Metroplex Communications, Inc. v. Meta Platforms, Inc.

In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 24-1440 METROPLEX COMMUNICATIONS, INC.,

Plaintiff-Appellee, v.

META PLATFORMS, INC.,

Defendant-Appellant.

____________________

Appeal from the United States District Court for the

Southern District of Illinois. No. 3:22-cv-1455-SMY — Staci M. Yandle, Chief Judge.

____________________

ARGUED NOVEMBER 14, 2024 — DECIDED AUGUST 27, 2026

____________________ Before JACKSON-AKIWUMI, PRYOR, and MALDONADO, Circuit Judges.

MALDONADO, Circuit Judge. Metroplex Communications, Inc. owns several local news outlets in Illinois and earns rev- enue primarily by selling ads on those platforms. Metroplex is not the only game in town, however; Meta Platforms, Inc., which sells ads on its social media platform, Facebook, com- petes for the same local advertisers. Metroplex brought suit on behalf of a putative class of small businesses that compete with Meta for advertisers. That suit alleges that Meta engages in unlawful, anticompetitive practices by distorting the reach and effectiveness of its Facebook advertisements to lure ad- vertisers away from other platforms like Metroplex. Coinci- dentally, Metroplex itself has purchased ads on Facebook over the last decade. It brought this action, however, not as an ad purchaser, but as a competitor vying for ad purchasers. Meta moved to compel arbitration against Metroplex based on the terms Metroplex had presumably agreed to when mak- ing ad purchases on Facebook. The district court denied the motion, and we affirm. Because the class’s claims concern un- fair competition and bear no meaningful connection to Metroplex’s own ad purchases, the arbitration clause in Meta’s Facebook ad terms does not apply.

I

In 2022, Metroplex filed a putative class action complaint alleging that Meta knowingly made false and misleading statements to induce businesses to advertise on Facebook ra- ther than on other platforms, such as Metroplex’s local news outlets. Specifically, Metroplex contends that Meta dramati- cally overstates the impact of ads displayed on Facebook by artificially inflating the size of Meta’s audience. Because audi- ence reach is the most important factor for choosing how and where to place ads, Metroplex alleges that Meta unfairly and deceptively siphoned prospective advertisers away from Metroplex and others in violation of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B), and the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/1 et seq. Metroplex seeks disgorgement of profits Meta allegedly earned through its misleading practices.

Meta moved to compel arbitration against Metroplex un- der the Federal Arbitration Act, 9 U.S.C. § 1 et seq., arguing that Metroplex consented to arbitration when it purchased ads on Facebook and agreed to Meta’s Terms of Service (“Commercial Terms”), including an arbitration clause. Metroplex employees had previously purchased Facebook ads for two Metroplex platforms—AdvantageNews.com, a local news site, and 107.1 FM, a local radio station—advertis- ing the platforms’ news coverage. And each time Metroplex’s employees purchased ads on Facebook, they agreed to arbi- trate “any claim, cause of action, or dispute that arises out of or relates to any access or use of the Meta Products for busi- ness or commercial purposes (‘Commercial Claim’) between you and Meta.”

The district court denied Meta’s motion to compel arbitra- tion, finding that Metroplex’s claims were beyond the scope of the arbitration clause. The court explained that Metroplex’s alleged injury was as a business competitor in the ad sales space rather than as a Facebook ad purchaser.

Meta appeals, invoking our jurisdiction to review a district court’s refusal to compel arbitration on an immediate inter- locutory basis. See 9 U.S.C. § 16(a)(1)(C).

II

Courts will compel arbitration if the parties have an en- forceable written agreement to arbitrate and their underlying dispute is within the scope of that agreement. A.D. v. Credit One Bank, N.A., 885 F.3d 1054, 1060 (7th Cir. 2018). The district court resolved this case solely on the scope of the arbitration clause, and so do we. That is, we assume, without deciding, that Metroplex is bound by the arbitration clause in Meta’s Commercial Terms, and we analyze only whether the arbitra- tion clause covers Metroplex’s unfair competition claims. See United Nat. Foods, Inc. v. Teamsters Loc. 414, 58 F.4th 927, 933 (7th Cir. 2023) (quoting Granite Rock Co. v. Int’l Bhd. of Team- sters, 561 U.S. 287, 299 (2010) (“Arbitration is strictly a matter of consent and thus is a way to resolve those disputes—but only those disputes—that the parties have agreed to submit to arbitration.”) (emphasis in original)). In so doing, we look to state law, Rodgers-Rouzier v. Am. Queen Steamboat Operating Co., LLC, 104 F.4th 978, 991 (7th Cir. 2024) (citing Arthur An- dersen LLP v. Carlisle, 556 U.S. 624, 630–31 (2009)), and here, as the parties agree, Illinois law governs. Our review of the scope of the arbitration clause is de novo. See Moore v. Club Exploria, LLC, --- F.4th ---, 2026 WL 2409841, at *4 (7th Cir. Aug. 18, 2026) (discussing standards of review for denials of motions to compel arbitration).

