Investors sue Meta for alleged failure to protect mental health of users

Shareholders filed a class action lawsuit against Meta (formerly Facebook) in the US District Court for the Northern District of California on Monday. The lawsuit is based on recent claims by Facebook whistleblower Frances Haugen, who revealed that Facebook continued to implement techniques to increase engagement with young people after internal research revealed that those techniques were causing body issues, anxiety, and depression.

The named plaintiff in the lawsuit is Juan Perez, a Meta stockholder who bought stock between April and October of this year. The lawsuit is structured as a class action suit where the plaintiffs are any person who bought Meta stock during that period of time.

The period was chosen because it coincides with Facebook SEC filings, shareholders meetings, and earnings calls where the company and its top executives made statements that Perez calls materially false and misleading. The class period terminates with the publishing of the Wall Street Journal’s articles based on the Facebook whistleblower’s statements. Perez argues that the material falsity of Meta’s statements was uncovered by these articles.

A shareholder can file suit against a company they hold stock in based on false and misleading statements. False and misleading statements about a security violate Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10(b)-5, the basis for modern securities law. A 10(b) suit is usually called securities fraud.

The lawsuit will continue as Meta files a reply to Perez’s complaint and shareholders register as part of the class.