WASHINGTON (CN) — The Supreme Court on Friday ruled that it shouldn’t have agreed to review a lower court decision finding that Meta violated disclosure laws by not telling investors about the Cambridge Analytica scandal.
Earlier this month, the court heard Meta’s appeal, but after much debate, the justices dismissed the case as improvidently granted.
Investors sued the social giant for securities fraud in 2018 after the company told shareholders that data security risks could affect their investments, without mentioning that Facebook user data had already been compromised in 2016.
Facebook discovered that data analytics firm Cambridge Analytica harvested user data and sold it to Republican election campaigns. Although the social site ordered Cambridge Analytica to delete users’ data, the firm continued to sell the information.
Shareholders said Meta misled them by suggesting that a data breach could harm the company financially without noting that the exact risk had already occurred. Investors tied the massive drop in Facebook’s stock to the public scandal that unfolded after news of the data misuse broke.
Meta argued that it didn’t have to notify shareholders of the 2016 breach because risk disclosures addressed potential future harm. A federal court agreed, but the Ninth Circuit reversed, ruling that the social giant misled investors by treating third-party data misuse as a hypothetical prospect even though the breach hadn’t yet resulted in any follow-on business harm.
The Supreme Court agreed to hear Meta’s appeal to decide the standard of review for loss causation in securities fraud cases and whether failing to disclose past harm was misleading.
Through a flurry of hypotheticals during oral arguments on Nov. 6, the justices struggled to pin down what Meta was asking them to do. Although the social giant claimed otherwise, the high court seemed to think Meta wanted a new bright-line categorical rule.
Justice Elena Kagan, a Barack Obama appointee, rebutted that suggestion, noting that the inquiry was contextual, not black-and-white as Meta suggested.
Chief Justice John Roberts, a George W. Bush appointee, and Justice Neil Gorsuch, a Donald Trump appointee, showed hesitancy toward potentially expanding the disclosure obligation.
Those concerns did not materialize in the court’s short per curiam ruling. The justices did not explain their decision to dismiss the appeal.