{"id":23522,"date":"2025-02-25T10:55:00","date_gmt":"2025-02-25T15:55:00","guid":{"rendered":"https:\/\/www.law.georgetown.edu\/georgetown-law-journal\/?page_id=23522"},"modified":"2025-05-12T11:12:42","modified_gmt":"2025-05-12T15:12:42","slug":"facebook-v-amalgamated-bank-why-did-the-supreme-court-dismiss-facebooks-writ-of-certiorari-as-improvidently-granted","status":"publish","type":"page","link":"https:\/\/www.law.georgetown.edu\/georgetown-law-journal\/submit\/glj-online\/supreme-court-coverage-program\/facebook-v-amalgamated-bank-why-did-the-supreme-court-dismiss-facebooks-writ-of-certiorari-as-improvidently-granted\/","title":{"rendered":"Facebook v. Amalgamated Bank: Why Did the Supreme Court Dismiss Facebook\u2019s Writ of Certiorari as Improvidently Granted?"},"content":{"rendered":"

Introduction<\/strong><\/h2>\n

On November 6, 2024, the Supreme Court heard oral argument in Facebook, Inc. v. Amalgamated Bank<\/em>.[1]<\/a> At issue was whether Facebook[2]<\/a> plausibly misled investors when it failed to disclose in a Securities and Exchange Commission (SEC) filing that it knew Cambridge Analytica had improperly obtained data from millions of Facebook users. Two weeks later, on November 22, the Court issued a one-line order dismissing the writ of certiorari as improvidently granted, thereby declining to clarify how lower courts should evaluate misleading risk disclosures in SEC filings.[3]<\/a> By issuing a \u201cDIG\u201d order,[4]<\/a> a rarely used mechanism for dismissing a case, the Court effectively admitted that it never should have granted Facebook\u2019s petition for certiorari in the first place. As a result, the Ninth Circuit\u2019s decision, which allowed Amalgamated Bank\u2019s shareholder class action lawsuit to proceed past a motion to dismiss, remained in effect.[5]<\/a><\/p>\n

The Court did not provide any reasoning for its DIG order.[6]<\/a> But the oral argument offers some clues, as the Justices struggled to define when a risk disclosure that omits a past occurrence of the risk-triggering event is misleading. The original question presented in Facebook\u2019s petition was also different than the issue as framed by Facebook\u2019s counsel, who arguably did not properly characterize the Ninth Circuit\u2019s holding or the state of the law. Ultimately, the Court likely did not want to decide whether Facebook\u2019s risk disclosures were misleading at the motion to dismiss stage without further evidence of what Facebook knew and when.<\/p>\n

This Essay will: (I) summarize the factual background of the case and the Ninth Circuit\u2019s decision; (II) describe the background legal framework that governs misleading disclosures in SEC forms; (III) discuss how the Justices failed to grasp the issues at oral argument; and (IV) explore why the Court may have dismissed Facebook\u2019s writ of certiorari as improvidently granted.<\/p>\n

I. Factual Background and Procedural History<\/strong><\/h3>\n

This Part will summarize (A) the background of the Cambridge Analytica scandal; (B) the allegedly misleading statements in Facebook\u2019s 2016 SEC risk disclosure; and (C) the procedural history of Amalgamated Bank\u2019s shareholder class action suit against Facebook.<\/p>\n

A. Factual Background<\/strong><\/h4>\n

In December 2015, The Guardian<\/em> reported that Cambridge Analytica, a British political consulting firm, had harvested data from Facebook users, created \u201cpsychographic profiles\u201d of each user, and sold them to Ted Cruz\u2019s 2016 presidential campaign.[7]<\/a> The data was reportedly harvested from a personality quiz uploaded to Facebook by Cambridge Analytica researcher Aleksandr Kogan, who gained access to detailed data from users who completed the quiz as well as from their Facebook \u201cfriends.\u201d[8]<\/a> Kogan obtained data from at least thirty million Facebook users through this method.[9]<\/a> He then trained an algorithm to generate \u201cprofiles\u201d of each user based on the \u201cbig five\u201d personality traits, and the Cruz campaign crafted targeted ads based on these profiles.[10]<\/a><\/p>\n

In response to the 2015 Guardian<\/em> story, Facebook said it was \u201ccarefully investigating\u201d the situation and promised to take \u201cswift action\u201d against companies that improperly harvested user data.[11]<\/a> Facebook asked Cambridge Analytica and Mr. Kogan to delete the data, which they agreed to do.[12]<\/a> In June 2016, however, Cambridge Analytica CEO Alexander Nix refused to certify that all the data harvested from Facebook had been deleted.[13]<\/a> And in October 2016, The Washington Post<\/em> reported that Cambridge Analytica was still harvesting personality data and selling it to political campaigns, although the article did not state that the data came from Facebook.[14]<\/a><\/p>\n

