The U.S. Supreme Court has greenlit a significant multibillion-dollar class action lawsuit against Meta, Facebook’s parent company, stemming from its alleged failure to disclose privacy risks linked to the Cambridge Analytica scandal. The case, which has now gained momentum after the high court dismissed Meta’s appeal, centers around investor allegations of inadequate transparency about the misuse of user data, which contributed to substantial drops in Meta’s stock value in 2018.
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Allegations and Legal Background
Investors accuse Meta of not fully disclosing the potential misuse of personal data by Cambridge Analytica, a consulting firm with ties to Donald Trump’s 2016 presidential campaign. Cambridge Analytica improperly accessed data from approximately 87 million Facebook users through a third-party app developer and utilized this information to target voters.
When news of the scandal surfaced, Meta’s share price dropped significantly on two occasions, causing financial losses for investors. They argue that these losses were fueled by the company’s lack of transparency about the risks of its data handling practices.
Meta’s Past Settlements and Ongoing Challenges
Meta has faced substantial consequences for its data privacy practices. The company has already paid:
- A $5.1 billion fine to the Federal Trade Commission (FTC).
- A $725 million settlement to users in a separate privacy class action.
However, the investors’ lawsuit, distinct from the user-related cases, alleges that the company failed to uphold its fiduciary duty by not providing adequate risk disclosures to shareholders.
Supreme Court’s Decision
Initially, the Supreme Court agreed to hear Meta’s appeal, which sought to halt the class action. However, on December 1, 2023, the justices dismissed the appeal, effectively allowing an appellate court ruling in favor of the investors to stand. This move enables the lawsuit to proceed in lower courts.
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A Broader Trend in Tech Accountability
The Supreme Court is also deliberating a separate class action against Nvidia, where investors allege the company misled them about its reliance on selling computer chips for cryptocurrency mining. These cases highlight a growing trend of increased scrutiny of tech companies’ accountability to both users and investors.
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Next Steps for Meta
As the case moves forward, Meta faces heightened legal and financial pressures. The outcome could set a precedent for how tech companies handle investor communications and user privacy issues in the future.
This legal battle underscores the continued fallout from one of the largest privacy scandals in recent history, as stakeholders push for accountability in the tech sector.
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