US District Court for Northern District of California: While deliberating over the instant suit brought by X Corp (formerly Twitter Inc) against Centre for Countering Digital Hate (CCDH) alleging that CCDH has created faulty narratives regarding X Corp. and the X service, with the express goal of seeking to harm X Corp.’s business by driving advertisers away from the platform; the Bench of Charles R. Breyer, J.*, dismissed the suit stating that the instant case was about punishing the defendants (CCDH) for their speech. “Sometimes it is unclear what is driving a litigation, and only by reading between the lines of a complaint can one attempt to surmise a plaintiff’s true purpose. Other times, a complaint is so unabashedly and vociferously about one thing that there can be no mistaking that purpose. This case represents the latter circumstance”.
Background: The dispute between the parties involves two separate means by which CCDH acquired X Corp. data, and three publications in which CCDH made use of that data.
Elon Musk took over Twitter in October 2022 and in July 2023, Twitter changed its name to ‘X’. X Corp. is a corporation organized under the laws of the State of Nevada, with its principal place of business in San Francisco, California. CCDH is a Washington DC based non-profit corporation.
Upon Musk’s takeover of Twitter, the CCDH presented several reports on the impact of this takeover and how certain controversial accounts of neo-Nazis, misogynists, white supremacists etc., which were blocked by Twitter earlier, were reinstated when Twitter became X. The report also stated that these accounts which are renowned for publishing hateful content and dangerous conspiracies, will generate up to $19 million a year in advertising revenue for X (CCDH’s Report titled “Toxic Twitter”).
X Corp alleged that CCDH’s reports use “flawed methodologies to advance incorrect, misleading narratives, cherry-picking data and labelling it as “hate speech” and that its reports and articles, coupled with its demands to entirely remove certain users from platforms, are transparent efforts to censor viewpoints that CCDH disagrees. X Corp further alleged that faulty narratives by the CCDH have been created with the goal of drying up advertisements meant for X platform. The suit against CCDH was brought by X Corp in 31-07-2023.
CCDH submitted that X Corp. has failed to state a claim as to each cause of action, and so the Court should either strike or dismiss the suit.
Court’s Assessment: While perusing the allegations, the Court took note of the ways in which CCDH accessed data from X Corp. It was noted that as a user of the X platform, CCDH necessarily agreed to X Corp.’s Terms of Service when it created a new account in 2019. The ToS provided that scraping the Services without the prior consent of Twitter is expressly prohibited, but it did not define “scraping”. The second means by which CCDH took X Corp. data, was via a company called Brandwatch.
The Court noted that under anti-SLAPP statute, which facilitates early dismissal of unmeritorious claims filed to interfere with the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances, the defendant must, at the first step, make prima facie showing that the state law claims, “arise from any act in furtherance of the person’s right of petition or free speech” in connection with a public issue.
It was pointed out that CCDH made a compelling case that gathering the data used in its publications is also an act in furtherance of its free speech rights. CCDH obtained X Corp. data in order to use that data in its reports and articles. Accordingly, the acquisition of X Corp. data was newsgathering in furtherance of CCDH’s protected rights. The Court also pointed out that it is impossible to read the complaint and not conclude that X Corp. is far more concerned about CCDH’s speech than it is its data collection methods.
The Court noted that the breach that X Corp. alleges in the instant case is CCDH’s scraping of the X platform and seeks only damages based on the reactions of advertisers (third parties) to CCDH’s speech in the Toxic Twitter report, which CCDH created after the scraping. Relying on relevant precedents, the Court pointed out that X Corp. failed to state a claim for breach of contract via alleging tangible, economic losses as it failed to draw the line between losses from direct harms and losses from reputational harms.
The Court further observed that if X Corp. was indeed motived to spend money in response to CCDH’s scraping in 2023, it was not because of the harm such scraping posed to the X platform, but because of the harm it posed to X Corp.’s image. CCDH’s data collection allowed it to claim knowledge of what was occurring on the X platform in a cumulative sense. According to CCDH, its scraping revealed that X Corp. was generating millions of dollars in advertising revenue from previously banned accounts.
Vis-à-vis CCDH using Brandwatch to access X platform’s data, the Court rejected X Corp’s reasoning that there was a breach because CCDH was able to access data via Brandwatch. Terming it to be a “tortured reasoning”, the Court pointed out that Any failure by Brandwatch to secure the Licensed Materials was a precondition to CCDH’s access. “In addition, to the extent that X Corp. maintains that CCDH need not have done anything to impact Brandwatch’s behaviour, then it is seeking to hold CCDH liable for breaching a contract to which it was not a party”. The Court further noted that Brandwatch was not made party to the instant suit.
The Court also agreed with CCDH’s argument on constitutional grounds. X Corp. cannot seek damages for the independent acts of third parties based on CCDH’s speech. “Accordingly, the ‘at least tens of millions of dollars’ that X Corp. seeks in connection with CCDH allegedly causing Brandwatch to breach its contract with X Corp. are impermissible”.
The Court strictly noted that X Corp.’s motivation in bringing the instant case is evident for this suit has been brought in order to punish CCDH for publications that criticized X Corp. and perhaps in order to dissuade others who might wish to engage in such criticism. “Although X Corp. accuses CCDH of trying to censor viewpoints that CCDH disagrees with; it is X Corp. that demands at least tens of millions of dollars in damages—presumably enough to torpedo the operations of a small nonprofit—because of the views expressed in the nonprofit’s publications”.
[X Corp. v. Centre for Countering Digital Hate Inc, Case No. 23-cv-03836-CRB, decided on 25-03-2024]
*Judgment by Justice Charles R. Breyer
