The U.S. Supreme Court has ruled that a class-action lawsuit against Meta, Facebook’s parent company, can proceed, allowing investors to pursue their claims of data misuse and privacy violations linked to the infamous Cambridge Analytica scandal. This legal battle represents a significant step toward holding tech giants accountable for their role in protecting user data.
The Allegations Against Meta
The lawsuit stems from accusations that Meta failed to disclose the full extent of the risks related to the misuse of Facebook users’ personal data by Cambridge Analytica. The political consulting firm, which played a key role in Donald Trump’s 2016 presidential campaign, accessed data from 87 million users without consent. This information was allegedly used to target U.S. voters with highly personalized political ads during the election.
Investors argue that Meta’s failure to adequately disclose the breach resulted in two significant drops in Facebook’s stock price in 2018. These drops occurred after the public learned the true scale of the scandal. The plaintiffs are seeking financial compensation for their losses, claiming Meta’s failure to report the breach led to their diminished stock value.
Meta has strongly denied these claims, calling them “baseless.” Company spokesperson Andy Stone expressed disappointment in the Supreme Court’s decision, emphasizing that they would continue to defend themselves as the case progresses in District Court.
Supreme Court’s Decision
On Friday, the Supreme Court rejected Meta’s appeal, leaving in place a lower court’s ruling that allows the lawsuit to move forward. This decision follows a hearing in November in which Meta had attempted to block the case. The Court ultimately acknowledged that it was wrong to initially consider the appeal.
The Biden administration supported the investors in the case, reflecting the broader push for greater corporate accountability in the tech industry. President Biden’s administration has been vocal about holding tech companies to higher standards of transparency and responsibility.
The Cambridge Analytica Fallout
The Cambridge Analytica scandal, which erupted in 2018, led to widespread concerns over data privacy and corporate governance. The breach resulted in a series of U.S. government investigations, lawsuits, and even a congressional hearing. In 2019, the U.S. Securities and Exchange Commission (SEC) took action against Facebook, leading to a $100 million settlement. Additionally, the company paid a hefty $5 billion fine to the Federal Trade Commission (FTC) to settle privacy-related allegations.
The scandal garnered intense media attention, partly due to the firm’s ties to Steve Bannon, a prominent strategist in Trump’s campaign. Cambridge Analytica paid a developer for access to Facebook user data, which was later used for targeted political campaigning.
Legal Controversy Over Risk Disclosure
A core issue in the case is whether Meta violated securities laws by failing to disclose the data breach in its risk statements. Instead of warning investors about the breach, Meta downplayed the risk, presenting it as a hypothetical scenario, despite it having already occurred.
Meta argued that its risk warnings were forward-looking, meaning they didn’t need to disclose the breach because it hadn’t been publicly known at the time of the warnings. However, the Ninth U.S. Circuit Court of Appeals disagreed, reviving the lawsuit after a lower court had dismissed it.
The Broader Impact on the Tech Industry
The lawsuit against Meta is just one of several ongoing legal challenges facing tech companies. The Supreme Court is also considering a case against Nvidia, where investors claim the company misled them about its reliance on selling chips for cryptocurrency mining. These cases highlight the increasing scrutiny on the tech industry and the demand for greater transparency and accountability from the companies that shape the digital world.
For Meta, the Supreme Court ruling adds to its mounting legal troubles. Beyond the class-action lawsuit, the company has already paid $725 million to settle privacy claims with Facebook users. Combined with the various fines and settlements, the financial impact of the Cambridge Analytica scandal continues to grow.
