Triggered by the 2018 Cambridge Analytica Scandal
Shareholders: "Five Billion Dollar Fine, Executives Responsible"
Settlement Reached Just Before Legal Testimony
Reuters and other media outlets reported on July 17 (local time) that Meta Platforms, the parent company of Facebook, and its current and former executives, including CEO Mark Zuckerberg, have reached a settlement in an $8 billion (11.1144 trillion won) lawsuit. The lawsuit alleged that they allowed Facebook's privacy violations to go unchecked, resulting in financial damage to the company.
The Meta shareholders who filed the lawsuit informed Delaware Court of Chancery Judge Kathaleen McCormick of the settlement as a hearing was underway ahead of the second trial. The specific terms of the settlement were not disclosed.
Eleven Meta shareholders filed the lawsuit against Mark Zuckerberg and others in April 2018, in connection with the so-called 'Cambridge Analytica scandal.' They claimed that the management failed to adequately disclose related risks, which damaged the company's value and forced Meta to pay billions of dollars in fines and legal costs to authorities. The shareholders argued that the executives should be held personally liable for these costs.
The 'Cambridge Analytica scandal' refers to an incident during the 2016 U.S. presidential election, in which the British political consulting firm Cambridge Analytica collected the personal data of approximately 87 million Facebook users without consent and used it for election advertising and other purposes. After the scandal was reported in the media, Meta's share price plummeted by about 7% on the first trading day.
In 2019, the U.S. Federal Trade Commission (FTC) imposed a $5 billion fine on Facebook for failing to adequately protect users' personal information. However, at the time, it was agreed that Mark Zuckerberg and other executives would not be personally sued.
In response, Meta shareholders filed a lawsuit seeking the recovery of damages, arguing that the company agreed to an excessive settlement with the FTC because Zuckerberg wanted to avoid personal legal liability.
The trial for this case began on July 16, and on July 17, testimony was scheduled from Meta board member and billionaire venture capitalist Marc Andreessen. Mark Zuckerberg, Palantir co-founder Peter Thiel, and Netflix co-founder Reed Hastings were also scheduled to testify.
The settlement with investors was reached abruptly ahead of the testimony from Zuckerberg and other current and former executives. Plaintiffs' attorney Sam Closic stated, "The settlement was reached very quickly."
The UK Financial Times (FT) reported, "This trial has drawn attention as the first Delaware case in which a board of directors could be held legally responsible for corporate governance failures. While most similar lawsuits in the past have been dismissed, recently, companies have increasingly opted to resolve such cases at the board level through settlements rather than contesting allegations of misconduct in court."
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