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Speaker 1: This is Bloomberg Law with June Brasso from Bloomberg Radio.

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Speaker 1: More than seventy lawsuits have been filed this year against Meta, snap, TikTok,

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Speaker 1: and Google, centering on claims from adolescents and young adults

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Speaker 1: who say their addiction to social media has caused them anxiety, depression,

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Speaker 1: eating disorders, and sleeplessness are silicon valleys algorithms causing real

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Speaker 1: world harm. The suits make claims of product liability that

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Speaker 1: are new to social media but echo past campaigns against

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Speaker 1: tobacco companies and automobile manufacturers. Joining me is Joe Rosenblatt,

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Speaker 1: Bloomberg Legal Reporter. So if you could start by telling

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Speaker 1: us about some of the claims from the plaintiffs in

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Speaker 1: a few of these suits. Sure, it's a range of

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Speaker 1: people and claims, starting with kids who are they're spending

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Speaker 1: too much time on social media. That's the kind of

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Speaker 1: underlying claim are the common thread through all of them,

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Speaker 1: but different conditions are ascribed to that overuse, so ranging

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Speaker 1: from depression, lack of sleep sometimes leading to depression for girls.

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Speaker 1: Often the claims are about body image and depression or

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Speaker 1: extreme self consciousness, or you know, just kind of feeling

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Speaker 1: isolated or alienated because of the content that they're viewing.

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Speaker 1: In the most extreme case, we're talking about suicides. And

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Speaker 1: one of those cases was probably the most difficult interview

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Speaker 1: I've ever done with a woman named Janet Majewski whose

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Speaker 1: daughter Emily committed suicide. And Janet Majewski, you know, is

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Speaker 1: identifying and claiming that her daughter's overuse, the extreme amount

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Speaker 1: of time she was spending on social media led to

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Speaker 1: her suicide, which she posted. She posted a video of

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Speaker 1: the suicide, not not the actual act itself, but leading

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Speaker 1: up to it on TikTok, and TikTok wouldn't despite her

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Speaker 1: please and the fleas of law enforcement who was investigating

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Speaker 1: the suicide, TikTok wouldn't take that video down for days.

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Speaker 1: So you get a range of problems from kind of

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Speaker 1: you know, mild mild depression or alienation to suicide. And

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Speaker 1: you know, these cases are really said, So they're suing

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Speaker 1: about content that's been created by third parties on TikTok

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Speaker 1: or meta or whatever that's right in general sense, they're

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Speaker 1: they're suing about kind of what's being seen there. But

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Speaker 1: the lawsuit that I just mentioned, Janet Madjuski's suit what's

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Speaker 1: different about hers and interesting is that she's targeting the

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Speaker 1: algorithms that the platforms are using. So here we're talking

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Speaker 1: about the meta for example, you know on Facebook and Instagram,

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Speaker 1: and her suit is targeting those companies use of the algorithms,

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Speaker 1: not the content. So the companies for a long time

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Speaker 1: have shielded themselves behind Section to thirty, a law that

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Speaker 1: limits their liability for a third party content, so they

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Speaker 1: can't be sued for the content of other companies or

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Speaker 1: other content creators. And Jane Majoski is saying, I'm not

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Speaker 1: suing over the actual content, I'm singing over the algorithms

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Speaker 1: you're using that targeted my daughter. So these algorithms are

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Speaker 1: adjusted and can identify what users are interested in looking

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Speaker 1: at and will provide or hint at the content based

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Speaker 1: on what they're reading into an individual's use. Is this

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Speaker 1: the first wave of lawsuits like this or have there

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Speaker 1: been lawsuits like this in the past that we're dismissed.

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Speaker 1: Perhaps there have been many, many lawsuits that have been

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Speaker 1: dismissed by large these platforms have have won these lawsuits.

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Speaker 1: If you're asking, have these lawsuits identify the algorithm targeted?

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Speaker 1: The algorithm that's new, that's different. I don't know if

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Speaker 1: this is the first suit, but it's the first suit

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Speaker 1: to do that in such detail that I'm aware of.

