• by Wendy Davis  @wendyndavis, December 24, 2014

In a blow to Facebook, a federal judge has rejected the company's bid to dismiss a lawsuit accusing it of scanning the “private” messages that users send to each other on its platform.

The potential class-action lawsuit, initially brought last year by Matthew Campbell and Michael Hurley, centers on allegations that Facebook scans users' messages to each other, in order to determine whether people are sending their friends links to outside sites.

Campbell, an Arkansas resident, and Hurley, of Oregon, say that Facebook interprets links within users' messages to each other as “Likes” — then includes them in the total number of “Likes” that appear on the publishers' pages via social plug-ins.

The consumers also allege that Facebook draws on information within messages in order to increase its “knowledge of the user base.” They allege: “'Likes' generated by Facebook’s interception of users’ private messages provide a trove of information that not only informs Facebook’s knowledge of those users’ choices and characteristics but, combined with other users’ data, produces deep and powerful knowledge of the user base as a whole.”

The consumers allege that Facebook's message-scans violate several laws, including the federal wiretap law, which generally prohibits companies from intercepting messages without users' consent.

Facebook asked for the lawsuit to be dismissed on several grounds, including that it couldn't “intercept” messages that were sent through its own platform. In ruling issued on Tuesday, U.S. District Court Judge Phyllis Hamilton in the Northern District of California rejected that argument on the grounds that Facebook's interpretation of the word “intercept” was too narrow.

The social networking platform alternatively argued that any interceptions fell within an exception to the federal wiretap law, which exempts conduct that occurs in the “ordinary course of business.”

But Hamilton ruled that Facebook hasn't yet shown that it was engaged in the ordinary course of business when it allegedly scanned messages in order to convert links into “likes.”

“Facebook has not offered a sufficient explanation of how the challenged practice falls within the ordinary course of its business, which prevents the court from determining whether the exception applies,” she wrote.

Hamilton specifically rejected an argument put forward by Facebook's lawyer, who suggested at a hearing in October that any revenue-generating activity fell within the ordinary course of business.

“An electronic communications service provider cannot simply adopt any revenue-generating practice and deem it 'ordinary' by its own subjective standard,” she wrote. “The court instead finds that any interception falling within the exception must be related or connected to an electronic communication provider’s service.”

Facebook denied that it uses links embedded in private messages for ad-targeting, but also argued that doing so would fall within the ordinary course of business, according to Hamilton's opinion.

She called Facebook's argument on that point “problematic,” stating that the company “is attempting to have it both ways” by arguing that the ad-related allegations are false, but also using them to bolster its argument that scans were conducted in the ordinary course of business.

Some of the allegations in the lawsuit first emerged in 2012, when security researcher Ashkan Soltani (now at the Federal Trade Commission) reported that Facebook interprets links within users' messages to each other as “Likes,” and includes them in like-counters that appear on publishers' pages.

Facebook told The Wall Street Journal at the time that no private information is exposed, but confirmed that the Like-counter "reflects the number of times people have clicked those buttons and also the number of times people have shared that page's link on Facebook."

At the October hearing, Facebook said that it had “ceased the challenged practice” two years ago, according to Hamilton.

The ruling issued on Tuesday paves the way for the consumers to proceed with the lawsuit, but doesn't necessarily mean that they'll prevail. Hamilton noted in the ruling that she will revisit Facebook's defense of its scans in the future, after more evidence about how the company's software operates has been developed.