Vargas v. Facebook, Inc.

• Court: District Court, N.D. California
• Decided: January 21, 2021
• Docket: 3:19-cv-05081
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ROSEMARIE VARGAS, et al., Case No. 19-cv-05081-WHO

8 Plaintiffs, ORDER GRANTING MOTION TO 9 v. DISMISS

10 FACEBOOK, INC., Re: Dkt. No. 64 Defendant. 11

12 Plaintiffs’ Second Amended Complaint (SAC) asserts claims under the federal Fair 13 Housing Act (FHA) and analogous California and New York laws challenging defendant 14 Facebook, Inc.’s former practice of allowing advertisers to self-select target audiences for their 15 housing advertisements (ads), theoretically excluding protected classes of consumers from seeing 16 those advertisers’ particular housing ads. Facebook moves to dismiss, arguing that (i) plaintiffs 17 lack standing because they fail to identify any facts about their use of Facebook to search for 18 housing ads sufficient to plausibly allege injury in fact, (ii) Facebook’s publishing conduct is 19 protected and immune under Section 230 of the Communications Decency Act (CDA), and (iii) 20 plaintiffs fail to state their claims under the FHA, California, and New York law. 21 I conclude that plaintiffs’ failure to allege any specific facts regarding their use of 22 Facebook to search for housing means, given the context of this case, that they have not 23 adequately alleged plausible injury in fact and lack Article III standing. Plaintiffs are given leave 24 to amend to attempt to allege the facts that are within their exclusive knowledge. 25 BACKGROUND 26 In the SAC, plaintiffs allege that when Facebook “created, implemented and/or maintained 27 a pre-populated list of demographics, behaviors and interests that allowed real estate brokers, real 1 housing,” its conduct resulted in discriminatory “redlining” in violation of the FHA1 and New 2 York2 and California3 state statutes. SAC ¶ 3. Facebook was sued for this exact conduct by non- 3 profits and charged with discrimination by the United States Department of Housing and Urban 4 Development, and plaintiffs admit that Facebook asserts that it stopped using the challenged tools 5 by December 2019. Id. ¶¶ 3, 24. Plaintiffs sue, however, to recover damages for plaintiffs who 6 were allegedly injured by the practice and to enjoin Facebook from restarting use of the 7 challenged tools in the future. Id. 8 Plaintiffs assert that Facebook created an advertising platform (the “Ad Platform”) that 9 published and disseminated targeted advertisements for housing. This Ad Platform “allowed 10 and/or facilitated the omission of certain Facebook users based on their real or perceived personal 11 characteristics (which included several protected classes), by purposefully and intentionally 12 creating, developing, and/or offering the ‘Exclude People’ feature. The Ad Platform also 13 permitted advertisers to include only certain users with certain demographic characteristics (which 14 included several protected classes), excluding users who lacked those characteristics (the ‘Include 15 People’ feature).” Id. ¶ 5. Plaintiffs allege that Facebook also created “Multicultural Affinity 16 groups for use on its Ad Platform,” where Multicultural Affinity groups were “made up of people 17 whose activities on Facebook suggest they may be interested in ads related to African American, 18

19 1 42 U.S.C. § 3601 et seq., in particular § 3604, making it unlawful:

20 (a) To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person 21 because of race, color, religion, sex, familial status, or national origin. . . . 22 (c) To make, print, or publish, or cause to be made, printed, or published any notice, statement, or advertisement, with respect to the sale or rental of a dwelling that indicates 23 any preference, limitation, or discrimination based on race, color, religion, sex, handicap, familial status, or national origin, or an intention to make any such preference, limitation, 24 or discrimination. (d) To represent to any person because of race, color, religion, sex, handicap, familial 25 status, or national origin that any dwelling is not available for inspection, sale, or rental when such dwelling is in fact so available. 26

