Meta Faces State AGs in Child Safety Trial

Meta Faces Pivotal California Trial: Could State Lawsuits Reshape Social Media’s Future?

The legal battles surrounding Meta Platforms Inc. and its social media behemoths, Facebook and Instagram, are reaching a critical juncture. While New Mexico has set a precedent for holding the tech giant accountable, California, Meta’s home state, may ultimately determine the company’s fate by forcing fundamental changes to its core algorithms and business practices.

Opening arguments commenced this week in a landmark federal trial in Oakland, California, where a coalition of 29 state attorneys general are co-leading a case against Meta. The core allegations revolve around the company’s purported cultivation of addictive behavior among young users, violating federal and state consumer protection laws, including the Children’s Online Privacy Protection Act (COPPA).

This trial is being widely described as social media’s “Big Tobacco” moment. In the 1990s, tobacco companies faced devastating financial penalties and a significant erosion of their influence after being found liable for misleading the public about the harms of their products. A similar outcome for Meta could have profound implications for the entire digital advertising landscape, a sector that generates nearly all of Meta’s revenue.

Earlier this month, Meta suffered a significant legal defeat in New Mexico, resulting in a ruling that mandates changes to its services and nearly $1 billion in penalties. However, the sheer economic and legal influence of California, coupled with its position as a global technology hub, means a negative verdict in this state could lead to far more severe and widespread consequences.

“California holds immense sway, far beyond any other U.S. jurisdiction,” commented Julia Powles, executive director of the UCLA Institute for Technology, Law and Policy. “It’s where Meta faces the most extensive legal reach, and its decisions are scrutinized globally.”

Raúl Torrez, the Attorney General of New Mexico, who recently secured a victory against Meta, emphasized the potentially “astronomical” repercussions for the company. Meta’s substantial investments in artificial intelligence, projected to cost upwards of $145 billion this year, are heavily reliant on the cash flow from its dominant online advertising business.

The New Mexico ruling included a $567 million payment into an abatement fund as part of the second phase of a case concerning child sexual exploitation allegations. In the first phase, a jury found Meta liable for $375 million for violating the state’s unfair practices act. Meta has stated its disagreement with the New Mexico judgment and its intention to appeal.

Torrez cautioned that the New Mexico judgment, while substantial, pales in comparison to what a California verdict could entail. “This is a state with roughly 2 million people,” Torrez noted. “If you project that same argument onto California, Florida, Texas, or New York, you’re looking at a potentially massive, market-shifting force.”

**Navigating the Section 230 Hurdle**

A key strategy employed by state attorneys general in these lawsuits is to focus on app design features and alleged misrepresentations about safety, thereby circumventing Section 230 of the Communications Decency Act. This federal law has historically provided broad immunity to tech companies for content posted by their users.

The New Mexico case, for instance, requires Meta to enhance its “age assurance models and tools” utilizing AI and to develop an under-13 prediction model within two years. It also mandates easier reporting mechanisms for underage usage and partnerships with educational institutions to create a portal for flagging suspected under-13 accounts.

This approach, which focuses on Meta’s own product design and user engagement strategies, offers a “blueprint for other states to hold them accountable,” according to Torrez. This tactic has also been employed by other states, as seen in a March case where a Los Angeles jury found Meta and Google negligent for failing to warn users about the dangers of their platforms.

California Attorney General Rob Bonta, appointed in 2021, stated that protecting children from harm is a paramount responsibility. “Meta designed a dangerous product for young users, knew it to be dangerous, and then lied to children, families, and the community about how dangerous it was,” Bonta asserted. “We are ready to hold Meta accountable for its role in fueling the mental health crisis of American children and look forward to trial.”

Meta, in response, has characterized the attorneys general’s claims as unsubstantiated and their financial demands as disproportionate. The company argues that the AGs have offered no proof of residents being misled and are attempting to penalize Meta for industry-wide challenges like age verification.

**The Potential Financial and Operational Fallout**

Meta’s legal team has previously estimated the consolidated state AG trial could result in damages as high as $1.4 trillion. However, lawyers representing the states suggested a more realistic figure of $200 billion during a recent court filing.

“You could wake up to a headline judgment that is, as I’ve said, astronomical,” Torrez reiterated.

Michael Coffey, a defense litigator and founding partner at Coffey Modica, notes that such cases can define an attorney general’s career. However, he also points out that victims may receive only a fraction of any ultimate payout, with the bulk potentially going to government entities and the plaintiffs’ bar.

Beyond financial penalties, the potential for mandated design changes in California could prove far more disruptive to Meta’s business model. Laura Marquez-Garrett, an attorney with the Social Media Victims Law Center, explained that state attorneys general possess the unique ability to compel companies, through the court system, to fundamentally alter their business models and design decisions – a power typically beyond the reach of private plaintiffs.

In their court filings, the state AGs are seeking “permanent injunctive relief, on a nationwide — rather than state-by-state — basis, to restrain Meta’s unlawful acts and practices” for any COPPA violations. This includes demands for the deletion of personal data of children under 13 and the algorithms trained on that information. For violations of state consumer protection laws, the states are pushing for the removal of “certain addictive design features,” such as infinite scroll, autoplay, ephemeral content, beauty filters, and “engagement-optimized algorithms.”

While Torrez acknowledged that his team did not achieve all desired design modifications in the New Mexico case, such as eliminating infinite scroll or altering recommendation algorithms, due to potential conflicts with Section 230 and First Amendment protections, he indicated a move toward legislative solutions with proposed social media and consumer protection law updates.

Meta and its competitors continue to face numerous other lawsuits nationwide. While some initial cases, including those involving school districts and consolidated trials against Meta, YouTube, TikTok, and Snap, have been settled, the California trial represents a significant escalation.

From Torrez’s perspective, Wall Street is currently underestimating the potential impact of a negative California verdict, viewing the New Mexico outcome in isolation. While Meta’s stock has seen a decline this year, most analyst concerns have centered on the company’s substantial capital expenditures for AI infrastructure, rather than fears of a deterioration in its advertising business.

“The analysts aren’t pricing this correctly right now,” Torrez warned. “That California judgment by itself could be gargantuan enough that it changes the ability of this company to do what it needs to finance into the future.” The outcome in California could indeed prove to be a watershed moment, not only for Meta but for the broader social media industry and the regulatory landscape governing digital platforms.