By Jonathan Stempel
(Reuters) -A divided U.S. appeals court said Meta Platforms must face a class action by advertisers that accused the Facebook and Instagram owner of overcharging them by fraudulently inflating the number of people their ads might reach.
In a 2-1 decision on Thursday, the 9th U.S. Circuit Court of Appeals in San Francisco said advertisers could sue for damages as a group over Meta's claims about the "potential reach" of their ads.
Advertisers said the metric used measured the number social media accounts, not the lower number of actual people, and inflated the number of potential viewers by as much as 400%.
The court also decertified a separate class seeking injunctive relief, meaning the advertisers cannot sue as a group, because it wasn't clear that the main plaintiff had legal standing to sue.
A dissenting judge would have decertified both classes. The advertisers have estimated Meta could owe more than $7 billion of damages, court papers show.
Meta and its lawyers did not immediately respond to requests for comment.
The Menlo Park, California-based company has said ads generate "substantially all" of its revenue, which totaled $134.9 billion in 2023. Net income was $39.1 billion.
Class actions afford potentially greater recoveries at lower cost than if plaintiffs are forced to sue individually.
Circuit Judge Sidney Thomas wrote for the majority that because Meta provided the same alleged misrepresentation about potential reach, advertisers could try to prove that their alleged damages stemmed from a "common course of conduct."
The class covers potentially millions of individuals and businesses that have paid for ads on Facebook and Instagram since Aug. 15, 2014.
Their lawsuit included a claim that senior executives knew that duplicate and fake accounts, including from bots, inflated the "potential reach" metric, but took steps to cover it up.
Circuit Judge Danielle Forrest, in a partial dissent, said she would decertify the damages class because of individualized questions about what advertisers understood about what Meta was telling them before they bought ads.
Geoffrey Graber, a lawyer for the advertisers, said he looked forward to taking the damages case to a jury.
The case is DZ Reserve et al v Meta Platforms Inc (NASDAQ:META), 9th U.S. Circuit Court of Appeals, No. 22-15916.