Alert June 27, 2012

Recent Consumer Class Decision

Certification of Class of Facebook Advertisers Denied

The U.S. District Court for the Northern District of California recently denied class certification in an action alleging that Facebook, Inc. breached its advertising contracts by charging advertisers for “clicks” that did not result in any benefit to advertisers. In re Facebook, Inc. PPC Advertising Litig., 2010 WL 1746143 (N.D. Cal. Apr. 22, 2010). The plaintiffs sought certification of a Rule 23(b)(3) class of “all persons or entities in the United States who paid money to Facebook, Inc. for cost-per-click advertising” starting in May 2009. The court held that the putative class did not satisfy the adequacy of representation prong of Rule 23(a) or the predominance and superiority requirements of Rule 23(b)(3).

With respect to Rule 23(a), the court found that the two named plaintiffs had not established that they suffered any concrete injury from “invalid” clicks, or that they had timely disputed their advertising charges. The court thus held that the plaintiffs might be required to litigate individualized defenses that could be dispositive of their claims, which rendered them inadequate class representatives. It also held that the plaintiffs’ interests might differ from those of people who signed materially different advertising contracts. Finally, the court found that one plaintiff was an inadequate class representative because “he testified in his deposition that he knows essentially nothing about the case, and indicated that he would defer to counsel in prosecuting this action.”

The court also found that the class did not satisfy Rule 23(b)(3) because common questions did not predominate with regard to the plaintiffs’ claim that there was a “systematic breach of contract” by Facebook because the plaintiffs failed to establish three key points:  (i) that the allegedly breached contract terms were within the scope of the contract between Facebook and its advertisers, (ii) that there was a uniform way to distinguish between different types of “clicks” on a class-wide basis and (iii) that damages could be calculated on a class-wide basis. Because of the need for multiple individualized determinations, the court also found that a class trial would not be the superior way to resolve the dispute, as required by Rule 23(b)(3).