Case 4:21-cv-08812-JST Document 110 Filed 01/27/23 Page 1 of 48
`
`
`
`
`
`Neal A. Potischman (SBN 254862)
`DAVIS POLK & WARDWELL LLP
`1600 El Camino Real
`Menlo Park, California 94025
`Telephone: (650) 752-2000
`Facsimile: (650) 752-2111
`Email: neal.potischman@davispolk.com
`
`James P. Rouhandeh (admitted pro hac vice)
`Charles S. Duggan (admitted pro hac vice)
`DAVIS POLK & WARDWELL LLP
`450 Lexington Avenue
`New York, New York 10017
`Telephone: (212) 450-4000
`Facsimile: (212) 701-5800
`Email: rouhandeh@davispolk.com
`
`charles.duggan@davispolk.com
`
`
`Attorneys for Defendants Meta Platforms, Inc.,
`Mark Zuckerberg, David M. Wehner, Nick
`Clegg, Adam Mosseri, Guy Rosen, Andy Stone,
`Antigone Davis, Karina Newton, Yann LeCun,
`Monika Bickert, and Pavni Diwanji
`
`UNITED STATES DISTRICT COURT
`
`FOR THE NORTHERN DISTRICT OF CALIFORNIA
`
`OAKLAND DIVISION
`
`
`Lead Case No. 4:21-cv-08812-JST
`
`DEFENDANTS’ NOTICE OF MOTION
`AND MOTION TO DISMISS THE
`CONSOLIDATED AMENDED CLASS
`ACTION COMPLAINT; MEMORANDUM
`OF POINTS & AUTHORITIES IN
`SUPPORT THEREOF
`
`Date: June 8, 2023
`Time: 2:00 p.m.
`Dept.: Courtroom 6 – 2nd Floor
`Judge: Honorable Jon S. Tigar
`
`
`
`
`
`
`IN RE META PLATFORMS, INC.
`SECURITIES LITIGATION
`
`This document relates to: All Actions
`
`
`
`
`
`
`
`
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 4:21-cv-08812-JST Document 110 Filed 01/27/23 Page 2 of 48
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`TABLE OF CONTENTS
`
`PAGE
`
`TABLE OF AUTHORITIES ............................................................................................................. iii
`
`NOTICE OF MOTION AND MOTION TO DISMISS ......................................................................1
`
`MEMORANDUM OF POINTS AND AUTHORITIES .....................................................................1
`
`STATEMENT OF ISSUES .................................................................................................................1
`
`PRELIMINARY STATEMENT .........................................................................................................1
`
`COMPLAINT ALLEGATIONS .........................................................................................................5
`
`A.
`
`B.
`
`C.
`
`D.
`
`Meta’s Statements About its Enforcement of Community Standards .........................5
`
`Meta’s Statements About its Algorithm and Content Moderation Efforts ..................8
`
`Meta’s Statements About Instagram’s Alleged Impact on Teens ..............................10
`
`Meta’s Statements About the Prevalence of Duplicate Accounts (or SUMAs) ........12
`
`ARGUMENT .....................................................................................................................................13
`
`14
`
`I.
`
`The Complaint Does Not State a Claim that Defendants Deceived Investors About
`Meta’s Enforcement of Community Standards ......................................................................14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`A.
`
`B.
`
`C.
`
`No Materially False or Misleading Statement ...........................................................14
`
`No Strong Inference of Scienter.................................................................................17
`
`No Loss Causation .....................................................................................................19
`
`II.
`
`The Complaint Does Not State a Claim that Defendants Deceived Investors About
`Meta’s Algorithms and Content Moderation Efforts .............................................................21
`
`A.
`
`B.
`
`C.
`
`No Materially False or Misleading Statement ...........................................................21
`
`No Strong Inference of Scienter.................................................................................26
`
`No Loss Causation .....................................................................................................28
`
`23
`
`III.
`
`The Complaint Does Not State a Claim that Defendants Deceived Investors About
`Instagram’s Alleged Impact on Teens ...................................................................................29
`
`24
`
`25
`
`26
`
`27
`
`28
`
`A.
`
`B.
`
`C.
`
`No Materially False or Misleading Statement ...........................................................29
`
`No Strong Inference of Scienter.................................................................................32
`
`No Loss Causation .....................................................................................................33
`
`i
`DEFENDANTS’ MOTION TO DISMISS THE CONSOLIDATED AMENDED CLASS ACTION COMPLAINT
`CASE NO. 4:21-cv-08812-JST
`
`

