Court Opinion

ID: 9890602
Source: CourtListenerOpinion
Date Created: 2023-10-13 18:01:23.404276+00
Date Added: 2024-06-11T13:25:35.874563
License: Public Domain

UNITED STATES COURT OF APPEALS                     FILED
                              FOR THE NINTH CIRCUIT                    OCT 13 2023
                                                                   MOLLY C. DWYER, CLERK
                                                                     U.S. COURT OF APPEALS
ROSEMARIE VARGAS; et al.,                     No.   21-16499

                Plaintiffs-Appellants,        D.C. No. 3:19-cv-05081-WHO
                                              Northern District of California,
and                                           San Francisco

NEUHTAH OPIOTENNIONE; JESSICA                 ORDER
TSAI,

                Plaintiffs,

  v.

FACEBOOK, INC.,

                Defendant-Appellee.

Before: M. MURPHY,* GRABER, and OWENS, Circuit Judges.

       The memorandum disposition filed on June 23, 2023, is hereby amended.

The amended disposition and Judge Owens’ dissent will be filed concurrently with

this order.

       With the memorandum disposition so amended, Judge Murphy and Judge

Graber have voted to deny the petition for panel rehearing. Judge Owens has voted

to grant the petition for panel rehearing. Judge Murphy and Judge Graber have

       *
        The Honorable Michael R. Murphy, United States Circuit Judge for the
U.S. Court of Appeals for the Tenth Circuit, sitting by designation.
recommended denial of the petition for rehearing en banc. Judge Owens has voted

to grant the petition for rehearing en banc.

      The full court has been advised of Appellee’s petition for rehearing en banc,

and no judge of the court has requested a vote on it.

      The petition for panel rehearing and rehearing en banc, Docket No. 80, is

DENIED. No further petitions for rehearing or rehearing en banc will be

entertained.

                                          2
                              NOT FOR PUBLICATION                        FILED
                    UNITED STATES COURT OF APPEALS                       OCT 13 2023
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                              FOR THE NINTH CIRCUIT

ROSEMARIE VARGAS; et al.,                       No.    21-16499

                Plaintiffs-Appellants,          D.C. No. 3:19-cv-05081-WHO

and
                                                AMENDED MEMORANDUM*
NEUHTAH OPIOTENNIONE; JESSICA
TSAI,

                Plaintiffs,

 v.

FACEBOOK, INC.,

                Defendant-Appellee.

                  Appeal from the United States District Court
                       for the Northern District of California
                 William Horsley Orrick, District Judge, Presiding

                        Argued and Submitted July 28, 2022
                           Withdrawn January 9, 2023
                            Resubmitted June 20, 2023
                             San Francisco, California

Before: M. MURPHY,** GRABER, and OWENS, Circuit Judges.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The Honorable Michael R. Murphy, United States Circuit Judge for
the U.S. Court of Appeals for the Tenth Circuit, sitting by designation.
      Plaintiffs Rosemarie Vargas, Jazmine Spencer, Kisha Skipper, Deillo

Richards, and Jenny Lin appeal from the dismissal of their Third Amended Class

Action complaint against Defendant Facebook, Inc. We review the dismissal de

novo, Meland v. Weber, 2 F.4th 838, 843 (9th Cir. 2021), and reverse and remand

for further proceedings.

      1. The district court erred by dismissing the operative complaint for failure

to allege a concrete injury sufficient to confer Article III standing. “[A]t the

pleading stage, the plaintiff must allege sufficient facts that, taken as true,

‘demonstrate each element’ of Article III standing.” Jones v. L.A. Cent. Plaza

LLC, 74 F.4th 1053, 1057 (9th Cir. 2023) (alteration adopted) (quoting Spokeo,

Inc. v. Robins, 578 U.S. 330, 338 (2016)). Plaintiffs have done so here.

      The operative complaint alleges that Facebook’s “targeting methods provide

tools to exclude women of color, single parents, persons with disabilities and other

protected attributes,” so that Plaintiffs were “prevented from having the same

opportunity to view ads for housing” that Facebook users who are not in a

protected class received.

      Plaintiff Vargas provides an example. She alleges that she is a disabled

female of Hispanic descent and a single parent living in New York City with her

two minor children and that she is a frequent Facebook user who has posted photos

of herself and her children. Because of her use of Facebook, the platform knew

                                            2
that she was “a single parent, disabled female of Hispanic descent.” She sought

housing from August 2018 through April 2019 and was ready, willing, and able to

move. In an effort to find housing, she accessed the Facebook Marketplace.

