Mark Zuckerberg is slated to make yet another high-stakes courtroom appearance this week as shareholders seek to hold him accountable for the more than $8 billion that Meta has spent to settle lawsuits over privacy violations.
The trial, set to begin Wednesday in Delaware’s Court of Chancery, aims to hold Zuckerberg, former Meta COO Sheryl Sandberg and other former executives personally liable for the billions the company spent to resolve allegations that it failed to safeguard user data.
Shareholders argue that Zuckerberg, Sandberg and former VP Konstantinos Papamiltiadis violated their fiduciary duties by “intentionally” failing to ensure compliance with a 2012 Federal Trade Commission consent order requiring the firm then known as Facebook to protect user privacy.
That failure, they say, enabled the Cambridge Analytica scandal — a notorious breach that saw data from tens of millions of Facebook users improperly harvested for political profiling.
Meta is not a named defendant in the suit and declined to comment on the case. Attorneys for the defendants did not immediately respond to a request for comment on Monday evening.
The case is a shareholder derivative lawsuit, a type of legal action that allows investors to sue company executives or board members on behalf of the company itself.
In these cases, shareholders argue that corporate insiders failed in their fiduciary duties and caused harm to the company—financial or otherwise—that management has failed to address.
In April, Zuckerberg was questioned by the Federal Trade Commission about internal communications surrounding Facebook’s acquisitions of Instagram and WhatsApp.
Meta is facing regulatory scrutiny for allegedly abusing its monopolistic power to gain a competitive advantage in the marketplace.
The trial in Delaware will further probe Meta’s handling of user privacy with a focus on the company’s knowledge and decision-making in the run-up to the Cambridge Analytica breach.
The case has drawn in a number of other prominent figures from the tech and business world who are either current or former members of Meta’s board of directors.
Both sides are seeking testimony from billionaire venture capitalist Marc Andreessen.
Shareholders also want Netflix co-founder Reed Hastings to testify. Former PayPal executive Peter Thiel, former Biden White House chief of staff Jeff Zients and eBay CFO Peggy Alford are on the witness list as well, either for in-person testimony or recorded depositions.
Hastings, Thiel and Zients are no longer on Meta’s board of directors.
According to the shareholders’ complaint, the defendants failed to act on multiple “red flags” prior to the scandal.
The case highlights the company’s 2019 decision to settle with the FTC for $5 billion after it was accused of violating the 2012 consent order.
That settlement, the shareholders argue, was approved by a board that disregarded evidence of noncompliance.
In its 2012 consent decree, the FTC ordered Facebook to give users “clear and prominent notice” and obtain “their express consent” before sharing information beyond their privacy settings.
At the time of the Cambridge Analytica scandal, Facebook allowed third-party apps not only to collect data from users but also from those users’ friends — without their direct knowledge or consent.
In early 2018, Facebook acknowledged that Cambridge Analytica had improperly obtained data from tens of millions of users. The final estimate was that up to 87 million individuals were affected.
Zuckerberg later issued a public apology, stating the platform had “a responsibility to protect your data.”
The fallout was global. In 2019, the FTC announced a then-record $5 billion fine against Facebook as part of a settlement over violations of the consent order.
A separate investigation by the British parliament concluded that had Facebook taken its obligations seriously under the 2012 consent decree, the Cambridge Analytica breach might have been prevented.
Shareholders cite that conclusion in their pretrial filings.
In their defense, attorneys for Zuckerberg and the other executives claim there is no evidence of wrongdoing.
“This evidence, and much more like it, negates plaintiffs’ pleaded portrait of a company indifferent to compliance,” the defense wrote in a recent court filing.
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The lawsuit has been years in the making. Two years ago, efforts to have the case dismissed failed.
At the time, Vice Chancellor Travis Laster, the judge overseeing the case, remarked that “this is a case involving alleged wrongdoing on a truly colossal scale.”
The current non-jury trial will be presided over by Chancellor Kathaleen McCormick. McCormick is best known for repeatedly striking down Elon Musk’s $55 billion Tesla compensation package.
Her rulings have led to discontent in the tech and business world over Delaware’s handling of corporate governance cases.
In the aftermath, several major firms — among them Andreessen Horowitz, Roblox, Dropbox and Bill Ackman’s Pershing Square Capital Management — have either left Delaware or announced plans to reincorporate elsewhere.
The Post has sought comment from Meta, Sandberg, Andreessen, Hastings, Thiel, Zients, Alford and Papamiltiadis.
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