On October 16, 2018, Cohen Milstein and co-counsel filed an unsealed version of their fourth amended complaint in a putative consumer class action regarding two inflated video metrics that Facebook disseminated to advertisers. Plaintiffs’ third amended complaint already alleged that Facebook violated California’s Unfair Competition Law (§ 17200) and breached their implied duty to perform with reasonable care. The fourth amended complaint adds an allegation that Facebook committed fraud, based upon internal documents produced by Facebook in the litigation.

Case Background

In September 2016, the Wall Street Journal revealed that Facebook had been overstating the average time its users spent watching paid video advertisements. The Wall Street Journal reported that Facebook’s metrics had been overstated by between 60 and 80%. In response to the media attention, Facebook admitted it made a mistake, but emphasized that it had only discovered the mistake “about a month ago,” and that “as soon as we discovered [it], we fixed it.” When Plaintiffs originally filed this class action on behalf of advertisers in October 2016, they had no reason to believe Facebook was not telling the truth, and limited their claims to contract and statutory claims.

The fourth amended complaint alleges that internal records recently during the litigation suggest that Facebook’s action rises to the level of fraud and may warrant punitive damages. As explained in the fourth amended complaint, “Facebook did not discover its mistake one month before its public announcement. Facebook engineers knew for over a year, and multiple advertisers in 2015 had reported aberrant results caused by the miscalculation (such as 100% average watch times for their video ads). Yet Facebook did nothing to stop its dissemination of false metrics.”

In addition to Facebook knowing about the problem far longer than previously acknowledged, the fourth amended complaint further alleges that Facebook’s records also show that the impact of its miscalculation was much more severe than reported. The average viewership metrics were not inflated by only 60%-80%; they were inflated by some 150 to 900%.

The fourth amended complaint further alleged that, even once Facebook decided to correct the false metrics, it chose not to do so immediately. Instead, Facebook chose to continue disseminating false metrics for several more months while it developed and deployed a “no PR” strategy designed to “obfuscate the fact that we screwed up the math.”

The case is: LLE One, LLC v. Facebook, Case. No.: 4:16-cv-06232-JSW, United States District Court, Northern District of California, Oakland Division