b'In re Facebook, Inc. Securities Litigation,to July 11, 2018 indicating users were increasingly Case No. 5:18-cv-01725, 2020 WL 4569443disengaging with Facebook in the aftermath of the (N.D. Cal. Aug. 7, 2020)Cambridge Analytica scandal, with more than half of Data Breach Facebook users changing their privacy settings to share less with Facebook.Facebook, Inc. operates the worlds largest socialOn September 25, 2019, the court granted the networking company. Between 2016 and early 2018,defendants motion to dismiss the consolidated Facebook warned in SEC filings that [s]ecurityamended complaint, with leave to amend, on breaches and improper access to or disclosure ofthe grounds that only one of thirty-six alleged our data or user data, or other hacking and phishingmisstatements or omissions was actionable, and that attacks on our systems, could harm our reputationplaintiffs failed to allege scienter as to that statement. and adversely affect our business. During the sameThe court found the remaining 35 challenged period, Facebook maintained a data privacy policy,statements to be inactionable because they were either which stated, Your trust is important to us, which isforward-looking with meaningful cautionary language why we dont share information we receive about youprotected by the PSLRAs safe harbor, constituted with others unless we have: received your permission;corporate optimism or puffery, or plaintiffs failed to given you notice, such as by telling you about it inplead falsity. this policy; or removed your name and any otherOn November 15, 2019, plaintiffs filed their second personally identifying information from it. Thereafter,amended complaintadding new allegations based beginning in March 2018, media reports stated that aon allegedly false and misleading statements made political consulting firm, Cambridge Analytica, gatheredafter the initial complaints were filedalleging that personal information of 50 million Facebook usersdefendants made 83 materially misleading statements without permission or proper disclosures to developor omissions and adding an alleged violation of Section user profiles to target Facebook users with pro-Trump20A of the 1934 Act. Defendants moved to dismiss the and pro-Brexit ads. Further reports of U.S. and foreignsecond amended complaint, arguing that the disputed government investigations into the matter followed, andstatements were not false or misleading or else were Facebooks stock price declined 20.3% between Marchpuffery or protected forward-looking statements, 19, 2018 and March 27, 2018.that the plaintiffs failed to plead a strong inference On March 20, 2018, investors filed securities classof scienter, and that plaintiffs failed to plead loss action lawsuits against Facebook and its officerscausation. The court dismissed the second amended alleging that defendants made materially false and/orcomplaint, with leave to amend, holding that while 26 misleading statements about Facebooks handlingalleged misstatements or omissions were actionable, of user data in violation of Sections 10(b) and 20(a) ofplaintiffs failed to plead sufficient facts establishing the 1934 Act and Rule 10b-5 promulgated thereunder.scienter for one of them and failed to allege facts Thereafter, in April and June 2018, Facebook officersestablishing loss causation for the other 25. testified at government hearings that users controlThe court found the remaining 57 statements not the applications that can use their data and whoactionable. For example, the court held that the CEOs sees their content, and that it worked hard to ensurestatement that Facebook worked hard to make sure compliance with a 2012 FTC consent order requiringit was compliant with a Federal Trade Commission it to obtain express consent from users before sharingconsent decree was the exact type of vague, their data beyond their privacy settings. On April 25,unverifiable statement that is typically held to be not 2018, Facebook released favorable first quarter 2018actionable because no reasonable investor would earnings and held an earnings call stating that althoughrely on such a statement. The court found statements a handful of advertisers had paused spend afterconcerning defendants anticipation and predictions the Cambridge Analytica news, this did not appear toof how the GDPR would impact Facebook were be a meaningful trend. It also discussed the potentialinactionable forward-looking statements protected by impact of the General Data Protection Regulationthe PSLRAs safe harbor provision. The court further which had recently taken effect and stated that it wouldfound the remaining fifty-four statements not actionable not pose an issue because Facebook was alreadybecause plaintiffs failed to plead facts establishing almost compliant.that they were false. For example, the court found In its July 25, 2018 Form 10-Q for 2Q 2018 earnings,insufficient plaintiffs allegations that Facebooks risk Facebook announced profitability, user growth,disclosures about potential harm from a data breach and revenue growth was lower than expected. Thewere materially misleading because plaintiffs failed following day, Facebooks stock dropped by 19%.to allege that the Cambridge Analytica data breach On September 5, 2018, pew research center issuedwas already affecting Facebook at the time these a report based on a study it conducted from May 29risk disclosures were made. The court also found 34'