2 New York Rights Law, N.Y. Exec. L. § 290 et seq. 27 1 Hispanic American, or Asian American communities.” Id. ¶ 7. Facebook then “allowed 2 advertisers to promote or market a community or home for sale or rent to select ‘ethic affinity’ 3 groups as part of their advertising campaigns” and through the Multicultural Affinity tool used 4 with the other feature of the Ad Platform allowed housing advertisers to “steer advertisements, 5 information and content away from users in protected classes,” resulting in a segregated 6 marketplace for housing. Id. ¶¶ 8, 15. 7 Plaintiff Rosemarie Vargas is a resident of New York City, New York. She is a disabled 8 female of Hispanic descent, and a single parent with minor children. Id. ¶ 29. She alleges that 9 “during the relevant time” she “searched for housing periodically on Facebook” and “would filter 10 her search for housing on the Facebook marketplace by location and cost,” but because “Facebook 11 created a platform which provided tools to exclude women of color, single parents and other 12 protected attributes, Ms. Vargas and others similarly situated were prevented by Facebook from 13 having the same opportunity to view ads for housing that other Facebook users who did not share 14 the same characteristics were shown.” Id. ¶¶ 30-31. She also claims that she “filtered her search 15 for housing on the Facebook marketplace using the same parameters that her white male friend 16 used but she obtained fewer results than her white male friend,” and when she “included her use of 17 a Section 8 voucher and her status as a veteran in her search, she obtained no results.” Id. ¶¶ 32- 18 33.4 19 The plaintiffs did not identify: (i) when and how often they used Facebook to search for 20 housing ads; (ii) the parameters or selection criteria used for those searches; (iii) what specific ads 21 they saw during those times as the result of their searches; or (iv) the numbers of ads that were 22 returned by their searches, or any other details regarding their “use” of Facebook to “seek 23 housing.” They did not allege that they were denied access to housing ads that, had they had seen 24 them, they were otherwise ready, able, and willing to accept during the specific time periods they 25 were using Facebook to search for housing. As an example, neither Vargas nor any plaintiff 26

