In a significant development for Meta Platforms Inc., the United States Supreme Court has dismissed the company’s appeal regarding a major lawsuit from investors. This legal battle hinges on accusations that Meta, previously known as Facebook, misled shareholders about the risks associated with the infamous data-harvesting scandal tied to Cambridge Analytica. The lawsuit posits that the company inflated its share prices by downplaying the potential impact of the scandal, which an eventual disclosure allegedly caused significant devaluation, slicing over $200 billion off the firm’s market cap (Bloomberg Law).
The Supreme Court had initially agreed to review a previous ruling by a federal appeals court that had allowed the lawsuit to proceed. However, the Court later opted to withdraw its review post-agreement, offering no rationale other than it being “dismissed as improvidently granted.” This leaves Meta facing a potential settlement that could amount to $2 billion, according to Bloomberg Intelligence analyst Matthew Schettenhelm.
Meta’s stance on the lawsuit has been one of defense, as indicated by their statement criticizing the Supreme Court’s decision and dismissing the plaintiff’s claims as groundless. The pending proceedings will now return to the district court for further deliberation. In the broader context, this case had potential implications for altering legal precedents related to corporate disclosure. Business groups like the Chamber of Commerce had advocated for the Supreme Court to side with Meta, contending that allegations tied to risk disclosures have spurred meritless securities litigation.
The data-harvesting controversy involving Cambridge Analytica first emerged publicly in late 2015 when it was revealed that the firm harvested data from Facebook users for political purposes, particularly aiding Senator Ted Cruz’s campaign. Shareholders argue that Meta knew Cambridge Analytica obtained private user information without proper consent but failed to acknowledge the breach’s severity publicly until pressure mounted in 2018. The aftermath of these disclosures saw Meta’s stock plummet on two separate occasions, with a particularly notable drop occurring in July 2018.
The case, formally known as Facebook v. Amalgamated Bank, had garnered attention and support from the Biden administration, highlighting the administration’s stance on transparency and corporate accountability in securities matters. As this lawsuit progresses, its outcomes may resonate across similar corporate disclosure litigations awaiting resolution. For more information on the details of the ongoing suit and the Supreme Court’s involvement, see docket 23-980 on the Supreme Court’s website.