`

`Case 4:21-cv-08812-JST Document 110 Filed 01/27/23 Page 3 of 48
`
`
`
`IV.
`
`The Complaint Does Not State a Claim that Defendants Deceived Investors About
`Duplicate Accounts ................................................................................................................35
`
`A.
`
`B.
`
`C.
`
`No Materially False or Misleading Statement ...........................................................35
`
`No Strong Inference of Scienter.................................................................................37
`
`No Loss Causation .....................................................................................................37
`
`V.
`
`The Complaint Fails to State a Claim as to Any Individual Defendant .................................37
`
`CONCLUSION ..................................................................................................................................40
`
`
`
`ii
`DEFENDANTS’ MOTION TO DISMISS THE CONSOLIDATED AMENDED CLASS ACTION COMPLAINT
`CASE NO. 4:21-cv-08812-JST
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 4:21-cv-08812-JST Document 110 Filed 01/27/23 Page 4 of 48
`
`
`
`1
`
`2
`
`3
`
`TABLE OF AUTHORITIES
`
`CASES
`
`PAGE(S)
`
`4
`
`Abadilla v. Precigen, Inc.,
`
`5
`
`2022 WL 1750033 (N.D. Cal. May 31, 2022) ............................................................................ 26
`
`6
`
`Albert Fadem Tr. v. Citigroup, Inc.,
`
`7
`
`165 F. App’x 928 (2d Cir. 2006) ................................................................................................ 23
`
`8
`
`Barnes v. Edison Int’l,
`
`9
`
`10
`
`2021 WL 2325060 (C.D. Cal. Apr. 27, 2021),
`
`aff’d, 2022 WL 822191 (9th Cir. Mar. 18, 2022) ................................................................ passim
`
`11
`
`In re BofI Holding, Inc. Sec. Litig.,
`
`12
`
`977 F.3d 781 (9th Cir. 2020) .......................................................................................... 19, 20, 34
`
`13
`
`In re Citigroup, Inc. Sec. Litig.,
`
`14
`
`330 F. Supp. 2d 367 (S.D.N.Y. 2004) ........................................................................................ 23
`
`15
`
`City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Align Tech., Inc.,
`
`16
`
`856 F.3d 605 (9th Cir. 2017) ...................................................................................................... 33
`
`17
`
`City of Pontiac Policemen’s & Firemen’s Ret. Sys. v. UBS AG,
`
`18
`
`752 F.3d 173 (2d Cir. 2014) ....................................................................................................... 17
`
`19
`
`Crihfield v. CytRx Corp.,
`
`20
`
`2017 WL 2819834 (C.D. Cal. June 14, 2017) ............................................................................ 18
`
`21
`
`In re Cutera Sec. Litig.,
`
`22
`
`610 F.3d 1103 (9th Cir. 2010) .............................................................................................. 21, 30
`
`23
`
`In re Daou Sys., Inc.,
`
`24
`
`411 F.3d 1006 (9th Cir. 2005) .................................................................................................... 26
`
`25
`
`Di Donato v. Insys Therapeutics Inc.,
`
`26
`
`2017 WL 3268797 (D. Ariz. Aug. 1, 2017) ............................................................................... 30
`
`27
`
`Eng v. Edison Int’l,
`
`28
`
`2017 WL 1857243 (S.D. Cal. May 5, 2017) ........................................................................ 20, 34
`iii
`DEFENDANTS’ MOTION TO DISMISS THE CONSOLIDATED AMENDED CLASS ACTION COMPLAINT
`CASE NO. 4:21-cv-08812-JST
`
`