27 4 The five other named plaintiffs identify only their ethnicities and gender and that they “used 1 provides facts explaining: (i) why she was actively looking for housing, (ii) what specific markets 2 at specific price ranges she was looking for during any specific time, and (iii) if she had found 3 housing in her preferred market, within those ranges and during those times, she would have 4 applied for that housing. 5 LEGAL STANDARD 6 A motion pursuant to Federal Rule of Civil Procedure 12(b)(1) tests whether the court has 7 subject matter jurisdiction to hear the claims alleged in the complaint. A Rule 12(b)(1) motion 8 may be either facial, where the inquiry is limited to the allegations in the complaint, or factual, 9 where the court may look beyond the complaint to consider extrinsic evidence. Wolfe v. 10 Strankman, 392 F.3d 358, 362 (9th Cir. 2004). Here, Facebook brings a facial attack on the 11 sufficiency of the allegations in the SAC. See Safe Air for Everyone v. Meyer, 373 F.3d 1035, 12 1039 (9th Cir. 2004) (in a facial attack under Rule 12(b)(1), “the challenger asserts that the 13 allegations contained in a complaint are insufficient on their face to invoke federal jurisdiction.”). 14 A district court, “resolves a facial attack as it would a motion to dismiss under Rule 12(b)(6): 15 Accepting the plaintiff’s allegations as true and drawing all reasonable inferences in the plaintiff’s 16 favor, the court determines whether the allegations are sufficient as a legal matter to invoke the 17 court’s jurisdiction.” Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014). As with a Rule 18 12(b)(6) motion, however, a court is not required “to accept as true allegations that are merely 19 conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. 20 Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). 21 DISCUSSION 22 Facebook argues, first, that plaintiffs lack Article III standing and statutory standing. For 23 Article III standing, plaintiffs must allege facts supporting (1) “an injury in fact, (2) that is fairly 24 traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a 25 favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016) (quoting Lujan 26 v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992)). Under the Unruh Act and Section 51.5, 27 plaintiffs must allege facts showing that they “actually suffer[ed] the discriminatory conduct” 1 conjectural.” Angelucci v. Century Supper Club, 41 Cal. 4th 160, 165 (2007); White v. Square, 2 Inc., 7 Cal. 5th 1019, 1032 (2019). Similarly, under the NYSHRL, they must allege plausible 3 facts that they have been “aggrieved by an unlawful discriminatory practice,” N.Y. Exec. Law § 4 297, which “requires a threshold showing that a person has been adversely affected by the 5 activities of defendants …, or—put another way—that [he or she] has sustained special damage, 6 different in kind and degree from the community generally.” Mobil Oil Corp. v. Syracuse Indus. 7 Dev. Agency, 76 N.Y.2d 428, 433 (N.Y. 1990). Under California’s UCL, plaintiffs must allege 8 facts to “(1) establish a loss or deprivation of money or property sufficient to qualify as injury in 9 fact, i.e., economic injury, and (2) show that economic injury was the result of, i.e., caused by, the 10 unfair business practice.” Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 321–22 (2011) (citing 11 Cal. Bus. Prof. Code § 17204). 12 Facebook points out that none of the plaintiffs in this case has identified any specific 13 advertisement or series of advertisements (i.e., advertisements from a particular source) that she or 14 he was deprived of receiving. Nor do any of the plaintiffs allege that if they had seen particular 15 advertisements, they would have been ready, willing, and able to pursue the housing advertised. 16 Instead, plaintiffs broadly allege that they believe they were discriminated against because some 17 unidentified housing advertisers may have used the Facebook tools that were available to target 18 housing advertisements away from them and, accordingly, plaintiffs may not have been shown the 19 same housings ads as others of presumably different races, ethnicities, genders, and/or family- 20 types were shown in violation of the housing laws they invoke. 21 Two judges in this District have dismissed materially similar cases for lack of Article III 22 standing. In Bradley v. T-Mobile US, Inc., 17-CV-07232-BLF, 2020 WL 1233924 (N.D. Cal. 23 Mar. 13, 2020), plaintiffs alleged that defendants T-Mobile US, Inc. (“T-Mobile”) and 24 Amazon.com, Inc. (“Amazon”) used the discriminatory tools provided by Facebook to routinely 25 exclude older individuals from viewing the employment ads they post on Facebook in violation of 26 the Age Discrimination in Employment Act (“ADEA,” 29 U.S.C. § 623(e)) and similar state laws, 27 including the California Unruh Act and UCL. The Hon. Beth Labson Freeman recognized that 1 Facebook’s tools to target-ads away from older Facebook users might establish Article III 2 standing. But in order to plausibly plead injury in fact, Judge Freeman concluded that the 3 plaintiffs must “show that they were deprived of the opportunity to apply for jobs” and to do so 4 must “plausibly allege that they were ‘able and ready’ to apply for one or more of the jobs 5 advertised using age-restricted ads” and where “‘able’ means qualified and to be ‘ready’ means 6 seeking employment and genuinely interested in the position.” Id., at *10. Because plaintiffs had 7 not alleged those types of facts – and instead simply asserted (similar to plaintiffs here) that they 8 were “denied” access to job advertisements – the complaint was dismissed with leave to amend. 