By Tom Hals
WILMINGTON, Delaware (Reuters) -Mark Zuckerberg is expected to appear as a star witness in an unusual $8 billion trial that kicks off this week at which the Meta CEO is accused of operating Facebook as an illegal enterprise that allowed users’ data to be harvested without their consent.
Shareholders of Meta Platforms, the parent company of Facebook, Instagram and WhatsApp, sued Zuckerberg and other current and former company leaders, saying they continually violated a 2012 agreement between Facebook and the Federal Trade Commission to protect users’ data.
The case dates back to 2018, after it emerged that data from millions of Facebook users was accessed by Cambridge Analytica, a now-defunct political consulting firm that worked for Donald Trump’s successful campaign for U.S. president in 2016.
Shareholders want Zuckerberg and the other defendants to reimburse the company for more than $8 billion in fines and other costs paid by Meta after the Cambridge Analytica scandal came to light, including a record $5 billion fine imposed on Facebook by the FTC in 2019 for violating the 2012 agreement.
Defendants in the case include former Chief Operating Officer Sheryl Sandberg, venture capitalist and board member Marc Andreessen, as well as former board members Peter Thiel, the Palantir Technologies co-founder, and Reed Hastings, the co-founder of Netflix.
Zuckerberg and the other defendants, who declined to comment, have dismissed the allegations in court filings as “extreme claims.” Meta, which is not a defendant, also declined to comment.
The non-jury trial in Wilmington, Delaware, is scheduled to last eight days. It will mostly focus on decade-old events and board meetings to determine how Facebook leaders implemented the 2012 agreement.
While the trial will cover long-ago policies, it comes as privacy concerns continue to dog Meta, which is under scrutiny for its training of AI models. The company says it has invested billions of dollars since 2019 in its program to safeguard users’ privacy.
Jason Kint, the head of Digital Content Next, a trade group for content providers, said the case will fill in details about what the board knew – and when – regarding the data of users, who now total more than 3 billion daily across Meta’s platforms. “There’s an argument we can’t avoid Facebook and Instagram in our lives,” he said. “Can we trust Mark Zuckerberg?”
MOST DIFFICULT CLAIMS
Two years ago, the defendants sought to dismiss the case before trial, which the judge declined. “This is a case involving alleged wrongdoing on a truly colossal scale,” said Travis Laster, the judge handling the case at the time. The trial in the Court of Chancery will be overseen by Kathaleen McCormick.
Now the plaintiffs, individual investors and union pension funds including California’s State Teachers’ Retirement System, must prove what is often described as the most difficult claim in corporate law – showing that directors utterly failed in their duty of oversight. Legal experts said it appears to be the first trial on such a claim.
Zuckerberg and Sandberg are alleged to have knowingly caused the company to violate the law. While Delaware law protects directors and officers for bad business decisions, it does not protect them from illegal ones, even if they are profitable.
Defendants said in court filings that plaintiffs cannot deliver the evidence.
The shareholders in pretrial court papers said they can prove that after the 2012 agreement, Facebook continued deceptive privacy practices, at the direction of Zuckerberg. The defendants said the evidence will show that the company built a team to oversee privacy and hired an outside compliance firm and that Facebook was a victim of Cambridge Analytica’s “studied deceit.”
In addition to the central privacy claims, plaintiffs also allege that when Zuckerberg could see that the Cambridge Analytica scandal was about break and send company stock lower, he was motivated to offload his stock and reaped at least $1 billion in profit. Defendants said evidence will show he used a stock-trading plan that can protect against insider-trading allegations. They also said the motivation was to benefit his charitable pursuits.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Noeleen Walder and Matthew Lewis)