Under Illinois law, “[a] court must initially look to the lan- guage of a contract alone, as the language, given its plain and ordinary meaning, is the best indication of the parties’ intent.” Gallagher v. Lenart, 874 N.E.2d 43, 58 (Ill. 2007) (citations omit- ted). In scope disputes, we compare the text of the arbitration clause with the factual allegations of the claims to be arbi- trated. See Rosenblum v. Travelbyus.com Ltd., 299 F.3d 657, 663– 64 (7th Cir. 2002); see also, e.g., Davitashvili v. Grubhub, Inc., 131 F.4th 109, 119 (2d Cir. 2025) (quoting Specht v. Netscape Commc’ns Corp., 306 F.3d 17, 36 (2d Cir. 2002)) (explaining the importance of grounding scope analysis “on the factual alle- gations in the complaint”); Jeanetta Vaughn v. JP Morgan Chase & Co., No. 24-1016, 2025 WL 3514012, at *6 (10th Cir. Dec. 8, 2025) (same). Here, the text of the arbitration clause reads in relevant part:

b. Commercial Claims: Section[] 5.c . . . below appl[ies] to any claim, cause of action, or dis- pute that arises out of or relates to any access or use of the Meta Products for business or com- mercial purposes (“Commercial Claim”) be- tween you and Meta. c. U.S. Commercial Claims: If you reside in the United States or your business is located in the United States:

i. You agree to arbitrate Commercial Claims between you and Meta Platforms, Inc.

Because the scope of the arbitration clause is “broad,” in- sofar as it applies to “any dispute” that “arises out of” or “re- lates to any” commercial use of Meta’s products, Meta argues that Metroplex’s unfair competition claims fall within it. See Gore v. Alltel Commc’ns, LLC, 666 F.3d 1027, 1033-1034 (7th Cir. 2012) (gathering cases and noting that we have long described the “arising out of or relating to” formulation as broad); see also Int'l Bhd. of Elec. Workers Loc. 2150 v. NextEra Energy Point Beach, LLC, 762 F.3d 592, 594 (7th Cir. 2014) (“Where the arbi- tration clause is broad, we presume arbitrability of dis- putes.”).

But even where the arbitration clause is broad, a claim does not fall within the clause’s scope unless it is strongly tied to the underlying contract. See Domer v. Menard, Inc., 116 F.4th 686, 700–01 (7th Cir. 2024) (quoting S+L+H S.p.A. v. Miller-St. Nazianz, Inc., 988 F.2d 1518, 1524 (7th Cir. 1993) (“A claim arises from a purchase agreement when it ‘draws its very essence from the fact of and performance under the agree- ment in question.’”). That is, there must be “a sufficient nexus between the subject matter of the contract and the substance of the claim” to presume a dispute’s arbitrability. Id. at 703 (citations omitted); Kiefer Specialty Flooring, Inc. v. Tarkett, Inc., 174 F.3d 907, 910–11 (7th Cir. 1999) (holding tort claim arbi- trable because it arose “from the very same act” as the crea- tion of the underlying contract).

Metroplex’s claims do not meet that test. The complaint does not allege that Meta breached the Commercial Terms with Metroplex as an ad purchaser or that Meta’s perfor- mance under that agreement forms the basis of the anticom- petitive harm. Instead, the complaint alleges that Meta dis- torted its advertising reach metrics to unfairly lure customers away from competitors like Metroplex. These allegations con- cern Meta’s public representations and allegedly anticompet- itive conduct, not Metroplex’s own “purely coincidental” and limited use of Meta’s ad services. See Davitashvili, 131 F.4th at 120 (internal quotation marks omitted). Thus, while the arbi- tration clause is broad, Metroplex’s claims do not fall within its scope insofar as they are untethered to “the fact of and per- formance under the agreement in question.” See S+L+H S.p.A., 988 F.2d at 1524 (citation modified).

