Can You DIG It?

On Friday, the Supreme Court issued its first decision of the term in an argued case – and it was a DIG, dismissed as improvidently granted, in a one-sentence order. The effort and attention given the case until that resolution can seem frustrating and a waste of judicial resources, although respondents generally should be pleased given that their victory below is thereby preserved.

The case was Facebook, Inc. v. Amalgamated Bank, No. 23-980. The issue involved whether Facebook was sufficiently forthcoming in its securities filings when it failed to mention that a risk has materialized in the past, even if that past event presents no known risk of ongoing or future business harm?

The event in the past that animated this case was Facebook’s sharing of user data of some 30 million users without their permission with a researcher who founded the infamous Cambridge Analytica. The data was originally used by Senator Ted Cruz’s presidential primary campaign to target voters. The data was used to place political advertising on Facebook while covering up its cooperation in the effort. Eventually, Facebook’s role in sharing the data became public, and the Securities and Exchange Commission filed suit against Facebook for misleading investors about the risk it incurred from the episode. Facebook paid a $5.1 billion civil penalty in settlement.

When a class of investors sued to recover damages in a securities action, the district court dismissed, but the Ninth Circuit held that Facebook’s risk statements “represented the risk of improper access to or disclosure of Facebook user data as purely hypothetical when that exact risk had already transpired.” The gist of the opinion scored Facebook for portraying the risk of a breach of private users data as if it did not and could not occur, when it had and when it resulted in a significant drop in stock prices.

The Supreme Court granted certiorari after the petition suggested that a three-way split existed in the circuits. It claimed that the Sixth Circuit took the position that no disclosure of past instances was necessary. It then claimed that six other circuits require disclosure of past risks but only if the company knows it will harm the business. It then asserted that the Ninth Circuit, along required disclosure even if there is no known threat of business harm.

The Brief in Opposition, known as the BIO, asserted that the question presented assumed a factual premise that the Ninth Circuit rejected as unsupported by the record. According to Facebook, when it filed its disclosures with the SEC, the breach was public without adverse consequences. The claimed sequence of events and the lack of adverse public reaction, the BIO asserted, was inconsistent with the Ninth Circuit’s filings. It then claimed that the case did not qualify for certiorari, because the Supreme Court had recently advised that granting certiorari is “imprudent” when the premise of the issue presented “does not hold.” DeVillier v. Texas, 601 U.S. 285, 292-93 (2024).

Even so, the Court granted certiorari, received full briefing, and conducted oral argument earlier this month. When the Court decides to DIG a case, something that happens once or twice a term, it usually does not provide an explanation. The usual assumptions are that the case turned out to be a poor vehicle for resolving the issue, the issue granted turns out not to be the principal basis for the petitioner’s argument in a bait-and-switch stratagem, new developments either in the case or related to the issue changes the need for a decision, or the justices are so divided on what the real issue is that the case no longer looks to them to be what it was when certiorari was granted.

In this case, it seems likely that the arguments about what the Ninth Circuit did or did not decide that were made in the BIO became clearer to the justices and resulted in the DIG. Still, it often seems that a more careful review of the BIO would certainly result in fewer cases that are granted for plenary review only to be rejected without decision through a DIG with the result being the same as it would have been if certiorari had been denied.