This is [music] Bloomberg Law with June

Graasso from Bloomberg Radio.

>> It's the very definition of a highstakes

trial. Dozens of state attorneys general

are suing Meta, claiming it uses

unprecedented technology to entice,

engage, and ensnare teenagers and

children, harming their mental health.

At stake, a damages claim of 1.4 4

trillion,

very close to the social media giants's

market cap, plus the imposition of

fundamental structural changes to the

platform. The trial is the latest in an

avalanche of lawsuits against Meta and

other social media companies, including

Google's YouTube, Tik Tok, and Snap over

claims their platforms harm young

people, illegally collect their data,

and are deliberately designed to addict

them. My guest is an expert in internet

law, Eric Goldman, a professor at Santa

Clara University School of Law and

co-director of the High-Tech Law

Institute. Eric, this is a very high

stakes trial. Tell us what's at stake

here.

>> In this trial, the state attorneys

general are pursuing the social media

defendants for a number of claims,

including claiming that they are a

public nuisance. The state attorneys

general have asked for $1.4 $4 trillion

worth of damages, which if issued would

represent a major chunk of the overall

value that those entities are worth. The

case also potentially puts in play

structural remedies that would change

how social media services operate. So

between the damages awards and the

possibility of structural reform, it's

possible that these cases will change

social media structurally.

>> The state attorneys general are saying

that Meta designed the platforms to get

children and teenagers hooked. Tell us

more about the allegations here.

>> There's a lot of allegations, so it's a

little hard to summarize. You hinted at

one of them. The state attorneys general

are arguing that social media services

were designed to be addictive. In fact,

addicted the users and that addiction

caused harm. They've also claimed, for

example, that the social media services

knew about that addictive attributes and

harm and failed to disclose it to the

public. And they're also claiming that

the consequences of this addiction are

harming society generally.

>> Obviously, Meta denies the allegations.

what specifically has it said?

>> And I just want to point out uh that you

keep using the term meta. There are

multiple social media services in play

here. So just want to make clear about

that. The social media defendants are

defending on a wide range of grounds.

They're defending on the position that

the claims that are being advanced

against them simply don't fit the facts

that what the social media services have

done is not illegal [clears throat] and

therefore there should be no remedy for

it. They have argued that the First

Amendment applies to their decisions,

that they're acting like publishers

making editorial decisions, and basing

liability on those editorial decisions

is inconsistent with the First

Amendment. And they're claiming that

section 230 applies. Section 2 there

says websites are liable for third party

content. And a lot of the arguments

about addiction are ultimately about the

delivery of third party content. and

therefore uh the social media defendants

argue that section 230 should preempt

those claims.

>> So I hear 7 weeks of trial. How do the

state ages go about trying to prove

their claim? Are we going to hear from

individual, you know, teenagers? Are we

going to hear from experts in social

media? I mean, what kind of witnesses

will they use? I think that they'll use

a variety of different experts uh who

will try to bolster the argument that

the social media services engaged in

addictive practices and in fact caused

harm. Both of those propositions are not

scientifically established. The state

ages will have to make a case for them.

I would assume that we will hear from

individual victims. We might also hear

from former company employees who have

inside information and maybe others.

>> So far, it seems like Meta hasn't fared

well before juries. You had the case

that we talked about before where in Los

Angeles in state court, a jury awarded a

woman $6 million in a case involving

claims that Meta and Google's YouTube

caused her anxiety and depression. And

then we had this New Mexico jury which

deliberating less than a day awarded

$375 million in civil penalties. And

then last week the judge added on a

additional 567

million. Is Meta on the losing end so

far of all these trials?

>> The cases are not going well for Meta or

for that matter for other social media

defendants. The judges and the juries

have generally looked disfavorably on

the arguments that they're making.

