Facebook’s parent company, Meta Platforms Inc., is facing a significant legal challenge as investors claim that the company misled them, resulting in a drop in the value of its stock. The Supreme Court has agreed to review a large shareholder lawsuit that alleges Facebook deceived investors regarding a data-harvesting controversy involving Cambridge Analytica, a political consulting firm.
The case centers around a private securities fraud-related class action related to Cambridge Analytica’s “wrongful acquisition and misuse of Facebook user data.” In response to the controversy, Meta agreed in December 2022 to pay $725 million to settle a class-action proceeding that accused the company of allowing third parties, including Cambridge Analytica, to access the personal information of up to 87 million users. The scandal became public knowledge in 2018.
Cambridge Analytica, which had previously worked on Donald Trump’s presidential campaign in 2016, gained access to the personal data of millions of Facebook users without their consent. This data was then used for targeted advertising and voter profiling. The incident triggered government investigations, and Meta CEO Mark Zuckerberg was called to testify before Congress.
The Supreme Court’s decision to grant the petition for certiorari in Facebook Inc. v. Amalgamated Bank signifies the court’s willingness to review the case. However, the order did not provide an explanation for the decision, and no justices dissented. To advance to the oral argument stage, at least four of the nine justices must vote in favor of granting the petition.
The Supreme Court will specifically examine whether a federal appeals court erred in allowing the multi-billion dollar lawsuit to proceed based on claims that Facebook inflated share prices by failing to disclose adequately that user data would be misused. The investors argue that this controversy contributed to two significant price drops in 2018, leading to a loss of over $200 billion in market capitalization for the company.
The U.S. Court of Appeals for the 9th Circuit had previously ruled against Facebook in October 2023, paving the way for the case to reach the Supreme Court. As this is a developing story, further updates will be provided.
This legal battle raises important questions about the responsibilities of tech companies in safeguarding user data and providing transparent disclosures. It highlights the potential financial consequences companies may face if they fail to adequately protect user privacy and data security. With the Supreme Court’s involvement, the outcome of this case could have significant implications for how future data breaches and privacy controversies are handled in the United States.
