Jeff Chiu/AP
Mark Zuckerberg is expected to face another courtroom grilling.
Shareholders want to force Zuckerberg, Sheryl Sandberg, former Meta COO, and other officials to repay the company over $8 billion in fines and penalties the social network has paid to settle disputes about its privacy practices.
The trial in Delaware’s Court of Chancery is set to start Wednesday.
In April, Zuckerberg was grilled by Federal Trade Commissioner prosecutors over his private thoughts ahead of Facebook’s acquisitions of Instagram and WhatsApp. This time could be even more excruciating as the shareholders’ case hinges on the Cambridge Analytica scandal, a painful chapter in Meta’s history.
Other major tech players may also testify, due to the shareholders’ claims about Facebook’s Board of Directors.
Both sides want billionaire venture capitalist Marc Andreessen to testify in court. The shareholders also want Netflix cofounder Reed Hastings to testify. Former PayPal Peter Thiel, former Biden White House chief of staff Jeff Zients, and eBay CFO Peggy Alford are on the witness list for in-person testimony or recorded depositions. (Thiel and Zients are no longer on Meta’s board.)
Meta, which declined to comment on the case, is not a named defendant.
Rather, the shareholders claim that Zuckerberg, Sandberg, and former VP Konstantinos Papamiltiadis violated their fiduciary duty to shareholders by “intentionally” failing to ensure compliance with Facebook’s 2012 consent order with the FTC, which, in their view, paved the way for the Cambridge Analytica scandal.
Attorneys for the defendants did not immediately respond to a request for comment Monday evening.
In 2012, the FTC said that Facebook needed to give users “clear and prominent notice” and obtain “their express consent” before sharing information beyond a user’s privacy settings. Cambridge Analytica obtained data from over 80 million users largely because of a Facebook policy that allowed third-party apps to obtain both user data and data of a user’s Facebook friends.
Cambridge Analytica is back
The shareholders’ complaint also zeroes in on Facebook’s 2019 Board of Directors’ decision to approve a $5 billion settlement with the FTC after the agency sued Facebook for violating the consent order. The shareholders’ pretrial brief states that all directors ignored “red flags” in the lead-up to the Cambridge Analytica scandal.
In early 2018, Facebook admitted that data analytics firm Cambridge Analytica had improperly obtained data from tens of millions of users. Its final estimate found that up to 87 million users had their data improperly shared. Zuckerberg later apologized, saying the social network had “a responsibility to protect your data.”
Investigations ensued around the world. In 2019, the FTC announced a record-breaking $5 billion fine as part of a settlement with Facebook. A UK parliamentary investigation later concluded that if Facebook had taken the 2012 consent decree seriously, then Cambridge Analytica could have been avoided. The shareholders’ attorneys cite that conclusion in their pretrial brief.
Attorneys for Zuckerberg and the other defendants said there is “no proof” that Meta’s CEO operated outside the law.
“This evidence, and much more like it, negates plaintiffs’ pleaded portrait of a company indifferent to compliance,” according to a recent court filing.
Two years ago, Reuters reported that the defendants failed to get the case tossed out.
“This is a case involving alleged wrongdoing on a truly colossal scale,” said Vice Chancellor Travis Laster, the judge overseeing the case at the time.
Zuckerberg won’t be the only one who’s watched closely
The non-jury trial will be overseen by Chancellor Kathaleen McCormick, the judge responsible for repeatedly striking down Elon Musk’s $55 billion Tesla pay package.
McCormick’s Musk-related rulings sparked anger within the tech community toward Delaware’s Court of Chancery, which handles business disputes in the state that was once unrivaled for incorporation.
Since then, Andreessen Horowitz, Roblox, Dropbox, Bill Ackman’s Pershing Square Capital Management, and other big names have either moved or announced their intentions to leave Delaware.
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