`

`Case 4:21-cv-08812-JST Document 110 Filed 01/27/23 Page 5 of 48
`
`
`
`1
`
`In re Equifax Inc. Sec. Litig.,
`
`2
`
`357 F. Supp. 3d 1189 (N.D. Ga. 2019) ....................................................................................... 36
`
`3
`
`In re Facebook, Inc. Sec. Litig.,
`
`4
`
`405 F. Supp. 3d 809 (N.D. Cal. 2019) ........................................................................................ 14
`
`5
`
`In re Facebook, Inc. Sec. Litig.,
`
`6
`
`477 F. Supp. 3d 980 (N.D. Cal. 2020) ................................................................................ passim
`
`7
`
`Fadia v. FireEye, Inc.,
`
`8
`
`2016 WL 6679806 (N.D. Cal. Nov. 14, 2016) ........................................................................... 26
`
`9
`
`Ferraro Fam. Found., Inc. v. Corcept Therapeutics Inc.,
`
`10
`
`501 F. Supp. 3d 735 (N.D. Cal. 2020) ........................................................................................ 19
`
`11
`
`In re Gap Stores Sec. Litig.,
`
`12
`
`457 F. Supp. 1135 (N.D. Cal. 1978) ........................................................................................... 39
`
`13
`
`Huang v. Higgins,
`
`14
`
`443 F. Supp. 3d 1031 (N.D. Cal. 2020) ...................................................................................... 34
`
`15
`
`In re Intel Corp. Securities Litig.,
`
`16
`
`2019 WL 1427660 (N.D. Cal. Mar. 29, 2019) ........................................................................... 29
`
`17
`
`In re InterMune, Inc.,
`
`18
`
`2004 WL 1737264 (N.D. Cal. July 30, 2004) ............................................................................ 40
`
`19
`
`In re Int’l Rectifier Corp. Sec. Litig.,
`
`20
`
`2008 WL 4555794 (C.D. Cal. May 23, 2008) ............................................................................ 39
`
`21
`
`Iron Workers Loc. 580 Joint Funds v. Nvidia Corp.,
`
`22
`
`2020 WL 1244936 (N.D. Cal. Mar. 16, 2020) ........................................................................... 27
`
`23
`
`Khoja v. Orexigen Therapeutics, Inc.,
`
`24
`
`899 F.3d 988 (9th Cir. 2018) ...................................................................................................... 14
`
`25
`
`Knollenberg v. Harmonic, Inc.,
`
`152 F. App’x 674 (9th Cir. 2005)
`
`aff’d, 2021 WL 4281301 (9th Cir. Sept. 21, 2021) .................................................................... 39
`
`26
`
`27
`
`28
`
`iv
`DEFENDANTS’ MOTION TO DISMISS THE CONSOLIDATED AMENDED CLASS ACTION COMPLAINT
`CASE NO. 4:21-cv-08812-JST
`
`

`

`Case 4:21-cv-08812-JST Document 110 Filed 01/27/23 Page 6 of 48
`
`
`
`1
`
`Lipton v. Pathogenesis Corp.,
`
`2
`
`284 F.3d 1027 (9th Cir. 2002) .............................................................................................. 27, 39
`
`3
`
`Loos v. Immersion Corp.,
`
`4
`
`762 F.3d 880 (9th. Cir. 2014) ......................................................................................... 13, 20, 34
`
`5
`
`Luna v. Marvell Tech. Grp. Ltd,
`
`6
`
`2016 WL 5930655 (N.D. Cal. Oct. 12, 2016) ............................................................................ 18
`
`7
`
`McGann v. Ernst & Young,
`
`8
`
`102 F.3d 390 (9th Cir. 1996) ................................................................................................ 22, 29
`
`9
`
`McGovney v. Aerohive Networks, Inc.,
`
`10
`
`367 F. Supp. 3d 1038 (N.D. Cal. 2019) ...................................................................................... 16
`
`11
`
`In re McKesson HBOC, Inc. Sec. Litig.,
`
`12
`
`126 F. Supp. 2d 1248 (N.D. Cal. 2000) ...................................................................................... 39
`
`13
`
`Metzler Inv. GMBH v. Corinthian Colleges, Inc.,
`
`14
`
`540 F.3d 1049 (9th Cir. 2008) .................................................................................................... 29
`
`15
`
`Middlesex Ret. Sys. v. Quest Software Inc.,
`
`16
`
`527 F. Supp. 2d 1164 (C.D. Cal. 2007) ...................................................................................... 39
`
`17
`
`In re Moody's Corp. Sec. Litig.,
`
`18
`
`274 F.R.D. 480 (S.D.N.Y. 2011) ................................................................................................ 34
`
`19
`
`Nguyen v. Endologix, Inc.,
`
`20
`
`962 F.3d 405 (9th Cir. 2020) ...................................................................................................... 17
`
`21
`
`In re NVIDIA Corp. Sec. Litig.,
`
`22
`
`768 F.3d 1046 (9th Cir. 2014) .................................................................................................... 33
`
`23
`
`Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund,
`
`24
`
`575 U.S. 175 (2015) ............................................................................................................. 22, 30
`
`25
`
`Oregon Pub. Emps. Ret. Fund v. Apollo Grp. Inc.,
`
`26
`
`774 F.3d 598 (9th Cir. 2014) ...................................................................................................... 37
`
`27
`
`Paracor Fin., Inc. v. Gen. Elec. Cap. Corp.,
`
`28
`
`96 F.3d 1151 (9th Cir. 1996) ...................................................................................................... 39
`v
`DEFENDANTS’ MOTION TO DISMISS THE CONSOLIDATED AMENDED CLASS ACTION COMPLAINT
`CASE NO. 4:21-cv-08812-JST
`
`