B. Facebook\u2019s Statements<\/strong><\/h4>\n

In an SEC filing in February 2017, Facebook represented the risk of improper third-party data access and misuse of user data as hypothetical without disclosing that Cambridge Analytica had already misused its user data.[15]<\/a> In the \u201cRisk Factors\u201d section of its 2016 Form 10-K,[16]<\/a> which requires disclosure of \u201cmaterial factors\u201d that make an investment speculative or risky,[17]<\/a> Facebook noted that \u201c[a]ny failure to prevent or mitigate . . . improper access to or disclosure of our data or user data . . . could<\/em> result in the loss or misuse of such data, which could<\/em> harm our business and reputation and diminish our competitive position.\u201d[18]<\/a> Another statement noted that \u201cif <\/em>these third parties or developers fail to adopt or adhere to adequate data security practices . . . our data or our users\u2019 data may<\/em> be<\/em> improperly accessed, used, or disclosed.\u201d[19]<\/a><\/p>\n

C. Procedural History<\/strong><\/p>\n

After reporting by The<\/em> New York Times <\/em>and The Guardian<\/em> in 2018 revealed the full extent of Cambridge Analytica\u2019s data harvesting\u2014including the fact that the company had continued to harvest data and had not deleted the data it improperly collected in 2015\u2014Facebook\u2019s stock price plummeted.[20]<\/a> This revelation prompted enforcement actions by the SEC[21]<\/a> and the FTC,[22]<\/a> as well as a shareholder class action lawsuit led by Amalgamated Bank.[23]<\/a> The shareholder suit alleged, in relevant part, that Facebook misled investors in its 2016 Form 10-K by characterizing the risk of data misuse and improper access as \u201cmerely hypothetical\u201d while failing to disclose that Cambridge Analytica had already improperly accessed and misused data in the past.[24]<\/a><\/p>\n

The district court dismissed the complaint after three rounds of amendments, concluding that the plaintiffs failed to allege that Facebook made a false or misleading statement in its 2016 Form 10-K.[25]<\/a> The court reasoned that the Cambridge Analytica scandal had been a matter of public knowledge for over a year and was not actively harming Facebook\u2019s reputation by the time the form was filed in February 2017.[26]<\/a> Furthermore, the court found that \u201cinvestors would not have been misled\u201d about the risk of data misuse and improper disclosure because that risk \u201chad already been realized\u201d when news of the scandal broke in 2015.[27]<\/a><\/p>\n

A divided Ninth Circuit panel reversed in relevant part.[28]<\/a> As the panel held, the plaintiff\u2019s allegations, if true,[29]<\/a> suggested that Facebook knew Cambridge Analytica\u2019s misuse of user data in February 2017 was ongoing and that the Form 10-K \u201cdirectly contradicted\u201d this knowledge.[30]<\/a> The panel reasoned that investors may not have had enough information to evaluate the risk of future harm because the full extent of the Cambridge Analytica scandal was not yet public.[31]<\/a> In addition, the panel noted that a statement presenting the risk of future business harm or data misuse as purely hypothetical could be misleading \u201ceven if the magnitude of the ensuing harm was still unknown.\u201d[32]<\/a> In dissent, Judge Bumatay argued that the risk disclosures were not misleading because the plaintiffs did not allege that Facebook knew the data misuse had already resulted in business harm or that the risk of harm could immediately come to fruition.[33]<\/a><\/p>\n

In its petition for a writ of certiorari, one of the questions Facebook presented for review was: \u201cAre risk disclosures false or misleading when they do not disclose that a risk has materialized in the past, even if that past event presents no known risk of ongoing or future business harm<\/em>?\u201d[34]<\/a> The Court granted certiorari on this question alone.[35]<\/a> In its response brief, Respondents disputed this framing and agreed that the answer would be no.[36]<\/a> Instead, they argued that the Cambridge Analytica scandal did<\/em>, in fact, present a known risk of ongoing or future business harm at the time Facebook submitted its 2016 Form 10-K. Because they adequately alleged that Facebook knew about this risk in their complaint, Respondents argued that the Ninth Circuit correctly reversed the district court\u2019s dismissal. By contrast, Facebook and amici maintained that the Ninth Circuit\u2019s rule was an \u201coutlier\u201d that could lead to lengthy disclosures and \u201cevent driven litigation\u201d whenever a past event results in harm to a business.[37]<\/a><\/p>\n

II. Background<\/strong><\/h3>\n

A company can be liable for securities fraud if it makes a false or misleading statement to the SEC. Section 10(b) of the Securities Exchange Act prohibits any \u201cmanipulative or deceptive\u201d practice in connection with the purchase or sale of a security.[38]<\/a> SEC Rule 10b-5 implements this provision and prohibits making \u201cany untrue statement of a material fact\u201d or omitting a \u201cmaterial fact necessary in order to make the statements made, in the light of the circumstances . . . not misleading.\u201d[39]<\/a> Private litigants can sue to enforce Rule 10b-5[40]<\/a> and must allege: (1) a material misrepresentation or omission by the defendant (at issue here); (2) scienter; (3) a connection with the purchase or sale of a security; (4) reliance; (5) economic loss; and (6) loss causation.[41]<\/a><\/p>\n

The SEC also requires publicly traded companies to file annual reports on Form 10-K.[42]<\/a> As relevant here, Item 105 of SEC Regulation S-K requires this Form to include a section titled \u201cRisk Factors\u201d that describes \u201cmaterial factors that make an investment in the registrant or offering speculative or risky.\u201d[43]<\/a> However, the SEC Act does not \u201ccreate an affirmative duty to disclose any and all material information,\u201d[44]<\/a> and the failure to disclose information is actionable only if the omission renders an affirmative statement misleading to a reasonable investor.[45]<\/a> As the Supreme Court has recognized, the reasonable investor standard is inherently context-specific and \u201ccannot be reduced to a bright-line rule.\u201d[46]<\/a> Several circuit courts have held that a past event is \u201cmaterial\u201d and must be disclosed if the risk of harm from the event has already<\/em> begun to materialize.[47]<\/a><\/p>\n

