Recently, a California federal court held that Apple, Google, and Facebook (the “Platforms”), operating as application distribution platforms, are not protected by Section 230 against a claim that the Platforms are “processing unlawful transactions for unlawful gambling.” In Re: Apple Inc. App Store Simulated Casino-Style Games Litigation, No. 5:21-md-02985-EJD, Dkt. No. 92 at 33 (N.D. Cal. Sept. 6, 2022) (emphasis in original). Essentially, a content distribution platform might not be shielded from liability by Section 230 if it generates or distributes revenue in connection with illegal conduct, or in other words, “[S]ection 230 does not apply to a platform’s own bad acts.” Id. at 29 (emphasis in original).  It’s an important decision for interactive entertainment platform companies that rely on Section 230. Here’s a summary.

            Section 230 in a nutshell. In general, Section 230 provides statutory immunity for service providers against liability arising from information originating with a third-party user of the service. Central to the court’s analysis is whether a claim against an interactive service provider “would place [the service provider] in a publisher’s role.” Id. at 10. Such lawsuits that would seek to “hold a provider liable for its exercise of a publisher’s traditional editorial functions—such as deciding whether to publish, withdraw, postpone, or alter content—are barred.” Id. This means that Section 230 would protect a service provider against a claim that is seeking to hold the service provider liable for, as examples, choosing, or choosing not to, publish a particular piece of third party content, or for editing such content as a traditional editor would.

            The In Re: Apple Inc. App Store Simulated Casino-Style Games Litigation case. In Apple, the plaintiffs advanced three theories of liability: (1) the Platforms are liable because they, through at least their discovery and recommendation algorithms, “amplify and direct users to content” that is unlawful; (2) the Platforms are liable because they function as “bookies” by processing payments for unlawful conduct; and (3) the Platforms are liable because they provide support services, such as data sharing and marketing recommendations, to the creators of the unlawful third party content to help the third party improve their unlawful content.

            The court held that the first and third theories of liability are barred by Section 230, but the second is not, though the court stated that the third theory of liability is the “trickiest” to decide upon. Id. at 30–35 (ultimately deciding that, with respect to the third theory of liability, the Platforms were behaving as “editor[s]”). In finding that the second theory of liability may survive Section 230, the court compared the Platforms’ conduct to Google’s conduct in Gonzales v. Google LLC, 2 F.4th 871 (9th Cir. 2021) and HomeAway.com, Inc.’s conduct in HomeAway.com, Inc. v. City of Santa Monica, 918 F.3d 676 (9th Cir. 2019). In Gonzales, the 9th Cir. held that Section 230 does not protect Google from liability where the plaintiffs’ theory of liability is based on an allegation that “Google shared advertising revenue with ISIS . . . in violation of the Anti-Terrorism Act” because the allegation was not “directed to the publication of third-party information”, but was instead premised on “Google providing ISIS with material support by remitting money to ISIS.” Gonzales, 2 F.4th at 898. In HomeAway.com, the 9th Cir. upheld an ordinance requiring internet rental hosting platforms, such as HomeAway.com, to follow specific rules about listings, one of which limits them to booking only registered properties. HomeAway.com, 918 F.3d at 682. HomeAway.com argued that the ordinance was preempted by Section 230 because the ordinance would require HomeAway.com to “monitor the content of a third-party listing”, but the 9th Cir. disagreed, reasoning that HomeAway.com wasn’t required to monitor third-party listings; it was only prohibited from “processing transactions for  unregistered properties.” Id.

             The court certifies question to 9th Circuit. Recognizing the import of its decision, the Northern District of California—without prompt from any party to the litigation—certified its order for immediate interlocutory appeal to the 9th Circuit. We will continue to monitor this case as it develops. In the meantime, internet service providers need to be aware that Section 230 may not provide protection from liability that relates to third party content where the internet service provider is affirmatively acting or engaging in conduct that may lead to legal liability.