The Supreme Court on Wednesday considered Facebook's bid to block shareholder lawsuits over the Cambridge Analytica data scandal from proceeding.
After the scandal became widely known in 2018, shareholders on social media accused Facebook of misleading investors by not mentioning Cambridge Analytica's misuse of user data in previous securities filings. sued the company.
The tech giant acknowledged in a 2016 filing that inappropriate use of its data by third parties could harm its business, but did not mention Cambridge Analytica. As a result, shareholders claim they were led to believe that no such incident occurred.
However, Facebook argues that the statements in the risk disclosure section of its securities filings speak only of future events and do not imply that such events have not occurred at all.
Several conservative justices on the Supreme Court on Wednesday rejected shareholders' arguments that it could create confusion for companies about what they should disclose and that it would probably be better left to the Securities and Exchange Commission. He suggested that there might be.
“Why should the judiciary think seriously about this and answer that question when the SEC can?” Justice Brett Kavanaugh told U.S. government lawyers arguing on behalf of shareholders. I asked a question.
“There's all sorts of uncertainties and all kinds of assumptions that are going on, which, at least in my opinion, raises a lot of questions about what companies should and shouldn't disclose. “I think so,” he added.
Kavanaugh also suggested that there are various ways that reasonable investors could interpret forward-looking statements and statements about what has or has not happened in the past. did.
Chief Justice John Roberts proposed a hypothetical situation in which such a statement could indicate that the event had occurred previously.
“For example, if you were leaving my house and I told you I might slip on the stairs, you wouldn't say, 'Well, that's never happened to me before,'” Roberts said. he said. “By your reasoning, that's what happened, and that's why I'm warning you.”
The court's three liberal justices seemed somewhat skeptical of Facebook's claims Wednesday.
“What's a little concerning is the fact that past events, the triggers for past attacks, can still lead to future harm, and what's misleading is the implication when you make completely futuristic statements. I'm not sure your position recognizes the fact that there is no such harm in the future,'' Judge Ketanji Brown Jackson told Facebook's lawyers.
Justice Elena Kagan also noted that Facebook's risk disclosure statement in its securities filings provided information about past events other than Cambridge Analytica.
“They're not talking about Cambridge Analytica, but they're talking about other things,” Kagan said. “I heard that there have been hacking incidents in the past. Hacking is a real problem, and we have experienced it too.”
“And I think if you had left that out, you had the right to stand there and say, 'Who can really believe our statement that there have been no hacking incidents in the past? ?”
The case stems from the 2016 presidential election, in which Cambridge Analytica was used to support the campaign of Sen. Ted Cruz (R-Texas) and the president-elect, who was still a candidate in the election. used data from tens of millions of unwitting Facebook users. time.
The British political consulting firm bought the data from Aleksandr Kogan, who created a third-party app called “This is Your Digital Life,” which collected data from users for personality tests.
However, it also collected data on users' Facebook friends, allowing it to amass a wealth of information that would eventually be used to create psychological profiles of American voters for election campaigns.
The Guardian first reported on Cambridge Analytica's use of data on behalf of the Cruz campaign in 2015. Three years later, the Guardian and the New York Times revealed that the consulting firm also used the data to aid the Trump campaign.
The outlet also reported that Facebook was aware of Cambridge Analytica's misuse of data, but did not notify users or take public action against the company until 2018.
Facebook faced massive backlash over this revelation. The Federal Trade Commission fined the social media giant $5 billion, and the SEC sued the company, which ultimately settled for $100 million.
