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Big Win for Facebook in Breach of Contract Lawsuit


Posted on Apr 20, 2012

On Friday, April 13, Facebook Inc. earned a victory in court when U.S. District Judge Phyllis Hamilton denied a group of advertisers’ attempt to bring a class action breach of contract lawsuit against the company. The judge ruled that the advertisers did not have enough in common to sue as a class for breach of contract and violation of California’s unfair competition law. The group consisted of thousands of advertisers who asserted that the company overcharged them.

Facebook Inc. runs the world’s largest social networking website. It is based in Menlo Park, California, and is valued at an estimated $95.8 billion. The advertisers hoped to file a class action lawsuit because class certification often leads to higher recovers. It also reduces the legal bills faced by plaintiffs.

In their complaint, the plaintiffs allege that Facebook overcharged them under the terms of their cost-per-click contracts. Advertisers were required to pay fees every time Facebook users clicked on their advertisements. The group asserted that Facebook overcharged them by:

  • Charging for non-existent clicks;
  • Charging for clicks caused by server problems; and
  • Charging for accidental multiple clicks by individual users.

Judge Hamilton ruled in favor of Facebook, stating that the plaintiffs did not show a viable method for proving each class member’s recovery. Instead, liability and damages under this breach of contract claim would have to be determined on an individual basis. As such, the judge ruled that the class in this case was inappropriate for treatment as a class. In her decision, she cited a 2011 U.S. Supreme Court decision involving Wal-Mart Stores, Inc., that held class action groups must show a systematic breach of contract as well as similarity among the claims raised.

For more information about the legal principles involved in this case, contact a New York breach of contract lawyer at (888) 497-3410.

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Jonathan Cooper
New York Business & Commercial Litigation Attorney