Fri Nov 22 18:18:46 UTC 2024: **Supreme Court Sidesteps Facebook Securities Fraud Case, Leaving Lower Court Ruling Intact**
Washington, D.C. – The Supreme Court on Friday declined to hear Facebook’s appeal in a securities fraud class-action lawsuit stemming from the 2018 Cambridge Analytica data breach. The Court’s one-line dismissal leaves in place a lower court ruling allowing the lawsuit to proceed.
The lawsuit, filed by Amalgamated Bank in 2018, alleges that Facebook misled investors by downplaying the risks associated with user data misuse. Plaintiffs claim that Facebook’s failure to disclose the extent of the Cambridge Analytica data breach, which affected over 30 million users, violated the Securities Exchange Act of 1934. They argue that Facebook presented the risk of such breaches as hypothetical when, in fact, a significant breach had already occurred.
Facebook maintained that it wasn’t obligated to specifically detail the past breach, arguing that reasonable investors understand risk disclosures to be forward-looking statements. The company expressed disappointment with the Supreme Court’s decision, stating that they will continue to defend themselves in the lower court.
The case, one of two before the Supreme Court this month concerning corporate accountability for securities fraud, had been appealed after a district court dismissed the suit, only to have the Ninth Circuit Court of Appeals reverse the decision. The Biden administration supported the shareholders’ claims.
Legal experts anticipate the plaintiffs will now move forward with discovery. Facebook may attempt to refile a motion to dismiss, potentially as a delaying tactic. The Cambridge Analytica scandal previously resulted in significant penalties for Facebook, including a $100 million settlement with the SEC and a $5 billion fine from the FTC. The Supreme Court’s decision, while providing no explanation, leaves open the question of corporate disclosure obligations regarding past security breaches.
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