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Speaker 1: This type of suit or this particular claim has an

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Speaker 1: interesting foundation, has an interesting fact that it can point to,

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Speaker 1: and that is the testimony of Francis Hogan, who was

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Speaker 1: a product manager at Facebook, you may recall, who testified

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Speaker 1: before Congress last year to reveal that Facebook was aware of,

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Speaker 1: you know how, internal research showing that their algorithms were

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Speaker 1: resulting in this kind of behavior depression, anxiety among girls

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Speaker 1: in particular, and continue to use it. So that's another

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Speaker 1: thing that's very different about this lawsuit that they have

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Speaker 1: an insider and they have her testimony, and who knows

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Speaker 1: what else they can get maybe the research that that

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Speaker 1: she identified to support their claims. The plaintiffs here actually

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Speaker 1: know what the algorithm is that Facebook or TikTok is using. No,

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Speaker 1: I don't think so, but but they know it exists

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Speaker 1: based on this testimony. We all know that these exist,

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Speaker 1: but the algorithms that the algorithms exist, um, but they

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Speaker 1: have more concrete evidence that they knew that it was

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Speaker 1: resulting in in in this kind of bad and upsetting behavior.

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Speaker 1: And sometimes I don't know that they don't know that

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Speaker 1: Facebook itself uh correlated there what they're doing their algorithms

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Speaker 1: with suicide, but they knew it at ill effects on teenagers.

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Speaker 1: So so they have that and so while they may

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Speaker 1: not have the actual algorithm itself, I think the idea

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Speaker 1: is that they can get past the hurdles that have

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Speaker 1: previously shielded these companies to get in and get discovery right,

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Speaker 1: pre trial information gathering and exchange information to try to

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Speaker 1: get ahold of you know, those algorithms in a more

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Speaker 1: meaningful way to analyze them. Is it sort of hard

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Speaker 1: to make the leap here? For example, most children don't

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Speaker 1: get addicted and have bad out comes, And for example,

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Speaker 1: the body shaming aspect of it, if it were in

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Speaker 1: social media, it might be fashion magazines or TV. Isn't

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Speaker 1: it hard to make the leap that it's because of

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Speaker 1: social media? Well exactly, I mean you put your finger

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Speaker 1: on what I think it's going to be the most

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Speaker 1: difficult problem to get around. So in this type of

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Speaker 1: suit that has you know, that is different because it's

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Speaker 1: identified the algorithm and not just content. You know, YouTube

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Speaker 1: is is oftentimes times of defendants in these suits Google.

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Speaker 1: I think it is said that there are products out

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Speaker 1: there that are potentially addictive and potentially harmful if they're

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Speaker 1: abused or overused. You know, you could give age old

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Speaker 1: examples of television or shopping right, and just because that

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Speaker 1: those exist out there doesn't mean that any one of

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Speaker 1: them can be targeted as the cause of any individual,

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Speaker 1: any particular individuals suicide or depression. And you put your

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Speaker 1: finger on I think kind of the central defense. I

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Speaker 1: think another thing that may come up is up to

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Speaker 1: the parents to tell their kids. You know, you can

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Speaker 1: have this much time on social media day and you

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Speaker 1: can't go past it's sort of monitor their children. Did

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Speaker 1: you ask Mrs Majewski about that, you know? And I

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Speaker 1: did put that question to her because I mean, that's

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Speaker 1: the question you have to ask, And she was she

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Speaker 1: was aware it was terribly upsetting. I mean, she she

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Speaker 1: was reliving the experience as we were talking. But she

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Speaker 1: said something that was really interesting to me. And I

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Speaker 1: think anybody who has kids who are on a phone

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Speaker 1: can see kind of the trouble that they can get

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Speaker 1: into very quickly. You can just see the addictive power

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Speaker 1: of what's going on, and so she she said something

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Speaker 1: that was really interesting to me. There's a quote in

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Speaker 1: the story, the Business Week story I wrote, she said

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Speaker 1: to me because what she did was she looked at

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Speaker 1: the phone, that she went back and looked at the phone,

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Speaker 1: She looked at her daughter was looking at and she

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Speaker 1: didn't think that she was spending an ordinate amount of time.

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Speaker 1: I don't know, you know exactly how many hours as are.

