Facebook Data Protection Trial Begins. Billions of Dollars at Stake

As reported by Reuters, the case dates back to 2018, when it was revealed that Cambridge Analytica , a now-defunct consulting firm that worked on Donald Trump's successful 2016 US presidential campaign, had gained access to data on millions of Facebook users.

Meta's billion-dollar losses after scandal revealed

Shareholders are seeking reimbursement of more than $8 billion in fines and other costs incurred by Meta following the revelations of the Cambridge Analytica scandal, including a record $5 billion fine levied against Facebook by the FTC in 2019 for violating a 2012 agreement.

Defendants in the case include former chief operating officer Sheryl Sandberg, venture capitalist and board member Marc Andreessen, and former board members Peter Thiel, co-founder of Palantir Technologies, and Reed Hastings, co-founder of Netflix.

The non-jury trial in Wilmington, Delaware, is expected to last eight days. It will focus primarily on events from a decade ago and board meetings to determine how Facebook leaders implemented the 2012 agreement .

While the lawsuit will address the old rules, it comes as Meta , which is under scrutiny for its training of AI models, continues to grapple with privacy concerns.

Meta has spent billions on a user privacy program.

The company says it has invested billions of dollars in its user privacy program since 2019. Jason Kint, head of Digital Content Next, an industry group representing digital content providers, said this will allow for the collection of information about what management knew—and when—about user data, which currently totals more than 3 billion per day on Meta platforms.

Two years ago, the defendants sought to have the case dismissed before trial, which the judge denied. "This is a case involving allegations of misconduct on a truly colossal scale," said Travis Laster, the judge presiding over the case at the time. The trial in Chancery Court will be overseen by Kathaleen McCormick.

Now, plaintiffs, individual investors and union pension funds, including the California State Teachers' Retirement System, must prove what is often described as the most difficult claim in corporate law – showing that directors completely neglected their duty of supervision .

Zuckerberg and Sandberg are accused of knowingly causing the company to violate the law. While Delaware law protects directors and officers from poor business decisions, it does not protect them from illegal decisions , even if they are profitable.

Shareholders said in pre-trial documents that they can prove that after the 2012 agreement, Facebook continued unfair privacy practices at Zuckerberg's direction.

The defendants said the evidence would show the company had created a privacy oversight team and hired an outside compliance firm, and that Facebook had fallen victim to Cambridge Analytica's "elaborate fraud."

Zuckerberg sold his shares during the scandal?

In addition to the main privacy allegations, the plaintiffs also claim that when Zuckerberg saw the Cambridge Analytica scandal heading toward bankruptcy and the company's stock price plummeting, he was motivated to sell his shares , earning at least $1 billion in the process. The defendants argue that the evidence will show he employed a stock trading scheme that could shield him from insider trading allegations. They also said he was motivated to support charitable causes.

Last week, Meta hired Ruoming Pang, a former head of Apple's AI modeling team , offering him a salary of more than $200 million over several years. Apple didn't attempt to match the offer, which significantly exceeds the salaries of company leaders other than CEO Tim Cook.