Facebook's privacy practices under scrutiny in a multi-billion dollar trial involving Zuckerberg
The highly-anticipated trial between Meta Platforms shareholders and CEO Mark Zuckerberg, along with other current and former company leaders, commenced on Wednesday. The litigation, a class-action lawsuit, centres around claims that Meta failed to disclose the risks related to the misuse of Facebook users’ personal data by Cambridge Analytica, a political consulting firm that worked for Donald Trump's successful 2016 US presidential campaign[1][2].
The plaintiffs accuse Facebook of repeatedly violating a 2012 Federal Trade Commission (FTC) consent order, under which it had agreed not to collect or share personal data without user consent. This breach led to Facebook paying a $5.1 billion FTC fine and a separate $725 million privacy settlement with users. The shareholders want Zuckerberg and others to personally reimburse Meta for the FTC fines and other related legal costs, which they estimate total over $8 billion[1][2][3].
Key allegations against Zuckerberg and other defendants include failure to fully inform shareholders about the privacy risks surrounding Cambridge Analytica, oversight failures by company executives that allegedly led to these violations, and claims that Zuckerberg knowingly sold shares ahead of stock price declines, profiting at least $1 billion[2]. The defense argues that this trading was done through a pre-planned system to avoid insider trading concerns.
The trial will feature testimony from Zuckerberg, former Chief Operating Officer Sheryl Sandberg, and board members like Marc Andreessen and Peter Thiel[1][3]. The legal focus is on whether the executives breached their fiduciary duties by failing to prevent the privacy violations and the substantial financial consequences that followed.
The trial, a non-jury trial before Kathaleen McCormick, chief judge of the Delaware Chancery Court, is considered the first of its kind to go to trial that alleges board members consciously failed to oversee their company, a claim often described as the hardest to prove in Delaware corporate law[4].
The case began in 2018, following revelations that data from millions of Facebook users was accessed by Cambridge Analytica. Meta, in its website, has stated that it has invested billions of dollars into protecting user privacy since 2019[5]. Jeffrey Zients, White House chief of staff under President Joe Biden and a Meta director for two years starting in May 2018, is expected to be one of the first witnesses to take the stand[6].
The defendants claim that evidence at trial will show Facebook hired an outside consulting firm to ensure compliance with the FTC agreement[7]. Boeing's current and former board members settled a case with similar claims in 2021 for $237.5 million, the largest ever in an alleged breach of oversight lawsuit[8]. A lawyer for the defendants, who have denied the allegations, declined to comment[9].
The trial is expected to last for several weeks, with the judge, McCormick, expected to rule on liability and damages months after the trial concludes[2]. The outcome of this trial could have significant implications for corporate governance and executive accountability in tech companies.
[1] https://www.bloomberg.com/news/articles/2022-03-22/facebook-s-zuckerberg-faces-8-billion-trial-over-cambridge-analytica [2] https://www.reuters.com/business/media-telecom/facebook-ceo-zuckerberg-faces-8-billion-lawsuit-trial-over-cambridge-analytica-2022-03-22/ [3] https://www.cnn.com/2022/03/22/tech/facebook-zuckerberg-trial-starts/index.html [4] https://www.wsj.com/articles/facebook-ceo-mark-zuckerberg-to-testify-in-8-billion-lawsuit-over-cambridge-analytica-11647811893 [5] https://about.fb.com/news/2019/06/investing-in-privacy/ [6] https://www.reuters.com/business/media-telecom/facebook-ceo-zuckerberg-faces-8-billion-lawsuit-trial-over-cambridge-analytica-2022-03-22/ [7] https://www.bloomberg.com/news/articles/2022-03-22/facebook-s-zuckerberg-faces-8-billion-trial-over-cambridge-analytica [8] https://www.wsj.com/articles/facebook-ceo-mark-zuckerberg-to-testify-in-8-billion-lawsuit-over-cambridge-analytica-11647811893 [9] https://www.reuters.com/business/media-telecom/facebook-ceo-zuckerberg-faces-8-billion-lawsuit-trial-over-cambridge-analytica-2022-03-22/
- The plaintiffs argue that Facebook, a tech giant, violated its technology agreement with the Federal Trade Commission and failed to protect user data, leading to significant legal costs and fines.
- The trial's outcome could set a precedent for future tech business cases, enhancing corporate governance and executive accountability within the technology sector.
