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Federal Agency of News LLC v. Facebook, Inc.

United States District Court, N.D. California, San Jose Division

January 13, 2020

FEDERAL AGENCY OF NEWS LLC, et al., Plaintiffs,
v.
FACEBOOK, INC., Defendant.

          ORDER GRANTING MOTION TO DISMISS WITH PREJUDICE RE: DKT. NO. 40

          LUCY H. KOH UNITED STATES DISTRICT JUDGE.

         Plaintiffs Federal Agency of News LLC (“FAN”) and Evgeniy Zubarev (collectively, “Plaintiffs”) bring suit against Defendant Facebook, Inc. (“Facebook”) because Facebook removed FAN's Facebook account and page. The Court previously granted Facebook's motion to dismiss without prejudice. ECF No. 33. Before the Court is Facebook's second motion to dismiss. ECF No. 40. Having considered the parties' submissions, the relevant law, and the record in this case, the Court GRANTS Facebook's motion to dismiss with prejudice.

         I. BACKGROUND

         A. Factual Background

         Plaintiff FAN is a “corporation organized and existing under the laws of the Russian Federation” that “gathers, transmits and supplies domestic and international news reports and other publications of public interest.” ECF No. 36 (“First Amended Complaint” or “FAC”) ¶¶ 2, 5. Plaintiff Evgeniy Zubarev is “the sole shareholder and General Director of FAN.” Id. ¶ 6. Defendant Facebook operates an online social media and social networking platform on which users like FAN can disseminate content by publishing on the users' Facebook page “posts and other content for its Facebook followers.” Id. ¶¶ 3, 30. Facebook users' utilization of Facebook is governed by Facebook's Terms of Service that, if violated, may result in the deletion of users' Facebook accounts and pages. Id. ¶¶ 4, 58, 91.

         On or about December 2014, FAN started “a Facebook page through which FAN has published its posts and other content for its Facebook followers.” Id. ¶ 3. After the 2016 United States presidential election, “Facebook began to shut down ‘inauthentic' Facebook accounts that allegedly sought to inflame social and political tensions in the United States.” Id. ¶ 10. Facebook allegedly shut down such accounts because the accounts' activities were “similar to or connected to that of Russian Facebook accounts during the 2016 United States presidential election which were allegedly controlled by the Russia-based Internet Research Agency (‘IRA').” Id. FAN's Facebook account and page were among those that were shut down. Id. ¶ 57. FAN's Facebook account and page were shut down on April 3, 2018. Id.

         1. FAN's Role in Russian Interference in the 2016 United States Presidential Election

         As aforementioned, Facebook shut down Facebook accounts with connections to Russian Facebook accounts allegedly controlled by the IRA. Id. ¶ 10. The IRA was “an agency which allegedly employed fake accounts registered on major social networks . . . to promote the Russian government's interests in domestic and foreign policy.” Id. ¶ 11. Specifically, in a United States Intelligence Community report regarding alleged Russian interference in the 2016 presidential election, the IRA was described as an agency of “professional trolls whose likely financier is a close Putin ally with ties to Russian intelligence.” Id. ¶ 14 (internal quotation marks omitted). Notably, from “the time of FAN's incorporation and until in or about the middle of 2015, FAN and the IRA were located in the same building” in Saint Petersburg, Russia. Id. ¶ 37.

         In addition, FAN's founder and first “General Director” is Aleksandra Yurievna Krylova. Id. ¶ 34. The Special Counsel investigation into Russian interference in the 2016 presidential election that was headed by Robert Mueller determined that Krylova was employed by the IRA from about September 2013 to about November 2014. Id. ¶¶ 19, 34. However, FAN proclaims that it does not know the veracity of the Special Counsel's finding. Id. ¶ 34. Nevertheless, on February 16, 2018, the Special Counsel indicted Krylova, who was accused of participation in the IRA's “interference operations targeting the United States.” Id. ¶ 39.

         Moreover, on October 19, 2018, the United States District Court for the Eastern District of Virginia unsealed a criminal complaint. Id. ¶ 41. The criminal complaint divulged that the Federal Bureau of Investigation (“FBI”) had uncovered “a Russian interference operation in political and electoral systems targeting populations within the Russian Federation, and other countries, including the United States” codenamed “Project Lakhta.” Id. In support of the criminal complaint, the FBI asserted that Project Lakhta used “inauthentic user names to create fictitious Facebook profiles” and “published false and misleading news articles intended to influence the U.S. and other elections.” Id. ¶¶ 46, 48. Notably, the FBI also attested that FAN, as well as the IRA, were entities within Project Lakhta. Id. ¶ 42. Furthermore, the criminal complaint was filed against Elena Alekseevna Khusyaynova, who has been FAN's chief accountant since August 2, 2016. Id. ¶¶ 41, 51. However, FAN maintains that it was not involved in Project Lakhta and that it had no “direct connection” to the IRA. Id. ¶¶ 45, 56.