9 In Opiotennione v. Facebook, Inc., 19-CV-07185-JSC, 2020 WL 5877667, at *1 (N.D. 10 Cal. Oct. 2, 2020, Magistrate Judge Jacqueline Scott Corley dismissed a materially similar case 11 that likewise included federal and California Unruh Act discrimination claims. There, plaintiff 12 challenged Facebook’s practice of allowing businesses to direct their advertising to consumers 13 based on a potential customer’s age or gender. Unlike here, the plaintiff identified examples of 14 ads “where Facebook and financial services companies selected and executed upon age- or 15 gender-restricted audience selections that denied older persons and/or women, including Plaintiff, 16 the full and equal accommodations, advantages, facilities, and services of Facebook and those 17 companies.” Id. at 1. And, unlike here, the plaintiff further identified “three specific ads that 18 allegedly were not displayed in her News Feed because of her age and/or gender” that including 19 she alleged she would have been interested in receiving in order to consider pursuing the 20 opportunity. Id. 21 Despite plaintiff’s identification of advertisements that she claimed were discriminatorily 22 denied to her, Judge Corley still determined that plaintiff “has not met her burden of alleging facts 23 sufficient to support an inference of injury in fact. She contends that because she identified 24 advertisements that could not appear in her News Feed because of her age or gender she has 25 suffered an injury in fact, namely, being subject to discrimination. . . . These allegations, however, 26 are merely a generalized claim of “unequal treatment” that does not rise to the level of an Article 27 III injury in fact.” Id. at *3. While plaintiff generally alleged that she “would have been 1 injury in fact because she failed to “allege that she was qualified for and interested in actually 2 applying for the product offered.” Id. at *4. Judge Corley explained, “Plaintiff’s general 3 grievance about being denied ‘full and equal access’ without alleging facts that support an 4 inference that she was personally injured by that denial fails to demonstrate an injury in fact 5 sufficient to confer Article III standing.” Id. at 5. Considering plaintiff’s separate allegation of 6 injury (that she suffered “stigmatic harm” when “she was denied a primary benefit or service of 7 Facebook—financial services advertising and information—based on age and gender”), Judge 8 Corley determined that was also deficient because “it still requires a personal denial of equal 9 treatment, which as discussed supra, Plaintiff has not alleged.” Id. 10 Plaintiffs here attempt to distinguish these two decisions by arguing that standing under the 11 FHA is broader than that under the ADEA at issue in Bradley and the discrimination laws at issue 12 in Opiotennione. They cite no support for that proposition. Instead, plaintiffs cite Supreme Court 13 decisions finding standing in situations markedly different from the allegations here. 14 In Havens Realty Corp. v. Coleman, 455 U.S. 363, 373–74 (1982), the Court found 15 standing under the FHA for a “tester” who received false information from an apartment complex. 16 There, the rental agents “told her on four different occasions that apartments were not available in 17 the Henrico County complexes while informing white testers that apartments were available.” Id. 18 at 374. The Court explained that Section 804(d) of the FHA “establishes an enforceable right to 19 truthful information concerning the availability of housing, is such an enactment. A tester who has 20 been the object of a misrepresentation made unlawful under § 804(d) has suffered injury in 21 precisely the form the statute was intended to guard against, and therefore has standing to maintain 22 a claim for damages under the Act’s provisions. That the tester may have approached the real 23 estate agent fully expecting that he would receive false information, and without any intention of 24 buying or renting a home, does not negate the simple fact of injury within the meaning of § 25 804(d).” Id. at 373-74. Having received false information, the tester had standing even though the 26 tester did not have the actual intent to secure housing from the rental agents. See also Bradley, 27 2020 WL 1233924 at *8 (distinguishing Havens and other “tester” cases as inapposite “because 1 original)). Havens also addressed the standing of a non-profit that had spent money to combat 2 housing discrimination. It found that those expenditures constituted concrete harms sufficient to 3 confer standing. Id. at 379. 4 In both of those situations, the plaintiffs had alleged sufficient injuries in fact to confer 5 standing under the FHA. See also Bank of Am. Corp. v. City of Miami, Fla., 137 S. Ct. 1296, 1304 6 (2017) (standing for city based on allegation that banks “intentionally targeted predatory practices 7 at African–American and Latino neighborhoods and residents,” which led to a “concentration” of 8 “foreclosures and vacancies” in those neighborhoods, that caused “stagnation and decline in 9 African–American and Latino neighborhoods,” and “reduced property values, diminishing the 10 City’s property-tax revenue and increasing demand for municipal services.”); Trafficante v. Metro. 