The U.S. Supreme Court discussed Meta’s Facebook’s attempt to dismiss a federal securities fraud lawsuit brought by shareholders. The lawsuit accuses the social media platform of deceiving users about its misuse of user data.
The Supreme Court heard arguments in Facebook’s appeal against a lower court’s decision allowing a 2018 class action lawsuit by Amalgamated Bank to move forward. The lawsuit aims to recover lost value of investors’ Facebook stock. Another lawsuit filed this month involves Nvidia, where litigants accuse the company of securities fraud, potentially making accountability more challenging.
The key issue is whether Facebook broke the law by not disclosing previous data breaches in its risk disclosures, portraying the risks as hypothetical.
Facebook argued in its brief to the Supreme Court that reasonable investors would see risk disclosures as forward-looking statements, eliminating the need to disclose previous risks that materialized.
Justice Elena Kagan and Justice Samuel Alito raised questions during the hearing, asserting that risk assessment is always forward-looking.
The plaintiffs accused Facebook of violating the Securities Exchange Act by misleading investors about a 2015 data breach involving Cambridge Analytica. The case was initially dismissed, but the U.S. 9th Circuit Court of Appeals reinstated it.
The Cambridge Analytica scandal led to various investigations and legal actions against Facebook. The Supreme Court is expected to reach a decision by June.
Despite the conservative majority on the Supreme Court, there are differing views on how investors interpret forward-looking risk disclosures.
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Facebook’s stock price dropped after reports in 2018 regarding the misuse of user data by Cambridge Analytica in connection with President Donald Trump’s 2016 campaign.
Source: www.theguardian.com