However, these cases are all going to go

up on appeal and there's no reason to

believe that the jury or judge verdicts

are going to survive intact. There are a

number of good arguments that the

defendants will make on appeal. And if

they can succeed on any one of those

arguments, it's possible that some or

all of the lower court rulings will be

undone. So I haven't put a lot of stock

in where we stand today other than as

data points. The juries are sending a

message that they do hold social media

services culpable for harming their

users. Whether or not the law recognizes

that harm and upholds the legal

consequences that have been assigned to

it remains to be seen on appeal.

>> Is the strongest argument on appeal that

the social media platforms have had

immunity from prosecution over the

content that users post and states are

trying to sidestep that by going after

the product design features. I think

there are several strong arguments that

will be advanced on appeal in this case

and in frankly all of the cases. Section

230 is one of those. Section 230 says

that the services can't be responsible

for third party content. And ultimately

given that their basic business is the

delivery of third party content, section

23 clearly casts a long shadow. But I

think the first amendment arguments are

even more obvious and in some respects

even more troubling. In the end, social

media services are engaging in

publication of content. Whether it's

third party content or first party

content, the First Amendment applies

equally in that circumstance. As a

result, to the extent that social media

defendants are being held legally liable

for their editorial decisions, that

sounds like a problem and that sounds

like the kind of thing that an appella

court will pay attention to. [snorts]

>> The damages of $1.4 trillion. Meta's

market cap is $1.5 trillion. I mean,

where does that number come from?

>> The number might have a little bit of

fiction to it. It might be a fantasy

land computation, but it doesn't really

matter if that number is the right

number. It really is more the order of

magnitude of the state attorney's

general position. They are saying that

if the social media services are causing

as much or more damage as their market

cap, they literally shouldn't exist.

They're basically trying to drive the

value of those companies to near zero.

And so that's why I think that the

numbers so helpfully at crystallizing

the stakes of this case. It's a reminder

that the arguments that state agencies

are advancing potentially make social

media services untenable, not

profitable, and maybe no longer a viable

market.

>> They're also demanding changes besides

this staggering sum. Are the changes to

the platforms that the state agents are

asking for, would they change, you know,

the very essence of the way these

companies, social media platforms work?

>> Unquestionably, the structural remedies

that are being ordered by courts and

also mandated by legislators will change

how social media operates. What's less

clear today is that they're going to

change it in a way that will materially

affect our willingness to use them. And

I'm going to give you an example because

I think it's so helpful. The New Mexico

judge set a cap on the number of hours

that a user could use the service in a

month. Now, that cap was pretty

generous. That's a lot of hours. I think

it was 90. But imagine that a different

judge based on some other assessment of

the science such that any of these

decisions are based on that decides that

the number is much much lower. Let's

pick a number for a moment. It says that

only 5 hours a month is permissible. At

that point then many users will no

longer be able to engage in the

community the way they're currently

engaging and it'll just starve the

ecosystem for the engagement that's been

driving it. There'll be less people

there. They'll be contributing less.

There'll be less people to consume it.

And as a result, the ecosystem goes into

a death spiral. It just, you know, can

no longer function as the kind of

vibrant conversation that we've assumed.

Now, I'm just giving you a speculative

scenario. I don't know if that scenario

is going to play out, but it's helpful

to show how one small product change

ordered by a court or legislature could

easily trigger a downward spiral. and

multiply that by the dozens if not

hundreds of different product changes

that courts could issue or that

legislators have already mandated and we

can see that the ecosystem is under

extraordinary pressure and may not

survive it.

>> So Meta as we said broadly denies the

allegations but they also say that

social media addiction is not a

recognized psychiatric condition.

>> That's correct. There is no medical

recognition or psychological recognition

of a thing called social media

addiction. That argument was in play in

the uh Los Angeles bellweather trial and

the jury was convinced enough that

something was recognizable sufficient to

support the damages award that they

issued. Having said that, it's a

reminder that the science here is

actually quite contested and may not

back up the arguments that the state

attorneys general are making. In other

words, their general position is social

media is an evil. It just harms people.

