Supreme Court to Hear Facebook’s Appeal to Dismiss Shareholder Lawsuit

( – The Supreme Court’s 2023-2024 term is almost over. The justices are expected to release a series of high-profile decisions in the coming weeks. They are also choosing cases to add to the docket for their next term. That will now include a lawsuit involving Facebook and its shareholders.

On June 10, the SCOTUS granted a review in Facebook v. Amalgamated Bank. Facebook is asking the justices to dismiss a case brought by shareholders. The shareholders have accused the social media giant of defrauding them in 2017 and 2018 by filing a form with the Securities and Exchange Commission (SEC) indicating that the harvesting of users’ data by third parties was just a hypothetical risk but that it could harm Facebook if it happened.

Investors say that at the time the form was filed, Facebook knew that Cambridge Analytica had already misused users’ data. The political consulting company obtained the data through a researcher who’d told Facebook it was collecting it for academic research. Cambridge Analytica was a digital consultant for former President Donald Trump’s 2016 campaign. The company obtained the personal data of more than 80 million users and used it to build voter profiles. When news broke about the scandal in 2018, the company’s stock fell. Later that year, the shareholders amended the lawsuit after more information came out that Facebook shared users’ data with dozens of other third parties

In 2021, US District Judge Edward Davila initially dismissed the lawsuit, saying the shareholders failed to prove knowledge of wrongdoing, plead falsity, and show loss causation. The US Court of Appeals for the 9th Circuit reversed the lower court’s ruling. The judges determined a plausible claim had been made that Facebook’s claim about “risk factors” on the SEC form was fraudulent and that the shareholders had pleaded it sufficiently.

Judge Margaret McKeown wrote the 9th Circuit opinion and stated the issue was that Facebook filled out the SEC paperwork and pretended that the potential improper use of data was “purely hypothetical when that exact risk had already transpired.”

Facebook is arguing to the Supreme Court that allowing the lawsuit to move forward would force companies to tell investors about “past incidents that pose no known threat to the business.”

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