Although she sought housing in Manhattan, her Facebook searches yielded no ads

for housing in Manhattan. After receiving unsatisfactory search results, in early

2019, Plaintiff Vargas sat side by side with a Caucasian friend “and conducted a

search for housing through Facebook’s Marketplace, both using the same search

criteria . . . . [The Caucasian friend] received more ads for housing in locations

that were preferable to Plaintiff Vargas. Plaintiff Vargas did not receive the ads

that [the friend] received.” Third Am. Compl. at 24 (emphases added). In other

words, her Caucasian friend saw more, and more responsive, ads than Plaintiff

Vargas received even though they used identical search criteria. See Havens

Realty Corp. v. Coleman, 455 U.S. 363, 373–74 (1982) (holding that racially

diverse “testers” attempting to obtain truthful information about available housing

had standing to sue under the Fair Housing Act of 1968).

      The district court faulted the complaint for not identifying specific ads that

Plaintiff Vargas did not see. But Plaintiffs’ very claim is that Facebook’s practices

concealed information from housing-seekers in protected classes. And nothing in

the case law requires that a plaintiff identify specific ads that she could not see

when she alleges that an ad-delivery algorithm restricted her access to housing ads

                                           3
in the first place.

       The district court also relied on the fact that only paid ads used Facebook’s

targeting methods, and Plaintiffs do not specify whether the ads that Plaintiff

Vargas’s Caucasian friend saw (and that Plaintiff Vargas did not) were paid ads.

The operative complaint alleges that Facebook hosts a vast amount of paid

advertising but does not allege that all ads on the Marketplace are paid ads.

Nonetheless, given the allegations concerning the magnitude of paid advertising, it

is plausible to infer that one or more of the ads that Plaintiff Vargas could not

access because of Facebook’s methods was paid. If Plaintiff Vargas cannot prove

that she was denied access to one or more paid ads, then her claims will fail on the

merits—but they do not fail for lack of standing. See Cath. League for Religious

& Civil Rts. v. City & County of San Francisco, 624 F.3d 1043, 1049 (9th Cir.

2010) (en banc) (“Nor can standing analysis, which prevents a claim from being

adjudicated for lack of jurisdiction, be used to disguise merits analysis, which

determines whether a claim is one for which relief can be granted if factually

true.”). Plaintiff Vargas alleges a concrete and particularized injury—deprivation

of truthful information and housing opportunities—whether or not she can

establish all the elements of her claims later in the litigation.

       2. The district court also erred by holding that Facebook is immune from

liability pursuant to 47 U.S.C. § 230(c)(1). “Immunity from liability exists for ‘(1)

                                            4
a provider or user of an interactive computer service (2) whom a plaintiff seeks to

treat, under a [federal or] state law cause of action, as a publisher or speaker (3) of

information provided by another information content provider.’” Dyroff v.

Ultimate Software Grp., 934 F.3d 1093, 1097 (9th Cir. 2019) (quoting Barnes v.

Yahoo!, Inc., 570 F.3d 1096, 1100 (9th Cir. 2009)). We agree with Plaintiffs that,

taking the allegations in the complaint as true, Plaintiffs’ claims challenge

Facebook’s conduct as a co-developer of content and not merely as a publisher of

information provided by another information content provider.

      Facebook created an Ad Platform that advertisers could use to target

advertisements to categories of users. Facebook selected the categories, such as

sex, number of children, and location. Facebook then determined which categories

applied to each user. For example, Facebook knew that Plaintiff Vargas fell within

the categories of single parent, disabled, female, and of Hispanic descent. For

some attributes, such as age and gender, Facebook requires users to supply the

information. For other attributes, Facebook applies its own algorithms to its vast

store of data to determine which categories apply to a particular user.

      The Ad Platform allowed advertisers to target specific audiences, both by

including categories of persons and by excluding categories of persons, through the

use of drop-down menus and toggle buttons. For example, an advertiser could

choose to exclude women or persons with children, and an advertiser could draw a

                                           5
boundary around a geographic location and exclude persons falling within that

location. Facebook permitted all paid advertisers, including housing advertisers, to

use those tools. Housing advertisers allegedly used the tools to exclude protected

categories of persons from seeing some advertisements.

      As the website’s actions did in Fair Housing Council of San Fernando

Valley v. Roommates.com, LLC, 521 F.3d 1157 (9th Cir. 2008) (en banc),

Facebook’s own actions “contribute[d] materially to the alleged illegality of the

conduct.” Id. at 1168. Facebook created the categories, used its own

methodologies to assign users to the categories, and provided simple drop-down

menus and toggle buttons to allow housing advertisers to exclude protected

categories of persons. Facebook points to three primary aspects of this case that

arguably differ from the facts in Roommates.com, but none affects our conclusion

that Plaintiffs’ claims challenge Facebook’s own actions.

