Meta Board And Mark Zuckerberg Face $8 Billion Trial Over User Data Misuse Allegations

(MENAFN- Live Mint) A high-stakes trial opened on Wednesday as shareholders of Meta Platforms brought an $8 billion lawsuit against Mark Zuckerberg and other current and former company leaders, accusing them of failing to uphold their legal duty to safeguard Facebook users' data in breach of a 2012 agreement with the US Federal Trade Commission (FTC).

The case, being heard in Delaware's Chancery Cour before Chief Judge Kathaleen McCormick, centres on claims that the defendants knowingly permitted Facebook to mislead users about how their data was being handled, particularly in the run-up to the Cambridge Analytica scandal.

Notably, the trial began with testimony from Neil Richards, a privacy law expert from Washington University. He stated,“Facebook's privacy disclosures were misleading,” highlighting the alleged disconnect between the company's public assurances and its internal practices.

The lawsuit traces its roots back to 2018, when it emerged that Cambridge Analytica, a political consultancy which supported Donald Trump's 2016 presidential campaign, had improperly accessed the data of millions of Facebook users. Following the revelations, the FTC imposed a record $5 billion fine on Facebook, citing violations of a 2012 consent decree.

Shareholders are now demanding that Zuckerber and other defendants, including former Chief Operating Officer Sheryl Sandberg, board member Marc Andreessen, and ex-directors Peter Thiel and Reed Hastings, compensate Meta for the fine and other associated legal costs, totalling more than $8 billion according to court filings.

Jeffrey Zients, former White House Chief of Staff and Meta board member from 2018 to 2020, is also expected to give evidence.

The defendants, who have denied any wrongdoing, argue that Facebook was itself deceived by Cambridge Analytica. They further claim the company had employed an external consultancy to ensure compliance with the FTC agreement.

Although Meta is not listed as a defendant, the lawsuit marks a rare instance in which a Caremark claim, alleging directors failed to exercise proper oversight, is proceeding to trial. Such cases are typically difficult to prove under Delaware corporate law, but courts in the state have shown increasing willingness to let them advance in recent years.

The trial also arrives amid broader scrutiny of Delaware's role as a corporate haven. Earlier this year, state lawmakers revised laws governing deals with controlling shareholders such as Zuckerber , tightening the rules for shareholder challenges. While the recent changes do not affect Caremark claims, they followed meetings between state officials and Meta representatives. Meta had reportedly considered leaving Delaware over concerns related to its legal environment.

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Meanwhile, Andreessen Horowitz, the venture capital firm co-founded by Marc Andreessen, has already opted to reincorporate in Nevada, citing legal unpredictability in Delaware, a nod to recent rulings such as the rescinding of Elon Musk's $56 billion Tesla pay package by Judge McCormick.

Andreessen is scheduled to appear in court on Thursday.

In a separate allegation, plaintiffs claim Zuckerberg offloaded Facebook stock ahead of the Cambridge Analytica fallout, allegedly anticipating a drop in share price and profiting by at least $1 billion. The defence asserts that Zuckerberg's transactions were conducted through a pre-arranged trading plan designed to prevent insider dealing.

Meta has declined to comment on the proceedings. However, the company has previously stated it has invested heavily in user privacy protections since 2019.

(With inputs from Reuters)

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