It's an inauspicious end of the year for X Corp. (the social media platform formerly known as Twitter) in light of a recent court decision. On December 28, 2023, a federal judge denied X Corp.'s motion for preliminary injunction to enjoin enforcement of a California law that requires certain content moderation reporting from social media platforms. The court's decisions comes after X Corp. sued the California Attorney General, Rob Bonta, challenging the validity of California Assembly Bill 587 ("AB 587"). 

As a quick recap, AB 587 was signed into law in September 2022 by California Governor Gavin Newsom and has been heralded as a ‘social media transparency’ bill. The bill applies only to social media companies that have generated at least $100 million annual gross revenue. Additionally, “social media platforms” are defined as a public/semipublic internet-based platforms where a “substantial function” of the platform is to connect users for social interactions and allow users to: (1) construct public or semipublic profiles; (2) generate a list of shared social connections of other users within the platform; and (3) create or post user-generated content to the platform that other users can view. AB 587 specifically does not apply to apps that permit email or direct-messaging on the sole basis of that functionality alone. 

Under AB 587, social media companies must provide the then-current terms of service for their platform and disclose various details regarding their content moderation practices in a  consolidated report.  These reports were due for submission on January 1, 2024, with various social media platform reports now publicly available on the California Attorney General's website. Failure to comply with AB 587 also carries significant penalties of up to $15,000 per day of noncompliance and injunctive relief. 

X Corp. filed a complaint in September 2023, asserting that AB 587 violates various federal laws, such as the First Amendment and the Communications Decency Act ("CDA"). In its order denying X Corp.'s request to pause enforcement, the court addressed these claims, which we've summarized:

• First Amendment. For anyone not fresh out of their Constitutional Law class, government-compelled commercial speech is typically subject to intermediate scrutiny. However, where the compelled commercial speech is related to factual and uncontroversial information, the law will be upheld if it is “reasonably related” to a substantial government interest. This is the lowest level of First Amendment scrutiny, often referred to as the Rational Basis Test. The court found that AB 587 is reasonably related to the California AG's substantial interest in requiring social media companies to transparently disclose their content moderation practices, and thus does not violate the First Amendment. 
• CDA Section 230 Immunity. Section 230 of the CDA provides certain immunity to online platform providers from civil liability for user content posted to the platform. X Corp. argued that AB 587 is preempted by Section 230 by imposing liability on social media companies for their content moderation practices. The court was not persuaded and instead found that AB 587 does not contemplate potential liability stemming from a company’s content moderation activities, per se. 

The court denied a motion for injunctive relief, which has two important implications: First, X Corp.'s case against AB 587 has not entirely been resolved, though the lawsuit appears unlikely to succeed. 

Second and perhaps most importantly, AB 587 is currently effective and these Q3 terms of service reports were due to the California AG on January 1, 2024. Failure to comply could result in some hefty penalties. Reports covering Q4 are due April 1, 2024. For more information about AB 587, check out the California AG's AB 587 online portal.