Meta ordered to pay $567 million in New Mexico for teen mental health fund

By Andrew Hay, Dietrich Knauth and Diana Novak Jones

Aug 6 (Reuters) - A New Mexico state court ordered Meta on Thursday to pay $567 million into a teen mental health fund and change how its platforms function for young users after finding the company is to blame for harming children's wellbeing.

Judge Bryan Biedscheid in Santa Fe ruled the company had created a public nuisance in New Mexico, siding with Attorney General Raúl Torrez, a Democrat. Torrez had accused the social media company of designing products to addict young users and failing to protect children from sexual exploitation on its platforms.

The ruling comes five months after a New Mexico jury in an earlier phase of the case ordered Meta to pay $375 million after finding it violated consumer protection law by misrepresenting the safety of Facebook and Instagram for young users.

The case was being closely watched amid a growing wave of litigation accusing social media companies of harming young users. While many lawsuits have been brought by children and families over alleged injuries to individuals, states, municipalities and school districts have also pursued lawsuits seeking broad changes to the industry.

More than 40 states and over 1,300 school districts have filed public nuisance lawsuits against social media companies, seeking damages as well as court orders requiring changes to products and practices.

Biedscheid on Thursday ordered Meta to implement youth-safety measures, including monthly limits on teens' use of Facebook and Instagram, restrictions on notifications, tighter controls on adult contact with minors, safeguards for AI chatbots, and enhanced review of child sexual abuse reports, under a decree that will be in place for five years.

Meta said it will appeal the ruling and that it has been working to identify and remove harmful content from its platforms.

"We remain confident in our record of protecting teens online and will continue to defend ourselves against claims that misrepresent the facts," Meta said in a statement.

New Mexico's Torrez said in a statement that Meta chose profit over child safety, and that the ruling was the first to force a social media giant to make changes protecting children.

"This is not just a judgment against one company. It is a blueprint," Torrez said. "Now other states, and other countries confronting the same crisis, have a roadmap they can follow."

Reuters last year reported on company documents that showed Meta's AI chatbots could "engage a child in conversations that are romantic or sensual," part of a series of investigations into Meta profiting from ads peddling fraud and banned products.

In Thursday's ruling, Biedscheid ordered Meta to prevent children in New Mexico from "engaging in romantic or sexualized interactions with Meta's artificial intelligence chatbots" and to prevent adults in New Mexico from using chatbots to simulate or discuss a sexualized interaction with a child.

PUBLIC NUISANCE

Biedscheid heard three weeks of testimony during the second trial over the lawsuit, which did not involve a jury. It focused solely on whether Meta's platforms created a "public nuisance" under New Mexico law.

Public nuisance claims traditionally have targeted conduct that endangers public health or safety, such as ​blocking roads or polluting waterways, but state governments have also invoked them in litigation involving tobacco, opioids, climate change, vaping and most recently artificial intelligence.

"(J)ust as noxious pollution produced by the factory can harm the common public right to reasonably clean air, the harmful effects of Meta’s platforms on children do not stay contained by its platforms and, instead, migrate to the internet as a whole and, perhaps most concerning, to the real world and create a common, societal burden on and harm to the affected children and their families and schools, as well as hospitals and law enforcement," Biedscheid wrote.

Meta had said at trial it could not have created a public nuisance because it had not interfered with a "public right," such as access to air or water. Meta also argued that its social media platforms are not the only ones used by the state's young residents, and the case ignores the impact of other apps.

It also criticized the changes New Mexico sought, saying in filings many were "technologically impractical or completely impossible," and could force the company to exit the state altogether.

Meta had also argued that New Mexico's claims were barred by Section 230 of the Communications Decency Act, a federal law that generally shields online platforms from liability for user-generated content. Biedscheid rejected that defense, finding the state was challenging Meta's platform features rather than trying to hold the company liable as publisher of third-party content.

However, Biedscheid declined to impose some of the remedies sought by New Mexico, finding that changes to Meta's algorithms and features such as infinite scroll and autoplay could infringe the company's rights under the First Amendment to the U.S. Constitution, harm its competitive position, and run afoul of Section 230.

The ruling comes as Meta prepares to face a trial next week in federal court in Oakland, California, over claims by 29 states that it designed Facebook and Instagram to addict children and misled users about their safety, a case that could expose the company to massive damages.

The company is also defending a lawsuit brought by Tennessee in a trial that began in July.

Meta has told investors that ⁠legal and ​regulatory blowback in the U.S. and European Union over youth social media issues "could significantly ​impact our business and financial results."

(Reporting by Andrew Hay in New Mexico and Dietrich Knauth in New York; Editing by Alexia Garamfalvi and Christopher Cushing)