In its petition for certiorari, Facebook emphasized a purported circuit split concerning the extent to which public companies must disclose past events in their Form 10-K filings.[48]<\/a> According to Facebook\u2019s characterization, the Ninth Circuit held that disclosures \u201cmust include past instances when risks came to fruition even if<\/em> the company has no basis to believe those events will harm the business.\u201d[49]<\/a> This approach purportedly conflicted with the Sixth Circuit\u2019s, which it claimed never requires disclosure of past events,[50]<\/a> and six other circuits, which only require disclosure where the risk from the past event (a) has already materialized or (b) is \u201cvirtually certain\u201d to materialize.[51]<\/a> Respondents and government counsel challenged Facebook\u2019s framing of the circuit split and the Ninth Circuit\u2019s opinion, which in their view held that shareholders adequately alleged that the risk of harm from the Cambridge Analytica scandal had already materialized.[52]<\/a><\/p>\n

III. the Court\u2019s Confusion at Oral Argument<\/strong><\/h3>\n

Over the course of two hours of oral argument, the Justices did not grapple with the circuit split that figured so prominently in Facebook\u2019s certiorari petition. Instead, they repeatedly posed or considered hypotheticals aimed at delineating when a conditional \u201cif-then\u201d statement that fails to disclose a past occurrence of the risk-triggering \u201cif\u201d event is misleading. For example: Does a student mislead his parents when he says he \u201cmay fail an exam\u201d if in fact he has already failed? Or does a realtor mislead his clients when he says home insurance \u201ccould become more expensive\u201d if crime goes up without disclosing a string of recent burglaries?[53]<\/a><\/p>\n

In their opening statements, each advocate posed a hypothetical designed to probe the Justices\u2019 intuitions about when a bare conditional statement[54]<\/a> is misleading. As Petitioner\u2019s counsel Kannon Shanmugam argued, a bare statement that \u201cthe road may be flooded if it rains\u201d is not misleading, even if it rained yesterday.[55]<\/a> In contrast, Respondent\u2019s counsel Kevin Russell posed the student hypothetical, arguing that the student\u2019s statement about possibly failing the exam was misleading because his risk of failure had already materialized.[56]<\/a> In a recurring hypothetical, Justice Kagan asked about a factory\u2019s failure to disclose that a past fire limited production capacity, and Justice Alito asked whether the analysis would change if the fire were caused by a Molotov cocktail or \u201cspace junk that fell out of the sky, among other unpredictable events.\u201d[57]<\/a><\/p>\n

Absurd musings aside, the Justices seemed to realize by the middle of the argument that they could craft any number of hypothetical situations with bare conditional statements that fell on either side of the misleading line based on context.[58]<\/a> As Justice Barrett noted, the line between a purely prospective \u201cif-then\u201d risk statement and a misleading omission that implies non-occurrence of a past triggering event is \u201cnot easily susceptible to a categorical rule.\u201d[59]<\/a> The Chief Justice and Justice Kavanaugh even suggested that the Court should not formulate a rule at all, given that the SEC is better positioned to clarify when an omission in a risk disclosure is misleading.[60]<\/a><\/p>\n

The Justices also repeatedly expressed confusion about the question presented towards the end of the argument. After Mr. Russell stated that the Cambridge Analytica scandal was a \u201cticking time bomb\u201d that Facebook knew would cause future harm, Justice Alito replied that this argument seemed \u201cdifferent from the one . . . presented by the question.\u201d[61]<\/a> Justice Kavanaugh later said that he thought the question presented was whether an omission of a past event was misleading \u201ceven though the harm from that event . . . is over.\u201d[62]<\/a> In response, Mr. Russell noted that this was \u201cvery different\u201d from what the parties had been discussing.[63]<\/a> Assistant to the Solicitor General Kevin Barber also argued that the original question presented did not accurately characterize the Ninth Circuit\u2019s decision and that Petitioner\u2019s counsel did not properly construe the virtual certainty test.[64]<\/a><\/p>\n

By the end of oral argument, the Justices seemed unsure how craft a context-sensitive rule to define when a bare conditional risk statement in an SEC filing is misleading. Their hypotheticals emphasized the fact-bound nature of the inquiry, and their confusion about the question presented only added to the sense that they were shooting in the dark. Several commentators thought the Court would narrowly rule in favor of Facebook given the general skepticism of private securities fraud suits displayed by multiple conservative Justices.[65]<\/a> But the Court decided to dismiss the writ of certiorari as improvidently granted instead, an unexpected but not unprecedented result for a case that prompted such confusion from the bench.<\/p>\n

