Appeal Ending Silicon Valley Lawsuit Immunity Crushes Stock Market
Written by Chriss W. Street
“In memory of sweet ten-year-old Nylah Anderson“
Third Circuit Court of Appeals for Philadelphia just ruled that Silicon Valley companies are no longer immune from trillions of dollars of lawsuits under Rule 230 of the Communications Decency Act regarding content moderation on their social media sites.
Congress at the 1990s dawn of the Internet did not want to stifletech online messaging board growth by treating start-ups like publishers; such as newspapers, bookstores, or phone companies. Publishers face strict liability for illegal content and defamatory statements that they display, because they are legallyresponsible for the content that goes into their products due to editorial control to withdraw, edit, or promote content.
After a negotiated agreement was reached to deem start-ups as passive distributors of content, the notion was incorporated into the 1996 Decency Act Section 230(c)(1) as: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”
The concept disruptively worked, because social media start-upsgrew over the last three decades to be Facebook, TikTok, Google, and ten others currently have combined revenues of over $270 billion and stock market valuations of over $1.9 trillion.
Matt Stoller dubbed Rule 230 as Big Tech’s Get-Out-Of-Jail-Free-Card that allowed these multi-national corporate behemoths to maximize profits and stifle free speech by using algorithms and other devices to actively moderate search results and content visibility on their platforms to predatorily favor friends and punish enemies.
But that may all come to a screeching halt after a U.S. Appeals court revived a lawsuit filed by the mother of a 10-year-old Pennsylvania girl who allegedly hung herself on purse strap in her mother's closet performing the “blackout challenge dare” on TikTok.
The facts of the case stated: “TikTok, Inc., via its algorithm, recommended and promoted videos posted by third parties to ten-year-old Nylah Anderson on her uniquely curated “For You Page.” One video depicted the “Blackout Challenge,” which encourages viewers to record themselves engaging in acts of self-asphyxiation. After watching the video, Nylah tried the conduct depicted in the challenge and unintentionally hanged herself. Nylah’s mother, Tawainna Anderson, sued TikTok and its corporate relative ByteDance.”
Big Tech lawyers successfully argued in the trial court thatsocial media companies had blanket immunity to get the case dismissed, “because the algorithm did it.”
But Third Circuit Appellate Court Judge Paul Matey summed up the facts on appeal as: “TikTok reads 230 of the Communications Decency Act to permit casual indifference to the death of a ten-year-old girl.” The three-judge Appellate Court panel partially reversed the dismissal and sent the case back to the lower court for liability trial.
Judge Patty Shwartz in writing for the three judge panel acknowledged the ruling was a major departure from prior Section 230 decisions. But Judge Shwartz emphasized that the former reasoning no longer holds after a U.S. Supreme Court ruling in July on whether state laws designed to restrict the power of social media platforms to curb content they deem objectionable violate their free speech rights.
In those cases, the Supreme Court held a platform's algorithm reflects “editorial judgments” about “compiling the third-party speech it wants in the way it wants.” Judge Shwartz said under that under the same logic, company content curation using algorithms is speech by the company itself, which is not protected by Section 230.
She highlighted that: “TikTok makes choices about the content recommended and promoted to specific users, and by doing so, is engaged in its own first-party speech.”
Based on the Appellate Court decision, deceased 10-year-old Nylah’s mother Tawainna Anderson’s seems set to win a massive judgement. That will tee-up a Supreme Court appeal that could blow away one of Silicon Valley’s most valuable business advantage.
Nvidia Software Company (NVDA) as the most valuable stock in the history of the world, suffered the worst single day stock loss in the history of the world with a -$252.2 billion crash on September 3, 2024. Since the August 27, 2024 Third Circuit ruling, Nvidia has lost almost $600 billion.