It's, you know, laying waste to to

people's lives and our communities. And

the science just doesn't back that up at

all. And so they're having to create a

scientific fiction, a [clears throat]

thing called social media addiction

that's not recognized elsewhere, and

then predicating legal consequences on

that. That's one of the kinds of things

that could also be addressed on appeal.

>> Coming up next on the Bloomberg Law

Show, I'll continue this conversation

with Professor Eric Goldman of Santa

Clara University Law School. The jury's

being picked today, but it's only an

advisory jury. We'll tell you what that

means. I'm June Grao and you're

listening to Bloomberg.

Jury selection began today in Meta's

federal trial over claims its platforms

have harmed youth mental health and also

track children in violation of federal

law. The trial itself is scheduled to

begin next week and is expected to last

6 to 8 weeks. Meta faces 29 states in

the federal multi-dist lawsuit filed in

2023,

but the Oakland trial will only include

the first four states: California,

Colorado, Kentucky, and New Jersey. I've

been talking to Professor Eric Goldman

of Santa Clara University Law School, an

expert in internet law. Eric, when I

look at the claims on both sides in

these social media addiction trials,

sort of clinically, just on paper, I

wonder if these multi-million dollar

verdicts are due to a jury sympathizing

with these teenagers who are struggling

with terrible mental health problems.

When on the other side, you have these

huge social media companies. you know,

it's just like the sympathy factor of a

jury as opposed to if this were maybe a

judge trial.

>> Well, two things about that. Uh, first,

I will remind you that in the Los

Angeles Bellweather trial, the jury was

nonunanimous. It was a 10-2 decision,

and that's a sign that not all the

jurors are on board with the arguments

that they're hearing, even if they feel

extraordinary sympathy towards any

particular victim. Now, when the state

AG case is starting, the judge is

actually going to make all decisions.

She's appointed an advisory jury to give

her input on certain things, but the

judge will make the final call about the

uh arguments. And so, to the extent that

it's a jury who has her passions

inflamed by a armed victim, the state a

case might look different. I will also

add that in the state AG case, the

attorneys general are speaking on behalf

of the entire community which actually

waters down the impact of any individual

victim story.

>> This judge Ivon Gonzalez Rogers also

used an advisory jury in the Elon Musk

Sam Alman trial. It's very rare and

she's using it in this huge case. Are

there any problems with using an

advisory jury? I must confess, I'm not a

civil proceduralist, so I don't know

what the rules are about advisory

juries. I have heard of them before, and

I think part of the judge's

consideration is the judge doesn't

necessarily want to just rely on her own

position. She'd like to hear how the

community is feeling about the arguments

that they're hearing. And that makes

sense to me because the cases are really

about the social media's impact on the

community. And the judge may not even be

a heavy social media user, may not have

the kinds of experiences that the jury

does.

>> There's always a possibility of

settlement. Settlement is always a

possibility. And Bloomberg Intelligence

looking at major big tech settlements in

the past decade like Meta's $5 billion

deal with the FTC and Amazon's $2.5

billion deal with the FTC. So BI

estimates a possible settlement of

between 4 and 7 billion in this case.

What do you think?

>> To be honest, I I think if Meta,

speaking just about Meta, if Meta

thought it could settle this case for $7

billion and avoid all future liability,

he'd probably write that check happily.

But I don't think those are the right

numbers. So it sounds very low. I'm

guessing that both the state ages and

the other plaintiffs, including

individual plaintiffs, have much higher

numbers in mind. Remember though, in the

bellweather trial, I believe that the

one plaintiff in the first bellweather

asked her $100 million.

>> She ended up with not that much, though

the verdict was $6 million.

>> Right? So, going back to the evaluation,

you know, how much is each case worth?

And I will note that if there are, and

we're going to pick a number for a

moment, there are 3,000

victims who are in either the state or

federal consolidated cases. If the

number is 3,000, which might be a little

overstated, but work with me. If the

number is 3,000 victims and each was

worth $6 million, which is the number we

got from the first bell withdrawal,

that's actually closer to $20 billion.