Meta nonetheless presses that the arbitration clause’s cov- erage of disputes relating to “any access or use” of Meta’s products sweeps in the unfair competition claims. As Meta reads the clause, “any access or use” would include any claim related to ad purchases on Facebook.

But Meta’s interpretation creates an “absurd result[].” See Full Circle Villagebrook GP, LLC v. Protech 2004-D, LLC, 119 F.4th 522, 526 (7th Cir. 2024) (quoting Beanstalk Grp., Inc. v. AM Gen. Corp., 283 F.3d 856, 860 (7th Cir. 2002) (defining an “absurd result” as a “result[] that the parties, presumed to be rational persons pursuing rational ends, are very unlikely to have agreed to seek”)); see also Suburban Auto Rebuilders, Inc. v. Assoc’d Tile Dealers Warehouse, Inc., 902 N.E.2d 1178, 1190 (Ill. App. Ct. 2009) (citing Health Professionals, Ltd. v. Johnson, 791 N.E.2d 1179, 1193 (Ill. App. Ct. 2003)). Illinois courts have been unflinching in cautioning against defining the scope of an arbitration agreement so broadly as to lead to “absurd re- sults” because “[a] contract—and not fate—dictates arbitra- bility.” Peterson v. Devita, 237 N.E.3d 1010, 1017 (Ill. App. Ct. 2023). Taken to its logical end, Meta’s reading would require any party that has ever advertised on Facebook to arbitrate any claim that touches, however tangentially and indirectly, on Meta’s ad practices. Cf. id. at 1013, 1018 (denying Airbnb’s motion to compel arbitration of plaintiff’s claim of personal injury at Airbnb property that he did not personally book where he had several years earlier created an account and ac- cepted the terms of service—binding the plaintiff “to arbitra- tion in perpetuity even if, as here, his claims have no connec- tion whatsoever with his use of the website” was “absurd”); Arbogast v. Chi. Cubs Baseball Club, LLC, 194 N.E.3d 534, 544 (Ill. App. Ct. 2021) (affirming denial of baseball club’s motion to arbitrate photographer’s personal injury claim where pho- tographer was not on reasonable notice of contractual rela- tionship between himself and the club merely because he used his employer-provided media credential, which in- cluded provision requiring arbitration of all claims asserted against club).

We decline to adopt an interpretation that would trans- form a commercial terms agreement into a sweeping waiver of judicial recourse for all claims against Meta. Rosenblum, 299 F.3d at 664 (courts should not “expand the operation of [an arbitration] clause beyond its express terms and beyond the intent of the parties”). Meta’s reading has no limits. See Smith v. Steinkamp, 318 F.3d 775, 777 (7th Cir. 2003) (arbitration agreement would be overbroad if it purported to encompass claims unrelated to the subject matter of the contract contain- ing the arbitration agreement). The core of Meta’s revenue stream comes from advertising on its platforms. In that con- text, to accept Meta’s construction would mean that anyone, anywhere, who just once purchased ad space on Facebook would be bound to arbitrate any claim that tangentially “re- lates” to Meta’s ad business—a rule for which Meta has pro- vided no limiting principle. See id. at 777–78 (listing the “ab- surd results” that would follow from reading an arbitration clause in a similarly expansive manner, such as subjecting conversion claims based on an employee pickpocketing a cus- tomer to arbitrability).

Finally, to the extent Meta argues for a “presumption in favor of arbitration,” it misses the mark. We need not “place a thumb on the scale in favor of arbitration[.]” Carter v. SP Plus Corp., 172 F.4th 970, 973 (7th Cir. 2026). Instead, as instructed by the Supreme Court, we “treat[] arbitration contracts like all others[.]” Morgan v. Sundance, Inc., 596 U.S. 411, 418 (2022). And as discussed above, our interpretation of this contract leads us to conclude that Metroplex’s unfair competition claims, lodged from its status as a competitor rather than con- sumer of Meta, neither arise out of nor relate to Metroplex’s use or access of Meta’s products. These claims are therefore beyond the scope of the arbitration agreement.

AFFIRMED