Facebook recently appealed a lawsuit that alleged that shareholders did not have complete information before investing. The appeal has now been thrown out, allowing the lawsuit to continue.
Earlier this month, we reported on the Facebook case that had made its way to the Supreme Court.
The case revolves around a 2018 class action suit led by Amalgamated Bank, which claims that investors were misled about the business risks associated with Facebook. If so, Facebook would be in violation of the Securities Exchange Act of 1934. The plaintiffs claimed that Facebook should have disclosed that the company was involved in a breach in 2015, which impacted more than 30 million Facebook users. The breach was in connection to Cambridge Analytica and it’s believed Facebook data was improperly harvested during Donald Trump’s 2016 presidential campaign.
Instead of disclosing the breach, Facebook simply noted that breaches were possible. Soon after the plaintiffs joined as stakeholders, Facebook stocks fell as the breach drew in more attention.
When the appeal was first brought forward, it put a halt to the class action lawsuit. Now, it looks like the lawsuit may be revived.
On November 22nd, the Supreme Court announced they would be dismissing Facebook’s appeal, thus reviving the class action lawsuit.
In its opinion, according to CBS News, the court issued a one-line unsigned decision dismissing the appeal, implying that the court believed it should not have taken up the case. The high court did not explain their decision.
By tossing the appeal, the decision from the U.S. Court of Appeals for the 9th Circuit remains in place, in favor of shareholders.
As part of Facebook’s case, the company argued that the ruling would open the door to new lawsuits to allege “fraud-by-hindsight,” which would make risk disclosures burdensome to companies and less useful to investors.
The Biden administration backed the shareholders, arguing that Facebook was misleading in their disclosures by claiming that events that had occurred were only hypothetical. The case could lay the legal groundwork for future suits from stockholders.
Cases like these can show the long-lasting ramifications of data breaches. This incident began in 2015, when Cambridge Analytica misused Facebook data taken from a personality quiz. While a simple quiz may seem minor, when it involves personal data, it can quickly become a larger issue.
The misused data is believed to have aided Ted Cruz and Donald Trump in their campaigns, showcasing the high value of personal data and the consequences of allowing it to be misused. Even if Cambridge Analytica was equally responsible for the misuse, Facebook ultimately paid the price.
Organizations should be mindful of what data they are collecting and why. If a company ever considers selling data, it should carefully consider potential legal ramifications.
Related: HIPAA Compliant Email: The Definitive Guide