U.S. Appeals Court Revives Class Action Against Meta Platforms Inc for Concealing Facebook Data Misuse

In a recent development, a proposed class action against Meta Platforms Inc, formerly known as Facebook, has been revived by a U.S. appeals court. Shareholders have accused Meta of concealing the misuse of Facebook users' data in 2017 and 2018. The 9th U.S. Circuit Court of Appeals in San Francisco, ruling 2-1, restored the shareholders' claim that Meta falsely stated that user data could be compromised, despite already being aware of the privacy violations committed by Cambridge Analytica, a UK-based consulting firm. Circuit Judge Margaret McKeown, writing for the majority, highlighted that Facebook represented the risk of improper access or disclosure of user data as hypothetical when the exact risk had already occurred.

This ruling sets the stage for a potential legal battle between Meta and the shareholders. Attorney Darren Robbins, representing the Meta investors, expressed satisfaction with the well-reasoned ruling. However, Meta has not yet responded to the ruling or made any comments on the matter. The breach, initially reported in 2015, exposed the personal data of an estimated 87 million Facebook users. Following reports that Facebook was still permitting third parties to access user data and that data from the Cambridge Analytica breach was used in connection with Donald Trump's presidential campaign, shareholders filed a lawsuit in 2018.

The lawsuit was mostly dismissed in 2020, but the recent ruling by the 9th Circuit cited a similar ruling involving Alphabet, Google's parent company, which allowed shareholders to sue over data privacy risks that had already occurred. Although the majority of the 9th Circuit favored reviving the case against Meta, Circuit Judge Patrick Bumatay dissented, contending that Facebook's disclosures related to the risks involved in its business, rather than confirming a data breach.

In aftermath of the Cambridge Analytica scandal, Facebook paid over $5 billion in penalties to U.S. authorities and settled a lawsuit with Facebook users for $725 million. This latest ruling sets a significant precedent in holding companies accountable for disclosing potential risks to shareholders when the risks have already transpired. It remains to be seen how Meta will navigate this legal challenge and address the accusations made by the shareholders.