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Speaker 1: And I think that's part of the problem is a

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Speaker 1: lot of parents don't know. You know, if you're not

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Speaker 1: really monitoring the actual phone itself, you don't know how

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Speaker 1: many hours they're spending. But along with investigators, she was

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Speaker 1: able to look at the phone, look at the hours,

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Speaker 1: look at the content, and she didn't see anything. There

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Speaker 1: was nothing to her that stood out as like this

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Speaker 1: is really troublesome or troubling or or should have been

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Speaker 1: to her. And what she said was though she said,

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Speaker 1: as parents, we're not seeing what they are seeing. And

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Speaker 1: then also as a parent, was just intuitively powerful to me,

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Speaker 1: because I do get the feeling with my own children,

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Speaker 1: for example, that they're just kind of processing this information

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Speaker 1: differently than we are. I think that there's something to

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Speaker 1: that argument, and that if they can kind of get

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Speaker 1: past the motion to dismiss, the attempt to throw this

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Speaker 1: suit out and can get into the research. I think

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Speaker 1: that she's onto something with that. There's something to that

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Speaker 1: that I think could could be a powerful argument. You

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Speaker 1: write that. Another hurdle for plaintiffs in these cases is

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Speaker 1: establishing that algorithms should be treated just like other defective products.

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Speaker 1: Tell us about that. This kind of argument has been

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Speaker 1: you know, most associated with, for example, tobacco, right or

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Speaker 1: car manufacturers, you know, defective products. And so the suit

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Speaker 1: treats the algorithm is that is something like tobacco that

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Speaker 1: was known to be harmful to cause cancer by by

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Speaker 1: tobacco companies or a part in that car. And so

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Speaker 1: that's what these suits are doing. They're identifying the algorithm

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Speaker 1: as essentially a kind of product that's defective and known

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Speaker 1: to be defective and used anyway. So that's how the

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Speaker 1: lawsuit is kind of framing the algorithm. So with all this,

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Speaker 1: you know, there's been a lot of negative publicity. Are

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Speaker 1: any of these platforms doing anything to try to change

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Speaker 1: things or you know, for public relations purposes at least? Well, yes,

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Speaker 1: I mean you can if you can see on the internet,

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Speaker 1: even on just websites, you know, not that not the

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Speaker 1: platforms themselves. You can where you can definitely find out,

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Speaker 1: but on various website I myself have just seen this,

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Speaker 1: I think probably because I'm writing about it and my

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Speaker 1: Internet usage is being monitored and advertising tailored to me.

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Speaker 1: But you can see the companies are hinting at and

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Speaker 1: advertising their own programs for parents to get more informed

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Speaker 1: and for kids to also be more informed and you know,

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Speaker 1: understand what's going on, what's good and bad, and how

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Speaker 1: to you know, moderate your own behavior or your children's behavior.

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Speaker 1: You know, those strike me as kind of predictable things

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Speaker 1: to do, predictable responses. On both sides of the political spectrum,

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Speaker 1: there is deep unhappiness and concern about Section to thirty

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Speaker 1: and the left. The content that that the left is

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Speaker 1: targeted has been disinformation about vaccines or the outcome of

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Speaker 1: the US election or the January six attacks. But on

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Speaker 1: the on the right, to politicians including Donald Trump have

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Speaker 1: pointed to you know, an alleged bias of Silicon Valley

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Speaker 1: companies against conservative views and Trump himself, there's deep unhappiness

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Speaker 1: with Section two thirty, but the companies have long since

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Speaker 1: their beginnings, have pointed to it as a really critical

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Speaker 1: law in order to preserve kind of the well being

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Speaker 1: in the in the vibrancy of the Internet, and that

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Speaker 1: without it, if they can be sued for the content

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Speaker 1: that they're providing, they're putting up, they're just you know,

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Speaker 1: they argue, they're just connecting users with the content. If

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Speaker 1: they can be sued for that, they argue, well, then

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Speaker 1: that just dims the Internet, maybe to the point of

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Speaker 1: they would argue non existence. These could the companies have

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Speaker 1: argued that section to thirty is you know, a fortress.

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Speaker 1: But should you somehow see that it doesn't provide the

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Speaker 1: defense that they need, then they arguing alternatively, well, let's

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Speaker 1: just look at the First Amendment, and on First Amendment grounds,

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Speaker 1: we can't be sued for providing this content. Well, it's

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Speaker 1: certain that we'll be hearing a lot more about these cases.

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Speaker 1: Thanks Joe. That's Bloomberg Legal reporter Joe Rosenblatt. Coming up next,

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Speaker 1: the biggest penalties against US banks for record keeping lapses.