      First, in Roommates.com, the website required users who created profiles to

self-identify in several protected categories, such as sex and sexual orientation. Id.

at 1161. The facts here are identical with respect to two protected categories

because Facebook requires users to specify their gender and age. With respect to

other categories, it is true that Facebook does not require users to select directly

from a list of options, such as whether they have children. But Facebook uses its

own algorithms to categorize the user. Whether by the user’s direct selection or by

                                           6
sophisticated inference, Facebook determines the user’s membership in a wide

range of categories, and Facebook permits housing advertisers to exclude persons

in those categories. We see little meaningful difference between this case and

Roommates.com in this regard. Facebook was “much more than a passive

transmitter of information provided by others; it [was] the developer, at least in

part, of that information.” Id. at 1166. Indeed, Facebook is more of a developer

than the website in Roommates.com in one respect because, even if a user did not

intend to reveal a particular characteristic, Facebook’s algorithms nevertheless

ascertained that information from the user’s online activities and allowed

advertisers to target ads depending on the characteristic.

      Second, Facebook emphasizes that its tools do not require an advertiser to

discriminate with respect to a protected ground. An advertiser may opt to exclude

only unprotected categories of persons or may opt not to exclude any categories of

persons. This distinction is, at most, a weak one. The website in Roommates.com

likewise did not require advertisers to discriminate, because users could select the

option that corresponded to all persons of a particular category, such as “straight or

gay.” See, e.g., id. at 1165 (“Subscribers who are seeking housing must make a

selection from a drop-down menu, again provided by Roommate[s.com], to

indicate whether they are willing to live with ‘Straight or gay’ males, only with

‘Straight’ males, only with ‘Gay’ males or with ‘No males.’”). The manner of

                                          7
discrimination offered by Facebook may be less direct in some respects, but as in

Roommates.com, Facebook identified persons in protected categories and offered

tools that directly and easily allowed advertisers to exclude all persons of a

protected category (or several protected categories).

      Finally, Facebook urges us to conclude that the tools at issue here are

“neutral” because they are offered to all advertisers, not just housing advertisers,

and the use of the tools in some contexts is legal. We agree that the broad

availability of the tools distinguishes this case to some extent from the website in

Roommates.com, which pertained solely to housing. But we are unpersuaded that

the distinction leads to a different ultimate result here. According to the complaint,

Facebook promotes the effectiveness of its advertising tools specifically to housing

advertisers. “For example, Facebook promotes its Ad Platform with ‘success

stories,’ including stories from a housing developer, a real estate agency, a

mortgage lender, a real estate-focused marketing agency, and a search tool for

rental housing.” A patently discriminatory tool offered specifically and knowingly

to housing advertisers does not become “neutral” within the meaning of this

doctrine simply because the tool is also offered to others.

      REVERSED and REMANDED.

                                          8
                                                                       FILED
                                                                        OCT 13 2023
Vargas v. Facebook, Inc., No. 21-16499
OWENS, Circuit Judge, dissenting:                                   MOLLY C. DWYER, CLERK
                                                                     U.S. COURT OF APPEALS

      I respectfully dissent. Each of Plaintiffs’ theories of injury—denial of

truthful information, denial of the opportunity to obtain a benefit, denial of the

social benefit of living in an integrated community, and stigmatic injury—depends

on Plaintiffs having been personally discriminated against by at least one housing

advertiser that used Facebook’s Ad Platform. Thus, to survive a motion to dismiss,

Plaintiffs would need to plausibly allege that a housing ad that would otherwise

have appeared in their News Feeds or in their search results on Facebook

Marketplace did not appear because the advertiser used Facebook’s Ad Platform to

exclude their protected class. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-

57 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).

      As to each named plaintiff, the Third Amended Complaint (“TAC”) does not

identify any such ad or advertiser. Nor does it allege facts supporting an inference

that housing discrimination (even if the identities of the ads and advertisers are

unknown) is plausibly the reason Plaintiffs failed to find housing ads meeting their

respective search criteria. Plaintiffs have alleged nothing to exclude the possibility

that suitable housing was not available or not advertised on Facebook. See Iqbal,

556 U.S. at 682 (finding that an allegation of discrimination was not plausible in

view of one “obvious alternative explanation”).

                                           1
      Although Vargas alleges in Paragraph 95 of the TAC that her Caucasian

friend, while using the same search criteria, received ads on Facebook Marketplace

that she did not, she does not specify whether the ads her Caucasian friend saw

were user-generated or paid (i.e., created using the Ad Platform and its audience

selection tools). Users can distinguish paid ads from user-generated ads by the

label “Sponsored.” See Andrew Hutchinson, Facebook Provides New Option to

Boost Marketplace Posts, and Marketplace Ads for Businesses, SocialMediaToday

(June 7, 2018), https://www.socialmediatoday.com/news/facebook-provides-new-

option-to-boost-marketplace-posts-and-marketplace-ad/525158/. Only paid ads are

relevant to Vargas’s housing discrimination claims.

      Accordingly, I would affirm the district court’s dismissal for failure to allege

a concrete injury sufficient to confer standing.

                                          2