Meta Executives Face Shareholder Lawsuit Over $5 Billion FTC Fine

Meta’s executives, including its chief executive Mark Zuckerberg and former COO Sheryl Sandberg, are set to appear in a Delaware corporate law court this week to face a shareholder lawsuit. The lawsuit alleges that the company’s board of directors failed to enforce privacy rules and mismanaged privacy controls, leading to a record $5 billion fine to shield Zuckerberg from personal liability. The trial, which begins on Wednesday and is expected to last for eight days, stems from a 2019 settlement with the U.S. Federal Trade Commission (FTC) following the Cambridge Analytica scandal.

The scandal involved the harvesting of personal data from millions of users through a third-party app without their consent. Shareholders have accused the board of breaching its fiduciary duties by failing to uphold a 2012 FTC consent decree. They argue that the $5 billion settlement was unjustly high and designed to protect Zuckerberg’s personal interests rather than serve the company or its shareholders. The lawsuit was filed by three minority shareholders and names several prominent current and former directors, including venture capitalist Marc Andreessen, investor Peter Thiel, Netflix’s co-founder Reed Hastings, Kenneth Chenault, the former American Express CEO, and Jeff Zients, a former Biden adviser. All of these individuals are expected to testify.

The trial is particularly significant as it is one of the first “Caremark” claims in Delaware. Caremark lawsuits allege a board’s failure to oversee corporate compliance and historically struggle to survive early dismissal. The plaintiffs claim that Meta’s board approved the $5 billion FTC fine without conducting an internal investigation, thereby protecting Zuckerberg from being named personally in the FTC case. They further allege that Zuckerberg unlawfully sold billions in company stock while possessing material non-public information about Facebook’s undisclosed data-sharing practices.

In court filings, Meta and the defendants deny these allegations. They argue that the company’s directors did not knowingly violate the 2012 consent decree and acted prudently within their fiduciary duties. Meta maintains that, after the decree, the company implemented “a robust system of privacy controls,” and that there is no evidence of misconduct from the board. Despite these defenses, the core Caremark claim has already survived Meta’s motion to dismiss. Sandberg has also already faced sanctions in the case. The court sanctioned her earlier this year for deleting Gmail messages after being notified of the lawsuit. Sandberg stepped down from her role as Meta’s COO in 2022 and left the board in 2024.

Meta’s market capitalization has grown to nearly $2 trillion. The lawsuit has revived longstanding concerns about how aggressively the company pursued growth at the expense of user privacy and public trust. Critics argue Meta’s pursuit of engagement led to its mishandling of systemic data and amplified online harms such as misinformation and hate speech.

Chancellor Kathaleen McCormick, who will oversee the Meta case, also made headlines in 2024 for rescinding Tesla’s $55 billion pay package for CEO Elon Musk. The lawsuit has prompted unease among tech leaders, with the venture capital firm Andreessen Horowitz, co-founded by Meta board member Marc Andreessen, announcing its plans to move its incorporation from Delaware to Nevada. The firm cited “unprecedented subjectivity” in Delaware’s judicial decisions.

“What’s at stake is the trust of the company — not just for the users but for the shareholders,” said Jason Kint, the CEO of the online publishing group Digital Content Next, regarding the matter.