What You Need to Know in a Minute or Less
Media reports, as well as a recent report prepared by various US senators and representatives, have focused attention on the use of pixel tools on the websites of major tax filing service companies. These reports allege that, through pixel technology, tax filing service companies have transmitted to Meta Platforms, LLC (Meta) and other third-party pixel technology providers the personal financial information of millions of individuals who have used those companies’ tax return preparation and filing websites.
According to these reports, tax-specific personal financial information, including taxpayer or household income, filing status, assets and liabilities, information about dependents, and refund amounts may have been transmitted. Personally identifiable information such as names, phone numbers, mailing addresses, and e-mail addresses may also have been transmitted. These reports have prompted an uptick in litigation focused on personal financial information collected and transmitted by pixel tools.
In a minute or less, here is an overview of this growing litigation trend.
What Has Been Reported?
On 22 November 2022, online news media outlet The Markup published a report on the use of Meta’s pixel tool by a number of major tax filing service companies.1 The article identified a wide variety of personal financial information purportedly collected and transmitted to Meta “to power its advertising algorithms.” The article prompted an investigation by several lawmakers in Congress, who released a report in July 2023 claiming that these tax filing service companies had “recklessly” shared millions of taxpayers’ financial data.2
The publication of the reports has been accompanied by calls for further investigation and for prosecution by the Justice Department, the Federal Trade Commission, and the Internal Revenue Service—as well as civil litigation.
What Litigation Has Arisen From Recent Reporting?
The types and potential depth of the information collected and transmitted opens the door to potential lawsuits from consumers. A handful of class actions have already been filed against Meta and another third-party pixel technology provider in relation to the alleged transmission of taxpayer information.3
Claims asserted include statutory and common law invasion of privacy, violation of federal and state wiretapping and eavesdropping acts, unfair or deceptive acts or practices, unjust enrichment, negligence, and other statutory and common law claims. In moving to dismiss the consolidated class action complaint filed against it, Meta argued that nothing is inherently unlawful about its pixel tool, and that the owners of webpages decide “whether, where, and how” to use the tool.4 In sum: “Offering a standard tool is not enough to impose liability [on Meta] merely because some third parties might misuse it.”5 Meta’s motion remains pending.6
Class actions have been filed against tax filing service companies named in the congressional report.7 There is considerable overlap between the claims against these entities and those against Meta. These putative class plaintiffs, however, have also brought claims under state and federal laws related to the protection of tax returns and tax return information.
What Potential Mitigation Strategies and Defenses Are Available?
According to the congressional report, a number of the tax filing service companies may not have understood how the pixel tools worked or what information was collected and transmitted to Meta. Thus, the first step to mitigating potential risk is to understand the pixel tools and to tailor the personal financial information collected and transmitted to the specific website on which the pixel tool will be deployed. Further, pixel tool users—particularly those that may be subject to a particular regulatory overlay—should not simply rely on their standard disclosures for consent. Clear and robust disclosures, specifically related to the use of pixel tools and supplementing a website’s typical disclosures, may mitigate the risk of claims.
If invasion of privacy, wiretapping, or eavesdropping claims are brought, a number of defenses are available in response. Nearly all of these claims require lack of consent by the plaintiff and some level of scienter by the website owner. Consent is typically demonstrated through acceptance of and agreement to terms of use, user agreements, or other policies. While it remains to be seen how this defense (and others) will play out, companies deploying pixel tools on their websites should be mindful of “whether, where, and how” they use and disclose the tools, particularly when related to personal financial information.
1 The Markup, Tax Filing Websites Have Been Sending Users’ Financial Information to Facebook (22 Nov. 2023)
2 See The Offices of Senators Elizabeth Warren, Ron Wyden, Richard Blumenthal, Tammy Duckworth, Bernie Sanders, and Sheldon Whitehouse, and Representative Katie Porter, Attacks on Tax Privacy: How the Tax Prep Industry Enabled Meta To Harvest Millions of Taxpayers’ Sensitive Data (2023)
3 See Doe v. Meta Platforms, Inc., No. 3:22-cv-07557-SI (N.D. Cal. Dec. 1 2023); Calderon v. Meta Platforms, Inc., No. 3:22-cv-09149-SI (N.D. Cal. Dec. 29, 2022); Craig v. Meta Platforms, Inc., No. 3:23-cv-00315-SI (N.D. Cal. Jan. 23, 2023); C.P. v. Meta Platforms, Inc., No. 3:23-cv-00735-SI (N.D. Cal. Feb. 17, 2023).
- The actions against Meta Platforms have been consolidated under the caption In re Meta Pixel Tax Filing Cases, No. 3:22-cv-07557-SI. See also Smith v. Google, LLC, No. 5:23-cv-03527-PCP (N.D. Cal. Jul. 14, 2023); Adams v. Google, LLC, No. 5:23-cv-04191-BLF (N.D. Cal. Aug. 17, 2023). These actions have also been consolidated under the caption Smith v. Google, LLC, No. 5:23-cv-03527-PCP.
4 See Motion to Dismiss Consolidated Class Action Complaint, at 1–2, In re Meta Pixel Tax Filing Cases, No. 3:22-cv-07557-SI (N.D. Cal. July 7, 2023) (ECF No. 107).
5 Id. at 2.
6 The forthcoming fourth installment of our Pixel Tool Litigation series will look at the use of pixel tools in connection with personal medical and healthcare information, and will examine more closely how Meta’s motions to dismiss in those cases have fared.
7 For example, see Wright v. TaxSlayer, LLC No. 1:23-cv-05481-HG (E.D.N.Y. Jul. 19, 2023); Temple v. TaxSlayer, Inc. No. 230800122 (Court of Common Pleas, Philadelphia County Aug. 1, 2023); Kirkham v. TaxAct, Inc. No. 2:23-cv-03303-WB (E.D. Pa. Aug. 24, 2023).
