Mark Zuckerberg and Meta shareholders settle $8 billion lawsuit on repeated privacy invasions by Facebook, saving time for long trial.
At Glance on Allegations Behind $8 Billion Meta Lawsuit
- Meta shareholders charged board members with not monitoring Facebook’s compliance with 2012 FTC order on privacy.
- Allegations include repeated invasions of user data, including the Cambridge Analytica violation.
- Plaintiffs claimed $8 billion damages, including fees and penalties.
- Mark Zuckerberg, Sheryl Sandberg, and Marc Andreessen included in lawsuit.
- Defendants supposedly masterminded FTC’s $5B settlement in order to shield Zuckerberg.
- Settlement avoids lengthy trial, no admission of wrongdoing.
Settlement Closes The Book on Facebook Privacy Scandal
Meta Platforms and several of its shareholders resolved an $8 billion lawsuit, ending a nasty courtroom battle just a day before the Delaware court’s second day of trial. The lawsuit, filed against senior executives including CEO Mark Zuckerberg, revolves around allegations that Facebook repeatedly broke user privacy and ignored a 2012 consent decree from the U.S. Federal Trade Commission (FTC).
Stockholders charged existing and former members of the board with facilitating repeated violations, including most famously the Cambridge Analytica affair, in which personal information from tens of millions of Facebook users was obtained and used in political campaigns. The stockholders called for the defendants to be held financially responsible for damages, attorney fees, and fines paid by Meta as a result of these violations.
Cambridge Analytica and the FTC Agreement
The lawsuit follows revelations in 2018 that political consulting company Cambridge Analytica harvested Facebook data without users’ permission. This data exploitation was central to Donald Trump’s successful presidential campaign in 2016. At the time Facebook had already agreed to a 2012 FTC order requiring that the company better protect user data, but shareholders allege the company still acceded to privacy violations.
In 2019, Facebook paid $5 billion to settle accusations of privacy violations from the FTC. Shareholders claim the deal, which was orchestrated by Meta executives, aimed to protect Zuckerberg from individual liability at the expense of harming the company and depressing its stock price.
The plaintiffs demanded compensation from 11 defendants such as Zuckerberg, ex-COO Sheryl Sandberg, and venture capitalist Marc Andreessen. They demanded the use of personal funds to pay Meta for damages. While the settlement terms are confidential, the outcome stops what could have been a celebrity-studded trial exposing internal Meta communications and decision-making.
It was a whistleblower who led the charge in bringing to light how data was illegally collected, driving the FTC probe and eventual sanctions. Expert witnesses testified Facebook’s privacy policies were full of “gaps and weaknesses,” corroborating allegations of systemic failure in monitoring.
Embed from Getty ImagesCourtroom Testimonies and Legal Strategy
Jeffrey Zients, a former Meta board member and subsequent White House Chief of Staff, testified that the board did not pursue a settlement that would make Zuckerberg personally responsible. The investors complained that board members did not monitor compliance with the FTC order and instead decided to defend the CEO.
Zuckerberg would have been required to testify under oath, giving a rare insight into his management of one of Meta’s most tumultuous times. Other potential witnesses were Sandberg, Andreessen, and Peter Thiel, co-founder of Palantir.
Among other things, the plaintiffs alleged insider-trading, asserting that as the scandal was unfolding, Zuckerberg was engaging in stock sales to cancel out losses. His lawyers argued that this was speculative and was not contextualized.
Meta’s Control of Governance and Markets
Zuckerberg maintains approximately 61% voting control at Meta thanks to the dual-class share structure. This enables him to have a say over board decisions, the corporation’s direction, and the crisis response. For years shareholders have claimed imbalance of powers in governance, but there had been little ability to enact changes because of this concentration of power.
While insisting on no wrongdoing, Meta admitted it has spent billions on enhancing user privacy since 2019. Critics, however, say these moves are not enough to constitute meaningful reform. Advocates of digital rights say the company lost an opportunity for actual accountability by opting to settle rather than go through a complete trial.
Why the Trial Mattered
This suit was one of the first in Delaware Chancery Court to take director-oversight claims against a public technology company to trial. Delaware is where over 60% of Fortune 500 companies have their headquarters, and it’s famous for corporate law prowess. Legal analysts saw the case as a landmark for privacy litigation with shareholder claims.
Bloomberg Intelligence reported that Meta could have faced up to $2 billion in settlement damages, had the case continued. Instead, the parties entered into an undisclosed settlement agreement which provides closure without the potential for more adverse consequences for Meta.
Meta’s Strategic Shifts Post-Trial
The outcome of the lawsuit could change the way Meta thinks about user data, corporate governance, and shareholder engagement. Although the company avoided public scrutiny through trial testimony, the scrutiny surrounding its privacy practices continues to mount.
The FTC settlement continues to represent the largest fine ever relating to a breach of privacy. Notably, given that public scrutiny has grown and the legal pressure is mounting, Meta in particular has not shown, nor has any particular case brought against them indicated, that they will be able to show their commitment to security around data. The case also generated interest in moving incorporation away from Delaware, given the illusion of judicial bias, especially with regard to rulings against other technology CEO’s like Elon Musk.
As Meta rides out the scandal, the broader tech industry is observing. This case exemplifies the impact shareholder activism can have on corporate behavior around pressing privacy issues.
Meta executives and shareholders reach resolution on $8 billion privacy suit involving Facebook exploitation of data. The matter involved Cambridge Analytica and FTC infractions and came to a close before Zuckerberg’s anticipated testimony.