SCOTUS allows shareholder lawsuit against Facebook to go forward
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The Supreme Court dismissed an appeal Friday by Meta’s Facebook, allowing a lawsuit to go forward that was brought by investors who claim they were misled by the social media giant about risks from a massive data breach.
The justices wrote in a unanimous, one-line opinion that the case was “improvidently granted,” meaning the court should not have taken it in the first place. The justices did not explain the reasoning for their ruling.
The decision came a little over two weeks after the justices appeared sharply split during oral arguments in the case. The lawsuit was brought by investors, led by Amalgamated Bank, after Facebook’s stock price plunged following news that the Republican-aligned political consulting firm Cambridge Analytica had improperly obtained the personal information of 30 million Facebook users.
The Securities and Exchange Commission mandates businesses disclose information about investment risks, and separate regulations prohibit companies from making misleading or false statements related to the purchase or sale of a stock. The shareholders claim Facebook misled them and did not reveal crucial information about a known risk that could expose the data of Facebook users. Facebook denies the claims.
The high-profile data breach prompted government investigations of Facebook and its relationship with Cambridge Analytica, which helped boost conservatives during Donald Trump’s 2016 presidential campaign. A Federal Trade Commission probe led to a $5 billion civil penalty against Facebook and a $725 million class-action settlement with users over the privacy breach.
The U.S. District Court for Northern California initially dismissed the shareholders’ lawsuit, before a divided panel of the U.S. Court of Appeals for the 9th Circuit reversed that decision. The case will now go back to the district court for further proceedings.
Meta officials did not immediately respond to a request for comment. An attorney for the shareholders declined to comment.
Naomi Nix contributed to this report.
