the sale of such information (such as the sale of such information to Google in exchange for gift cards), and that profits to Facebook were tantamount to billions of dollars in fees. Id. at 3-4.

Facebook’s motion to dismiss followed. Id. at 6. Facebook presented two bases for dismissal.  First, Facebook argued that all of Plaintiffs claims failed for lack of standing pursuant to Federal Rule of Civil Procedure 12(b)(1). Second, Facebook argued that pursuant to Federal Rule of Civil Procedure 12(b)(6), Plaintiffs’ fraud-based claims should be dismissed for lack of specificity and failure to state an actionable claim. Id. at 7.

In the district court’s discussion, Judge Davila found that Plaintiffs showed “some degree of intrinsic value to their personal information,” but could not establish constitutional standing as to any of the claims presented in their complaint because they “failed to adequately connect this value to a realistic harm or loss that is attributable to Facebook’s alleged conduct.” Id. at 10. He explained that the complaint did not demonstrate that any Plaintiff “personally lost the opportunity to sell their information or the value of the information was diminished” by Facebook’s tracking practices and that the complaint alluded to injury that is “conjectural or hypothetical.” Id. at 10-11.

The court next explored Plaintiffs’ statutory standing argument, and, under the same rationale, dismissed all of Plaintiffs’ common-law claims, which require economic harm related to the loss of personal information as an element of damages, as well as Plaintiffs’ UCL, CLRA, and CCCL claims, which also require a plausible economic injury. Id. at 11-14.

Because economic injury is not a prerequisite for Plaintiffs’ Federal Wiretap Act, SCA, or CIPA claims, the district court found that the allegations alone were sufficient to establish standing as to those claims, id. at 13, and reviewed the sufficiency of those claims. Id. at 15-17.

Relying on the Ninth Circuit’s interpretation of “contents” as defined in the Wiretap Act, Judge Davila dismissed as deficient Plaintiffs’ Wiretap Act claim because it failed to plead that Facebook intercepted the “contents” of an electronic communication. Id. at 16 (citing In re Zynga Privacy Litigation, 750 F.3d 1098, 1100, 1106-07 (9th Cir. 2004) (holding that “contents” amount to the information contained in the intended message conveyed, not record information regarding transmission of the communication)). Interestingly, the court suggested that this defect could be fatal, stating: “Plaintiffs may never be able to state an action[able] Wiretap Act claim, particularly since their arguments on this issue are unpersuasive.” Id.

Similarly, Judge Davila dismissed Plaintiffs’ SCA claim as deficient, noting the language and legislative history of “electronic storage” under the SCA makes clear that the SCA is “targeted at communications temporarily stored by electronic communication services incident to their transmission,” as opposed to cases as this one which involves personal information permanently stored in users’ personal web browsers. Id. at 16-17.  

Judge Davila also dismissed Plaintiffs’ CIPA claim for failure to state a claim—accepting Facebook’s arguments that Plaintiffs’ failed to plead facts showing Facebook used a “machine, instrument, or contrivance” to obtain the contents of communications. Id. at 18.

All of Plaintiffs’ claims were dismissed with leave to amend (with the exception of the CFAA claim which Plaintiffs had previously withdrawn). Plaintiffs have until November 30, 2015, to file an amended complaint. Whether Plaintiffs will be able to cure any or all of their deficiencies is still unclear.

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