In House - The FindLaw Corporate Counsel Blog

Facebook Data Mining Scandal Becomes Shareholder Class Action

While most of the internet public was outraged when news of the Cambridge Analytica scandal broke, one Facebook investor and shareholder decided to take legal action.

The shareholder, Fan Yuan, filed a federal class action in the Northern District Court of California. The lawsuit claims that Facebook's privacy failures resulted in the 10 percent drop in Facebook's share price, causing significant losses to its shareholders. As noted by comedian and the Late Show host Stephen Colbert, that's equates to a $36 billion dollar tumble.

Data Mining Debacle

If you haven't followed this recently developing story, apparently one of those annoying personality quizzes on Facebook actually was a data mining program. Making matters worse, not only did the quiz mine your data, it mined data from your Facebook friends as well. And while you may have blindly clicked the "agree" button when the quiz asked to access your info, your friends didn't have that same option.

For many people, the thought of some Facebook app doing some data mining might not be too troubling. However, what came out of the recent scandal that the data wasn't just used for the silly quiz, it was sold to Cambridge Analytica, who in turn used it to help President Trump during his 2016 campaign. Notably though, Facebook's policies prohibit apps from selling data, and in fact, require apps to delete the data after a period of time or inactivity. Furthermore, Facebook received affirmative responses when it asked the quiz's maker and Cambridge Analytica whether the data had been deleted.

Owning Up to Failure

Days after being called out for on their silence, Mark Zuckerberg and Cheryl Sandberg both issued statements. While Zuckerberg appears to be remorseful, and accept responsibility for the privacy failure and breach of trust, he did not apologize

Instead, both CEOs focused on moving forward and not repeating the same mistake again. Interestingly, the shareholder lawsuit alleges other failures that show Facebook's failure to safeguard private information. Additionally, the lawsuit heavily relies on a settlement agreement with the FTC governing Facebook's use of users' private info.

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