Investors and Technology Industry Policy Advocates Asking SCOTUS to Protect Shareholders’ Rights to Information Concerning Key Data-Security Failures

October 02, 2024

Facebook Investors and Corporate Accountability Watchdogs Ask Court to Recognize Critical Importance of Data-Security Risks that Led to the Cambridge Analytica Data Breach Scandal

CHICAGO, October 1, 2024– Corporate accountability nonprofit Ekō, leading responsible investment firm NorthStar Asset Management, and technology-industry accountability nonprofit the Tech Justice Law Project filed an amicus brief today in the case of Facebook, Inc v Amalgamated Bank, which will be heard by the US Supreme Court this session.

The case arises out of the massive Facebook-Cambridge Analytica data breach scandal in which over 87 million Facebook users’ personal data was misappropriated and misused. When news of that scandal broke in 2018, Facebook lost over $100 billion of shareholder value, was forced to pay over $5 billion in penalties to federal regulators, and Facebook suffered a massive loss of user trust and revenue. But Facebook knew about the breach in 2015, falsely denied Cambridge Analytica’s misconduct at the time, and failed to put in guardrails to ensure that user data was protected and not misused moving forward.

After the Court of Appeals ruled that Facebook should face liability for failing to disclose the data breach, the Supreme Court agreed to consider whether companies like Facebook must disclose that similar risks have already come to pass. The amici filed this brief to stress to the Court that the data-security issues that the Cambridge Analytica disclosed are critically important to Facebook’s users, the technology community, and the public. In turn, as amici discuss in their brief, these data-security and privacy issues are paramount to company and shareholder value, and directly implicate Facebook investors’ right to have truthful and timely information relevant to buying, selling and voting of stock.
Amicus Ekō’s members have for years raised concerns about Facebook's failure to protect users' data and privacy – and about the risks this failure presents to investors like themselves. Yet, for years, Facebook failed to let users and shareholders know of the Cambridge Analytica breach until it was exposed by the media.

“Not only did the Cambridge Analytica data breach violate Facebook users' rights, it also exposed Facebook and its investors to substantial risk,” noted Christina O’Connell, Senior Manager of Shareholder Engagement for Ekō. “Now the company wants our Supreme Court to bless its failures to inform consumers and investors even though those failures led to historic fines and continuing litigation around the world. And the company continues to show a lack of respect for–and transparency around–data protection and disclosure regulations both here and in the EU.”
This case takes place as regulators crack down globally on Meta’s abusive data practices. Earlier this year, Meta faced significant administrative challenges, including the European Data Protection Board’s (EDPB) ruling against its 'pay or okay' model, and decisions in Europe and Brazil to halt its data harvesting plans for its AI training purposes. In Brazil, São Paulo’s Federal public prosecutor and major civil society organizations are suing the social media company for over $318 million for breaching data protection laws.

Amicus NorthStar Asset Management, has led efforts to address Facebook’s problematic corporate governance, both before and after the Cambridge Analytica scandal broke.

Julie Goodridge, Founder and Chief Executive Officer of NorthStar, remarked that “For almost a decade we have been concerned about proper corporate governance at Facebook. While it is true that founders play an important part in idea development, tracking impact and defining guardrails is vital in the social media and technology space. The Cambridge Analytica breach is a direct result of an immature understanding of operational risk and too much voting power vested in the CEO, which obstructs investor efforts to hold him and the board accountable for massive risk management failures .”

Meetali Jain, Director of the Tech Justice Law Project, added, “Beyond Cambridge Analytica, Meta has demonstrated a pattern and practice of failing to disclose critical information about the risks of its products. Although the company itself has known about those risks for years, the public has learned about the company’s data-security failures, and other risks, only through the brave action of whistleblowers, journalists, and advocates–such as the effect of Instagram on girls’ mental health, the prevalence of anti-vaccine misinformation, and the use of Facebook for human trafficking. Meta’s continued failures to reveal such risks demonstrates that the company cannot be relied upon to make full and fair disclosures on its own.”

Adam Hollander and Elena Roberts of Slarskey LLC and Sanford Lewis of Sanford Lewis & Associates are representing the amici.

Ekō is a global movement of consumers, investors, and workers all around the world, united together to hold corporations accountable for their actions and to forge a new, sustainable and just path for our global economy.

NorthStar Asset Management, Inc. is a wealth management company based in Boston with a focus on socially responsible investing. At NorthStar, creative shareholder engagement is a positive force for change.

Tech Justice Law Project works with a collective of legal experts, policy advocates, digital rights organizations, and technologists to ensure that legal and policy frameworks are fit for the digital age.