Judge Sides With Facebook on Cambridge Analytica Stock-Drop Claims
U.S. District Judge Edward Davila found that only one of 36 statements identified by the plaintiffs as misleading Facebook investors was actionable. Even in that case he found plaintiffs hadn't demonstrated the intent or deliberate recklessness needed to support a securities fraud claim.
September 26, 2019 at 01:38 PM
4 minute read
A federal judge in San Jose has dismissed a stock-drop lawsuit filed against Facebook Inc. and company executives in the wake of its Cambridge Analytica privacy scandal, but has given investors a chance to amend their securities fraud claims.
U.S. District Judge Edward Davila of the Northern District of California on Wednesday granted a motion to dismiss filed by Facebook's lawyers at Gibson, Dunn & Crutcher in full finding that plaintiffs by-and-large hadn't shown that Facebook's policy statements, investor communications and comments to the media were false or misleading.
"Here, it is plaintiffs' burden to point to plausible and particular facts tending to show fraudulent behavior by defendants," wrote Davila, who found that only one of the 36 statements identified by the plaintiffs as misleading was actionable.
In bringing claims that the company, founder and CEO Mark Zuckerberg, COO Sheryl Sandberg, and CFO David Wehner had misled investors, plaintiffs' co-lead counsel at Robbins Geller Rudman & Dowd and Bernstein Litowitz Berger & Grossmann pointed to statements Facebook made as far back as 2015 to The Guardian. Facebook's responses to the British paper came after an initial round of reporting on how political consulting firm Cambridge Analytica gained access to information about millions of Facebook users via an obscure personality quiz app installed by around 270,000 users. Plaintiffs counsel also said the defendants had misled investors via the company's privacy policy released in September 2016, statements in the company's U.S. securities regarding data security and privacy efforts, as well as statements made by the company after the second wave of reporting from the Guardian and the New York Times publicized President Donald Trump's campaign's use of the Cambridge Analytica data.
In all but one of the 36 instances plaintiffs pointed to, however, Davila found that the plaintiffs had failed to plead that Facebook's statement was false when made. The only statement that Davila found could be shown to be false was in a 2017 interview Sandberg gave to Axios where the COO said "no one is going to get your data that shouldn't have it" because "you're controlling who you share with."
There, Davila found the plaintiffs had adequately alleged that the company was sharing data with certain "whitelisted" apps without users knowledge or consent. But, he found that they hadn't shown that Sandberg had acted with the misleading intent or "deliberate recklessness" needed to support a securities fraud claim.
"Plaintiffs do not allege that Sandberg knew about whitelisting or was provided detailed information about it," Davila wrote. "It is not enough that Facebook's business model depends on users freely sharing their information and thus incentivizes misuse of data." he wrote.
Davila, however, gave the plaintiffs until Oct. 26 to file an amended complaint.
"Although the Court has determined that Plaintiffs fail to state a claim, it is possible plaintiffs can cure their allegations by alleging, among other things, more particular facts as to why statements by the Individual Defendants were false when made," the judge wrote.
Neither Robbins Geller's Dennis J. Herman nor John C. Browne of Bernstein Litowitz responded to messages seeking comment Thursday morning.
"We're pleased that the court rejected the plaintiffs' allegations and dismissed the lawsuit in its entirety," a Facebook spokesperson said.
The ruling comes a little more than two weeks after Davila's Northern District colleague, U.S. District Judge Vince Chhabria, largely allowed users privacy claims brought in the wake of the latest Cambridge Analytica revelations to move forward.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllIn Lawsuit, Ex-Google Employee Says Company’s Layoffs Targeted Parents and Others on Leave
6 minute readPre-Internet High Court Ruling Hobbling Efforts to Keep Tech Giants from Using Below-Cost Pricing to Bury Rivals
6 minute readWill Khan Resign? FTC Chair Isn't Saying Whether She'll Stick Around After Giving Up Gavel
Trending Stories
- 1Call for Nominations: Elite Trial Lawyers 2025
- 2Senate Judiciary Dems Release Report on Supreme Court Ethics
- 3Senate Confirms Last 2 of Biden's California Judicial Nominees
- 4Morrison & Foerster Doles Out Year-End and Special Bonuses, Raises Base Compensation for Associates
- 5Tom Girardi to Surrender to Federal Authorities on Jan. 7
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250