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Meta’s celebrities will testify publicly this week in Delaware’s legal court this week on shareholders’ allegations that they are directly responsible for the management of billions of sanctions paid by social media groups for data breaches.
Two of the most well-known executives of Facebook’s parent company, CEO Mark Zuckerberg and former Chief Operating Officer Sheryl Sandberg, are listed as witnesses for the eight-day trial, which begins Wednesday.
Longtime director and investor Mark Andreesen and former board member Jeff Zaens, a former top advisor to former US President Joe Biden, will also be appearing. Other director defendants include investors Peter Thiel and Kenneth Shenaugh, former CEO of American Express, and Reed Hastings, co-founder of Netflix.
The lawsuit brought by three minority meta shareholders is the first time a complaint against the board’s negligence in a corporate scandal has reached trial in Delaware, and most such cases will be dismissed immediately.
In a small number of instances, the company settled lawsuits against board supervision claims. Most notably, a Boeing director who agreed to pay $237.5 million over shareholders accused the highest level of the Air Titans of failing to prevent the 737 maximum scandal.
The lawsuit accuss Meta of intentionally overseeing LAX privacy practices in violation of a 2012 consent ruling that clashed with the US Federal Trade Commission, designed to protect users’ personal information – accusing the defendant of denied it.
The FTC later launched a survey of Facebook parents, particularly triggered by the Cambridge Analytica scandal, and user data was leaked to the Political Research Group through third-party apps.
Litigation shareholders are seeking damages arising from the $5 billion settlement that was attacked by the FTC in 2019. According to the plaintiffs, the board “protected” Zuckerberg by approving the price tag without an internal investigation in return for the FTC agreeing to drop his name as an individual defendant in the case.
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The plaintiffs also allege that the founder “illegally sold billions of dollars of meta stocks for the important private information he had about the company’s illegal and private data sharing practices (“MNPI”).
Mehta declined to comment on the incident. In the court application, the defendant argues that directors of the social media company did not knowingly violate the 2012 consent order and that board decisions were wise and not conflicting.
Meta continues to regulate and legal scrutiny on issues such as privacy and antitrust. Critics argue that growth and aggressive hunting for profit as a young company led to online harm, accusing the company of amplifying hate speech and misinformation about juice involvement and accusing poor data management practices. Recently, he has poured billions of dollars into trying to become a leader in artificial intelligence.
“The allegations are important in terms of who knew what during the biggest scandal that anyone had as a company,” said Jason Kind, a leading technology critic who leads the online publisher’s next trade group for digital content. “What’s at stake is the company’s trust, not just for users but also for shareholders.”
The shareholder lawsuit alleging poorly oversight on the board has become known as a “butler” claim, named after a medical company that claimed liability under the Corporation Act for criminal fraud charges at medical companies in the 1990s.
Scholars and judges have long been skeptical that misconduct, which stems from business operations far from the boardroom, could be locked into directors of problematic companies. Directors can also provide the defense that pushing the boundaries of the law coincides with maximizing shareholder value. In the case of Meta, its market capitalization has skyrocketed to around 2tn.
Anne Lipton, a law professor at the University of Colorado, said:
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Meta said in a court brief that a Delaware judge had previously stated after the 2012 FTC consent ruling, “it is the most difficult theory that plaintiffs would like to rule,” and Meta’s “indicates that they have implemented a robust system of privacy management.”
However, the company is already facing a set-up. Core Care Mark claims from the plaintiffs have already survived the motion for dismissal of meta.
Separately, the court granted sanctions earlier this year against Sandberg, who resigned from her executive role in 2022 and left the Meta Commission in 2024, in order to remove email messages from her Gmail account after being notified of the lawsuit.
Last week, venture capital firm Andreessen Horowitz said it would “move Delaware’s intake into Nevada, injecting recent actions by the “Delaware’s) Chancery Court into a judicial decision, leaving it to a judicial decision, damaging the court’s reputation for Bayal’s expertise.”
The Financial Times previously reported that Meta is pondering the movement of intakes from Delaware. Delaware is a nation that has traditionally been dominated by both public and private companies.
The technology company is surprised by Delaware Premier Kathaleen McCormick’s 2024 decision to withdraw the $55 billion salary transaction that Tesla previously attacked CEO Elon Musk. The case will soon be heard on an appeal by the Delaware Supreme Court.
Prime Minister McCormick is the judge who oversees Facebook trials.