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Speaker 1: Regulators reach settlements with a dozen banks, bringing total penalties

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Speaker 1: to more than two billion dollars. After a sprawling investigation

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Speaker 1: into how global financial firms failed to monitor their employees

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Speaker 1: communications on unauthorized messaging apps, joining me a securities law attorney,

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Speaker 1: Robert him a partner at Tartar, Krinsky and Drogn. This

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Speaker 1: is a stunning amount of fines. What did these banks

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Speaker 1: do that was illegal? It really is. June. It's a

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Speaker 1: very big announcement from the SEC, and it centers around

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Speaker 1: the banks failure to preserve electronic communications that their employees

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Speaker 1: engaged in that related to work. And under the federal

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Speaker 1: securities laws, broker dealers and other regulated entities have obligations

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Speaker 1: to preserve all business related to communications, and what the

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Speaker 1: SEC found was that, according to their settlement papers, there

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Speaker 1: was widespread ignoring of that rule by these sixteen firms

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Speaker 1: that settled with the SEC. The SEC categorized their conduct

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Speaker 1: as pervasive. And not only that, it wasn't just regular

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Speaker 1: line employees that were using personal devices for business communications,

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Speaker 1: but it was senior executives, the very people that were

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Speaker 1: responsible for implementing these policies were also ignoring them. In

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Speaker 1: some cases, managers even texted with employees in charge of

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Speaker 1: ensuring that banks comply with the law, So it could

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Speaker 1: be that none of these texts were over improper conduct.

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Speaker 1: It was just record keeping. According to the SEC settlement documents,

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Speaker 1: it really was just record keeping. In some instances. The

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Speaker 1: SEC says that the failure of the firms to preserve

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Speaker 1: the employees business related communications hampered their investigations, but they

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Speaker 1: don't really say any specifics about how it was hampered

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Speaker 1: or whether any sort of key evidence was lost as

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Speaker 1: a result of the firm's misconduct, and so it's hard

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Speaker 1: to judge really whether any critical evidence may have been lost.

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Speaker 1: But it just reinforces the SEC's position that proper record

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Speaker 1: keeping as required the law is something that they're going

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Speaker 1: to take very seriously. It seems like an awful lot

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Speaker 1: of money over improper record keeping if there was no

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Speaker 1: allegation of other misconduct connected to the record keeping. Yes,

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Speaker 1: absolutely it does that. This was by far the largest

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Speaker 1: fine for firms not abiding by the record keeping rules,

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Speaker 1: which were require them to save an archive employee communications

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Speaker 1: like emails or texts, even when those communications occur on

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Speaker 1: their personal devices. And that's really what this settlement focuses

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Speaker 1: on is employees who in this day and age working remotely,

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Speaker 1: and many firms have bring your own device policies to

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Speaker 1: work under the securities laws, firms have an obligation to

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Speaker 1: capture and save any business related to communications, which you

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Speaker 1: know can be very challenging in this environment. But the

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Speaker 1: SEC justified these large fines some firms paid up to

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Speaker 1: million dollars to settle these cases by just noting how

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Speaker 1: long lasting this conduct was going on for and how

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Speaker 1: much involved in the misconduct was the senior officers of

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Speaker 1: these banks. So regulators want to be able to track

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Speaker 1: every message, every email, every text. Do a few messages

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Speaker 1: really matter in the broad scope of things. It's really

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Speaker 1: hard to say. Um. Certainly, the SEC and other regulators

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Speaker 1: want firms to preserve every single business related communications, whether

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Speaker 1: they occur on the bank's own internal email systems or

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Speaker 1: whether those business communications occur on personal devices. And it

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Speaker 1: raises a lot of questions because you know, employees have

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Speaker 1: privacy concerns too, because if they're using their phones both

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Speaker 1: for personal communications with family members and also with business colleagues,

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Speaker 1: it can be very challenging for the banks and employers

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Speaker 1: to be able to separate those two types of communications

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Speaker 1: and really just capture and save the business related communications.

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Speaker 1: The Bank of America had the biggest penalty, a hundred million.

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Speaker 1: How did they allocate the fines. Was it dependent on

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Speaker 1: the number of communications that were missed or the people

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Speaker 1: who missed them. Yeah, the SEC didn't specify in detail

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Speaker 1: how they allocated the fines because, as you noted, some

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Speaker 1: firms paid significantly more than others. And there was a

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Speaker 1: total of sixteen firms that's settled with the SEC, and

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Speaker 1: some paid as low as ten million and some paid

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Speaker 1: over a hundred million. And generally speaking, that's going to

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Speaker 1: be a function of how widespread the conduct was at

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Speaker 1: the firm, uh and the degree that senior people were

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Speaker 1: involved in it. But the SEC also takes into consideration

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Speaker 1: the size of the firms and their ability to pay

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Speaker 1: in order to have the proper deterrent effect without you know,

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Speaker 1: perhaps jeopardizing the firms of financial condition. How do banks

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Speaker 1: monitor this in the future. You mentioned the proliferation of

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Speaker 1: messaging apps and you know employees texting on their personal phones.