IV. Why the Supreme Court May Have Diged Facebook<\/strong>\u00a0<\/strong><\/h3>\n

Why did the Court dismiss Facebook\u2019s writ of certiorari as improvidently granted rather than issue a decision on the merits? The Court\u2019s one-line DIG order provided no reasoning, so any commentary on closed-door maneuvering is inherently speculative. But several factors may explain the Court\u2019s decision to DIG: (1) the Court did not have enough facts about Facebook\u2019s knowledge to decide whether its statements were misleading; (2) the Court may have realized that Facebook did not accurately characterize the Ninth Circuit\u2019s decision and exaggerated a minor circuit split; or (3) the Court was unable to formulate a general rule to define misleading omissions and thought further commentary would not be helpful to the district court. By DIGing the case, the Court upheld the Ninth Circuit and allowed the shareholder class action to proceed against Facebook, thus placing the burden on the district court to decide the context-specific question of whether Facebook\u2019s 2016 10-K statements were plausibly misleading.<\/p>\n

The Supreme Court rarely dismisses writs of certiorari as improvidently granted. Empirical analysis indicates that between 1955 and 2005, the Court DIGed only two or three cases per term on average.[66]<\/a> The sole DIG order of the 2023\u201324 term was in Moyle v. United States<\/em>,[67]<\/a> an unusual instance of the maneuver given the case\u2019s public salience and the lengthy opinions filed by multiple Justices.[68]<\/a> Of note, the Supreme Court issued a DIG order on December 11, 2024, in NVIDIA Corp v. E. Ohman J:or Fonder AB<\/em>,[69]<\/a> a similar securities fraud case about pleading standards and expert reports.[70]<\/a> Given the Court\u2019s shrinking merits docket in recent years,[71]<\/a> these back-to-back DIGs raise questions about the Court\u2019s case selection process and its ability to discern the certworthiness of petitions from large defendants in high-profile cases.<\/p>\n

In a strange coincidence, Kevin Russell (Respondent\u2019s Counsel) authored a blog post in 2019 describing three circumstances in which the Court often DIGs a case: (1) the Court discovers that the case is a poor vehicle for resolving the question presented; (2) the petitioners rely on a different argument than the one presented; or (3) the Court cannot reach a consensus and wants to avoid a fractured opinion.[72]<\/a> All three circumstances appear to have been present to some extent in Facebook<\/em>, contributing to the Court\u2019s decision to dismiss as improvidently granted.<\/p>\n

A. What DID. Facebook Know and When?<\/strong><\/h4>\n

One of the fundamental disagreements between the parties at oral argument centered on how to characterize the risk posed to Facebook\u2019s business by the Cambridge Analytica scandal. Was the scandal a discrete past event whose risk of harm had already materialized and fizzled by February 2017?[73]<\/a> Or was it a \u201cticking time bomb\u201d that Facebook knew would likely cause future harm if fully disclosed?[74]<\/a> In other words, was the risk of business harm ongoing <\/em>when Facebook issued its 2016 Form 10-K? The answer depends on what Facebook knew and when, specifically whether Facebook executives knew Cambridge Analytica\u2019s data misuse was ongoing or whether they reasonably believed the scandal had passed.<\/p>\n

Because Facebook appealed the Ninth Circuit\u2019s decision reversing a motion to dismiss, the District Court did not make factual findings about what Facebook executives knew in February 2017. The Ninth Circuit only held that plaintiffs adequately pled that the risk of harm had already materialized because, among other allegations, Facebook knew Cambridge Analytica\u2019s CEO had refused to certify that he deleted user data in June 2016.[75]<\/a> The fact-specific nature of the misleading omissions inquiry and the procedural posture of this case made it a poor vehicle for the Court to decide a thorny question of securities law without further factual development.<\/p>\n

B. Exaggerated Circuit Split and Flawed Question Presented<\/strong><\/p>\n

In its petition for certiorari, Facebook framed the Ninth Circuit\u2019s decision as an \u201coutlier\u201d that would require companies to disclose past events even if they have no known risk of business harm.[76]<\/a> This decision, in Facebook\u2019s view, \u201cexacerbated a deep and mature circuit split\u201d regarding what information companies must disclose in SEC 10-K filings.[77]<\/a> The Court was likely convinced to grant Facebook\u2019s writ because the company\u2019s high-profile Supreme Court attorneys framed the circuit split as particularly salient and ripe for resolution. Citing a circuit split is a reliable way to catch the attention of a Supreme Court clerk, even if \u201cnot all splits are created equal.\u201d[78]<\/a><\/p>\n

By DIGing the case, the Court may have realized upon further review that the purportedly \u201cdeep\u201d circuit split was shallower than it first thought. As Respondents argued, the Ninth Circuit\u2019s holding was consistent with the first prong of the \u201cvirtual certainty\u201d test adopted by other circuits, namely that the omission of a past event in a risk disclosure can be misleading if the risk of harm had already materialized.[79]<\/a> Several Justices also seemed surprised by Respondents\u2019 challenge to the framing of the original question presented, and Petitioner\u2019s counsel effectively agreed that the question was inapplicable.[80]<\/a> Ultimately, the Court may have realized that it granted cert in the first place based on an exaggerated circuit split and with a question presented that failed to capture the Ninth Circuit\u2019s decision.<\/p>\n

C. Impossible to Formulate a General Rule<\/strong><\/p>\n

At oral argument, the Justices presented hypothetical scenarios that sought to define when bare conditional statements are misleading. But the wide range of hypotheticals underscored the challenge of formulating a general answer to such a context-specific question. By deciding to DIG the case, the Court likely realized that any \u201crule\u201d it could have formulated would not have assisted the lower courts in answering whether the omission was material such that a reasonable investor was misled, which depends on evaluating what Facebook knew in February 2017 and the extent to which the Cambridge Analytica scandal was known to the public at that time.<\/p>\n