`

`Case 4:21-cv-08812-JST Document 110 Filed 01/27/23 Page 7 of 48
`
`
`
`1
`
`In re Peerless Sys., Corp. Sec. Litig.,
`
`2
`
`182 F. Supp. 2d 982 (S.D. Cal. 2002) ........................................................................................ 19
`
`3
`
`Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc.,
`
`4
`
`759 F.3d 1051 (9th Cir. 2014) .............................................................................................. 14, 35
`
`5
`
`In re REMEC Inc. Sec. Litig.,
`
`6
`
`702 F. Supp. 2d 1202 (S.D. Cal. 2010) ...................................................................................... 20
`
`7
`
`Retail Wholesale & Dept. Store Union Loc. 338 Ret. Fund v. Hewlett-Packard Co.,
`
`8
`
`845 F.3d 1268 (9th Cir. 2017) .................................................................................................... 21
`
`9
`
`In re Rigel Pharms., Inc. Sec. Litig.,
`
`10
`
`697 F.3d 869 (9th Cir. 2012) ................................................................................................ 27, 33
`
`11
`
`S. Ferry LP, No. 2 v. Killinger,
`
`12
`
`542 F.3d 776 (9th Cir. 2008) ...................................................................................................... 18
`
`13
`
`Sanders v. RealReal, Inc.,
`
`14
`
`2021 WL 1222625 (N.D. Cal. Mar. 31, 2021) ........................................................................... 33
`
`15
`
`In re Silicon Graphics, Inc. Sec. Litig.,
`
`16
`
`183 F.3d 970 (9th Cir. 1999) ................................................................................................ 16, 32
`
`17
`
`Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
`
`18
`
`551 U.S. 308 (2007) ................................................................................................................... 17
`
`19
`
`In re Tibco Software, Inc.,
`
`20
`
`2006 WL 2844421 (N.D. Cal. Sept. 29, 2006) ........................................................................... 26
`
`21
`
`In re TransDigm Grp., Inc. Sec. Litig.,
`
`22
`
`440 F. Supp. 3d 740 (N.D. Ohio 2020) ...................................................................................... 34
`
`23
`
`In re Vantive Corp. Sec. Litig.,
`
`24
`
`283 F.3d 1079 (9th Cir. 2002) .............................................................................................. 16, 27
`
`25
`
`Veal v. LendingClub Corp.,
`
`26
`
`423 F. Supp. 3d 785 (N.D. Cal. 2019) ........................................................................................ 26
`
`27
`
`Veal v. LendingClub Corp.,
`
`28
`
`2020 WL 3128909 (N.D. Cal. June 12, 2020) ............................................................................ 38
`vi
`DEFENDANTS’ MOTION TO DISMISS THE CONSOLIDATED AMENDED CLASS ACTION COMPLAINT
`CASE NO. 4:21-cv-08812-JST
`
`

