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Ninth Circuit urged to revive Facebook housing bias lawsuit

A Ninth Circuit judge sparred with a prominent Big Tech attorney over whether a housing discrimination lawsuit against Facebook mirrors a 1990 case over housing ads against The New York Times.

SAN FRANCISCO (CN) — A decades-old discrimination lawsuit against The New York Times could help resurrect housing bias claims against Facebook on behalf of a class of people who say the platform’s housing marketplace returned far fewer results when searched by racial minorities, single parents and people with disabilities.

Facebook, which changed its name to Meta in 2021, contends its marketplace does not systematically discriminate and that it can’t be held liable for housing advertisers who may misuse its “neutral” ad tools.

In a verbal joust with Facebook counsel Theodore Boutrous at oral arguments before a Ninth Circuit panel Thursday, Senior U.S. Circuit Judge Susan Graber asked if he’d heard of Ragin v. New York Times from 1990, where the Second Circuit ruled the newspaper’s readers had standing to sue under the Fair Housing Act even if they weren't in the market for housing.

That case, Graber said, rings very similar to the situation faced by plaintiff Rosemary Vargas, a disabled Hispanic veteran and single parent who searched for housing on Facebook but couldn’t find anything that met her criteria.

According to a court filing, “Instead of Manhattan she saw ads for predominately unsafe areas and/or Hispanic and Black residential neighborhoods outside of Manhattan, like the Bronx,” though she did get more results when she removed her Section 8 housing voucher. Her white male friend Chet Marcello saw more ads for preferable housing than Vargas did when the pair did a side-by-side search using the same criteria.

"It seems to me you're asking us to create a circuit split,” Graber said. “And in this case Vargas said she was ready willing and able to move if she could locate suitable housing. So she's in a stronger position than those newspaper readers.”

Boutrous, a partner with Gibson Dunn, said Vargas’ case is “easily distinguishable” from Ragin, to which Graber quickly rejoined, “For the better for Ms. Vargas because they said there you didn’t even have to want housing. And here she wants to move.”

“But there’s no ad she pointed to your honor, there’s no evidence,” Boutrous countered.

"There’s an absence of ads.”

Boutrous started to reply, “Correct your honor, but —”

“For discriminatory reasons. That’s the allegation,” Graber said.

He protested, "But nowhere has anyone identified an actual discriminatory ad where those exclusion efforts were made. Plaintiffs don’t even allege that the housing they sought existed.”

“If she didn't see them how would she know?” Graber asked.

"There are other ways for her to search for housing,” Boutrous said, tossing out apartments.com and Zillow as examples. “There’s a whole universe of places to look for housing. And here, Ms. Vargas said she was looking she was searching for a $1,700-a-month, three-bed apartment in Manhattan, which is a highly unlikely piece of real estate to exist.”

He said it was totally speculative that such a listing would exist, and surely it should be in the complaint if Marcello had seen it.

Graber, a Bill Clinton appointee, said this information could be unearthed in discovery, hinting the panel could send the case back to the trial court.

Vargas and five other named plaintiffs seek monetary damages over what they claim is Facebook’s discriminatory conduct and an injunction to ensure it never again operates a “segregated housing marketplace through its advertising platforms.”

They filed their case just months after Facebook agreed in March 2019 to change its advertising platform as part of a settlement that resolved five lawsuits filed between 2016 and 2018 in courts across the country brought by fair housing groups and the ACLU.

Facebook vowed to carry out sweeping reforms that will prevent advertisers for housing, jobs and credit from excluding certain groups from seeing targeted ads. 

In dismissing Vargas’ third amended complaint this past August, U.S. District Judge William Orrick III said she still lacked necessary details like how the types of ads she saw differed from the ads shown to Marcello.

“She simply declares that Marcello received unspecific ads in ‘preferable’ locations. She does not indicate those ads, even if paid ads, met her other criteria (cost, size, etc.) to plausibly allege that she was harmed by being denied access to those other, unidentified ads. That is insufficient,” he wrote in a decision following a hearing in early January.

Vargas' attorney, Gerarde Mantese of Mantese Honigman in Troy, Michigan, urged the appellate panel to reverse Orrick’s decision so he could obtain the necessary information from Facebook’s servers.

“What would you be seeking?” asked U.S. Circuit Judge John Owens, a Barack Obama appointee. “What would a fourth amended complaint look like?”

“We would show which paid ads were communicated to Ms. Vargas,” Mantese said. "Facebook has massive servers and stores millions of data bytes on all of us so we would have that information from Facebook's servers.”

Mantese also argued Facebook is not protected by the Communications Decency Act’s Section 230 immunity for online platforms because it supplied housing advertisers with “illegal” tools that allowed them to exclude certain people from search results.

“It even provided a toggle button that allowed you to draw a red-line around a geographical area to exclude people from that area, giving a new meaning to redlining. It in effect said, ‘if you want to discriminate, click here.’”

Under questioning from Graber, who asked whether Facebook could be held liable simply for providing the tools to advertisers, Mantese said Facebook "effectuated the discriminatory exclusions through its sophisticated ad delivery system. I'd say it was the excluder. It barred the door to the protected classes.”

Senior U.S. Circuit Judge Michael Murphy, a Clinton appointee sitting by designation from the Tenth Circuit, rounded out the panel, which took the arguments under submission.

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