The Court could have announced a narrow rule and remanded the case to the Ninth Circuit without deciding whether the rule applies to the facts below. A similar result happened last term in Macquarie v. Moab Partners<\/em>: The Court held that \u201cpure omissions\u201d were not actionable but did not decide whether the case involved a pure omission or not.[81]<\/a> But the Court here did not issue the narrow ruling that some commentators expected\u00ad\u00ad\u2014instead, it ran up the white flag and admitted defeat in the face of a flawed question presented and a fundamentally factual dispute.<\/p>\n

Conclusion<\/strong><\/h2>\n

In Facebook v. Amalgamated Bank<\/em>, the Supreme Court dismissed Facebook\u2019s writ of certiorari as improvidently granted rather than clarifying the circumstances in which an omission in an SEC risk-disclosure statement is misleading. While no one knows why the Court DIGed the case, the lack of facts related to Facebook\u2019s knowledge, the arguably false pretenses under which the case was brought, and the Justices\u2019 inability to craft a general rule likely made the Court realize that it never should have heard the case in the first place.<\/p>\n

As a result, Amalgamated Bank\u2019s shareholder class action against Facebook will proceed in district court, allowing plaintiffs to discover crucial facts about what Facebook knew in February 2017. Alternatively, Facebook could settle the case rather than subject itself to fact discovery and further litigation. As Justice Kavanaugh put it at oral argument, prevailing at the motion to dismiss stage is often \u201cthe game\u201d given the propensity of large defendants to settle fraud cases.[82]<\/a> It remains to be seen how Facebook will handle this lawsuit. But the investors who felt misled by Facebook\u2019s failure to disclose its knowledge of the Cambridge Analytica scandal in 2017 will finally get their day in court after over six years of amended complaints and waiting.<\/p>\n

[1]<\/a> 604 U.S. 4 (2024).<\/p>\n

[2]<\/a> In 2021, Facebook changed its name to \u201cMeta Platforms.\u201d Because the facts of this case took place before 2021, this Essay will refer to the company as Facebook.<\/p>\n

[3]<\/a> See Facebook<\/em>, 604 U.S. at 4 (\u201cThe writ of certiorari is dismissed as improvidently granted.\u201d).<\/p>\n

[4]<\/a> When the Supreme Court dismisses a writ of certiorari as improvidently granted (\u201cDIGs\u201d), it declines to reach the merits of the case and reverses its earlier decision to grant review, thus leaving in place the lower court decision as if it declined to grant review in the first instance.<\/p>\n

[5]<\/a> See<\/em> In re<\/em> Facebook, Inc. Sec. Litig., 87 F.4th 934 (9th Cir. 2023) (reversing the District Court\u2019s decision that granted Facebook\u2019s motion to dismiss Petitioner\u2019s Third Amended Complaint in relevant part); In re<\/em> Facebook, Inc. Sec. Litig., No. 18-cv-01725, 2021 WL 6000058 (N.D. Cal. Dec. 20, 2021).<\/p>\n

[6]<\/a> See Facebook<\/em>, 604 U.S. at 4.<\/p>\n

[7]<\/a> See<\/em>\u00a0Harry Davies,\u00a0Ted Cruz Using Firm That Harvested Data on Millions of Unwitting Facebook Users<\/em>, Guardian (Dec. 11, 2015, 5:22 PM EST), https:\/\/www.theguardian.com\/us-news\/2015\/dec\/11\/senator-ted-cruz-president-campaign-facebook-user-data.<\/p>\n

[8]<\/a> Id.<\/em><\/p>\n

[9]<\/a> In re Facebook Sec. Litig<\/em>, 87 F.4th at 943; see <\/em>Davies, supra<\/em> note 7.<\/p>\n

[10]<\/a> See <\/em>Davies, supra <\/em>note 7. The \u201cbig five\u201d traits are \u201copenness, conscientiousness, extraversion, agreeableness, and neuroticism,\u201d otherwise known as the \u201cOCEAN scale.\u201d Id.<\/em> The OCEAN scale is a personality test that has been used in psychological research for decades. See <\/em>Erin Brodwin, Here\u2019s The Personality Test Cambridge Analytica Had Facebook Users Take<\/em>, Bus. Insider (Mar. 19, 2018, 4:01 PM EDT), https:\/\/www.businessinsider.com\/facebook-personality-test-cambridge-analytica-data-trump-election-2018-3 [https:\/\/perma.cc\/K5Z3-L737].<\/p>\n

[11]<\/a> Id.<\/em><\/p>\n

[12]<\/a> See In re Facebook Sec. Litig.<\/em>, 87 F.4th at 943.<\/p>\n

[13]<\/a> Id.<\/em> at 943\u201344.<\/p>\n

[14]<\/a> See <\/em>Michael Kranish, Trump\u2019s Plan for a Comeback Includes Building a \u2018Psychographic\u2019 Profile of Every Voter<\/em>, Wash. Post (Oct. 27, 2016), https:\/\/www.washingtonpost.com\/politics\/trumps-plan-for-a-comeback-includes-building-a-psychographic-profile-of-every-voter\/2016\/10\/27\/9064a706-9611-11e6-9b7c-57290af48a49_story.html.<\/p>\n