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Speaker 1: I mean, how did they monitor it? Yeah, that's the

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Speaker 1: big challenge for banks and other firms that have these

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Speaker 1: record keeping obligations because you have apps like Snapchat that

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Speaker 1: delete messages shortly after their scent. We have Telegram, we

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Speaker 1: have What'sapp, and there's many many different devices, and they

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Speaker 1: often are not very easy to sink with an employer's

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Speaker 1: main frame computer and standard compliance systems. And it's still

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Speaker 1: very much a developing area. And what employers have done

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Speaker 1: under these settlements, many of them have had to retain

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Speaker 1: compliance monitors, and one of the jobs of the compliance

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Speaker 1: monitors to begin interviewing the employees at the firm to

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Speaker 1: see how widespread of a practice there is to use

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Speaker 1: personal devices for business communications, and then to help the

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Speaker 1: firms come up with technology and other solutions to try

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Speaker 1: to capture these Some firms are even going into the

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Speaker 1: area of banning employees from using personal devices for business

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Speaker 1: communications because of all these technical challenges in archiving business communications.

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Speaker 1: Do you know of any firms that have just said

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Speaker 1: you can't use your personal devices at work. Nobody has

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Speaker 1: come out specifically to say that at this point, but

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Speaker 1: it may be heading in that direction, depending on whether

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Speaker 1: firms can overcome the technology challenges and the privacy concerns

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Speaker 1: of employees using their devices. One issue is, even if

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Speaker 1: employers ban employees from using these types of apps, how

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Speaker 1: can the firm actually make sure that that is happening

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Speaker 1: and being followed, Because that's still going to require the

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Speaker 1: firm to look at employees personal devices to make sure

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Speaker 1: they're not using these prohibited apps. So there's not a

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Speaker 1: easy solution, and firms are working through the privacy implications

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Speaker 1: and the technology implications of trying to comply with record

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Speaker 1: keeping rules that actually date back to the nineteen thirties

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Speaker 1: when the securities laws were first passed that obviously couldn't

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Speaker 1: anticipate the proliferation of these types of text messages and

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Speaker 1: digital communications. Bankers and brokers often complained that they are

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Speaker 1: much more closely regulated than executives in other industries. Well,

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Speaker 1: that's certainly a true statement of finance, particularly in banking

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Speaker 1: and brokerage activities, is a highly regulated industry and they've

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Speaker 1: been subjected to these heightened record keeping requirements for a

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Speaker 1: long time. What's very interesting is the Department of Justice

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Speaker 1: is also now getting involved in this area. About a

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Speaker 1: week ago, the Department of Justice issued their own memo

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Speaker 1: saying that companies who want to get cooperation credit and

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Speaker 1: when criminal conduct is discovered, have to be prepared to

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Speaker 1: turn over personal device communications of employees that relate to

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Speaker 1: business matters. So there's definitely an effort by regulators and

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Speaker 1: by the Department of Justice to expand these types of

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Speaker 1: heightened record keeping provisions to other industries where there is

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Speaker 1: no legislation or statutory requirement UM those provisions be implemented.

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Speaker 1: Talk a little bit about why, particularly the Department of

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Speaker 1: Justice wants companies to keep track of this. Oftentimes, you know,

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Speaker 1: you find they build their caces based on text messages

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Speaker 1: and formerly based on emails, but I guess text messages

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Speaker 1: are the current way. Yes, text messages and emails and

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Speaker 1: other forms of electronic communications have been a very helpful

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Speaker 1: and fruitful source of evidence that prosecutors have obtained to

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Speaker 1: help make their cases. In many instances, a lot of

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Speaker 1: times employees have their guards down and they're talking over

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Speaker 1: text and over email in ways that they may not

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Speaker 1: do in a in a more formal setting. So these

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Speaker 1: types of electronic communications have been very fruitful for prosecutors

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Speaker 1: in terms of providing evidence of wrongdoing. And as a

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Speaker 1: result of these new apps like Telegram and What's App,

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Speaker 1: where they're encrypted messages or they're they're automatically deleted, it's

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Speaker 1: been very challenging for prosecutors to really get that same

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Speaker 1: type of evidence UM in recent years, and they're very

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Speaker 1: concerned about that, and these apps that into the big

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Speaker 1: challenge for prosecutors and kind of going after and getting

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Speaker 1: the smoking gun communications that are often very helpful in

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Speaker 1: making high profile cases. Yeah, the Justice Department that is

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Speaker 1: going to put more emphasis on whether companies, as you said,

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Speaker 1: handover employee digital communications when the Department is considering leniency

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Speaker 1: for cooperation. But with some of these apps, the messages

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Speaker 1: are gone, So handing over the device doesn't help, does it, right?

