The US Supreme Court recently declined to rule on a securities fraud lawsuit against Meta’s Facebook, leaving in place a lower court’s decision that allows shareholders to proceed with their class action. This lawsuit, led by Amalgamated Bank since 2018, accuses Facebook of misleading investors by failing to disclose the misuse of user data.
On November 6, the justices heard arguments but later issued a one-line order dismissing Facebook’s appeal without explanation. This action upholds the lower court’s stance and does not address the broader legal issues.
This case was one of two significant cases this month involving the rights of private parties to sue for securities fraud. The other case involves Nvidia, with arguments heard on November 13; the court has yet to decide.
Plaintiffs in the Facebook case argue that the company did not adequately inform investors about a 2015 data breach by British consulting firm Cambridge Analytica that compromised over 30 million users’ data. According to the plaintiffs, this breach violated the Securities Exchange Act of 1934, which mandates that public companies disclose significant business risks.
The breach became widely known in 2018, leading to a sharp decline in Facebook’s stock price after reports revealed Cambridge Analytica’s role in Donald Trump’s 2016 presidential campaign using the harvested data. Investors are now seeking unspecified damages to recover losses from the devaluation of their Facebook shares.
The US Supreme Court declined to rule on a securities fraud lawsuit against Meta's Facebook. The case, led by Amalgamated Bank, accuses Facebook of misleading investors about user data misuse. The justices left a lower court’s decision allowing the lawsuit intact. pic.twitter.com/W4Kp5QArXj
— RT (@RT_com) November 22, 2024Facebook has asserted that it met legal standards, arguing that the risks it had disclosed were intended to be forward-looking, and that it was not required to report that these risks had already occurred.
Facebook spokesperson Andy Stone voiced disappointment with the Supreme Court’s decision not to clarify the law, reinforcing the company’s position that the claims lack merit. Despite this challenge, Facebook plans to continue its defense as the case moves back to the district court.
US District Judge Edward Davila initially dismissed the lawsuit, but the 9th US Circuit Court of Appeals reinstated it, leading to Facebook’s unsuccessful Supreme Court appeal.
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With the Supreme Court’s decision, the plaintiffs will likely pursue discovery, which could cause further delays as Facebook might attempt to dismiss the case using new arguments. The litigation stems from a data breach that triggered US government investigations, multiple lawsuits, and hefty regulatory fines against Facebook, underscoring serious privacy concerns.
