Lawsuit Losing Streak Adds Existential Angst to Meta’s Pivot

The infinite scroll is officially being rebranded as a toxic spill. 

After a pair of landmark lawsuit losses in New Mexico and Los Angeles this week, Meta is suddenly at a crossroads. At the very least, the defeats underscore the importance of the company’s pivot away from social media and toward an AI-driven business model. Not that founder Mark Zuckerberg didn’t already know that.

Change in Status

For over a decade now, tech giants have relied on Section 230 (the statute that shields internet platforms from liability for the content that users post and share) to overcome courtroom challenges. Plaintiffs in the recent cases, however, sidestepped the legal shield by pegging accountability to platform design, not content. In New Mexico, a jury found that the company’s failure to notify users about safety concerns on its platforms violated a state consumer protection law. In the Los Angeles case, the jury found that Meta, along with YouTube, was negligent in deploying features that fed social media addiction. 

The LA case precedes thousands of other lawsuits already filed by teenagers, parents, school districts and state prosecutors that similarly define their cases around allegations of personal injury. Many are expected to go to trial this year, and they now have a roadmap for success. For Meta, that’s enough to give a molehill an ominous resemblance to a mountain: 

• The company was ordered to pay $4.2 million in damages in the LA case (on top of $375 million in the New Mexico case). That’s pennies compared with Meta’s earnings, though multiplied thousands of times over, it could become an annoyingly large expense.
• The case “establishes a framework for how similar cases across the country will be evaluated and demonstrates that juries are willing to hold technology companies accountable when the evidence shows foreseeable harm,” Matt Bergman, founding attorney of the Social Media Victims Law Center, told NBC News this week.

“If the ruling stands, Meta’s board is on notice that there are significant design problems with the company’s system,” Stavros Gardinis, faculty director of the UC Berkeley Center for Law and Business, told The Daily Upside. “It will have to explore alternative strategies and choose pathways that do not violate the law, steering clear of design features seen as problematic.”

New Profile Pic: Shares of Meta plummeted 8% Thursday as investors digested the implications of the court losses. In turn, Meta’s AI plans look as critical as ever, though Gardinis noted this “opens a new can of worms.” Meta, however, is pushing ahead. The company announced Thursday that it’s increasing its spending on an El Paso, Texas-based data center from $1.5 billion to $10 billion, or roughly the equivalent of 2,381 LA trial-sized personal injury payouts.