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Speaker 1: This is putting companies in oftentimes a very difficult bond

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Speaker 1: because what the Department of Justice is often expecting as

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Speaker 1: an enforcement of a policy that just isn't enforceable. Um.

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Speaker 1: And when apps are deleting automatically communications and not storing them.

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Speaker 1: You know, many apps like What's App and others don't

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Speaker 1: have central servers where subpoenas can be issued to to

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Speaker 1: get you know, messages that were deleted, and it's very challenging.

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Speaker 1: The messages just aren't air and that's by design for

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Speaker 1: some of these encrypted communication apps. Um, they just don't

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Speaker 1: save any messages. Under this new directive, will it be

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Speaker 1: enough for companies to just have a policy or is

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Speaker 1: there going to have to be some kind of compliance

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Speaker 1: program in the Department of Justices viewed having a policy

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Speaker 1: is just the first step, and they're going to require

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Speaker 1: much more from companies in terms of not just having

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Speaker 1: the policy, but also training the employees and regularly updating

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Speaker 1: the employees on the requirements, and in some situations having

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Speaker 1: software or other types of third party i T companies

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Speaker 1: working with the companies to make sure that business related

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Speaker 1: to communications that are happening on personal devices are being

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Speaker 1: captured and archived by the company. And the Department of

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Speaker 1: Justice is kind of coming at this through the back door,

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Speaker 1: whereas the SEC is operating under a statutory scheme that

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Speaker 1: requires companies to preserve these types of communications, there is

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Speaker 1: no similar statutes in many other industries, and the Department

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Speaker 1: of Justice is saying, well, we're going to use our

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Speaker 1: ability to give cooperation credit to companies to really encourage

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Speaker 1: them and in some cases probably has the effect of

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Speaker 1: requiring them to archive business communications even though there's no

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Speaker 1: legal requirement for the companies to do that. You know, um,

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Speaker 1: wondering what it's like, you know, for banks or companies

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Speaker 1: when dealing with changes in policy due to a change

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Speaker 1: in administration, and then you know that perhaps in two

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Speaker 1: years it'll be a different policy and a different administration.

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Speaker 1: So all you've done maybe for not. Yes, we've seen

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Speaker 1: these flip flops quite often. You know. Now that the

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Speaker 1: Biden administration is underway and Chairman Gainsler at the SEC

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Speaker 1: is looking to to make his mark and prosecute more corporations,

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Speaker 1: there's certainly been somewhat of the sea change in terms

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Speaker 1: of what's expected of companies compare to the prior administration.

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Speaker 1: And even before this, in the area of the Foreign

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Speaker 1: Corrupt Practices Act, which deals with foreign bribery, there's been

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Speaker 1: flip flops there too, where first the Department of Justice

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Speaker 1: required companies to go out and to turn over employee communications,

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Speaker 1: and then there was a change when the new administration

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Speaker 1: came in and scaled that policy back. So yes, this

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Speaker 1: is not something that's new. When new administrations come in

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Speaker 1: and change expectations, it has a profound effect on companies,

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Speaker 1: particularly in regulated industries. Thanks Bob. That's Robert him a

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Speaker 1: partner at Tartar, Krinsky and Draken. And that's it for

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Speaker 1: this edition of the Bloomberg Law Show. Remember you can

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Speaker 1: always get the latest legal news on our Bloomberg Law Podcast.

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Speaker 1: You can find them on Apple Podcasts, Spotify, and at

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Speaker 1: www dot bloomberg dot com, slash podcast, slash Law, and

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00:25:51,400 --> 00:25:54,160
Speaker 1: remember to tune into The Bloomberg Law Show every week

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Speaker 1: night at ten BM Wall Street Time. I'm June Grosso

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Speaker 1: and you're listening to Bloomberg