The agreement was announced in the Delaware Court of Chancery on Thursday, just before the trial was to resume its second day.
The trial, presided over by Judge Kathaleen McCormick, was halted after plaintiffs’ lawyer Sam Closic informed the court that a settlement had been reached. Details of the agreement remain confidential, and lawyers for the defence declined to comment.
According to Reuters, the lawsuit was filed by Meta shareholders who aimed to hold CEO Mark Zuckerberg, venture capitalist and board member Marc Andreessen, former COO Sheryl Sandberg, and others accountable for the company’s massive legal costs, primarily the $5 billion fine imposed by the US Federal Trade Commission (FTC) in 2019. That fine followed revelations about Facebook’s failure to comply with a 2012 agreement to protect user data.
Shareholders alleged that top executives ignored the company’s legal obligations and ran Facebook as an illegal data-gathering operation. The case was based on Caremark claims, a rare and difficult-to-prove legal standard in Delaware corporate law related to board oversight failures.
Zuckerberg and Sandberg were expected to testify next week, along with other prominent former board members such as Peter Thiel and Reed Hastings. Sandberg was previously sanctioned for deleting emails during litigation, complicating her defense.
By settling, the defendants avoid testifying under oath, while shareholders sidestep the challenge of proving complex corporate law claims. The case followed the infamous Cambridge Analytica scandal, in which user data was improperly accessed for political advertising during the 2016 US presidential campaign.
As reported by Reuters, Jason Kint, CEO of Digital Content Next, criticised the settlement, saying it denied the public a chance at accountability. “Facebook has reframed the Cambridge Analytica scandal as a few bad actors, avoiding deeper scrutiny of its surveillance-based business model,” he said. Meta has not commented on the settlement.
– Ends