Skip to main content

Twitter to Pay $809.5 Million to Settle Shareholder Lawsuit | October 2021

October 2021 | Volume 13, Issue 3

Read the full article from ABC News.

According to the article, Twitter said recently it will pay $809.5 million to settle a consolidated class-action lawsuit alleging that the company misled investors about how much its user base was growing and how much users interacted with its platform.

The San Francisco company said the proposed settlement, which must still be signed off by a judge, resolves all claims against it without Twitter admitting any wrongdoing. The original lawsuit filed in 2016 by Twitter investor Doris Shenwick claimed that Twitter executives “knowingly made inaccurate public statements regarding these metrics, and failed to disclose internal information about them, resulting in an inflated share price that fell when the truth about user engagement became known."

The company said it plans to use cash on hand to pay the settlement in the fourth quarter of 2021. It expects to record a one-time charge as a result.

According to the lawsuit, in 2014 Twitter executives said that the site's monthly average user base was expected to increase significantly to “to over 550 million" in the intermediate-term and “over a billion" over the longer term.

In 2019, Twitter stopped reporting monthly user figures. At last count that spring, that number was at 330 million. Now, Twitter reports only daily user figures.

And in 2017, Twitter said it had been overstating its monthly user numbers by mistake because it was including users of a third-party app it should not have.

Discussion Questions

  1. What is a class action lawsuit?

    A class-action lawsuit occurs when numerous plaintiffs with sufficient “commonality of interest” join in filing one lawsuit against a defendant for alleged wrongdoing that has harmed the entire class. To successfully pursue a class-action lawsuit, the class must be certified by a judge who has determined that the plaintiffs in fact have sufficient commonality of interest.
  2. In your opinion, strategically in terms of litigation outcomes, would it be better to pursue an individual lawsuit or a class action? Explain your response.

    This is a decision that an individual plaintiff must make. Obviously, the advantage of joining a class action would be the “power in numbers” associated with hundreds or thousands of plaintiffs joining forces against the defendant. The disadvantage to joining a class action would be that any recovery must be shared proportionally with the other plaintiffs.
  3. Regarding the information provided in the article, was this lawsuit based on allegations of fraud? Explain your response.

    Yes, the lawsuit was based on allegations of fraud. To prove a fraud case, the plaintiff(s) must establish, by the greater weight of the evidence:

    a. The defendant made a false statement of fact;
    b. The defendant made the false statement with knowledge of its falsity or with reckless indifference as to the truth of the statement;
    c. The defendant made the false statement with the intent that the plaintiff rely on the false statement;
    d. The plaintiff in fact relies on the false statement; and
    e. The plaintiff experiences harm as a result (physical and/or economic).

    In the subject case, the plaintiffs allege that Twitter misled investors about how much its user base was growing and how much users interacted with its platform. Those allegations, if proven, would amount to fraud.