[15]<\/a> See In re Facebook Sec. Litig.<\/em>, 87 F.4th at 944.<\/p>\n

[16]<\/a> The SEC\u2019s Form 10-K is an annual filing that provides a comprehensive summary of a public company\u2019s financial performance. See Form 10-K<\/em>, Investor.gov: U.S. SEC, https:\/\/www.investor.gov\/introduction-investing\/investing-basics\/glossary\/form-10-k [https:\/\/perma.cc\/3AZ3-CGTR] (last visited Jan. 27, 2025).<\/p>\n

[17]<\/a> 17 C.F.R. \u00a7 229.105(a).<\/p>\n

[18]<\/a> In re Facebook Sec. Litig.<\/em>, 87 F.4th at 944 (emphasis added).<\/p>\n

[19]<\/a> Id.<\/em> at 948 (emphasis added).<\/p>\n

[20]<\/a> Id.<\/em> at 945 (noting that Facebook\u2019s stock price \u201cdropped nearly 18%\u201d in the week after the news reports and reflected a \u201closs of more than $100 billion in market capitalization\u201d).<\/p>\n

[21]<\/a> Facebook agreed to settle a virtually identical lawsuit brought by the SEC in 2019 for $100 million. See <\/em>Press Release, Securities and Exchange Commission, Facebook to Pay $100 Million for Misleading Investors About the Risks It Faced from Misuse of User Data (Jul. 24, 2019), https:\/\/www.sec.gov\/newsroom\/press-releases\/2019-140 [https:\/\/perma.cc\/ES58-SQ2Z].<\/p>\n

[22]<\/a> The FTC imposed a $5 billion penalty and new privacy requirements on Facebook in 2019 for violating a previous FTC order preventing consumer deception. See <\/em>Press Release, Federal Trade Commission, FTC Imposes $5 Billion Penalty and Sweeping New Privacy Restrictions on Facebook (Jul. 24, 2019), https:\/\/www.ftc.gov\/news-events\/news\/press-releases\/2019\/07\/ftc-imposes-5-billion-penalty-sweeping-new-privacy-restrictions-facebook [https:\/\/perma.cc\/DN97-F92C].<\/p>\n

[23]<\/a> See<\/em> In re Facebook Sec. Litig.<\/em>, 87 F.4th at 945\u201346.<\/p>\n

[24]<\/a> See <\/em>Third Amended Consolidated Class Action Complaint for Violations of the Federal Securities Laws at \u00b6 527, In re <\/em>Facebook, Inc. Sec. Litig., 477 F. Supp. 3d 980 (N.D. Cal. 2020) (No. 18-cv-01725). The complaint also alleged that Facebook made false statements about its investigation into Cambridge Analytica\u2019s misconduct and about Facebook users\u2019 control over their data. See<\/em> In re<\/em> Facebook, Inc. Sec. Litig., 87 F.4th 934, 946 (9th Cir. 2023). But these claims are not at issue here.<\/p>\n

[25]<\/a> See In re <\/em>Facebook, Inc. Sec. Litig., No. 18-cv-01725, 2021 WL 6000058 (N.D. Cal. Dec. 20, 2021).<\/p>\n

[26]<\/a> In re Facebook Sec. Litig.<\/em>, 477 F. Supp. 3d at 1018.<\/p>\n

[27]<\/a> Id. <\/em>at 1018\u201319.<\/p>\n

[28]<\/a> In re Facebook Sec. Litig.<\/em>, 87 F.4th at 941.<\/p>\n

[29]<\/a> Because the case was appealed at the motion to dismiss stage, the panel accepted all factual allegations in the complaint as true. See id. <\/em>at 947\u201348.<\/p>\n

[30]<\/a> Id. <\/em>at 949 (citing Glazer Cap. Mgmt., L.P. v. Forescout Techs., Inc.<\/em>, 63 F.4th 747, 764 (9th Cir. 2023)).<\/p>\n

[31]<\/a> See id. <\/em>at 950.<\/p>\n

[32]<\/a> Id.<\/em><\/p>\n

[33]<\/a> See id.<\/em> at 959\u201361 (Bumatay, J., concurring in part and dissenting in part).<\/p>\n

[34]<\/a> See <\/em>Petition for Writ of Certiorari at i, Facebook, Inc. v. Amalgamated Bank, 144 S. Ct. 2629 (No. 23-980) (2024) (Mem.) (emphasis added).<\/p>\n

[35]<\/a> See Facebook, Inc. v. Amalgamated Bank<\/em>, 144 S.Ct. 2629 (Mem) (Jun. 10, 2024) (No. 23-980).<\/p>\n

[36]<\/a> Brief for Respondents at 1, Facebook<\/em>, 144 S.Ct. 2629 (\u201cRespondents have never argued otherwise, and the Ninth Circuit held nothing to the contrary.\u201d).<\/p>\n

[37]<\/a> See <\/em>Brief for Petitioners at 33, Facebook<\/em>, 144 S.Ct. 2629; Brief for Amici Curiae Law Professors and Former Officials of the Securities and Exchange Commission Supporting Petitioners at 3, Facebook<\/em>, 144 S.Ct. 2629; For other amicus briefs, see, e.g.<\/em>, Brief for the Chamber of Commerce of the United States of America and the Securities Industry and Financial Markets Association as Amici Curiae Supporting Petitioner, Facebook<\/em>, 144 S.Ct. 2629.<\/em><\/p>\n

