Elon Musk's X has won its appeal on free speech grounds to block AB 587, a California law requiring social media companies to submit annual reports publicly explaining their controversial content moderation decisions.
In his opinion, Ninth Circuit court of appeals judge Milan Smith reversed a district court's ruling that he said improperly rejected Musk's First Amendment argument. Smith was seemingly baffled to find that the "district court performed, essentially, no analysis on this question."
According to Smith, the district court "offered no reason" for finding that AB 587 only compelled commercial speech "except for wanting" to follow "the lead of the Fifth and Eleventh Circuits,” which never dealt with "speech similar" to AB 587's required content moderation reports. Instead, Smith said, the district court seemed to take up California's invitation to invent a new category of commercial speech that did not clash with the First Amendment.
"State legislatures do not have 'freewheeling authority to declare new categories of speech outside the scope of the First Amendment,'" Smith wrote, citing precedent.
Rather than constitutionally compelling commercial speech that is "purely factual and uncontroversial," AB 587 threatened social media companies with fines of $15,000 per violation per day for any failure to disclose six categories of content that X Corp argued are considered the most divisive and controversial. Those categories include hate speech or racism, extremism or radicalization, disinformation or misinformation, harassment, foreign political interference, and controlled substance distribution.
"They require a company to recast its content moderation practices in language prescribed by the State, implicitly opining on whether and how certain controversial categories of content should be moderated," Smith wrote. This, he said, unlawfully compelled companies to publicly comment on "intensely debated and politically fraught topics."
X accused California of trying to spark backlash with a supposed "transparency measure" that forces "companies like X Corp. to engage in speech against their will" by threatening "draconian financial penalties" if companies don't "remove, demonetize, or deprioritize constitutionally protected speech that the state deems undesirable or harmful."
Smith said that the appeals court accounted for these alleged effects in its analysis, but "whether State officials intended these effects plays no role in our analysis of the merits" of X's case.
That's likely because the appeals court agreed that X was likely to prevail in its First Amendment claims, finding that AB 587 compels noncommercial speech that requires strict scrutiny. The law also is not narrowly tailored enough "to serve the State’s purported goal of requiring social media companies to be transparent about their policies and practices." As Smith wrote, if the law is just a transparency measure, "the relevant question here is: transparency into what?"
Smith suggested that the law could have been more narrowly tailored to not run afoul of the First Amendment. If AB 587 only required companies to disclose "whether it was moderating certain categories of speech without having to define those categories in a public report," that might work. Or if the law only compelled a company "to disclose a sample of posts that have been removed without requiring the company to explain why or on what grounds."
Instead, AB 587's provisions require "every covered social media company to reveal its policy opinion about contentious issues, such as what constitutes hate speech or misinformation and whether to moderate such expression," Smith wrote.
"Even a pure 'transparency' measure, if it compels non-commercial speech, is subject to strict scrutiny," Smith wrote, concluding that X would likely suffer irreparable harm if key parts of the law weren't blocked.
It's unclear how much AB 587 will be cut down further, but X has succeeded in blocking the parts it disliked the most. Smith ordered the case to be remanded to the district court "with instructions to enter a preliminary injunction consistent with the opinion." The district court will also have to determine if unconstitutional parts of the law "are severable from the remainder of AB 587 and, if so, which, if any, of the remaining challenged provisions should also be enjoined."
This is the outcome that the state had asked for if the appeals court sided with X, giving California a fighting chance to preserve some parts of the law. But if the district court decides to strike the entire content moderation report section from the law, AB 587 would be properly gutted—basically only requiring social media companies to post their terms of service on a government website. That's the only part of the law that X did not fight to enjoin on appeal.