Just under two weeks after a defeat in New Mexico, Meta is confronting a major legal challenge led by California's Attorney General. Opening statements are set to begin Tuesday in a case brought by California Attorney General Rob Bonta, with multiple state governments pressuring the social media company to alter its app designs.

New Mexico Attorney General Raul Torrez, who recently won a case against Meta in his own state, told reporters, "You wake up one morning and you could see a judgment that is astronomical in scale." While the New Mexico ruling provided a blueprint for suing Meta, the California case could determine whether Facebook and Instagram's core products are forced into significant changes, potentially shaping the company's trajectory.

The multistate lawsuit, led by California Attorney General Rob Bonta, accuses Meta's products of fueling addictive behavior among teenagers and children. Opening statements commence Tuesday, with jury selection completed last week at the federal courthouse in Oakland. The case was initiated in 2023 by a coalition of 29 state attorneys general, with California, Colorado, New Jersey, and Kentucky representing the group in court.

The stakes are exceptionally high: state officials across the nation are demanding Meta face legal accountability for alleged violations of the Children's Online Privacy Protection Act (COPPA) and multiple consumer protection statutes. Industry experts describe this as a "big tobacco moment" for the social media sector, with Meta at the center of the storm. In the 1990s, tobacco companies were ordered to pay billions in penalties for concealing product dangers, after which their corporate power and influence declined markedly.

Earlier this month, Meta lost a case in New Mexico and was ordered to modify certain product services and pay nearly $1 billion in damages. However, since Meta is headquartered in California, a loss here could carry far harsher penalties, potentially including a forced large-scale restructuring of its core algorithms.

"California's judicial authority carries unique weight in the United States," said Julia Bowles, executive director of the Technology Law and Policy Institute at UCLA. "Meta faces the strongest legal constraints here, and the world is watching how this case unfolds."

Torrez, who just secured a victory in New Mexico, stated that the consequences for a company deriving 98% of its revenue from online advertising could be "astronomical." Meta CEO Mark Zuckerberg is relying on the substantial cash flow from advertising to fund massive AI investments, with related spending potentially reaching up to $145 billion this year.

In the second phase of the New Mexico case, involving child sexual exploitation allegations, the judge ordered Meta to pay $567 million into a dedicated remediation fund. In the first phase, a jury ruled in March that Meta violated the state's fair business practices act, awarding $375 million. Meta has stated it disagrees with the ruling and plans to appeal. Torrez called the judgment "quite substantial" but quickly emphasized it pales in comparison to what California could deliver.

"New Mexico has a population of only about 2 million," Torrez said. "If you apply this legal logic to California, Florida, Texas, and New York, the scale of judgments could shake the entire market."

Bypassing Section 230 of the Communications Decency Act

While the details of state lawsuits vary, they all center on claims that Facebook and Instagram apps feature product designs that harm users. The New Mexico judgment requires Meta to use AI to improve "age verification models and tools," developing predictive models within two years to specifically identify users under 13. It also requires simplifying reporting channels for minor accounts and establishing reporting pathways in collaboration with schools or child safety organizations, enabling schools to flag accounts on major social platforms suspected of belonging to children under 13.

Torrez noted that plaintiffs are focusing on product design flaws and false safety representations, "providing a template for other states to hold Meta accountable." This legal approach can bypass Section 230 of the Communications Decency Act, which traditionally shields tech companies from liability for third-party user content on their platforms.

In March, a Los Angeles jury found Meta and Google's YouTube negligent for failing to warn users about platform risks, with both companies losing their cases. California Attorney General Bonta, appointed by Governor Newsom in 2021, stated in a declaration last Monday that one of his most important duties is "protecting children from harm."

"Meta designed dangerous products for teenagers, knowing they were harmful, yet concealed those dangers from children, families, and society," Bonta said. "We are holding Meta accountable for worsening the youth mental health crisis in America, and we await trial."

Meta responded that the coalition's allegations "lack factual basis and the damages sought are grossly disproportionate." The company stated, "The states have presented no evidence that their residents were misled, have distorted ordinary features like multiple Instagram accounts into sources of harm, and are attempting to penalize Meta for industry-wide challenges like age verification."

Meta's lawyers have previously indicated that the multistate lawsuit's damages could reach as high as $1.4 trillion, while state attorneys told U.S. District Judge Yvonne Gonzalez Rogers last week that $200 billion would be a more realistic judgment amount.

"As I said, you wake up one morning and an astronomical judgment could be made public," Torrez remarked.

Michael Coffey, founding partner of the New York law firm Coffey Modica and a defense attorney, said such cases become career milestones for state attorneys general, but the actual compensation received by affected groups may be minimal. "Most of the damages go to the government, which then distributes them, and plaintiff legal teams take a cut," Coffey said.

Laura Marquez-Garrett, an attorney at the Social Media Victims Law Center, argued that beyond fines, the product changes Meta could be forced to make if it loses in California would be even more damaging. "States have capabilities that ordinary private plaintiffs do not: using courts to force companies to change business models, product designs, and more," said Marquez-Garrett, who recently worked on the Los Angeles case, during a press briefing last Friday.

In court filings, the state attorneys general are seeking a nationwide permanent injunction against Meta for illegal conduct violating COPPA. If Meta is found to have breached federal law, the states demand Meta delete all personal data of children under 13, as well as algorithms and models trained on that data. For violations of state consumer protection laws, the states seek to force Meta to remove certain addictive features: infinite scroll, autoplay, ephemeral content, beauty filters, and engagement-driven recommendation algorithms.

Torrez acknowledged that the New Mexico ruling did not achieve all requested remedies, such as fully eliminating infinite scroll or rewriting recommendation algorithms. The judge determined that some changes would conflict with Section 230 and the First Amendment, and since competitors like TikTok and YouTube retain similar features, unilaterally forcing Meta to make changes would be unfair. Torrez said he will next push for legislation introducing a social media bill to update consumer protection laws "covering common business practices in the digital economy."

Meta also faces multiple other lawsuits nationwide, with a significant federal trial scheduled in Northern California next year, brought jointly by several school districts. Multiple school district cases were originally consolidated for trial this summer, but Meta, YouTube, TikTok, and Snap all reached settlements. Torrez believes Wall Street is underestimating the impact of a Meta loss in California, with the market viewing the New Mexico ruling in isolation. Meta's stock has already fallen 11% this year, but analysts' concerns have largely focused on massive AI infrastructure capital expenditures rather than threats to the advertising business.

"Analysts are not adequately pricing in this risk," Torrez said. "A single California judgment could be enormous, directly affecting this company's ability to raise capital and conduct business in the future."