2 weeks Ago By Firstpost
The US Supreme Court on Wednesday tackled Facebook’s latest attempt to dodge a federal securities fraud lawsuit, a legal headache stemming from the notorious Cambridge Analytica scandal. The case, brought by investors, claims the social media giant misled them about data misuse. Meta, Facebook’s parent company, asked the Court to throw out the class-action suit, led by Amalgamated Bank, which accuses the platform of downplaying the fallout from the 2015 data breach.
This breach, involving British political consulting firm Cambridge Analytica, saw the personal data of over 30 million users used without permission, allegedly to sway voters during Donald Trump’s 2016 presidential campaign. Investors say Facebook’s lack of transparency led to significant losses, and they want monetary compensation for the drop in the company’s stock value. The legal argument centres on whether Facebook’s risk disclosures misled investors by failing to acknowledge that the very risks it warned about had already become reality.
The Supreme Court justices seemed split on the issue. Facebook’s lawyer argued that the company’s warnings were forward-looking statements and didn’t require disclosure of past breaches. He insisted that a “reasonable investor” wouldn’t expect those warnings to include events that had already occurred.
Chief Justice John Roberts, however, offered a hypothetical to challenge this view, suggesting that such warnings could imply past events had indeed happened. Justice Clarence Thomas also expressed doubt, pointing out that a reasonable person could misinterpret the statements as indicating the data misuse had never happened. Despite these pointed questions, Facebook’s defence remained firm, asserting that the disclosures were not misleading.
The case has broader implications, too, as a ruling could reshape how companies disclose risks and defend against securities fraud claims. This month is critical, as another case, involving Nvidia and securities fraud allegations, is also being considered. The outcomes could either tighten or loosen the rules for investor lawsuits.
The Cambridge Analytica scandal has already cost Facebook dearly. The company settled a $100 million claim with the US Securities and Exchange Commission in 2019 and paid a massive $5 billion penalty to the Federal Trade Commission. But the investor lawsuit’s fate now rests with a Supreme Court that has a 6-3 conservative majority, whose eventual ruling could redefine corporate accountability in the world of data privacy and securities law.
A decision is expected by the end of June..
