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SCOTUS to hear Facebook’s bid to toss shareholder suit over Cambridge Analytica scandal

The U.S. Supreme Court on Monday agreed to hear a motion by Meta-owned Facebook to dismiss a private securities fraud lawsuit accusing the company of misleading investors in 2017 and 2018 about the company and third parties’ misuse of user data.

The Supreme Court was hearing Facebook’s appeal of a lower court decision that allowed a shareholder lawsuit led by Amalgamated Bank in California to go forward. The court is scheduled to hear the case in its next session, which begins in October.

The plaintiffs filed the class action lawsuit in 2018 after Facebook’s stock price fell following media reports that British political consulting firm Cambridge Analytica had improperly collected and used Facebook user data in connection with Donald Trump’s 2016 presidential campaign. The Cambridge Analytica breach exposed the data of as many as 87 million users.


The plaintiffs filed the class action lawsuit in 2018 after Facebook’s stock price fell following media reports that British political consulting firm Cambridge Analytica had improperly collected and used Facebook user data in connection with President Donald Trump’s 2016 presidential election victory. AFP/Getty Images

The plaintiffs amended their lawsuit in 2018 to add that Facebook’s stock price fell for the second time that year following reports that the company had shared users’ data with dozens of third parties without their explicit consent. The suit seeks unspecified damages.

The plaintiffs allege that Facebook and its executives violated the Securities Exchange Act of 1934 by making false and misleading statements in 2017 and 2018 about the possibility of user data being leaked, despite knowing in 2015 that Cambridge Analytica had violated the company’s privacy policy.

U.S. District Judge Edward Davila dismissed the shareholders’ lawsuit in 2021, but the San Francisco-based 9th U.S. Circuit Court of Appeals reinstated the shareholders’ claims in a 2-1 decision.

“The problem is that Facebook presented a completely hypothetical risk of unauthorized access to or disclosure of Facebook user data, when in fact that very risk has already occurred,” Judge Margaret McKeon wrote in the 9th Circuit Court of Appeals’ decision.

Facebook argued that the 9th Circuit’s decision “forces public companies to inform investors about past incidents that pose no known threat to their business,” and asked the Supreme Court to hear the appeal.


Meta CEO Mark Zuckerberg
The plaintiffs allege that Mark Zuckerberg’s Facebook and its executives violated the Securities Exchange Act of 1934 by making false and misleading statements in 2017 and 2018. AFP via Getty Images

The Cambridge Analytica data breach has intensified government investigations into Facebook’s privacy practices, lawsuits and congressional hearings in which Meta CEO Mark Zuckerberg has been grilled by lawmakers.

Facebook has paid more than $5 billion in fines to U.S. authorities over the Cambridge Analytica scandal and paid $725 million to settle a separate class-action lawsuit brought by Facebook users.

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