That's just for the individual victims,

not the state a not the Native American

tribes. you know, singledigit billion

number is probably quite low if the

parties are going to settle. But I don't

think that they're likely to settle. And

there's two reasons why. I'm guessing

the social media defendants are hopeful

they can knock out big chunks of the

case on appeal. And also, a settlement

would need to be global in nature. It

would have to deal with all victims who

might have a claim. And there's not a

clear path by which the social media

defendants can put all potential victims

into a single settlement. And without a

mechanism to do that, I think settlement

is actually quite remote.

>> This lawsuit is one of more than 3,000

filed by school districts, individuals,

and others in federal court. And then

there are a second group of more than

3,000 in state court. Historically, is

there another kind of mass tort

litigation you could compare this to?

Maybe the tobacco litigation?

>> Yeah, we've had other mass tort claims.

Asbestous is one of them. Uh tobacco is

another. I don't have an inventory of

them, but they happen and they're

extraordinarily high stakes for both the

plaintiffs and the defendants. The

numbers boggle our mind in terms of the

amount of wealth that's going to be

moved one way or another. and this case

fits that model. I don't know that it's

going to have the same result. There are

some major differences between a mass

tor involving a physical product causing

a physical injury and a online service

causing many intangible injuries. It

doesn't quite fit the historical model.

>> What poses more of a danger to the

social media companies? lawsuits like

this or legislation in the US and

worldwide to limit them.

>> I don't rank the dangers and risk. I

would say look at it more like a

portfolio approach. Think about all of

the different cases and all of the

different legislation as a portfolio of

threats. And the question is, do the

cumulative risks pose danger to the

defendants? And the answer in my mind is

clearly yes. But I don't know which one

of the cases or which set of the cases

or which one of the laws or set of the

laws will pose the greatest threat. But

the overall aggregate effect of the

cases and the laws poses a major threat

to the social media defendants. There's

one other threat I'm going to mention.

The investors in these companies are

assuming they're going to get market

returns or better from their

investments. And as the threats grow

larger, the investors keep recalculating

their valuations. And so another

scenario is that the investors are going

to put some substantial pressure on the

social media defendants to do something

whether that's change their offerings or

settle or both in order to preserve

their investment expectations. So the

threats are really multi-itudinous and

it's not just the legal threat. So 10

years from now, do you think that the

social media landscape will be very

different?

>> I don't see how the current social media

ecosystem is going to survive in its

current form in the next 10 years. Uh

that strikes me as extremely unlikely

because of all the legal threats and

other changes in society. I just don't

see how that could be possible. The only

way it might happen is if the Supreme

Court issues a massive ruling that

preempts a lot of the cases and the laws

such that we have to rethink everything

from a legal standpoint. But absent

that, I believe that the cumulative

effect of the laws and litigation will

force social media services change. And

I'm concerned about that because it

means that where we take it for granted

that today we can talk to each other

freely online. I don't know that that's

going to be the net outcome when all

these changes have taken place. What we

are going to see I think instead is a

circumscription of our ability to talk

to each other and in ways I think will

make our lives less rich for many

people.

>> Eric, do you think that let's take Meta.

Do you think that Meta has learned

anything from the New Mexico trial and

the California trial that it might

change its tactics? Because I mean,

their defenses sound pretty much the

same.

>> Meta seems impervious to the feedback

that it has been getting for a very long

time about the concerns that people have

with its decision-m. it seems to be

making the same basic mistakes over and

over again both in terms of how it

treats its users and also how it's been

approaching the legal risk that it

faces. So I don't think Meta is likely

to learn any lesson from any particular

development. The most likely way that

Meta would change its tune is when the

investors start putting pressure on it.

Meta isn't delivering the kind of equity

returns that its investors expect. That

will catch their attention. I think

everything else is unlikely to change

who they are.

>> Meta always talks about we've done this,

we've done that. You know, we listen to

your concerns about teenagers. Have they

done anything that's really helpful?

