In re Facebook, Inc. Secs. Litig., 2019 U.S. Dist. LEXIS 166027 (N.D. Cal. Sept. 25, 2019):

This lawsuit stems from the revelation that Cambridge Analytica acquired the private Facebook data of millions of users and that, upon learning of this leak, Facebook allegedly attempted to suppress evidence of the breach contrary to its stated privacy policy.

Plaintiffs are persons who purchased shares of Facebook common stock between February 3, 2017 and July 25, 2018 (the "Class Period"), who believe that Mark Zuckerberg, Sheryl K. Sandberg, and David M. Wehner, collectively Defendants, made materially false and misleading statements and omissions in connection with the purchase and sale of Facebook stock. See Consolidated Complaint ("Compl.") ¶ 1, Dkt. 86. They allege that Defendants violated Section 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 promulgated thereunder because Defendants made guarantees that the Cambridge Analytica, and related data-privacy scandals, would not impact Facebook stock while knowing this to be false. Specifically, Plaintiffs focus on Defendants' statements and omissions "concerning Facebook's privacy and data protection practices" and their impact on Facebook's [*5]  stock price during two time periods: March and July 2018.

Defendants have filed a motion to dismiss the lawsuit arguing that Plaintiffs have not, and cannot, meet Rule 9(b)'s heightened pleading requirements for securities fraud and instead allege "an overarching hindsight theory." Motion to Dismiss ("Mot.") at 2, Dkt. 93. Defendants make four main arguments all centered around Plaintiffs' inability to meet the elements of securities fraud. First, Defendants argue Plaintiffs have not pled an actionable misstatement or omission because they have not identified any false statements. Defendants argue the 36 "actionable" statements or omissions Plaintiffs raise are, in fact, neither actionable nor fraudulent because Plaintiffs make no attempt to plead that Defendants lied or mislead investors. As explained infra Section III.C.1.a., as to all the allegations, only Statement 22 is actionable.

Second, Defendants argue Plaintiffs have not pled a strong inference of scienter because Plaintiffs do not (1) relate the alleged misstatements to any conduct establishing scienter or (2) show facts that the Defendants knew the challenged statements were false. Further, Defendants contend that Plaintiffs offer [*6]  only conclusions without alleging any specific facts to support these conclusions. As explained infra Section III.C.2. the one actionable Statement, Statement 22 lacks scienter because Plaintiffs do not allege with sufficient particularity that Defendant Sandberg made the statement knowing it was false.

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