Meta Settles Shareholder Lawsuit Tied to $5B FTC Penalty, Zuckerberg Avoids Testimony
Meta has reached a settlement in a high-profile shareholder lawsuit that accused the company’s board of failing to prevent massive breaches of user data—an oversight that plaintiffs said cost the company billions.
The agreement, revealed Thursday morning in a Delaware courtroom, came just as the second day of an anticipated eight-day trial was set to begin. A lawyer representing the plaintiffs, a group of pension funds with minor Meta holdings, informed the judge that the parties had reached a resolution.
The lawsuit had alleged that Meta’s directors ignored a 2012 consent decree with the U.S. Federal Trade Commission (FTC), which required Facebook to protect user privacy more aggressively.
That failure, plaintiffs claimed, ultimately led to the 2019 $5 billion FTC settlement, one of the largest ever imposed on a tech company, following data privacy lapses that enabled groups like Cambridge Analytica to access vast swaths of user data.
Speaking of both settlements and Zuckerberg’s successful evasion of testifying, Jason Kint, the head of Digital Content Next, a trade group for content providers, said, “That reckoning is now left unresolved.”
“Facebook has successfully remade the ‘Cambridge Analytica’ scandal about a few bad actors rather than an unraveling of its entire business model of surveillance capitalism and the reciprocal, unbridled sharing of personal data.”
While the specifics of Thursday’s settlement remain confidential, they are expected to be formally filed with the Delaware Court of Chancery in the coming weeks. A source close to the negotiations said discussions had stretched on for months and continued late into Wednesday evening, even after the trial had begun. According to this source, Meta’s directors and officers’ insurance policy will foot the bill.
The legal action, known as a derivative lawsuit, means that any proceeds will go to the company itself rather than being distributed directly to the shareholders. Such cases are rare but growing in frequency, as boards of major corporations increasingly face scrutiny over operational misconduct. However, Kint remains unsatisfied.
“This settlement may bring relief to the parties involved, but it’s a missed opportunity for public accountability.”
This case marked the first time Meta’s board was directly challenged in a Delaware trial over its internal oversight practices. The proceedings had been closely watched, not only because of the high-profile names involved, but also for the precedent it could set for corporate accountability.
Among the witnesses was Jeff Zients, who served on Meta’s board from 2018 to 2020 and was White House Chief of Staff under former President Joe Biden. He testified on Wednesday. Marc Andreessen, the influential venture capitalist and longtime Meta director, was slated to take the stand Thursday.
Company founder and CEO Mark Zuckerberg, along with former COO Sheryl Sandberg, were expected to appear next week.
Meta’s legal team had been preparing to argue that the board’s decision to settle with the FTC in 2019 was reasonable and not indicative of negligence. However, the plaintiffs claimed that Zuckerberg’s control over the company allowed him to shape the outcome in a way that protected him from personal accountability, while leaving Meta to shoulder the financial burden.
Zuckerberg was also accused of insider trading, with the plaintiffs alleging he sold Meta stock while fully aware of the looming fallout from the company’s data privacy failures.
The case comes amid broader debate within the tech world over Delaware’s role as the go-to corporate jurisdiction. Like Tesla and Dropbox, Meta has reportedly been exploring a potential relocation to a state more favorable to founder-led governance structures. Andreessen Horowitz, the VC firm co-founded by Andreessen, recently announced plans to move a major subsidiary to Nevada and encouraged others in tech to consider similar moves.
Delaware Chancellor Kathaleen McCormick, who presided over the case, congratulated both parties on the resolution and stated that she looked forward to reviewing the final terms once they were submitted.
Moumita Basuroychowdhury is a Contributing Reporter at The National Digest. After earning an economics degree at Cornell University, she moved to NYC to pursue her MFA in creative writing. She enjoys reporting on science, business and culture news. You can reach her at moumita.b@thenationaldigest.com.
