Zuckerberg’s Meta Strikes $190 Million Settlement in Lawsuit
Mark Zuckerberg and other directors of Meta Platforms Inc. have reached a $190 million settlement regarding allegations that they did not address ongoing violations of Facebook users’ privacy and crafted an agreement to protect the billionaire CEO from personal liability, according to court filings. The settlement amount, revealed in a filing on Thursday in Delaware Chancery Court, had remained sealed since the trial was paused in July. A lawsuit filed by Meta investors alleges that board members mismanaged the Cambridge Analytica data privacy scandal and inappropriately consented to a $5 billion settlement with the US Federal Trade Commission to safeguard Zuckerberg personally. Meta shareholders are pursuing a minimum of $7 billion in damages, contending that the directors improperly overcompensated in the FTC agreement to shield Zuckerberg from having to personally absorb part of the company’s financial losses. The accord, funded by an insurance policy for Meta directors, represents a recovery of 3%. In a court filing, the company asserted its innocence and stated that the settlement did not constitute an admission of liability.
The case revolved around revelations that an external developer harvested personal information from millions of Facebook users without their permission. Cambridge Analytica utilized the information after being engaged by now-President Donald Trump’s 2016 election campaign. Representatives from Meta, located in Menlo Park, California, along with Zuckerberg, did not respond promptly to emails requesting comments regarding the settlement. Meta shareholders have initiated legal action against Zuckerberg and other directors, including venture-capitalist Marc Andreessen, seeking to hold them personally accountable for billions in fines and legal expenses associated with ongoing breaches of the company’s privacy policies. In 2019, FTC officials imposed a $5 billion fine on Facebook after determining that the company had breached a 2012 agreement with regulators, which required it to obtain users’ consent prior to sharing their data.
The agreement also mandates that Meta revise certain corporate governance policies, including strengthening privacy oversight and complicating retaliation against employees who highlight privacy errors, as stated in court documents. Meta has also committed to establishing a code of conduct for its directors, aimed at preventing conflicts of interest and enhancing compliance with “laws and regulations,” according to the filings. As this is a derivative case — permitting investors to take legal action against board members on behalf of the company — the proposed settlement requires the approval of Kathaleen S.J. McCormick. The $190 million in insurance payments will be returned to the company instead of being allocated to any individual investor. Attorneys representing Meta investors, comprising retirement funds and an individual shareholder, outlined the terms of the accord in a filing aimed at securing approval from McCormick. Samuel Closic, a lawyer representing Meta shareholders in the lawsuit, expressed on Thursday that he was “proud of the settlement” and anticipated presenting it to McCormick.
McCormick is the same judge who turned down Tesla Inc. CEO Elon Musk’s $55 billion pay package. The ruling, along with several others — part of a judicial effort to address insider conflicts of interest — led multiple companies, including Tesla and Bill Ackman’s Pershing Capital, to relocate their states of incorporation to Nevada and Texas. They pointed to purported judicial bias directed at tech leaders like Musk and Zuckerberg. The recent wave of departures from Delaware, a state that relies on billions in corporate fees for over a quarter of its budget, prompted a significant revision of its corporate laws earlier this year. The modifications were formulated by a panel of experts, which featured former judges currently engaged in legal practice at firms associated with Musk and Zuckerberg, including one with ties to the Cambridge Analytica case. Meta officials have stated that they are considering the possibility of withdrawing their incorporation papers from Delaware, the corporate domicile for over 60% of Fortune 500 companies. The approval of the settlement remains uncertain, leaving questions about whether it will facilitate the incorporation switch.