`

`Case 4:21-cv-08812-JST Document 110 Filed 01/27/23 Page 8 of 48
`
`
`
`1
`
`Webb v. SolarCity Corp.,
`
`2
`
`884 F.3d 844 (9th Cir. 2018) ...................................................................................................... 19
`
`3
`
`Wessel v. Buhler,
`
`4
`
`437 F.2d 279 (9th Cir. 1971) ...................................................................................................... 30
`
`5
`
`Weston Fam. P’ship LLLP v. Twitter, Inc.,
`
`6
`
`29 F.4th 611 (9th Cir. 2022) ........................................................................................... 14, 23, 39
`
`7
`
`Zucco Partners, LLC v. Digimarc Corp.,
`
`8
`
`9
`
`552 F.3d 981 (9th Cir. 2009) ................................................................................................ 17, 19
`
`STATUTES & RULES
`
`10
`
`15 U.S.C. § 78j ....................................................................................................................... 1, 22, 29
`
`11
`
`15 U.S.C. § 78u-4 ...................................................................................................................... 14, 17
`
`12
`
`17 C.F.R. § 240.10b-5 ........................................................................................................................ 1
`
`13
`
`Fed. R. Civ. P. 9(b) ...................................................................................................................... 1, 14
`
`14
`
`Fed. R. Civ. P. 12(b)(6) ...................................................................................................................... 1
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`vii
`DEFENDANTS’ MOTION TO DISMISS THE CONSOLIDATED AMENDED CLASS ACTION COMPLAINT
`CASE NO. 4:21-cv-08812-JST
`
`

`

`Case 4:21-cv-08812-JST Document 110 Filed 01/27/23 Page 9 of 48
`
`
`
`1
`
`2
`
`NOTICE OF MOTION AND MOTION TO DISMISS
`
`PLEASE TAKE NOTICE that on June 8, 2023 at 2:00 p.m., or as soon thereafter as the matter
`
`3
`
`may be heard, in Courtroom 6, 2nd Floor, 1301 Clay Street, Oakland, CA 94612, Defendants will
`
`4
`
`and hereby do move the Court for an order dismissing with prejudice the Consolidated Amended
`
`5
`
`Class Action Complaint (the “Complaint” or “AC”) in its entirety pursuant to Federal Rule of Civil
`
`6
`
`Procedure 12(b)(6) and under the heightened pleading standards set forth in the Private Securities
`
`7
`
`Litigation Reform Act of 1995 (the “PSLRA”) and Federal Rule of Civil Procedure 9(b).1 This
`
`8
`
`motion is based on this Notice of Motion, the supporting Memorandum of Points and Authorities,
`
`9
`
`the Declaration of Charles S. Duggan and accompanying exhibits, the Request for Judicial Notice,
`
`10
`
`other materials in the record, argument of counsel and such other matters as the Court may consider.
`
`11
`
`12
`
`13
`
`MEMORANDUM OF POINTS AND AUTHORITIES
`
`STATEMENT OF ISSUES
`
`1.
`
`Whether Plaintiffs’ claim under Section 10(b) of the Securities Exchange Act of 1934
`
`14
`
`(the “Exchange Act”), 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R.
`
`15
`
`§ 240.10b-5, should be dismissed for failure to plead that (i) any Defendant made a materially false
`
`16
`
`or misleading statement, (ii) any Defendant acted with scienter, or (iii) Plaintiffs suffered any loss
`
`17
`
`caused by any allegedly false or misleading statement.
`
`18
`
`2.
`
`Whether Plaintiffs’ claims under Section 20(a) of the Exchange Act should be
`
`19
`
`dismissed for failure to plead a primary violation of the Exchange Act.
`
`20
`
`21
`
`PRELIMINARY STATEMENT
`
`Plaintiffs brought this lawsuit in the wake of a series of Wall Street Journal articles published
`
`22
`
`in September and October 2021 that concerned various aspects of Meta’s operations, drawing
`
`23
`
`extensively from select internal Meta documents taken without permission by a former employee.
`
`24
`
`Plaintiffs rely on those documents—largely unsourced and unattributed and often lacking any
`
`25
`
`26
`
`27
`
`28
`
`
`1 On July 26, 2022, the Court appointed the Ohio Public Employees Retirement System and PFA
`Pension, Forsikringsaktieselskab to serve as lead plaintiffs (“Plaintiffs”). (ECF No. 77.) The
`Complaint was filed on October 28, 2021. (ECF No. 97.) Defendants are Meta Platforms, Inc.,
`(“Meta” or the “Company”) and Mark Zuckerberg, David M. Wehner, Nick Clegg, Adam Mosseri,
`Guy Rosen, Andy Stone, Antigone Davis, Karina Newton, Yann LeCun, Monika Bickert and Pavni
`Diwanji (the “Individual Defendants”).
`
`1
`DEFENDANTS’ MOTION TO DISMISS THE CONSOLIDATED AMENDED CLASS ACTION COMPLAINT
`CASE NO. 4:21-cv-08812-JST
`
`