         2. Facebook's Role in the United States' Investigation of Russian Interference in the 2016 Presidential Election

         On September 6, 2017, Facebook's Chief Security Officer Alex Stamos announced that “Facebook found approximately $100, 000.00 in advertisement spending” between June 2015 and May 2017 “associated with more than 3, 000 advertisements in connection with approximately 470 allegedly inauthentic Facebook accounts and Pages.” Id. ¶ 15. Stamos stated that “Facebook conducted a sweeping search looking for all ads that might have originated in Russia.” Id. ¶ 16 (quotation marks omitted). Facebook then “shared these findings with United States authorities” and provided Congress “with information related to the 3, 000 advertisements.” Id. ¶¶ 16-17.

         On September 21, 2017, Facebook's cofounder, chairman, and chief executive officer Mark Zuckerberg released a video stating that “Facebook is actively working with the U.S. government on its ongoing investigations into Russian interference” and that Facebook is providing information to the Special Counsel. Id. ¶ 19.

         3. The Removal of FAN's Facebook Account and Page

         On April 3, 2018, Facebook shut down FAN's Facebook account and page. Id. ¶ 57. In an email, Facebook explained that FAN's Facebook account and page were shut down because FAN allegedly violated Facebook's Terms of Service. Id. ¶ 58. FAN was among the more than 270 Russian language accounts and pages that Facebook shut down on April 3, 2018. Id. ¶ 20. On the same day, Zuckerberg published a blog post explaining Facebook's actions. Id. ¶ 21. Zuckerberg wrote that the accounts and pages taken down on April 3, 2018 were removed because “they were controlled by the IRA” and not because of “the content they shared.” Id. Specifically, Zuckerberg wrote that the IRA “has repeatedly acted deceptively and tried to manipulate people in the US, Europe, and Russia, ” and since 2016, when the IRA “had set up a network of hundreds of fake accounts to spread divisive content and interfere in the U.S. presidential election, ” Facebook has improved its “techniques to prevent nation states from interfering in foreign elections.” Mark Zuckerberg, https://www.facebook.com/zuck/posts/10104771321644971 (last visited January 9, 2020); see FAC ¶ 21 (referencing Zuckerberg's blog post).

         B. Procedural History

         On November 20, 2018, Plaintiffs filed their complaint against Facebook. ECF No. 1 (“Compl.”). Plaintiffs originally alleged five causes of action: (1) a Bivens claim for violation of the First Amendment; (2) “damages under Title II of the U.S. Civil Rights Act of 1964 and 42 U.S.C. Section 1983”; (3) “Damages under the California Unruh Civil Rights Act”; (4) breach of contract; and (5) breach of the implied covenant of good faith and fair dealing. Id. ¶¶ 59-117.

         On April 15, 2019, Facebook filed a motion to dismiss Plaintiffs' Complaint. ECF No. 25. The Court granted Facebook's motion to dismiss without prejudice on July 20, 2019. ECF No. 33. The Court first dismissed Plaintiff's second cause of action under Title II of the U.S. Civil Rights Act of 1964 and 42 U.S.C. § 1983 because Plaintiffs did not allege that any party was acting under color of state law. Id. at 7.

         The Court then addressed Defendant's argument under 47 U.S.C. § 230(c)(1) (“Section 230”), or the Communications Decency Act (“CDA”). Under Section 230, “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” 47 U.S.C. § 230(c)(1). The Court concluded that Facebook fulfilled all three prerequisites necessary to claim Section 230 immunity. ECF No. 33 at 8-13. First, Facebook qualified as an “interactive computer service” based on Plaintiffs' allegations and ample case law. Id. at 8-9. Second, Plaintiffs sought to hold Facebook liable for removing information provided by an “information content provider” that was not Facebook. Id. at 9. Specifically, Plaintiffs sought to hold Facebook liable for content provided by FAN. Id. at 9-10. Third, Plaintiffs sought to hold Facebook liable as a publisher or speaker of Plaintiff's content because “Plaintiffs' claims [were] based on Facebook's decision not to publish FAN's content.” Id. at 11. Accordingly, the Court determined that the CDA barred all of Plaintiffs' causes of action except for Plaintiffs' Bivens claim for a violation of the First Amendment. Id.

