Meta Platforms Inc. Faces Backlash Over Data Privacy Scandal
- The Supreme Court reviewed a significant shareholder lawsuit against Meta Platforms Inc. regarding misleading disclosures related to a data privacy breach.
- The Ninth Circuit allowed the lawsuit to proceed despite earlier dismissals by a federal district court, raising concerns about potential over-disclosure obligations for companies.
- The ruling could significantly impact corporate disclosure rules and investor protections based on this major data privacy incident.
On November 6, 2024, the Supreme Court heard oral arguments regarding a lawsuit against Meta Platforms Inc., stemming from a controversy involving the data-harvesting practices of Cambridge Analytica. Shareholders contend that the company misled investors about the misuse of Facebook user data, which led to significant losses in market capitalization following two price drops in 2018. Despite being dismissed three times in lower courts, the Ninth Circuit allowed the lawsuit to proceed, citing concerns over inadequate public disclosure by Meta. During the arguments, Justices Elena Kagan and Ketanji Brown Jackson expressed support for the shareholders’ position, highlighting the potential for past events to inform future risks. Conversely, other justices, including Chief Justice John Roberts, warned of the broader implications of imposing more stringent disclosure requirements on companies. The outcome of this case, expected by June 2025, could set significant precedents regarding corporate disclosure obligations and investor protections in the context of securities fraud.