`

`Case 4:21-cv-08812-JST Document 110 Filed 01/27/23 Page 10 of 48
`
`
`
`1
`
`meaningful context—to argue that various statements by Defendants before and during the proposed
`
`2
`
`class period somehow misled investors about Meta’s commitment to its policies on enforcing
`
`3
`
`community standards and moderating content posted by users, among other matters. As courts have
`
`4
`
`repeatedly recognized, however, general statements of this kind cannot be subject to charges of
`
`5
`
`falsity, because they simply are not actionable as a matter of law. Plaintiffs cannot assert securities
`
`6
`
`fraud merely by gleaning corporate records for alleged instances where, for example, employees
`
`7
`
`purportedly identify challenges in achieving operational objectives or acknowledge trade-offs among
`
`8
`
`countervailing considerations. To do so would transform ordinary internal business debates and
`
`9
`
`discussions into a basis for pleading securities fraud. The Complaint entirely fails to carry its burden
`
`10
`
`of pleading with particularity that any Defendant made any statement during the proposed class
`
`11
`
`period that would support a claim of securities fraud, that any Defendant sought to mislead anyone,
`
`12
`
`or that any Defendant’s alleged conduct caused investors any loss.
`
`13
`
`The Complaint challenges alleged statements by Defendants regarding four disparate aspects
`
`14
`
`of Meta’s business operations, but fails to identify any actionable statement as to any of them:
`
`15
`
`First, Plaintiffs challenge certain general statements that affirmed Meta’s commitment to
`
`16
`
`holding all users to the same Community Standards—i.e., its internal rules for content allowed on its
`
`17
`
`apps. Plaintiffs assert that these purported statements were false because some users’ posts received
`
`18
`
`an additional layer of review, known as “X-Check,” or were “whitelisted.” But Meta’s general
`
`19
`
`statements about adhering to its Community Standards are precisely the sort of generalized
`
`20
`
`commitments to corporate policy that the Ninth Circuit has repeatedly held fall outside the scope of
`
`21
`
`the federal securities laws, as a matter of law. Moreover, Meta never claimed that it used the same
`
`22
`
`process in assessing all potentially actionable content. To the contrary, as the Complaint makes clear,
`
`23
`
`Meta repeatedly explained that its processes for enforcing its Community Standards may vary in
`
`24
`
`certain circumstances, such as where it applied a precautionary additional layer of review when
`
`25
`
`evaluating content posted by accounts with large numbers of followers. The Complaint simply fails
`
`26
`
`to plead that any Defendant misrepresented Meta’s commitment to apply the same Community
`
`27
`
`Standards to all users.
`
`28
`
`2
`DEFENDANTS’ MOTION TO DISMISS THE CONSOLIDATED AMENDED CLASS ACTION COMPLAINT
`CASE NO. 4:21-cv-08812-JST
`
`

