US Supreme Court Dismisses Securities Fraud Suit Against Facebook
On Friday, the US Supreme Court made a decision regarding a securities fraud lawsuit involving Meta’s Facebook. The case revolves around allegations that Facebook misled investors about the misuse of user data on the platform. The court heard arguments earlier in November and ultimately dismissed Facebook’s appeal of a lower court ruling that allowed the class action lawsuit to proceed.
The Supreme Court did not provide an explanation for its decision and opted to leave the lower court’s ruling in place. This case was one of two recent instances where private litigants sought to hold companies accountable for securities fraud. The other case, involving Nvidia, has yet to receive a ruling from the Supreme Court.
In this specific lawsuit against Facebook, shareholders claim that the company failed to disclose information about a 2015 data breach involving Cambridge Analytica, which impacted millions of Facebook users. This failure to disclose the breach allegedly misled investors, violating the Securities Exchange Act. The plaintiffs are seeking monetary damages to recover the lost value of their Facebook stock.
One of the key issues in the case is whether Facebook was obligated to disclose the previous data breach in subsequent risk disclosures. Facebook argued that its risk disclosures were forward-looking statements and that it was not required to reveal past incidents. The Biden administration supported the shareholders in this case.
Following the Supreme Court’s decision, it is expected that the plaintiffs will move forward with the discovery process to exchange information with Facebook. Despite the dismissal of the appeal, Facebook may still seek to dismiss the case on different grounds.
The Cambridge Analytica data breach led to government investigations, lawsuits, and penalties for Facebook. The company settled with the SEC for $100 million and paid a $5 billion penalty to the FTC over the issue. The Supreme Court has previously limited the authority of the SEC in cases of securities fraud.
Overall, the outcome of this case highlights the complexities of securities law and the ongoing efforts to hold companies accountable for their actions. We will continue to monitor developments in this case as it progresses through the legal system.
