CEO Mark Zuckerberg, along with current and former members of Meta Platforms Inc.’s board of directors, reached a settlement to close a shareholder lawsuit that accused Facebook executives of failing to prevent massive user data breaches that cost the company billions.
On July 17, the day after a formal trial began, a settlement agreement was announced in Delaware’s Court of Chancery. Terms of the settlement were not immediately disclosed.
The lawsuit derivative action brought by several Meta shareholders alleged that the company’s board failed to uphold its fiduciary duty by allowing years of lax data practices. Ultimately, the plaintiffs argued, this led to financially injurious scandals such as the misuse of Facebook user data by political consulting firm Cambridge Analytica. The plaintiffs sought $8 billion in damages.
Meta Platforms itself is not a defendant in the suit. It did not immediately respond to a request for comment from The Epoch Times on the settlement.
In the Cambridge Analytica event, data from up to 87 million Facebook users was improperly accessed by a political consulting firm, which then used the data to build political profiles during the 2016 U.S. presidential campaign.
In 2019, as a result of the scandal, Meta paid a $5 billion fine to settle Federal Trade Commission charges that it violated the terms of its prior 2012 Federal Trade Commission consent decree. Meta did not admit wrongdoing as part of the FTC settlement.
The Delaware case alleged that Meta’s board crafted the 2019 FTC settlement to protect top executives, including the Facebook founder and current CEO, from personal liability. The lawsuit also alleged that Zuckerberg engaged in insider trading by selling Meta shares while aware of undisclosed data governance issues.
Meta is controlled by Zuckerberg through a dual-class share structure that gives him majority voting power. The lawsuit contended that the board structured the Federal Trade Commission settlement to insulate Zuckerberg from exposure while the company bore the financial penalty.
Had the trial proceeded as planned, it would have been the first time a board of a major technology company faced courtroom scrutiny in Delaware over alleged operational misconduct. High-profile testimony was expected, including from Zuckerberg, former Chief Operating Officer Sheryl Sandberg, and longtime Meta board member Marc Andreessen.
Jeff Zients, a former White House chief of staff who served on Meta’s board from 2018 to 2020, testified on the first day of the trial. Andreessen had been expected to testify on Thursday.
The lawsuit is one of several filed in recent years in Delaware’s Chancery Court, where Meta and other tech companies have faced increasing shareholder scrutiny over corporate governance and founder control. In 2021, Boeing paid $238 million over claims adjudicated in the same jurisdiction that its board failed to properly oversee safety issues related to the 737 Max crashes.
The Meta case could have set a precedent for holding corporate directors accountable in court for data privacy failures and related reputational harm, but the settlement avoids further courtroom proceedings. In a statement he shared on X, Jason Kint, CEO of trade association Digital Content Next, said the settlement made just before executives were set to testify under oath “[deprives the] public of any accountability and facts.”
