A Delaware judge on Wednesday refused to dismiss a shareholder lawsuit alleging that Facebook officers and directors violated both the law and their fiduciary duties in failing for years to protect the privacy of user data.
Vice Chancellor J. Travis Laster rejected arguments that the complaint should be dismissed because the plaintiffs did not first demand that Facebook’s board take legal action before filing litigation themselves. Under Delaware law, shareholders must make such a demand or demonstrate that doing so would be futile because a majority of directors were self-interested, lacked independence or faced a substantial likelihood of liability.
“It tells a story of directors who were on notice of the law breaking, and who either affirmatively went along with it or consciously disregarded it,” Laster said. “What we don’t have is a little lawbreaking, what we don’t have is isolated lawbreaking, what we don’t have are immaterial violations. … This is a case involving alleged wrongdoing on a truly colossal scale.”
Facebook later sold user data to commercial partners in direct violation of the consent order, and removed disclosures from privacy settings that were required under consent order, the lawsuit alleges. The company’s conduct resulted in significant fines from regulators in Europe and culminated in the Cambridge Analytica scandal in 2018.
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