Supreme Court To Hear Case About Facebook Data-Harvesting Incident

The Supreme Court on June 10 agreed to look at a large shareholder lawsuit that claims Facebook parent Meta Platforms Inc. deceived investors regarding a data-harvesting controversy that involved Cambridge Analytica, a political consulting firm.

supreme court to hear case about facebook data harvesting incident
The U.S. Supreme Court in Washington on May 29, 2024. (Madalina Vasiliu/The Epoch Times)

The Supreme Court’s eventual ruling in the case could have an impact on corporate disclosure standards going forward.

The case involves a private securities fraud-related class action arising out of the now-defunct UK-based Cambridge Analytica’s “wrongful acquisition and misuse of Facebook user data,” according to Facebook’s filing with the nation’s highest court.

Meta agreed in December 2022 to pay out $725 million to settle a class-action proceeding that said the company permitted third parties, including Cambridge Analytica, to gain access to as many as 87 million users’ personal information. The incident was made public in 2018.

Cambridge Analytica previously worked for then-candidate Donald Trump’s successful presidential campaign in 2016, and had access to personal data from millions of Facebook accounts for purposes of targeting and profiling voters. The account holders did not consent and had their data harvested by means of an app.

The scandal led to government investigations and Meta CEO Mark Zuckerberg was called to testify before Congress.

In 2019, Facebook agreed to pay $5 billion to resolve a U.S. Federal Trade Commission probe into its privacy practices and $100 million to settle a U.S. Securities and Exchange Commission proceeding that alleged it misled investors about the misuse of their data.

At the same time, Meta is being investigated by the European Union for possible breaches of child safety rules on its Facebook and Instagram platforms.

The Supreme Court granted the petition for certiorari, or review, in Facebook Inc. v. Amalgamated Bank, in an unsigned order.

No justices dissented and the court didn’t explain its decision. At least four of the nine justices must vote to grant the petition for it to advance to the oral argument stage.

The Supreme Court will examine whether a federal appeals court erred in allowing the multi-billion dollar lawsuit to proceed premised on allegations that Facebook, as the company was known at the time, inflated share prices by failing to provide adequate disclosure that its user data would be misused.

The investors claim that the controversy contributed to two 2018 price drops that led to the company losing more than $200 billion in market capitalization.

The U.S. Court of Appeals for the 9th Circuit ruled against Facebook in the case at hand in October 2023.

Facebook is asking the Supreme Court to dismiss the lawsuit.

The federal district court threw out the plaintiffs’ claims three times but the 9th Circuit revived the claims, which Facebook said in its petition “adopted extreme outlier positions.”

The Ninth Circuit’s decision will light a beacon for class-action lawsuits that would be dismissed in any other circuit,” the petition stated.

The respondent, Amalgamated Bank, argued the circuit court decision was correct and the Supreme Court should reject the appeal.

“There is no circuit conflict,” the bank said in a brief.

The 9th Circuit “applies the same rule as the other circuits Facebook cites: a statement is misleading if it treats a material risk as hypothetical when the risk has already materialized.”

The Supreme Court is expected to hear Facebook Inc. v. Amalgamated Bank in its new term that begins in October.

Meanwhile, the Supreme Court justices are currently deliberating two cases that deal with social media platforms.

Supreme Court justices seemed skeptical of state arguments on March 18 that the federal government was wrong to communicate with social media platforms about public health issues during the recent pandemic.

At the same time, during oral argument in Murthy v. Missouri, the states argued that the federal government strong-armed social media companies into censoring disfavored views on important public issues such as side effects related to the COVID-19 vaccine and the government-imposed lockdowns. Applying this kind of pressure violates the First Amendment, the states argued.

Dr. Vivek Murthy is the U.S. surgeon general. The state of Missouri and other parties sued the federal government for alleged censorship by pressuring social media companies to suppress certain content.

On Feb. 26, Florida and Texas told the Supreme Court they should be allowed to regulate how social media platforms moderate content. During oral arguments, the justices seemed to be grasping for a new rule they could use to apply free speech principles to online discussions.

At stake is the right of individual Americans to freely express themselves online along with the right of social media platforms to make editorial decisions about the content they host. Both rights are protected by the First Amendment to the U.S. Constitution.

The challenge to the Florida statute regulating social media is Moody v. NetChoice LLC; the challenge to the Texas law is NetChoice LLC v. Paxton.

Both states’ laws impose restrictions on deplatforming users and force platforms to explain their content moderation decisions, a mandate the platforms consider to be overly burdensome.

The U.S. Court of Appeals for the 11th Circuit struck down part of the Florida statute, finding that “with minor exceptions, the government can’t tell a private person or entity what to say or how to say it.”

Even the “biggest” platforms are “private actors whose rights the First Amendment protects … [and] their so-called content-moderation decisions constitute protected exercises of editorial judgment.”

The U.S. Court of Appeals for the 5th Circuit took the opposite tack, finding the Texas constitutional and rejecting the “idea that corporations have a freewheeling First Amendment right to censor what people say.”

Rulings in these two cases are expected by the end of June.

via June 10th 2024