>> Oh, no doubt. That Meta has taken a

number of steps that are designed to

improve the experiences for its users

and keep them safer. Having said that,

Meta has also consistently,

if in doubt, chosen options that

prioritize user engagement over user

health. And that's why I think there are

so many disgruntled former Meta uh

employees who are turning into

whistleblowers or critics or witnesses

against Meta because they feel like they

weren't heard when they raised concerns

about the effects of decisions on their

users.

>> And what are some of the far-reaching

consequences if the state AG's win here?

If the state ages prevail in their

theories against social media

defendants, it is likely, if not

inevitable, that they will take those

same theories and apply them to other

parts of the internet. Other places

where we're talking to each other will

be put under the same legal microscope

that the social media defense are facing

now. And that's why I view the stakes of

the case so highly because not only is

social media on trial, but implicitly

the entire internet is on trial. And I

do worry that the plaintiffs, whether

state ags or school districts or

individual victims will learn the wrong

lessons, which is that they can put

editorial publishers under their thumb

and force them to change how they

publish content. If that's the lesson

that we take away from those cases, we

will all suffer the consequences. The

internet will look radically different.

>> Eric, thanks so much. It's always great

to have you on the show. That's

Professor Eric Goldman of Santa Clara

University Law School. Coming up next,

Trump is confirming judges faster than

in his first term. I'm June Grao and

you're listening to Bloomberg.

53 federal judges have been confirmed so

far during President Trump's second

term. That compares with 51 at the same

point in his first term. The Republicans

accelerated judicial confirmations this

summer, moving more nominees in June and

July than in the first five months of

the year. But now they'll have limited

time to process nominees after they

return from recess. Joining me is an

expert in the federal judiciary, Carl

Tobias, a professor at the University of

Richmond Law School. Carl, during

Trump's first term, we talked about the

backlog of judicial vacancies he

inherited and how fast they were moving.

How were they able to move even faster

in this second term? Well, because they

have been confirming him at a pretty

quick pace, Grassly has been very

aggressive about uh just setting the

committee uh meetings and hearings and

then moving them on to the floor with

what he has. But at this point there

hardly any left where there is a nominee

who has

not been through the process. Okay. And

so the holdup has been in the White

House. And so that's what we're going to

see. And then into the rest of the term,

there just aren't that many vacancies

that are going to be available because

judges are not taking senior status. And

so that's what you're seeing. Um Grassly

and the Senate have done almost

everything they could do. There are only

a few people who have been waiting for

their final votes right now.

>> Do you know how many how many

appointments there have been to the

circuit courts?

>> Yes. 10. 10 confirmed. Uh, and then

there's one, the 10th Circuit nominee,

Daniel Domenico, who is on the floor

awaiting a vote, and that will happen

when they return in September, and that

would be it. There's another vacancy in

the fifth circuit we've talked about

with Anna St. John. She had a hearing,

but she still will need a committee vote

and a floor vote. And then Bobby Shepard

from Arkansas on the eighth circuit has

said publicly that he will assume senior

status and there's no nominee yet from

the White House for his vacancy. So

that's all you have on the appeals

courts.

>> Now when they come back, are they going

to have time to do anything?

>> They'll have some three weeks in

September. I believe they'll come back

on the 14th and they will be able to do

some work then and they may be able to

get St. John through and then there are

a couple of district nominees and

they'll go through for Texas seats and

then the first day they're back for the

southern district of Ohio U. Matthew

Burn will have have a closure vote and

then confirmation on that Tuesday, but

that is it. And when those people have

votes, then it really will be incumbent

on the U White House to have more

nominees in front of them. But no one

will be able to be confirmed

except for Anna St. John and those I

just mentioned to you before they go out

um to campaign and then return after the

midterms. Things are slowing down on

that front. Grassly though has said that

he will work to the bitter end, but he

doesn't have much to work with. And so

it's really incumbent on the White House

to name more nominees. Um which they may

do during this break, right? And so

that's possible. And then there will be

a lame duck and some things could happen

there too.

