California Governor Gavin Newsom signed Assembly Bill 587 (AB 587) into law in September 2022. Often referred to as “a social media transparency bill,” the law requires social media companies that collect personally identifiable information from internet users to make their privacy policies available to consumers and submit semiannual “Terms of Service and Content Category Reports” to the State’s Attorney General.

The law only applies to platforms with over $100 million in gross annual income but requires qualifying platforms to provide their definitions of “hate speech or racism, extremism or radicalization, disinformation or misinformation, harassment, foreign political interference, and controlled substance distribution.” It also requires them to disclose what actions they will take if the social media content contains these types of speech.

X Corp (formerly Twitter), one of the affected companies, sued Rob Bonta, California’s Attorney General, based on AB 587, which requires the company in sections 22677(a)(3), (a)(4)(A), and (a)(5) to disclose its content moderation and hate speech policies. X Corp argued these sections are unconstitutional violations of the free speech provisions of both the U.S. and California Constitutions.

The complaint also alleged that AB 587 violates two areas that are federally preempted: the Dormant Commerce Clause and the Communications Decency Act. The Dormant Commerce Clause may prevent state or local regulation of interstate commerce because Congress has power over it. The Communications Decency Act attempts to prevent minors from gaining access to sexually explicit material on the internet.

X Corp’s complaint sought declaratory and injunctive relief that would bar enforcement of the law. On September 4, the Ninth Circuit Court of Appeals reversed the decision of Presiding District Judge William B. Shubb of the United States District Court for the Eastern District of California, who had ruled in favor of the Attorney General because he found that X Corp “failed to establish a likelihood of success on the Frist Amendment violations.” This decision was made after Shubb applied a rational basis test, rather than the strict scrutiny test required in non-commercial speech rulings. X Corp appealed. Shubb also said that the required reports are “purely factual” and only require social media companies to identify their policies about “content moderation.”

The Ninth Circuit agreed with the Elon Musk-owned X Corp by issuing a preliminary injunction against AB 587, codified as California Business & Professional Code §§ 22675–81. X Corp prevailed in the Ninth Circuit, which remanded the case back to Shubb with instructions to enter a preliminary injunction, to determine whether the Content Category Report provisions are “severable” from the remainder of the bill, and if so determine which provisions should also be enjoined.

In a unanimous opinion authored by Circuit Judge Milan D. Smith, with concurrences by Circuit Judges Mark J. Bennett and Anthony D. Johnstone, the Ninth Circuit held that X Corp was likely to succeed on the merits of its claim that the Content Category Reports “facially violate the First Amendment.” The opinion reasoned that the Reports that “compel non-commercial speech” are subject to “strict scrutiny” and not just a rational basis test because they are content-based and “not narrowly tailored to serve the State’s purported goal” of transparency about “their policies and practices.”

Smith’s opinion began by providing additional information about the new law. He explained that it requires social media companies to comply with three elements: (1) the requirement to publicly post their terms of service including the processes they use “for flagging content” along with a description of what actions could be taken on the content; (2) the requirement for the semiannual report that details their content-moderation practices regarding the six types of speech mentioned above, and (3) a penalty provision that allows the Attorney General to sue any company that “materially omits or misrepresents required information,” for up to $15,000 per violation per day.

Next, the opinion explained that it has the right to review the denial of Shubb’s preliminary injunction to determine if X Corp was likely to succeed on the merits of its claim, would suffer “irreparable harm” without the preliminary injunction, has more weight when the equities are balanced, and would be in the public interest. The Ninth Circuit used these factors to rule that the District Court erred by not using “strict scrutiny” on issues that compel non-commercial speech to comply. Smith said that because the district court was reversed on free speech grounds, the appellate court did not have to review the remaining complaints linked to federal preemption.

The Ninth Circuit then concentrated on X Corp.’s facial challenges to the First Amendment. First, the court explained that commercial speech must be distinguished from non-commercial speech because commercial speech is only subject to “intermediate scrutiny.” The justices determined that the Content Category Reports required by AB 587 are not commercial. They are not advertisements and they have no economic content. Instead, they are “content-based” and therefore subject to strict scrutiny. This is the highest standard of review a court can use to determine the constitutionality of a government action.

AB 587, Judge Smith wrote, “is likely to fail under strict scrutiny because (its provisions) are not narrowly tailored. They are more extensive than necessary to serve the State’s purported goal of “requiring social media companies to be transparent about their content-moderation policies and practices so that consumers can make informed decisions about where they consume and disseminate news and information.” Therefore, he concluded that “X Corp. has shown a likelihood of success on the merits” of its First Amendment claim regarding its Terms of Service and Content Category Reports.

The remainder of the opinion focused on “severability.” This question received only “cursory review” by the parties, so the Ninth Circuit left it up to the district court to determine whether other sections of AB 587 besides the Terms of Service and Content Category Reports are severable from the rest of the bill and whether they, too, should be enjoined.

X Corp called the Ninth Circuit ruling decision “not just a victory for our platform, but also for free speech nationwide.” Bonta’s office said it is “reviewing the opinion and will respond appropriately in court.”