Chief executive Mark Zuckerberg and ex-chief operating officer Sheryl Sandberg will testify, joined by Marc Andreessen, Jeff Zients, Peter Thiel, Kenneth Chenault and Netflix co-founder Reed Hastings.
This is the first time a shareholder case over board responsibility for a corporate scandal has reached trial in Delaware, a state where these things usually vanish a little too quickly.
The lawsuit claims Meta’s directors oversaw shoddy privacy standards despite a 2012 FTC consent decree. It says that the $5 billion fine agreed in 2019 was rubber-stamped to protect Zuckerberg personally, noting the board “protected” him by approving the sum without any internal probe, so the FTC would “drop his name as an individual defendant.”
The plaintiffs allege Zuckerberg “unlawfully sold billions of dollars of Meta stock because of the material non-public information he had regarding the company’s illicit, undisclosed data sharing practices.”
Meta has refused to comment but denies wrongdoing in court, insisting its board did nothing shady and had no conflicts. Its filings say, “Facebook implemented a robust system of privacy controls” following the 2012 decree.
However, the case has already survived a motion to dismiss, which rarely happens in these so-called Caremark claims. Sandberg has taken heat separately after deleting emails from her Gmail despite being told to keep them.
Jason Kint, Digital Content Next chief executive and long-time Big Tech sceptic, said, “The allegations are significant in terms of who knew what and when during their largest scandal that they’ve had as a company. What’s at stake is the trust of the company for the the users and shareholders.”
The court has become a less comfy venue for tech firms. Andreessen Horowitz said it was fleeing Delaware for Nevada, grumbling about “an unprecedented level of subjectivity into judicial decisions.” Meta has considered packing up after Delaware Chancellor Kathaleen McCormick tore up Tesla’s $55bn Musk pay package, a case now on appeal.
Law professor Ann Lipton from the University of Colorado reckons regulators have gone soft. “Increasingly there is a view that other regulators are not robustly doing their job and only corporate law and securities law can bail out victims,” she said.