Zuckerberg Faces $8 Billion Trial Over Privacy Violations

• Mark Zuckerberg is set to testify in an $8 billion trial alleging Meta’s illegal data practices since 2012.
• Shareholders claim the company violated privacy agreements, leading to massive fines, including the Cambridge Analytica scandal fallout.

Mark Zuckerberg, CEO of Meta Platforms, is expected to be a central figure in an extraordinary $8 billion trial commencing this week. He stands accused of operating Facebook as an illicit enterprise that permitted the harvesting of user data without proper consent. Shareholders of Meta Platforms, the parent company encompassing Facebook, Instagram, and WhatsApp, have initiated legal action against Zuckerberg and other current and former company leaders. They assert that these individuals consistently breached a 2012 agreement between Facebook and the Federal Trade Commission (FTC) designed to safeguard user data.

The origins of this case trace back to 2018, when revelations surfaced that data from millions of Facebook users had been accessed by Cambridge Analytica, a now-defunct political consulting firm that worked on Donald Trump’s successful 2016 U.S. presidential campaign. Shareholders are seeking to compel Zuckerberg and the other defendants to reimburse the company for over $8 billion in fines and various other costs Meta incurred following the Cambridge Analytica scandal. This sum includes a landmark $5 billion fine imposed on Facebook by the FTC in 2019 for violating the aforementioned 2012 agreement.

Among the defendants in the case are former Chief Operating Officer Sheryl Sandberg, venture capitalist and board member Marc Andreessen, along with former board members Peter Thiel, co-founder of Palantir Technologies, and Reed Hastings, co-founder of Netflix. Zuckerberg and the other defendants, who have refrained from commenting publicly, have dismissed the allegations in court filings as “extreme claims.” Meta, not a defendant in this specific case, also declined to comment. The non-jury trial in Wilmington, Delaware, is scheduled to begin on Wednesday and is slated to run for eight days. Its primary focus will be on events and board meetings from a decade ago, aiming to ascertain how Facebook’s leadership implemented the 2012 agreement.

Decades-Old Decisions Under Scrutiny

While the trial will delve into long-past policies, it unfolds as privacy concerns continue to plague Meta, which currently faces scrutiny over its methods for training AI models. The company states it has invested billions of dollars since 2019 into its program dedicated to protecting user privacy. Jason Kint, head of Digital Content Next, a trade group representing content providers, noted that the case is expected to reveal intricate details about what the board knew – and precisely when – concerning user data, which now totals over 3 billion daily across Meta’s diverse platforms. “There’s an argument we can’t avoid Facebook and Instagram in our lives,” he remarked. “Can we trust Mark Zuckerberg?”

Two years prior, the defendants attempted to have the case dismissed before trial, a request denied by the judge. “This is a case involving alleged wrongdoing on a truly colossal scale,” stated Travis Laster, the judge presiding over the case at that time. The current trial in the Court of Chancery will be overseen by Judge Kathaleen McCormick. The plaintiffs, who include individual investors and union pension funds like California’s State Teachers’ Retirement System, now face the challenging task of proving what is often described as the most difficult claim in corporate law: demonstrating that directors utterly failed in their duty of oversight. Legal experts suggest this appears to be the first trial of its kind on such a claim.

Zuckerberg and Sandberg are specifically alleged to have knowingly caused the company to violate the law. While Delaware law typically shields directors and officers from adverse consequences stemming from poor business decisions, it does not offer protection against illegal actions, even if those actions prove profitable. Defendants contend in court filings that the plaintiffs lack sufficient evidence to substantiate these claims.

Allegations and Defenses

In pretrial court documents, the shareholders assert that they can prove Facebook continued deceptive privacy practices after the 2012 agreement, purportedly at Zuckerberg’s direction. Conversely, the defendants claim that evidence will show the company established a dedicated team to oversee privacy and hired an external compliance firm. They also argue that Facebook itself was a victim of Cambridge Analytica’s “studied deceit.”

Beyond the central privacy claims, plaintiffs also allege that when Zuckerberg foresaw the impending Cambridge Analytica scandal and its potential to depress company stock, he was motivated to offload his stock, reaping at least $1 billion in profit. Defendants counter that evidence will demonstrate he utilized a pre-arranged stock-trading plan designed to protect against insider-trading accusations. Furthermore, they assert that his motivation for the stock sale was to benefit his philanthropic endeavors.

The Broader Landscape of Data Privacy Litigation

The $8 billion trial against Mark Zuckerberg and other Meta executives highlights a growing trend in corporate law: the increased scrutiny of executive responsibility in data privacy breaches. This case, focusing on the alleged breach of fiduciary duties related to a 2012 FTC agreement, represents a significant escalation from typical consumer class-action lawsuits. Historically, proving that directors “utterly failed” in their oversight duty, a concept known as Caremark claims in Delaware corporate law, has been notoriously difficult to win. Successful Caremark claims require showing that the board either completely failed to implement any reporting or information system, or, having implemented one, consciously failed to monitor or oversee its operations, thus exposing the company to systemic risks.

The fact that this specific claim is proceeding to trial, possibly for the first time in such a high-profile manner, signals a new era where directors and officers could face more direct accountability for privacy lapses, even when those lapses are perpetrated by third parties like Cambridge Analytica. This trial could set a precedent, pushing corporations to adopt more rigorous internal controls and board oversight mechanisms for data privacy, ultimately shaping the future landscape of corporate governance in the digital age.