On Monday, the US Supreme Court agreed to hear Meta’s (META.O) request. Facebook has agreed to dismiss a private securities fraud lawsuit alleging the social media platform of misleading investors in 2017 and 2018 about the exploitation of its user data by the firm and third parties.
The justices heard Facebook’s appeal of a lower court’s decision to allow a shareholder action initiated in California and spearheaded by Amalgamated Bank (AMAL.O). The court will consider the matter during its next term, which begins in October.
The plaintiffs launched a class action complaint in 2018 after Facebook’s stock plummeted in response to media revelations that the British political consulting firm Cambridge Analytica utilized inappropriately collected Facebook user data during Donald Trump’s successful presidential campaign in 2016. The Cambridge Analytica breach exposed the data of up to 87 million users. In 2018, the plaintiffs updated their claim to include a second stock loss that year, following news that Facebook had shared data with hundreds of third parties without users’ express authorization. The lawsuit seeks specific monetary damages.
The plaintiffs accused Facebook and top company officials of violating the Securities Exchange Act of 1934 by making false and misleading statements in 2017 and 2018, including that user data could be compromised, despite knowing in 2015 that Cambridge Analytica had violated its privacy policies.U.S. District Judge Edward Davila rejected the shareholders’ action in 2021, but the San Francisco-based 9th U.S. Circuit Court of Appeals reinstated their claims in a 2-1 decision.
“The issue is that Facebook presented the risk of improper access to or disclosure of Facebook user data as purely hypothetical when that risk had already occurred,” Judge Margaret McKeown stated in the 9th Circuit judgment.
Facebook requested the justices to hear its appeal, stating that the 9th Circuit’s decision would “force public companies to inform investors of past incidents that pose no known threat to the business.”