         As to the Bivens claim, the Court concluded that Facebook could not be held liable for violating the First Amendment because Facebook was not a “public forum” and Facebook's actions did not amount to state action. Id. at 14-22. As a result, the Court dismissed all of Plaintiffs' causes of action with leave to amend. The Court notified Plaintiffs that “failure to cure the deficiencies identified in this Order or in Defendant's briefing will result in dismissal with prejudice of the claims dismissed in this Order.” Id. at 22.

         On August 19, 2019, Plaintiffs filed their First Amended Complaint (“FAC”). ECF No. 36. The FAC makes minor grammatical edits and adds ten paragraphs. Id. ¶¶ 23-27, 70-71, 75, 96-97. Five paragraphs mainly pertain to allegations involving the 2018 midterm elections and Facebook's alleged “partnership with government and law enforcement agencies, ” id. ¶ 25, but none of these allegations, however, relate to Facebook's decision to remove FAN's profile and content following the 2016 presidential election. Id. ¶¶ 23-27. Two other paragraphs add allegations about Facebook's user agreements, id. ¶¶ 70-71; one paragraph makes a conclusory allegation that Facebook's work with the U.S. government “constitutes a conspiracy to deny FAN its free speech rights, ” id. ¶ 75, and the final two paragraphs simply allege that FAN did not publish obscene, indecent, or sexual content and that Facebook “operated in bad faith.” Id. ¶¶ 96-97.

         Additionally, Plaintiffs elected not to reallege their cause of action pursuant to “Title II of the U.S. Civil Rights Act of 1964 and 42 U.S.C. Section 1983.” Compare Compl. ¶¶ 59-117, with FAC ¶¶ 64-116. Instead, the FAC alleges five causes of action similar to those pled in Plaintiffs' Complaint: (I) a Bivens claim for violation of the First Amendment; (II) a claim for “Damages under the California Unruh Civil Rights Act”; (III) a claim for breach of contract; and (IV) and (V) two claims of breach of the implied covenant of good faith and fair dealing. FAC ¶¶ 64-116. Counts IV and V both plead breaches of the implied covenant of good faith and fair dealing. FAC ¶¶ 101-116. It is not entirely clear how Plaintiffs' theories of liability differ as to each count, as both counts allege that FAN “lost subscribers and revenues from subscriber services” or that “Facebook has made [FAN's] performance under [its agreements with subscribers] expensive or difficult or impossible.” Id. ¶¶ 106, 113.

         On September 16, 2019, Facebook filed a motion to dismiss Plaintiffs FAC. ECF No. 40 (“Mot.”). On October 11, 2019, Plaintiffs filed an opposition to Facebook's motion to dismiss. ECF No. 41 (“Opp.”). On October 8, 2019, Facebook filed a reply. ECF No. 42 (“Reply.”)

         II. LEGAL STANDARD

         A. Motion to Dismiss Under Federal Rule of Civil Procedure 12(b)(6)

         Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a complaint to include “a short and plain statement of the claim showing that the pleader is entitled to relief.” A complaint that fails to meet this standard may be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). The United States Supreme Court has held that Rule 8(a) requires a plaintiff to plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (internal quotation marks omitted). For purposes of ruling on a Rule 12(b)(6) motion, the Court “accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). The Court, however, need not “assume the truth of legal conclusions merely because they are cast in the form of factual allegations.” Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (per curiam) (internal quotation marks omitted). Additionally, mere “conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss.” Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004).

         B. Leave to Amend

         If the Court determines that a complaint should be dismissed, it must then decide whether to grant leave to amend. Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend “shall be freely given when justice so requires, ” bearing in mind “the underlying purpose of Rule 15 to facilitate decisions on the merits, rather than on the pleadings or technicalities.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (alterations and internal quotation marks omitted). When dismissing a complaint for failure to state a claim, “a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.” Id. at 1130 (internal quotation marks omitted). Accordingly, leave to amend generally shall be denied only if allowing amendment would unduly prejudice the opposing party, cause undue delay, or be futile, or if the moving party has acted in bad faith. Leadsinger, Inc. v. BMG Music Publ'g, 512 F.3d 522, 532 (9th Cir. 2008). At the same time, a court is justified in denying leave to amend when a plaintiff “repeated[ly] fail[s] to cure deficiencies by amendments previously allowed.” See Carvalho v. ...


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