US Supreme Court Dismisses Securities Fraud Suit Against Facebook
The US Supreme Court made a decision on Friday regarding a securities fraud lawsuit against Meta’s Facebook, ruling to dismiss Facebook’s appeal. In a one-line order, the court determined that the case should not have been taken up, leaving the lower court’s decision in place. This case stemmed from allegations that Facebook misled investors about the misuse of user data by Cambridge Analytica in 2015, affecting over 30 million Facebook users.
The plaintiffs, led by Amalgamated Bank, claimed that Facebook withheld information about the data breach, resulting in a drop in Facebook’s stock value following media reports. They accused Facebook of violating the Securities Exchange Act by failing to disclose business risks related to the data breach. Facebook argued that it was not obligated to disclose the breach in subsequent risk disclosures, as the risk was portrayed as hypothetical.
The Biden administration supported the shareholders in this case, with Facebook expressing disappointment in the Supreme Court’s decision. Moving forward, the plaintiffs are expected to seek discovery, exchanging information among parties in the case. This decision opens the door for potential further actions in the district court.
The Cambridge Analytica data breach led to various investigations, lawsuits, and a congressional hearing. In 2019, the US Securities and Exchange Commission brought an enforcement action against Facebook, which was settled for $100 million. Additionally, Facebook paid a $5 billion penalty to the US Federal Trade Commission over the issue.
Overall, the Supreme Court’s decision in this case highlights the ongoing legal battles surrounding securities fraud and the importance of transparency in disclosing business risks to investors. The outcome of this case could have broader implications for how companies handle similar situations in the future.
