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Meta Sued by Investors for Alleged Teen Mental Health Damage

Posted by Chris C. Han | Nov 30, 2021 | 0 Comments

Meta Platforms, Inc., formerly known as Facebook, Inc., is on the receiving end of an investor-led class-action lawsuit over its alleged failure to disclose internal study results indicating Instagram's detrimental impact on teen mental health. The case also complains that the company downplayed these findings.

Investors submitted their petition under Perez v. Meta Platforms, Inc., et al. to the U.S. District Court for Northern California and filed by the court under case number 3:21-CV-09041 on November 22, 2021. You can review recent docket activity here.

Perez v. Meta Lawsuit Background

The lawsuit highlights numerous revelations made public by whistleblower Frances Haugen. This case is one of several alleging that caused Facebook stock prices to fall throughout September and October 2021, materially damaging investors claiming Meta materially misrepresented and omitted relevant information that influences shareholder decisions.

The complaint said that 2019 internal surveys revealed that the company aggravated negative body image issues for one-third of teenage Instagram users. Facebook allegedly also knew those survey respondents blamed the platform for increasing common mental health issues, such as depression and anxiety.

Rather than implementing changes to protect the health and safety of teenage females, Instagram relied on techniques designed to increase the frequency and engagement of young Instagram users that resulted in harm.

Alleged Material Omissions Gave Investors Standing

The lawsuit also asserts that Facebook's failure to disclose internal studies in its subsequent annual reports constitutes a material omission of information that influences investors' decisions to buy or sell company stock, which is a securities law violation under § 10(b) of the Securities Exchange Act and the Securities and Exchange Commission (SEC) Rule 10(b)-5. For the exact text of these laws, please see this web page.

Eight AGs File Additional Consumer Protection Complaints

The filing states that Facebook's failure to act on this information has prompted eight state attorney generals, including California and Florida, to investigate the social media site for potential consumer protection law violations.

There is also the mention of an application called “FaceMash” that Facebook's founder Mark Zuckerberg developed in college, allowing other students to vote on female classmates. Plaintiffs allege that, even before the founding of Facebook, Zuckerberg engaged in female objectification.

According to the lawsuit, Facebook made “misleading” statements implying that communities grew organically, or without company or paid influence, when, in fact, the company used harmful techniques to increase teenage female engagement rates.

Stock Prices Plummet After Allegations Surface

Facebook's shares traded at $376 per share in September 2021 before the misinformation attracted attention in a Wall Street Journal article. Following the report, the share price fell to $312 by October 27, dropping at least $64 per share and billions in losses. The lawsuit represents and litigates for all individuals and entities who purchased publicly traded securities between April 29 and October 21, 2021.

Companies facing securities law litigation can work with legal representation to devise a case strategy. If your team needs legal advice, contact HAN LLP to schedule a meeting here.

About the Author

Chris C. Han

Founding & Managing Partner

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