US Supreme Court to hear appeal from Facebook shareholders

The U.S. Supreme Court has agreed to hear a case brought by Facebook, a subsidiary of Meta Platforms, as part of its effort to dismiss a shareholder lawsuit accusing the company of misleading investors during the Cambridge Analytica data sharing scandal in 2017 and 2018.

The suit alleges that long after Facebook management became aware of the data breach, the company continued to mention possible harm from such a breach in hypothetical terms in documents such as regulatory filings.

The court’s ruling, expected next year, could redefine the standards for disclosing harmful information in such documents filed with the Securities and Exchange Commission (SEC).

Facebook agreed in 2019 to pay $5.1 billion (£4 billion) in civil penalties to settle charges brought by the Federal Trade Commission (FTC) and the SEC over the scandal and has paid more than $725 million. dollars to settle a separate class action lawsuit filed by users.

Data access scandal

The shareholder lawsuit was filed in California by investors led by Amalgamated Bank in 2018 after Facebook’s stock price plummeted following reports that political consulting firm Cambridge Analytica had improperly accessed data from millions of users as part of Donald Trump’s successful bid in the 2016 presidential election.

The data of no less than 87 million users was affected.

The plaintiffs amended the lawsuit later that year to reflect a second drop in stock price following reports that Facebook shared user data with dozens of third parties without proper user consent .

The suit, which seeks unspecified damages, alleges that Facebook executives knew about improper access to Cambridge Analytica data as early as 2015.

Business risk

U.S. District Judge Edward Davila dismissed the lawsuit in 2021, but it was later reinstated by the 9th U.S. Court of Appeals.

“The problem is that Facebook considered the risk of inappropriate access or disclosure of Facebook users’ data to be purely hypothetical when that precise risk had already occurred,” Justice Margaret McKeown wrote in this latest decision.

Facebook said the 9th Circuit’s ruling would “require public companies to notify investors about past incidents that pose no known threat to the company.”