Social Media Addiction Suit Gets Boost From Litigation Funder

A funder is backing one of the lead attorneys in novel litigation accusing big tech companies of deliberately making sites addictive for children.

Social Media Victims Law Center has a funding arrangement with Flashlight Capital going back to June 2024, according to public records. The law firm is counsel of record for the plaintiff in the landmark jury trial against Meta’s Instagram and Google’s YouTube in California state court.

The bellwether trial serves as a critical test for thousands of similar pending lawsuits that allege companies designed the online platforms to generate profit at the expense of young people’s safety and mental health.

The plaintiff, a 20-year-old woman identified as K.G.M., alleges her addiction to social media caused anxiety, depression and body dysmorphia. The firm according to its website is representing more than 1,200 parties in the cases, which could snowball into billions of dollars’ worth of liability for tech companies in what has been called a potential “Big Tobacco moment.”

The funder’s willingness to invest in risky litigation without much precedent signals that financiers believe the case has merit and the potential to lead to large payouts. Though not a traditional mass tort like those dealing with pharmaceuticals or medical devices, the case is part of coordinated proceedings with a large number of potentially injured victims. It’s a rare scenario in a mass tort landscape that is currently suffering from long durations in existing cases and few new ones.

Prior to the trial, K.G.M. reached confidential settlements with Snap and TikTok, but the companies are part of two other bellwether cases set for trials in April and June.

Meta and YouTube deny wrongdoing and say they have rolled out tools and resources to support parents with teens and that the plaintiff’s mental health conditions were caused by other factors in her life.

‘Blowing Up’

From a funding perspective, the social media addiction cases are considered risky since there have been no previous court decisions on the merits.

“These cases are very novel and they’re very cutting edge,” said Martin Shellist, a founder and a managing director of litigation funder Virage Capital Management, which does not currently have a stake in the lawsuits but invests in a broad range of legal funding including mass tort litigation. “You can’t look back to 50 years of jurisprudence to determine whether or not these cases have merit.”

The potential application of Section 230 of the Communications Decency Act, which protects online platforms from liability for user-generated content, has also made investors pause.

Steve Nober, founder and CEO of mass tort marketer Consumer Attorney Marketing Group (CAMG), said his company began running advertisements for law firms in the social media addiction cases in 2021.

Along with advertising, CAMG works directly with litigation funders and pairs them with lawyers to generate cases. Nober said he hasn’t seen a large amount of funder involvement yet due in large part to the risk from Section 230. Lawyers in the addiction cases have gained traction in court by arguing the products’ design and functionality have created harms. Judges overseeing the current wave of lawsuits have ruled that Section 230 doesn’t protect the companies from negligence claims.

Nober said the outcome of this case and the ones following it will be telling.

“We’re on the precipice of this possibly blowing up,” he said.

Momentum Builds

Another risk factor that plagues mass cases and funders backing plaintiffs firms is the length of some of the litigation. The case against Johnson & Johnson for its talcum powder products, for example, has lasted more than a decade, as had the litigation against Bayer for its pesticide RoundUp. Shellist said he suspects it will take five to eight years before the social media litigation fully settles out.

“From an underwriter standpoint, I want to see the liability be established, what theories are getting traction, what cases are winning, which ones are losing and then are settlements starting to shape up,” he said.

Mass tort law firms use marketing firms to accumulate clients through advertising on social media, television and radio, and litigation funding can be used for these expenses. Jacob Malherbe, founder of Mass Tort Ad Agency, which advertises on behalf of mass tort law firms on social media platforms, said that initially there was a lot of skepticism around the cases.

“Once documents came out in discovery, I think it made a lot of people change their mind because they basically developed a product that they knew would hurt people because people would be basically addicted to what came next,” he said.

He says that he saw a spike in funder interest after Snap and TikTok settled with the plaintiff in January.

Matthew Bergman, lawyer for plaintiff K.G.M. and founder of Seattle-based Social Media Victims Law Center, didn’t respond to a request for comment.

In February, Bergman lost his leadership role in the case after breaking the court’s rules on technology use in the building.

Also in February, Meta’s CEO Mark Zuckerberg testified at the trial in California Superior Court, Los Angeles County, saying that it’s “very difficult” to enforce Instagram’s age limits. He downplayed how much teen users contribute to the company’s business.

Flashlight Capital is a separate vehicle of Connecticut-based litigation funder TRGP Capital whose goal is to “catch the confluence” between litigation finance and socially impactful investing. Flashlight declined to comment for the story but in an interview with Bloomberg Law in 2024, TRGP founder and managing partner Michael Rozen said Flashlight will provide funding for cases for underserved plaintiffs. It will take a smaller percentage of an award and take on riskier, less lucrative cases.

Flashlight was fundraising for a $250 million fund in early 2024 with an unnamed UK-based private equity firm as its lead investor. It was already supporting cases targeting environmental damage and alleged social media harms but was steering clear of highly politicized cases.

— With reporting by Maia Spoto

The case is: Social Media Cases JCCP, Cal. Super. Ct., 5255