Background
Metroplex Communications owns local Illinois news outlets that sell advertising. It brought a putative class action against Meta on behalf of small businesses competing with Meta for advertisers, alleging that Meta overstated Facebook advertising reach and effectiveness to divert advertisers from competing platforms.
Metroplex asserted false-advertising claims under the Lanham Act and the Illinois Uniform Deceptive Trade Practices Act and sought disgorgement of Meta’s allegedly ill-gotten profits. Although Metroplex had previously bought Facebook ads for two of its own outlets, it sued as a competing seller of advertising, not as a Meta advertising customer. Meta moved to compel arbitration under its Commercial Terms, which cover commercial claims arising out of or relating to access to or use of Meta products.
The Court’s Holding
The Seventh Circuit affirmed the denial of Meta’s motion to compel arbitration. Assuming without deciding that Metroplex was bound by Meta’s arbitration clause, the court held that the clause did not cover Metroplex’s unfair-competition claims.
Under Illinois law, even a broad arbitration provision requires a sufficient nexus between the agreement’s subject matter and the claims. Metroplex’s allegations concerned Meta’s public advertising-reach representations and alleged anticompetitive conduct toward rival ad platforms, not Meta’s performance under Metroplex’s own purchases of Facebook ads. Treating Metroplex’s incidental ad purchases as enough to require arbitration would create an impermissibly limitless and absurd result.
Key Takeaways
- A broadly worded arbitration clause does not reach claims lacking a meaningful connection to the contract containing it.
- A business that has used a company’s services may still pursue in court claims based on its separate status as a competitor.
- Courts must apply ordinary contract principles to arbitration agreements and may not expand them through a generalized presumption favoring arbitration.
Why It Matters
The decision limits efforts to use commercial-platform terms to arbitrate claims arising from a user’s separate competitive relationship with the platform. For false-advertising and unfair-competition plaintiffs, prior purchases from a defendant do not alone establish that their claims arise from those transactions.