Zuckerberg and Meta investors face off in $8 billion trial

The trial will begin this week and last for 8 days.

Zuckerberg and Meta investors face off in $8 billion trial

Mark Zuckerberg is expected to appear as a key witness in an unusual $8 billion trial beginning this week, in which the Meta CEO is accused of operating Facebook as an illegal entity that allowed the collection of user data without their consent.

Shareholders of Meta, the parent company of Facebook, Instagram, and WhatsApp, have filed a lawsuit against Zuckerberg and other current and former company leaders, alleging they have consistently violated a 2012 agreement between Facebook and the U.S. Federal Trade Commission to protect user data, according to Reuters.

The case dates back to 2018, after it emerged that Cambridge Analytica—a now-defunct political consulting firm that worked on Donald Trump's successful 2016 presidential campaign—had accessed the data of millions of Facebook users.

Shareholders are demanding that Zuckerberg and the other defendants compensate the company for more than $8 billion in fines and other costs Meta incurred following the Cambridge Analytica scandal, including a record $5 billion fine imposed by the Federal Trade Commission on Facebook in 2019 for breaching a 2012 agreement.

Defendants in the lawsuit include former chief operating officer Sheryl Sandberg, investor and board member Marc Andreessen, and former board members Peter Thiel and Reed Hastings, co-founder of Netflix. Zuckerberg and the other defendants have rejected the allegations in court documents, calling them "exaggerated allegations."

The trial, which is being held without a jury in Wilmington, Delaware, is scheduled to last eight days. It will largely focus on board meetings and events that took place a decade ago to determine how Facebook's leaders implemented the 2012 agreement.

While the trial will cover old policies, it comes at a time when privacy concerns continue to dog Meta, which is currently under scrutiny for the way it trains its AI models. The company says it has invested billions of dollars since 2019 in its program to protect user privacy.

Jason Kent, president of Digital Content Next, a trade group for content providers, said the case will detail what the board knew—and when—about the data of the now more than three billion daily users across Meta's platforms. "There's an argument that we can't avoid Facebook and Instagram in our lives," he said, adding, "Can we trust Mark Zuckerberg?"

The Toughest Lawsuits

Two years ago, the defendants sought to dismiss the lawsuit before it went to trial, a request the judge rejected. "This is a case of alleged wrongdoing on a truly massive scale," said Travis Laster, the judge who presided over the case. Judge Kathleen McCormick will oversee the trial in Chancery Court.

Now, the plaintiffs, individual investors and union pension funds, including the California State Teachers' Retirement System, must prove what is often described as one of the most difficult claims in corporate law: that the directors completely failed in their oversight duties. Legal experts said this trial appears to be the first of its kind on such a claim.

Zuckerberg and Sandberg are alleged to have intentionally caused the company to violate the law. While Delaware law protects directors and officers from bad business decisions, it does not protect them from illegal decisions, even if they are profitable.

The defendants said in court filings that the plaintiffs cannot present evidence. The shareholders argued in pretrial filings that they could prove that after the 2012 agreement, Facebook continued its deceptive privacy practices at Zuckerberg's direction.

In contrast, the defendants argued that the evidence would show that the company had established a privacy oversight team and hired an outside firm to ensure compliance, and that Facebook was the victim of "deliberate deception" by Cambridge Analytica.

In addition to the main privacy allegations, the plaintiffs also allege that when Zuckerberg saw the Cambridge Analytica scandal coming and could lead to a decline in the company's stock, it prompted him to sell his shares, making at least $1 billion in profits. The defendants said the evidence would show that he used a stock trading scheme that could protect against insider trading charges.