In a significant development, the US Supreme Court has agreed to review a multibillion-dollar shareholder lawsuit against Meta Platforms Inc., formerly known as Facebook, concerning allegations of investor deception in the infamous Cambridge Analytica data-harvesting scandal. The lawsuit accuses the company of misleading investors by inadequately disclosing the risks associated with the misuse of user data.

The investors claim that revelations regarding the scandal led to two substantial price drops in 2018, resulting in Meta Platforms losing over $200 billion in market capitalization. The case has the potential to reshape the corporate disclosure landscape and establish new legal guidelines for risk disclosure.

Several business groups, led by the influential Chamber of Commerce, have urged the Supreme Court to take up the case, arguing that claims related to risk disclosure have given rise to numerous baseless securities-fraud suits. The Securities and Exchange Commission (SEC) has mandated companies to disclose material factors that could pose investment risks since 2005.

The controversy surrounding Cambridge Analytica first surfaced in December 2015 when it was revealed that the British firm had utilized a database of information obtained from Facebook users to aid Senator Ted Cruz's presidential primary campaign. Despite initiating an investigation, Facebook downplayed the risk of a breach during that time.

Shareholders claim that Facebook later confirmed that Cambridge Analytica obtained personal data from over 30 million users without their consent. They further allege that the company characterized the risk as hypothetical until March 2018 when it released a statement in an attempt to pre-empt extensive coverage by The New York Times and The Guardian. The investors argue that these revelations led to a significant drop in Meta Platform's share price, generating shock and outrage among the public.

The shareholders also assert that the company's insufficient disclosures contributed to a historic decline in the company's value in July 2018. The 9th US Circuit Court of Appeals found the allegations substantial enough to allow the lawsuit to proceed.

Meta Platforms, however, maintains that it had no reason to believe that the scandal would harm the company, citing that details had already been published without impacting the stock price. The company argues that the 9th Circuit's ruling would necessitate the disclosure of past risks even if they do not pose any known present threat to the business.

If the case goes to trial and Meta Platforms fails to prevent it, the company could potentially face a hefty $2 billion settlement, according to Bloomberg Intelligence analyst Matthew Schettenhelm.

The US Supreme Court's decision to examine this high-profile lawsuit carries significant implications for the future of corporate risk disclosure obligations. As the legal battle unfolds, the outcome could shape the standards by which companies address and inform investors about potential risks associated with their operations.

The case, known as Facebook v. Amalgamated Bank, has been categorized as 23-980.