>> Is there anyone in charge at the White

House of judicial nominations like there

was in the first administration?

>> There are people there who have been

working on it. You know, there's just a

brand new White House council announced.

Warrington is leaving going back I think

to p practice and uh Will Sharf who

mostly has been moving the paperwork for

the president as the staff secretary. So

he helps with executive orders and that

type of thing will become the new White

House council. Uh and of course the

office of policy development in the

justice department helps prepare

nominees and may help with uh working

with home state senators. And I've seen

Senator Cornin from Texas saying we've

been working with the White House and we

have people in the pipeline because

they're five vacancies there. Uh all are

emergencies and three I think of those

don't have nominees yet. So that's the

state with the most vacancies at this

point.

>> Are the Republicanapp appointed judges

who can take senior status not taking

senior status for a reason or is it just

a sort of phenomenon?

>> It's almost varies from judge to judge.

But I think that this White House is

probably surprised that there are not

more judges who were Republican

appointees who have taken senior status.

A number in their 70s, a number in their

80s, and some even in their 90s

>> really. And so I don't know what that's

all about, but of course Democrats would

say and probably have said that the

president judges may not want Trump to

name people uh to succeed them.

>> We've discussed before when there are

these controversial nominees, they've

been ideologues rather than just

conservative. I mean, would you say most

of the appointees are ideologues

mixed in with a lot of Trump's former

lawyers?

Well, three, I believe, so far have been

his private lawyers in practice, and

there may be more coming, but uh on the

appellet bench, those 10 we talked about

or 11. Most of them look more to me like

standard issue federalist society type

of judges, though they're very

conservative ideologically. But at the

district level, they're extremely

conservative ideologically. And a number

of them have worked for entities,

for example, in opposition to abortion

um in uh religious freedom cases and

other, you know, high-profile areas that

are controversial. So, one talked about

being an anti-abortion crusader. um one

of the district nominees in Missouri and

others have been similarly conservative.

So that's where you see it more than on

the appellet bench I think.

>> Um but you know 10 is a pretty small

sample.

>> Most of these were on partyline votes.

>> Yes. a surprisingly high number were

partyline votes and I think that's

attributable to the fact that Democrats

are not happy about the refusal of all

the nominees I think appellet and

district to answer two important

questions for Democrats. One is who won

the election in 2020

and uh the January 6 capital rioters who

entered the capital and beat police on

January 6, 2021. They've been apparently

given patented answers by the White

House and Democrats have been

understandably unhappy with that. And so

very few of the judges, some of the

district judges, for example, u there

were two recent ones in blue states more

or less. Pennsylvania actually were a

split delegation and then Michigan two

assistant US attorneys basically

received a fair number of three or four

Democratic votes, but they also were

more flexible about answering those two

questions. That just proves that

Democrats are not happy with uh the

answers from most other nominees to

those questions.

>> Chuck Grassley is going to give the gavl

over. Do do we know who he's giving it

to?

>> No, it depends on what happens in the

midterms, right? I think it goes to the

seniormost person on the committee. And

I think at this point it would be Mike

Lee on the Republican side from Utah

given Cornin is not going to be

returning. He would be more senior and

then I think after Lee it would be Cruz

in terms of seniority in the Senate. It

usually falls to that person unless the

person has a another committee

assignment where he wants to be chair or

she wants to be chair. Thanks so much,

Carl. That's Professor Carl Tobias of

the University of Richmond School of

Law. And that's it for this edition of

the Bloomberg Law Show. Remember, you

can always get the latest legal news on

our Bloomberg Law podcast. You can find

them on Apple Podcast, Spotify, and at

www.bloomberg.com/mpodcast/law.

And remember to tune in to the Bloomberg

Law Show every week night at 1000 p.m.

Wall [music] Street time. I'm June

Graasso and you're listening to

Bloomberg.