[38]<\/a> 15 U.S.C. \u00a7 78j(b); In re Facebook Sec. Litig.<\/em>, 87 F.4th at 947.<\/p>\n

[39]<\/a> 17 C.F.R. \u00a7 240.10b-5.<\/p>\n

[40]<\/a>\u00a0 See <\/em>Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 165 (2008).<\/p>\n

[41]<\/a> See Facebook Sec. Litig.<\/em>, 87 F.4th at 947 (quoting In re <\/em>NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1052 (9th. Cir. 2014)). Private litigants are also subject to heightened pleading requirements under the Private Securities Litigation Reform Act and Federal Rule of Civil Procedure 9(b). But those provisions are not at issue here. See id<\/em>. at 936.<\/p>\n

[42]<\/a> See <\/em>15 U.S.C. \u00a7 78m(a)(2); 17 C.F.R. \u00a7 229.<\/p>\n

[43]<\/a> 17 C.F.R. \u00a7 229.105(a).<\/p>\n

[44]<\/a> See <\/em>Macquarie Infrastructure Corp. v. Moab Partners, L.P., 601 U.S. 257, 264 (2024).<\/p>\n

[45]<\/a> See <\/em>Omnicare, Inc. v. Laborers Dist. Council Const. Ind. Pension Fund, 575 U.S. 175, 186\u201387 (2015). This inquiry is \u201cobjective\u201d and depends on the \u201ccontext\u201d in which the affirmative statement is made. Id.<\/em><\/p>\n

[46]<\/a> Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 31.<\/p>\n

[47]<\/a> See, e.g.,<\/em> Karth v. Keryx Biopharmaceuticals, Inc., 6 F.4th 123, 138 (1st Cir. 2021); Williams v. Globus Med., Inc.,<\/em> 869 F.3d 235, 241 (3d Cir. 2017) (\u201c[C]ourts are skeptical of companies treating as hypothetical . . . risks that have already materialized.\u201d) (emphasis added); Rombach v. Chang, 355 F.3d 164, 173 (2d Cir. 2004) (\u201cCautionary words about future risk cannot insulate from liability the failure to disclose that the risk has transpired.\u201d).<\/p>\n

[48]<\/a> See <\/em>Petition for Writ of Certiorari at i, Facebook, Inc. v. Amalgamated Bank, 144 S. Ct. 2629 (No. 23-980) (2024) (Mem.).<\/p>\n

[49]<\/a> See id.<\/em> at 18.<\/p>\n

[50]<\/a> See id.<\/em> (citing Bondali v. Yum! Brands, Inc., 620 F. Appx 483, 491 (6th Cir. 2015)).<\/p>\n

[51]<\/a> See id. <\/em>at 19\u201322 (citing cases from the First, Second, Third, Fifth, Tenth, and D.C. Circuits). See also<\/em> Petition for Writ of Certiorari at i, Facebook<\/em>, 144 S. Ct. 2629.<\/p>\n

[52]<\/a> See <\/em>Brief in Opposition at 14\u201315, Facebook<\/em>, 144 S.Ct. 2629; Transcript of Oral Argument at 103, Facebook, Inc. v. Amalgamated Bank, 604 U.S. 4 (2024) (No. 23-980) (Mem.) [hereinafter Oral Arg. Tr.] (\u201cA risk statement can be false or misleading if\u2026 the risk has already materialized, which is our case<\/em> . . . .\u201d).<\/p>\n

[53]<\/a> See id. <\/em>at 14.<\/p>\n

[54]<\/a> A \u201cbare conditional statement\u201d refers to an \u201cif-then\u201d statement that does not disclose past instances of the triggering \u201cif\u201d event, like Facebook\u2019s risk disclosures described supra<\/em> in Part I.B.<\/p>\n

[55]<\/a> Oral Arg. Tr., supra <\/em>note 52, at 4.<\/p>\n

[56]<\/a> Id.<\/em> at 51.<\/p>\n

[57]<\/a> Id.<\/em> at 32, 86.<\/p>\n

[58]<\/a> See id.<\/em> at 83 (noting that in determining when a bare conditional statement implies non-occurrence of a past event, \u201csometimes it’s yes, sometimes it’s no. It depends on the particular context.\u201d);<\/p>\n

[59]<\/a> See id.<\/em> at 41; see also id. <\/em>at 42 (\u201cAssume that I think the Ninth Circuit’s rule goes too far and I think your rule goes too far. It seems to me very hard to articulate what the line is<\/em>.\u201d) (emphasis added).<\/p>\n

[60]<\/a> See id. <\/em>at 99 (\u201cWhy does the judiciary have to walk the plank on this . . . when the SEC could do it . . . ?\u201d); id. <\/em>at 84 (noting that the Court \u201cmay not do as good a job as the SEC\u201d in providing guidance).<\/p>\n