`

`Case 4:21-cv-08812-JST Document 110 Filed 01/27/23 Page 11 of 48
`
`
`
`1
`
`Second, Plaintiffs claim that Meta’s statements that it sought to reduce objectionable content
`
`2
`
`on its apps were false, because changes Meta made in 2018 to its “News Feed” algorithm in order to
`
`3
`
`encourage more “meaningful social interactions” (or “MSI”) among friends and family had the
`
`4
`
`unintended effect of promoting divisive content. Here again, Meta’s general statements that it sought
`
`5
`
`to encourage MSI and discourage hate speech, misinformation, and other negative content are simply
`
`6
`
`not the kind of statements policed by the federal securities laws. Nor do Plaintiffs’ allegations show
`
`7
`
`that any statements about Meta’s content moderation efforts were not true. The Complaint
`
`8
`
`acknowledges that Meta changed its algorithm in 2018 to increase MSI and that, in response to
`
`9
`
`information about the effects of those changes, Meta revised the algorithm again in April 2020 to
`
`10
`
`reduce misinformation for posts involving civic and health misinformation. And Meta repeatedly
`
`11
`
`warned investors that there were limits to its ability to identify and remediate every offending item
`
`12
`
`among the billions of posts on its apps. Plaintiffs’ contention that, in effect, Meta should have “done
`
`13
`
`more” but struck the “wrong balance” is not a basis for a claim of securities fraud, particularly in
`
`14
`
`view of Meta’s express warnings that its efforts might not be fully successful.
`
`15
`
`Third, Plaintiffs assert
`
`that certain Defendants misled
`
`investors by purportedly
`
`16
`
`mischaracterizing the state of research on teens and social media and by not disclosing certain specific
`
`17
`
`observations on that subject reflected in internal Meta documents. But again, the Complaint fails to
`
`18
`
`show that any Defendant made any false statement, and does not even allege that some of these
`
`19
`
`statements were made in a public context. Plaintiffs’ criticisms that Meta should have publicly shared
`
`20
`
`certain specific observations purportedly reflected in some internal documents do not state a claim
`
`21
`
`of fraud. Issuers are not legally obligated to detail all information that might bear on their affairs.
`
`22
`
`Fourth, Plaintiffs contend that Meta misled investors about the number of duplicate accounts
`
`23
`
`among its new users, because it disclosed only its estimates of duplicate accounts across its entire
`
`24
`
`user base, not the purportedly higher percentage of duplicates among new accounts. But Meta made
`
`25
`
`no claims about the number of duplicates among new accounts, and there is no “rule of completeness”
`
`26
`
`that would require it to do so. Nor do Plaintiffs plausibly allege that the percentage of duplicate
`
`27
`
`accounts among new users is as high as they claim. Here again, the Complaint simply fails to plead
`
`28
`
`an actionable false statement.
`
`3
`DEFENDANTS’ MOTION TO DISMISS THE CONSOLIDATED AMENDED CLASS ACTION COMPLAINT
`CASE NO. 4:21-cv-08812-JST
`
`

`

`Case 4:21-cv-08812-JST Document 110 Filed 01/27/23 Page 12 of 48
`
`
`
`1
`
`Apart from the failure to plead this essential element of falsity, the Complaint also fails to
`
`2
`
`carry its burden of pleading a “strong inference” that any Defendant acted with scienter. The
`
`3
`
`Complaint alleges no facts that would signify an intention to deceive; there are no particularized
`
`4
`
`allegations that any Defendant sought any personal benefit, personally thought that Meta was acting
`
`5
`
`contrary to its expressed commitments, or suppressed any information that Plaintiffs claim should
`
`6
`
`have been disclosed. There are no particularized allegations that any Defendant even knew about the
`
`7
`
`specific alleged information that Plaintiffs cherry-pick from the various internal Meta documents
`
`8
`
`cited in the Complaint. The Complaint’s conclusory allegations that presentations were made to
`
`9
`
`“management” or that certain Individual Defendants “must have known” about allegedly “important”
`
`10
`
`aspects of the Company’s operations are essentially unsupported—indeed, as to most of the
`
`11
`
`Individual Defendants, the Complaint contains no scienter allegations at all.
`
`12
`
`The Complaint also fails to plead that investors suffered any loss in connection with any
`
`13
`
`alleged misstatements regarding X-Check, Meta’s algorithm and content moderation practices,
`
`14
`
`Instagram’s purported impact on teens, or duplicate accounts, because the Complaint fails to plead
`
`15
`
`any “corrective disclosures.” The Complaint fails to show that the Wall Street Journal articles
`
`16
`
`revealed any material new information about these subjects. As Plaintiffs’ allegations make plain,
`
`17
`
`Meta had acknowledged its X-Check practices on numerous occasions before and during the class
`
`18
`
`period. Its content moderation efforts, the effects of its News Feed algorithm, and concerns about
`
`19
`
`teen health had been subjects of extensive public discussion, including in highly publicized
`
`20
`
`congressional hearings before the Wall Street Journal articles were published. The articles may have
`
`21
`
`supplied a window into Meta’s internal discussions of these issues, but they did not reveal any fraud
`
`22
`
`on investors.
`
`23
`
`Finally, the Complaint fails to state a claim for control person liability under Section 20(a) of
`
`24
`
`the Exchange Act because it does not state an underlying claim under Section 10(b) and, further,
`
`25
`
`because it fails to plead the necessary elements of control as to any of the Individual Defendants in
`
`26
`
`connection with the alleged misrepresentations.
`
`The Complaint should accordingly be dismissed in its entirety, with prejudice.
`
`27
`
`28
`
`4
`DEFENDANTS’ MOTION TO DISMISS THE CONSOLIDATED AMENDED CLASS ACTION COMPLAINT
`CASE NO. 4:21-cv-08812-JST
`
`

