One Size Does Not Fit All-Meta’s Petition For Certiorari Denied By The Supreme Court

On November 22, 2024, the United States Supreme Court dismissed Meta’s[1] (or “the Company”) appeal of the Ninth Circuit’s decision that allowed a 2018 securities fraud lawsuit to move forward against the Company for failing to disclose risks related to a prior data breach.  The case, Facebook v. Amalgamated Bank, No. 23-980, 604 U.S. --- (2024) (“Facebook”), centers around allegations made by a class of investors (“Plaintiffs”) that Meta and its officers (collectively “Defendants”) misled the market by disclosing that a data breach could significantly impact the Company but failing to disclose that this exact event had already occurred, and that Meta’s user data had been compromised back in 2016.  In response to these allegations, Meta argued that it was under no obligation to inform the market about the 2016 data breach event because it had already made disclosures about risks related to potential data misuse.

                Initially, the United States District Court for the Northern District of California (San Jose Division) agreed with the Company and dismissed the investors’ claims finding that Plaintiffs failed to allege that when Defendants made statements about the hypothetical risk of a data breach event, its “processes were still allowing bad actors to cause harm to innocent users.”[2]  Plaintiffs quickly appealed the District Court’s decision and the Ninth Circuit found that Meta’s risk disclosures were misleading because they "represented the risk of improper access to or disclosure of Facebook user data as purely hypothetical when that risk had already transpired.”[3]

                Following the Ninth Circuit’s decision, reversing the District Court’s dismissal, Meta petitioned for Certiorari to the Supreme Court of the United States arguing, in pertinent part, that “a risk disclosure is not misleading when it omits past events that pose no known risk of business harm.” [4]

                On November 6, 2024, the United States Supreme Court held oral argument, where a majority of the Justices expressed skepticism over Meta’s proposed bright-line or “one-size fits all” rule because the facts here were simply unique.  Shortly thereafter, the Court issued a single sentence decision, dismissing Meta’s appeal in a per curiam order, holding that “the writ of certiorari is dismissed as improvidently granted.”[5]

                The colloquy between counsel and the Court at oral argument clearly signals that (1) a “one-size fits all” approach is not appropriate when assessing the adequacy of a company’s risk disclosures and (2) risk disclosures couched in hypothetical terms are insufficient when those risks already materialized.