[61]<\/a> Id. <\/em>at 65\u201366.<\/p>\n

[62]<\/a> Id. <\/em>at 78.<\/p>\n

[63]<\/a> Id.<\/em><\/p>\n

[64]<\/a> Id. <\/em>at 81\u201382 (\u201cThere\u2019s been some discussion about the question presented and the extent to which it accurately captures what the court of appeals held. We agree with Respondents that it does not.\u201d); id. <\/em>at 103 (\u201c[T]he other circuits don\u2019t apply the virtual certainty rule in the way that Petitioners say they do.\u201d).<\/p>\n

[65]<\/a> See, e.g.<\/em>, Jessica Corso, Justices Eye Narrowing Disclosure Rules in Meta Investor Suit<\/em>, Law360 (Nov. 6, 2024, 7:56 PM), https:\/\/www.law360.com\/articles\/2257282\/justices-eye-narrowing-disclosure-rules-in-meta-investor-suit [https:\/\/perma.cc\/X2GL-H6VM]; Hannah Webster, Supreme Court Questions Risk Disclosure Arguments in Facebook Case<\/em>, UPI (Nov. 6, 2024, 3:25 PM), https:\/\/www.upi.com\/Top_News\/US\/2024\/11\/06\/us-supreme-court-risk-disclosure\/9501730921424\/ [https:\/\/perma.cc\/ED7B-347M].<\/p>\n

[66]<\/a> See <\/em>Michael E. Solimine & Rafael Gely, The Supreme Court and the DIG: An Empirical and Institutional Analysis<\/em>, 2005 Wis. L. Rev. 1421, 1421 (2005).<\/p>\n

[67]<\/a> 603 U.S. 324 (2024) (Nos. 23-726, 23-727).<\/p>\n

[68]<\/a> See <\/em>Wen W. Shen, Cong. Rsch. Serv., LSB11196, Supreme Court Allows Emergency Abortions in Idaho but Leaves Litigation Unresolved (2024), https:\/\/crsreports.congress.gov\/product\/pdf\/LSB\/LSB11196.<\/p>\n

[69]<\/a> 604 U.S. 20 (2024).<\/p>\n

[70]<\/a> For an explanation of NVIDIA <\/em>and why the Court may have DIGed it, see <\/em>Virginia Milstead & Mark Foster, The Supreme Court DIGs Securities Case, Leaving Important Questions Unanswered<\/em>, Reuters (Jan. 6, 2025, 9:17 AM), https:\/\/www.reuters.com\/legal\/legalindustry\/supreme-court-digs-securities-cases-leaving-important-questions-unanswered-2025-01-06\/.<\/p>\n

[71]<\/a> See, e.g.<\/em>, Steve Vladeck, 98. Why is the Court\u2019s Docket Shrinking?<\/em>, One First (Sept. 9, 2024), https:\/\/www.stevevladeck.com\/p\/98-why-is-the-courts-docket-shrinking [https:\/\/perma.cc\/T8J3-KDKQ].<\/p>\n

[72]<\/a> See <\/em>Kevin Russell, Practice Pointer: Digging into DIGs<\/em>, SCOTUSBlog (Apr. 25, 2019, 1:21 PM), https:\/\/www.scotusblog.com\/2019\/04\/practice-pointer-digging-into-digs\/ [https:\/\/perma.cc\/7MLV-KVVT].<\/p>\n

[73]<\/a> See <\/em>Oral Arg. Tr., supra <\/em>note 52, at 31 (\u201c[B]ecause we know that no harm occurred from the initial misuse of the data by Cambridge Analytica, this is an easy case even under [the virtual certainty test].\u201d).<\/p>\n

[74]<\/a> See id. <\/em>at 65.<\/p>\n

[75]<\/a> See In re<\/em> Facebook, Inc. Sec. Litig., 87 F.4th 934, 949 (9th Cir. 2023),<\/p>\n

[76]<\/a> See <\/em>Petition for Writ of Certiorari, supra <\/em>note 34, at 26.<\/p>\n

[77]<\/a> Id. <\/em>at 18.<\/p>\n

[78]<\/a> See <\/em>Joseph A. Grundfest, Quantifying the Significance of Circuit Splits in Petitions for Certiorari: The Case of Securities Fraud Litigation<\/em>, Rock Ctr. for Corp. Gov. (Mar. 20, 2024), https:\/\/securities.stanford.edu\/academic-articles\/20240320-quantifying-the-significance-of-circuit-splits-in-petitions-for-certiorari.pdf.<\/p>\n

[79]<\/a> See <\/em>Oral Arg. Tr., supra <\/em>note 64.<\/p>\n

[80]<\/a> See <\/em>Oral Arg. Tr., supra <\/em>notes 61\u201364.<\/p>\n

[81]<\/a> See <\/em>Macquarie Infrastructure Corp. v. Moab Partners, L.P., 601 U.S. 257, 266 (2024).<\/p>\n

[82]<\/a> Oral Arg. Tr., supra <\/em>note 51, at 78; See generally <\/em>Kevin LaCroix, Predicting Securities Suit Case Outcomes<\/em>, D&O Diary (May 2, 2012), https:\/\/www.dandodiary.com\/2012\/05\/articles\/securities-litigation\/predicting-securities-suit-case-outcomes\/ [https:\/\/perma.cc\/3Z28-KLAJ] (presenting dismissal or settlement as a binary in the analysis of securities fraud class action outcomes).<\/p>\n","protected":false},"excerpt":{"rendered":"

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