What If Cambridge Analytica Sues Facebook For Commercial Defamation?

Mitchell P. Brook | Attorney specializing in intellectual property and First Amendment law

Now that Cambridge Analytica has been driven into bankruptcy by Facebook’s data breach scandal, let’s imagine “what if?” What if Cambridge Analytica sues Facebook for its words and actions that apparently led to its bankruptcy?

The path to bankruptcy for Analytica appears to have started with Facebook’s inflammatory press release announcing that Facebook banned Analytica from its flagship social network. We can speculate on why Facebook chose to ban Analytica in such a fantastic fashion, but the aftermath was a disaster for both players – Facebook’s stock price plunged 14 percent in the week following its press release, and seven weeks later Analytica declared bankruptcy.

The players

Cambridge Analytica

Cambridge Analytica was a relatively small political data science consultancy based in the United Kingdom. It was a newcomer to the data science field and not particularly respected. For example, during an interview with 60 Minutes last fall, the Trump campaign’s digital media director Brad Parscale dismissed the company’s psychographic method saying “I just don’t think it works.” (Consider the contrast with some media reports which puffed Analytica as some kind of evil genius of data mining.)

Facebook

Facebook of course is well-known, owning some of the largest players in social networking, including Facebook.com, Instagram and WhatsApp. The social media behemoth’s top executives, including Mark Zuckerberg and COO Sheryl Sandberg appear to identify with Democratic Party politics, creating a juxtaposition with Cambridge Analytica’s GOP customers (such as President Donald Trump, Sen. Tom Cotton and Sen. Ted Cruz) that the press found particularly titillating.

The data-mining controversy

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. Perhaps — perhaps — in an effort to “get ahead” of the coming bad news, Facebook issued what has become an infamous press release. Instead of suppressing the public relations storm, the press release had an opposite effect — igniting a privacy scandal still roiling the entire tech industry.

The initial press release came Friday, March 16, 2018 and announced: “We are suspending Strategic Communication Laboratories (SCL), including their political data analytics firm, Cambridge Analytica, from Facebook.”

As Facebook itself explained it, in 2014-15, Cambridge University professor Dr. Aleksandr Kogan obtained Facebook user data via a survey app. 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 completion. Then, in the controversial part of Facebook’s statement, came the fraud accusation: “Several days ago, we received reports that, contrary to the certifications we were given, not all data was deleted.”

Unfortunately for Facebook, the press release did not stop there and included an acknowledgement that Facebook did not know the truth or falsity of that allegation: “If true, this is another unacceptable violation of trust and the commitments they made.” Rather than investigating before acting, Facebook suspended Analytica, “pending further information.”

Many media outlets 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 executives seem to have quickly realized they had sparked an avalanche of questions concerning the data security. The next day (March 17, 2018) they issued a brief clarification, stating that actually there had not been a data breach: “The claim that this is a data breach is completely false. Aleksandr Kogan requested and gained access to information from users who chose to sign up to his app, and everyone involved gave their consent. People knowingly provided their information, no systems were infiltrated, and no passwords or sensitive pieces of information were stolen or hacked.”

However, by then, the damage had been done.

So, can Cambridge Analytica sue Facebook for trade libel?

Now for the “What if?”

What if Cambridge Analytica decided to get compensated for Facebook’s defamatory statements. Corporate defamation or trade libel is governed by state law, and varies from state to state. Seven considerations typically come into play. Each one of them appears to provide an opening for a hypothetical commercial defamation case of Cambridge Analytica v. Facebook:

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

Yes. Alleging fraud in the certification of data deletion certainly is disparaging.

2. Did Facebook make a public statement?

Of course.

3. Was the statement untrue?

Perhaps. Analytica already denied it, and Facebook said it needed to investigate further.

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

Yes. Facebook stated that it did not know if its fraud allegation was true. However, by suspending Cambridge Analytica, it may have created an impression that Facebook knew, and it was acting with reckless disregard of the truth or falsity of its statements.

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

Yes. In the divided political atmosphere of our times, Facebook should have known that its public statements ahead of its investigation would devastate Cambridge Analytica’s business.

6. That Cambridge Analytica suffered direct financial harm because someone else acted in reliance on the statement; and

Yes. As NBC News reported, “nearly all of Cambridge Analytica’s 50 or so clients abandoned the data analytics company once the scandal hit.”

7. That Facebook’s conduct was a substantial factor in causing the Cambridge Analytica’s harm.

Yes. Facebook would likely argue that the media misconstrued its statements. However, it would be very hard to think that the credence Facebook itself provided to the sensationalized media reports had no impact.

Of course Facebook would have a variety of defenses to an allegation of trade libel. Those defenses, which certainly may succeed, include protected speech under the libel laws, and truth (if the speech is correct). However, those defenses certainly are not silver bullets in the commercial context as here. So, just imagine, “What if?” there winds up being a Cambridge Analytica v. Facebook case.

Mitchell P. Brook is an attorney specializing in intellectual property and First Amendment law.


The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.

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