by Jody Godoy
(Reuters) – Investors in Meta Platforms Inc formally asked a U.S. appeals court to revive a proposed class action lawsuit accusing the Facebook parent of hiding a serious privacy breach that sparked a political controversy. Allows the consulting firm to access users’ personal information.
The request came during oral arguments Wednesday before the 9th US Circuit Court of Appeals in San Francisco over the Cambridge Analytica scandal, where data on up to 87 million users was accessed.
Investors claimed that Facebook, as the company was known, misled them in 2016 by describing data breaches as a “risk” after it was revealed that Cambridge had accessed user data.
Investors said they suffered losses in July 2018 when Facebook’s share price plunged after the company said user growth had slowed after the magnitude of the breach became public.
US District Judge Edward Davila ruled in 2020 that Facebook’s statements were not false because Cambridge’s data use had been in the news in 2015.
At Wednesday’s hearing, Tom Goldstein, a lawyer for investors, told a three-judge panel that Davila’s decision should be reversed because Facebook downplayed the news reports and did not take strong action.
Meta’s attorney Joshua Lipshutz countered that the company had adequately disclosed that cyberattacks had occurred and would occur in the future.
Circuit Judges Margaret McKeown and Jay Bybee appeared skeptical, calling those disclosures “boilerplate” and suggesting they might not be meaningful to investors.
“If they have a phishing incident of some 18-year-old sitting in their parent’s basement, that’s true,” Bybee said. “But given the nature of the leak at Cambridge it is not helpful.”
Lipshutz replied that even if there were misrepresentations, investors should still see Meta as misinformed.
“It is not commendable that the company was trying to mislead the public about something the public already knew,” he said.
Facebook paid more than $5 billion in fines to US authorities in the Cambridge Analytica case. It agreed in December to pay $725 million to settle a lawsuit by Facebook users.
(Reporting by Jody Godoy)