The Supreme Court has denied Facebook's request to review a lawsuit related to misleading investors during the Cambridge Analytica scandal.
The Hill reported that in a significant legal development, the Supreme Court dismissed Facebook’s appeal to block a securities class action lawsuit this Friday.
This decision underlines the court's stance that Facebook must address the allegations brought against it by investors, who claim they were misled about privacy risks surfacing during the 2016 presidential campaign.
The case roots back to actions surrounding Facebook’s handling of user data, which was allegedly misused by Cambridge Analytica to support political campaigns, including those of Ted Cruz and Donald Trump.
At the heart of the issue was Facebook’s 2016 securities filing, which treated the risk of data misuse by third parties as merely hypothetical, despite ensuing events suggesting otherwise.
Previously, the Supreme Court had shown interest in the case, agreeing to hear Facebook’s appeal in June, following a decision by an intermediate appeals court that allowed the lawsuit to proceed. During the oral arguments earlier in November, the justices posed various hypothetical scenarios but appeared divided on the issues at hand.
This early conclusion to the case comes as a part of the first opinion day for the Supreme Court’s new term, which started in October. Typically, the first opinions in the last few terms were released in December or January, making this decision unusually prompt.
The one-sentence, unsigned opinion issued stated the appeal was "dismissed as improvidently granted," a rare form of dismissal used by the Supreme Court that typically signifies reconsideration by the justices of the worthiness of reviewing the case.
This type of dismissal is uncommon and has been used in significant cases, such as those involving emergency abortions and disputes over attorney-client privilege during the last few terms.
In response to the Supreme Court’s decisive move, Meta spokesperson Andy Stone conveyed disappointment. "The plaintiff's claims are baseless, and we will continue to defend ourselves as this case is considered by the District Court. We are disappointed in the Supreme Court’s decision not to clarify this part of the law," said Stone.
With the Supreme Court’s dismissal, the lawsuit will now revert to the District Court where Facebook will have to face the claims head-on.
The plaintiffs have argued earnestly that Facebook’s initial failure to address the potential for third-party misuse of data, as outlined in their 2016 securities filing, misled shareholders, impacting their decision-making and financial assessments.
This dismissal puts Facebook in a challenging position, compelling it to perhaps reconsider its defense strategies and how it communicates risks to its investors, especially given the rising scrutiny on data privacy and security.
The outcome of this case could set a precedent for how tech companies address and disclose security and privacy risks, which may influence investor confidence and corporate responsibilities.
As the legal proceedings continue, the technology sector and its stakeholders will be watching closely, mindful of the potential ramifications for corporate transparency and accountability practices.