What if Cambridge Analytica Sued Facebook?

Perhaps yes, perhaps no. Let me know what you think after you read the article.

The path to bankruptcy for Cambridge Analytica started unexpectedly and suddenly in March 2018 — as both Facebook and Cambridge Analytica became shorthand for social media personal data breach. Although they might dispute this, I believe this happened by Facebook’s self-inflicted legal wound.

Facebook of course is well-known, owning some of the largest players in social networking, including, Facebook.com, Instagram and WhatsApp. Their top executives, including Mark Zuckerberg and COO Sheryl Sandberg, identify with Democratic party politics, creating a juxtaposition with Cambridge Analytica’s GOP customers that the press has found particularly titillating.

In mid-March 2018, both The New York Times and the The Guardian were about to publish exposés on Facebook’s privacy practices as exploited by Cambridge Analytica. Undoubtedly in an effort to “get ahead” of bad news, Facebook issued what has become an infamous press release. Instead of suppressing the public relations storm, it had an opposite effect — igniting a privacy scandal roiling the entire tech industry.

As Facebook explained it, in 2014–15 Cambridge University professor Dr. Aleksandr Kogan obtained Facebook user data via a survey app that enabled chain access to millions of user’s personal data. Facebook contended this access to user data by Kogan in 2014–15 was improper and demanded that he delete it, along with copies that apparently had been shared with Cambridge Analytica. Both agreed to delete the data and certified that they had completed deletion:

Then came a fraud accusation:

Unfortunately for Facebook, the press release did not stop there and included an acknowledgement that they did not know the truth or falsity of that allegation:

Before completing a promised investigation, Facebook then immediately suspended Cambridge Analytica and their parent company, starting the media storm. The press exploded with the sensational Facebook announcement, painting Analytica as illicit appropriators of millions of Facebook users’ private information. However, that was factually incorrect, and Facebook quickly realized they had sparked an avalanche of questions concerning the data security.

In an effort to tamp down the scandal, Facebook issued a brief clarification he next day (March 17, 2018), stating that actually there had not been a data breach:

In a word, “yes”.

1. Did Facebook make a statement that would be understood to have disparaged Cambridge Analytica?

2. Did Facebook make a public statement?

3. Was the statement was untrue?

4. Did Facebook know that the statement was untrue or act with reckless disregard of the truth or falsity of the statement?

5. Did Facebook know, or should it have recognized, that someone else might act in reliance on the statement, causing financial loss to Cambridge Analytica?

6. Did Cambridge Analytica suffer direct financial harm because someone else acted in reliance on the statement?

7. Was Facebook’s conduct a substantial factor in causing the Cambridge Analytica’s harm?

There could not be much dispute that Facebook actually did make public statements that disparaged Cambridge Analytica, essentially accusing it of fraud. Whether the statements were true would be a factual inquiry, and Analytica already has issued a denial. It is doubtful that Facebook would deliberately have made a false statement, but whether they acted with reckless disregard for the truth would be subject to factual discovery.

Undoubtedly Analytica would argue that Facebook acted before investigating whether Analytica had falsely certified deletion of their data. That could be construed as reckless because the consequence of the public allegation of fraud surely would lead to a decline of public consulting business, and in fact did have that consequence.

I think that a typically prudent business would have assessed that there would be a financial loss to Cambridge Analytica from a fraud accusation. As proven by events, Analytica certainly suffered a direct financial harm, being forced into bankruptcy less that two months following the Facebook announcement. Facebook might argue that sensationalized press articles caused Analytica’s harm not its own press release. However, my review of news reports indicates that the press release was widely cited, and gave credence to accusations being made by an ex-employee of Cambridge Analytica.

Of course, Facebook would have a variety of defenses to an allegation of trade libel — such as whether there was actual malice under the New York Times v. Sullivan, but on balance, none of these defenses would support a motion to dismiss Cambridge Analytica’s hypothetical trade libel complaint.

Who do you think would win?

I am an attorney practicing in this field. One day I wondered “What if?” — and wrote the original, longer version on my law firm’s blog.

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