Meta shareholder lawsuit over user privacy revived by appeals court

By Jody Godoy

(Reuters) – A shareholders’ proposed class action accusing Meta Platforms Inc (NASDAQ:) of concealing sweeping misuse of Facebook users’ data in 2017 and 2018 was revived by a U.S. appeals court on Wednesday.

Ruling 2-1, the 9th U.S. Circuit Court of Appeals in San Francisco restored shareholders’ claim that the company, then known as Facebook, falsely said that user data “could” be compromised. At the time, the company was already aware that the UK-based consulting firm Cambridge Analytica had violated its privacy policies, shareholders allege.

“The problem is that Facebook represented the risk of improper access to or disclosure of Facebook user data as purely hypothetical when that exact risk had already transpired,” Circuit Judge Margaret McKeown wrote for the majority.

Darren Robbins, an attorney who represents Meta investors, said they are pleased with the “carefully reasoned” ruling. An attorney for Meta did not immediately respond to a request for comment.

The breach, first reported in 2015, exposed the data of an estimated 87 million Facebook users.

Shareholders sued in 2018 after the company’s stock fell on reports that Facebook was still allowing third parties to access user data, and that data from the Cambridge Analytica breach had been used in connection with Donald Trump’s presidential campaign.

The lawsuit was largely dismissed in 2020, before the 9th Circuit ruled that shareholders of Alphabet (NASDAQ:), Google’s parent company, could sue over warnings that data privacy risks “could” occur when a breach had already happened.

The 9th Circuit majority cited the Alphabet ruling in reviving the case against Meta.

Circuit Judge Patrick Bumatay dissented, saying that Facebook’s disclosures concerned the type of risks involved in its business, not whether or not a data breach had occurred.

Facebook paid more than $5 billion in penalties to U.S. authorities over the Cambridge Analytica scandal and paid $725 million to settle a lawsuit by Facebook users.