Facebook Inc (NASDAQ:FB) and its chief executive Mark Zuckerberg has won dismissal of an investor lawsuit accusing them of deceiving investors about the likely impact of a privacy breach on its stock price, though the investors will have a chance to refile their case, according to media reports.
On its website, Reuters reported that US District Judge Edward Davila in San Jose, California said the investors had failed to allege that Facebook or its executives knowingly made false statements that led to investor losses.
The class action lawsuit focused on a privacy breach, first reported in December 2015, that allowed UK-based consulting firm Cambridge Analytica access to data for an estimated 87 million Facebook users.
In March 2018, Facebook shares dropped sharply after media reports said Facebook was still allowing third parties to access user data, and that data from the Cambridge Analytica breach had been used in connection with President Donald Trump’s election campaign.
In July 2018, Facebook’s slumped again the social media company revealed in its quarterly earnings report that growth in the number of active users was slowing and total revenues was declining.
The investors claimed in their lawsuit that Facebook and its executives made dozens of statements downplaying the effect that the Cambridge Analytica leak and related user privacy issues would have on its stock price.
Davila, however, ruled that the investors had failed to identify specific instances of the company or its executives knowingly making false statements, Reuters said.
It noted that the judge gave the investors until October 26 to file a new version of their complaint, saying it was “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.”
Facebook is separately facing a nationwide lawsuit from users seeking to hold the company liable under various state and federal laws for allowing third parties to access their data.
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