11 Life Ins. Co., 409 U.S. 205, 209-212 (1972) (FHA allowed suits by white tenants claiming that 12 they were deprived benefits from interracial associations when discriminatory rental practices kept 13 minorities out of their apartment complex); Gladstone Realtors v. Village of Bellwood, 441 U.S. 14 91, 110-111 (1979) (municipality had standing based on allegations of lost tax revenue and had 15 the racial balance of its community undermined by racial-steering practices). 16 The allegations in those cases readily established the plaintiffs’ injuries in fact stemming 17 directly from the defendants’ conduct: in Havens, the tester’s receipt of false information and the 18 association’s expenditures; in Bank of Am. Corp., the City’s reduced taxes and increased 19 expenditures; in Trafficante, the denial of plaintiffs’ ability to live in integrated housing; and in 20 Gladstone Realtors, the loss of tax revenue and racially balanced neighborhoods. Here, however, 21 we have only allegations that plaintiffs could theoretically have been injured if housing advertisers 22 in fact used the targeted-ad tools to exclude users with plaintiffs’ characteristics from ads that 23 might have been within plaintiffs’ spheres of interest and ability. For these facially speculative 24 allegations of injury to be potentially plausible, plaintiffs must at a minimum allege more facts 25 regarding their own use of Facebook to search for housing that they would have been ready to 26 pursue. 27 Plaintiffs argue they have identified “concrete injuries that they have personally 1 “perpetuat[ion] [of] segregation” and denial of “the benefits of living in a[n] . . . integrated 2 society,” SAC at ¶ 92; and (3) denial of information that laws require to be given on an equal 3 basis. SAC at ¶¶ 87, 93; Oppo. at 6. Not so. There are no facts regarding the nature of the 4 searches performed by Vargas or the other plaintiffs, no facts regarding specific entities who 5 allegedly used Facebook’s ad-targeting tools to place discriminatory ads that possibly could have 6 been seen by Vargas or any other plaintiff, and no facts establishing that Vargas or the other 7 plaintiffs were actively looking for housing during a specific period and were ready, able, and 8 otherwise qualified to secure such new housing had they been able to see the ads to which they 9 were speculatively denied access. There are, in short, no facts showing that any of the plaintiffs 10 were plausibly injured personally by the ad-targeting tools that advertisers purportedly used to 11 possibly target housing ads in areas that plaintiffs possibly searched that plausibly resulted in 12 plaintiffs not receiving ads for housing based on the aspects of their protected classifications that 13 they otherwise would have been in a position to pursue. 14 The most specific allegation made by Vargas is that at some unspecified time, using some 15 unspecified search criteria, a search in Facebook’s “marketplace” for housing resulted in “fewer” 16 results than her white male friend received at some unspecified time, using some unspecified 17 search criteria. Id. ¶ 32. That is insufficient to establish Article III standing and statutory standing 18 under the FHA under plaintiffs’ own authority. 19 I recognize plaintiffs’ concern that because they were allegedly denied access to housing 20 ads, they cannot (absent evidence from a comparable “tester”) identify ads that they were not 21 shown as evidence of their actual injury in fact. I am not reaching the question of whether 22 plaintiffs in this sort of case need to plead facts showing that a specific, comparable testor received 23 different specifically identified ads. What I am requiring plaintiffs to plead are the facts within 24 their exclusive knowledge, explaining what they actually did with respect to their use of Facebook 25 to look for housing, how they know their white compatriot saw different ads, and facts regarding 26 their then-current intent and ability to secure housing had they been shown a full range of ads 27 through Facebook. Those facts – which are wholly absent from the SAC – are necessary to raise a 1 the Facebook’s discriminatory tools by housing advertisers.> 2 The result is no different for statutory standing under California’s Unruh Act and Unfair 3 Competition Law or New York law. There are no plausible facts alleged that any of the plaintiffs 4 || have personally suffered discrimination as a result of potential use of Facebook’s ad-targeting 5 tools at any particular time or in any particular manner, much less that they suffered any other 6 || non-conjectural injury or economic loss. 7 CONCLUSION 8 The Motion to Dismiss the Second Amended Complaint is GRANTED with leave to 9 || amend.° If plaintiffs can amend to cure the deficiencies identified, they shall file their Third 10 || Amended Complaint within 20 days of the date of this Order. 11 a 12 IT IS SO ORDERED.

13 || Dated: January 21, 2021

v 14

15 2 iam H. Orrick a 16 United States District Judge

it

Z 18 19 20 21 22 23 24 25 26 > These facts are within the exclusive control of plaintiffs. Plaintiffs’ request — made during the hearing on this motion — that they be provided “jurisdictional discovery” by Facebook puts the cart 97 || before the horse. Plaintiffs must make a plausible showing of their injury in fact based on facts within their exclusive control before Facebook may be subject to discovery. 28 || As such, I need not reach Facebook’s other arguments in support of its motion to dismiss.