`

`Case 4:21-cv-08812-JST Document 110 Filed 01/27/23 Page 13 of 48
`
`
`
`1
`
`2
`
`COMPLAINT ALLEGATIONS
`
`The Complaint asserts claims of fraud against Meta and the Individual Defendants on four
`
`3
`
`discrete theories based on the purported internal Meta communications publicized by the Wall Street
`
`4
`
`Journal beginning on September 13, 2021.
`
`5
`
`6
`
`A. Meta’s Statements About its Enforcement of Community Standards
`
`Meta has for years published “Community Standards” that “outline what is and isn’t allowed
`
`7
`
`on Facebook.” (AC ¶ 386.) Plaintiffs assert that Meta and certain of its executives made various
`
`8
`
`false or misleading statements regarding the Company’s application of its Community Standards
`
`9
`
`during the class period. But the challenged statements are, uniformly, highly generalized expressions
`
`10
`
`of Meta’s commitment to strive to apply its standards equally to all users. For example:
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
` Meta stated on its website that the Community Standards are applied “to everyone,
`all around the world, and to all types of content.” (Id. ¶¶ 83, 386.)
`
` Meta and its Chief Executive Officer, Mark Zuckerberg, stated in a May 2021
`submission to Congress that, “[w]e strive to enforce our policies consistently,
`without regard to religious or political affiliation. Our Community Standards
`apply to all content, and we assess everyone under those Standards. When we
`identify or learn of content that violations our policies, we remove that content
`regardless of who posted it.” (Id. ¶ 393.)
`
`
`
`In connection with its May 2021 annual meeting, Meta stated that it “remove[s]
`information that breaks our rules on violence, bullying, and harassment, and the
`other areas outlined in Facebook’s Community Standards” (id. ¶ 397) and Meta’s
`then-Vice-President for Global Policy, Nick Clegg, stated that, “[w]e always strive
`to enforce our policies evenly without regard to the political affiliation of those
`affected . . . and our policies on hate speech, incitement and so on apply to
`everyone regardless of their position of power” (id. ¶ 399).
`
` Mr. Clegg stated in a June 2021 interview that, “[w]hether you are the Pope, or
`the Queen, or the President of the United States, what we apply to everybody is
`you cannot use our services to say things which we think deliberately can lead to
`harm.” (Id. ¶ 411.)
`
`
`
`In an August 2021 interview, Mr. Zuckerberg stated that, “if we see harmful
`misinformation on the platform, then we take it down. It’s against our policies.”
`(Id. ¶ 412.)
`
`The Complaint alleges that Meta has an “X-Check” or “Cross-check” process, which Meta
`
`26
`
`has described as a “second layer of review to make sure we’ve applied our policies correctly.” (Id.
`
`27
`
`¶ 90.) The existence of X-Check was, as Plaintiffs concede, publicly disclosed as early as 2018 in
`
`28