The highly anticipated trial involving Meta Platforms shareholders against Mark Zuckerberg and other executives is set to commence on Wednesday. With claims that the defendants illegally harvested data from Facebook users, the lawsuit seeks $8 billion in damages. This is based on an alleged violation of a 2012 agreement with the U.S. Federal Trade Commission (FTC) concerning user privacy protections. The trial’s outcome could have far-reaching implications, both for the defendants and the technology industry as a whole.
Leading the witness list is Jeffrey Zients, who served as White House chief of staff under President Joe Biden and was a Meta director from May 2018. Zients is expected to be one of the first individuals to testify in this non-jury trial, presided over by Judge Kathaleen McCormick of the Delaware Chancery Court. This case has garnered significant attention due to the high-profile nature of its defendants, which include not just Zuckerberg but also other billionaires like former Chief Operating Officer Sheryl Sandberg, Marc Andreessen, a well-known venture capitalist, and former board members like Peter Thiel, co-founder of Palantir Technologies, and Reed Hastings, co-founder of Netflix.
The allegations have been firmly denied by the defendants, and their legal representatives have refrained from making additional comments to the media. This litigation traces back to revelations from 2018 concerning the Cambridge Analytica scandal, where data from millions of Facebook users was accessed by a political consulting firm linked to Donald Trump’s successful campaign in the 2016 U.S. presidential election. The fallout from this scandal was severe, leading to a $5 billion fine imposed by the FTC on Facebook for violating the privacy agreement.
In the context of the lawsuit, shareholders assert that the defendants should reimburse Meta for its hefty FTC fine, along with additional legal expenses, which the plaintiffs estimate to total over $8 billion. The defendants, in their court filings, have characterized the allegations as “extreme,” contending that evidence will demonstrate Facebook’s proactive measures in compliance with the FTC, including hiring an external consulting firm. They argue that the company was a victim of deception perpetrated by Cambridge Analytica.
Meta has opted not to participate as a defendant in this trial and declined to comment further on the matters at hand. The company has stated on its website that since 2019, it has invested billions of dollars to enhance user privacy standards. The trial is significant, as it marks the first instance in which shareholders are accusing board members of a deliberate failure to oversee their company’s operations, often regarded as one of the most challenging claims to substantiate under Delaware corporate law.
Previous cases have also shed light on accountability in corporate governance; notably, Boeing’s current and past board members reached a settlement for $237.5 million in 2021 concerning similar claims—a record for such a case, although the directors did not admit to any wrongdoing. Moreover, in addition to the privacy issues at the core of this case, the plaintiffs accuse Zuckerberg of having foreseen the negative impact of the Cambridge Analytica scandal on Facebook’s stock value. They assert that he sold his shares preemptively, profiting at least $1 billion because of this insight.
In defense, the defendants claim that Zuckerberg did not engage in insider trading, referencing a stock-trading plan that mitigates individual control over sales. This structured approach is aimed specifically at avoiding insider trading behavior. As the trial unfolds, Judge McCormick’s ruling on liability and damages is not expected until several months after the proceedings conclude, leaving the futures of all parties involved in uncertainty and anticipation.
This trial is not merely a business dispute; it poses questions about accountability and governance within one of the world’s most powerful tech companies, and the outcome may set precedent for how similar cases are handled in the future.
