By Dietrich Knauth and Diana Novak Jones
Oct 22 (Reuters) - Meta Platforms has a strong basis for arguing that the $25 billion penalty New Mexico secured this week in a case stemming from allegations the firm mishandled user data should be reduced on appeal, legal experts said.
The judgment was one of the largest state verdicts against a company in US history. It came after a jury found Meta misled consumers about who had access to their data in the wake of revelations that Cambridge Analytica, a political
consulting firm involved in President Donald Trump's 2016 presidential campaign, had harvested personal data from millions of Facebook users.
New Mexico said state law allowed for a penalty of up to $5,000 for each time someone in the state may have seen an allegedly misleading statement from Meta. Experts said the company would likely argue that Judge Francis Mathew should only have considered people who actually saw the statements.
"The most vulnerable basis on appeal is going to be the question about whether a violation is going to count, even in the absence of any proof that a particular person saw one of these misrepresentations or relied on them to their detriment," said Peter Ormerod, a law professor at Villanova University.
C.J. Mahoney, Meta's chief legal officer, said the company is confident it will win on appeal. The company is expected to appeal the underlying jury verdict and the penalty.
Meta has previously said that it does not sell user data and that New Mexico did not prove any consumer had actually been misled and that a penalty in the billions of dollars would risk violating its constitutional rights to due process and protection from excessive fines.
New Mexico Attorney General Raúl Torrez said on Wednesday he expected Meta to appeal the judgment and the state stood ready to defend its legal position. He did not immediately respond to a request for further comment.
JURY FOUND 43 MILLION VIOLATIONS
New Mexico's attorney general sued Meta in 2021, alleging that the company lied to Facebook users about who had access to their data, how the company handled hate speech and misinformation posted on the platform, and other internal policies.
Jurors on September 25 found that 26 of 29 statements made by the company and its leadership on those issues were misleading. Multiplying those statements by their potential audience within New Mexico, the jury said the company had committed more than 43 million violations of the state’s consumer protection laws. The state had 1.4 million active Facebook users and a population of 2.1 million as of 2020.
Mathew said in his ruling on Wednesday that a penalty of more than $219 billion would be justified under state law, which allows a $5,000 penalty for each violation, but he reduced the amount.
The state had urged Mathew to award the state between $35 billion and $40 billion, while Meta said penalties of no more than $3.45 billion were warranted.
Ormerod said that even if the company's appeals in state courts fail, Meta could argue to the US Supreme Court that the penalty violated its rights under the US Constitution to due process and against excessive fines.
The size of the penalty on its own does not mean it will be overturned, given the New Mexico law allowing for penalties for each willful violation, said Daryl Lim, a professor at Penn State Dickinson Law.
But it seems implausible that Meta was really responsible for so much financial harm, a sign the penalty may be unjust, said Eric Goldman, a professor at Santa Clara University School of Law.
"It felt like there was a lot of duplicative counting in the calculations," Goldman said. "How many times can a single person be duped by the same entity?"
(Reporting by Dietrich Knauth in New York and Diana Novak Jones in Chicago; Additional reporting by Anzar Mehraj in Bengaluru and by Andrew Hay in New Mexico; Writing by Luc Cohen, Editing by Alexia Garamfalvi and Edwina Gibbs)
