Meta shareholders vs Mark Zuckerberg in $8 billion lawsuit

Australia Broadcast Center

12 hours ago

Meta has been accused of harvesting user data without consent in a multi-billion-dollar lawsuit by company shareholders against chief executive Mark Zuckerberg.
The case dates back to a 2018 scandal which saw the data of millions of Facebook users accessed by a now-defunct political consulting firm.
The firm, Cambridge Analytica, worked for Donald Trump's 2016 presidential campaign.
Now Meta shareholders are suing Mr Zuckerberg and several current and former company executives, claiming they violated a 2012 agreement to protect user data.
They want Mr Zuckerberg and his co-defendants to reimburse the company for more than $US8 billion ($12.2 billion) in fines and other costs Meta paid following the controversy.
Mr Zuckerberg has dismissed the allegations in court filings as "extreme claims".
Jeannie Paterson, who specialises in consumer protection and AI regulation, said the lawsuit was "unusual".
"This is an action by some minority shareholders against the company they hold shares on, and they're saying that the bad behaviour of the company … would have caused them loss, for which they should be compensated for by the directors," Professor Paterson, from University of Melbourne, said.
"That is an astounding action and something quite new in this area."
How a scandal allegedly sold the personal data of 300,000 Australians
About a decade ago, a third-party app called This Is Your Digital Life saw the personal data of millions of Facebook users released to researchers.
More than 300,000 Australians used the app.
Ultimately data of tens of millions of users was allegedly handed over.
The data collected was allegedly given to Cambridge Analytica, a British data analytics firm, and its parent company, Strategic Communication Laboratories — which violated Facebook's terms of service.
The data was used by Cambridge Analytica to target Facebook users with political advertising during the 2016 US presidential election.
The fallout has seen Facebook embroiled in court case after court case — including the one about to begin.
Who's involved in the latest lawsuit?
Facebook COO Sheryl Sandberg testifies before a Senate Intelligence Committee hearing on foreign influence operations on social media platforms on Capitol Hill in Washington, U.S., September 5, 2018. ( Reuters: Joshua Roberts )
Sheryl Sandberg served as chief operating officer at Meta from 2008 to August 2022, when she stepped down.
When Mr Zuckerberg recruited the then-Google executive, the pair wanted Facebook to become a "global leader".
After stepping down, she remained a board member, noting she had only intended to stay for five years and not the ultimate 14 years of her tenure.
"I believe in this company," she said when announcing her decision to step down.
"Have we gotten everything right? Absolutely not.
"Have we learned and listened and grown and invested where we need to? This team has and will."
This year she announced she would not stand for re-election on the Meta board.
She rose to prominence in 2013 after publishing a corporate-feminist guide titled Lean In, which became a best seller.
In January she was sanctioned by a Delaware judge for deleting emails relating to the Cambridge Analytica privacy scandal. Marc Andreessen Venture capital firm Andreessen Horowitz Co-Founder and General Partner Marc Andreessen speaks at the WSJD Live conference in Laguna Beach, California October 28, 2014. ( Reuters: Lucy Nicholson )
Marc Andreessen runs an influential Silicon Valley venture capital firm which has previously invested in Instagram and Oculus VR.
He was a seed investor in Facebook and has served on its board of directors since 2008.
Late last year, he was credited as a "key networker" at Elon Musk's Department of Government Efficiency (DOGE), according to The Washington Post. Peter Thiel
Peter Thiel is a venture capitalist, tech billionaire, and co-founder of PayPal and software company Palantir.
He was the first big investor in Facebook, according to Forbes, but sold most of his stake in it and left the board in 2022.
He left the company to focus on politics.
Mr Thiel has been described as one of the largest donors to Republican candidates during the 2022 election campaign.
By the beginning of 2022, he had reportedly donated more than $US20.4 million ($31.2 million), according to The New York Times.
Recently Mr Thiel rose to viral fame during a podcast interview discussing AI.
Asked whether the human race "should survive", Mr Thiel hesitated long enough that the host was forced to repeat the question.
He ultimately said yes. Reed Hastings Netflix CEO Reed Hastings is now worth $3.4 billion USD.
Reed Hastings is the co-founder and chairman of Netflix.
Since stepping down as Netflix's co-chief executive in 2023, he has slowly been reducing his shares and now owns less than 1 per cent of the company, according to Forbes.
He was on Facebook's board of directors from 2011 to 2019.
According to The New York Times, he and fellow board member Peter Thiel butted heads over then-US-presidential-nominee Donald Trump in 2016.
He reportedly labelled endorsement of Mr Trump "catastrophically bad judgement" in emails between the pair. Mark Zuckerberg Meta Platforms CEO Mark Zuckerberg departs after attending a Federal Trade Commission trial that could force the company to unwind its acquisitions of messaging platform WhatsApp and image-sharing app Instagram, at U.S. District Court in Washington, D.C., U.S., April 15, 2025. ( Reuters: Nathan Howard TPX IMAGES OF THE DAY )
Mark Zuckerberg founded Facebook, now Meta, as a 19-year-old in 2004.
The company was taken public in 2013 and Mr Zuckerberg now owns 13 per cent of its stock, according to Forbes.
Between 2023 and 2024 his estimated net worth skyrocketed from $US64.4 billion ($98.3 billion) to $177 billion ($270 billion) and has continued to rise.
The latest lawsuit is set to get underway in the US state of Delaware on Wednesday, local time.
Professor Paterson said the case was a creative way of addressing corporate governance.
It was also an action that was coming under corporation law rather than the "non-existent privacy law" in the US.
But also, under the context of the US Communications Decency Act which protected platforms such as Facebook from being liable for content posted by its users.
"So it's a really interesting and innovative use of director's duties, and we've seen that a little bit in Australia," she said.
"So this action is now taking on platform governance as a serious director duty. So you could say the next one could be AI governance."
The non-jury trial is expected to last eight days.
Meta's ongoing legal dramas cost them billions
Over the last few years, Meta has settled cases surrounding the Cambridge Analytica scandal.
In 2022, Meta agreed to pay $US725 million to resolve a class action lawsuit over the scandal in the US.
Late last year, the company agreed to a historic $50 million settlement with Australia's information commissioner over the user data scandal.
One court case that is still ongoing has been brought by one of Australia's richest people, Andrew Forrest, and is related to fraudulent Facebook cryptocurrency ads.
In March, it was revealed there were about 230,000 fake ads purporting to show Mr Forrest spread across the company's social platforms.
"The Andrew Forrest case against Meta is also quite a novel action," Professor Paterson said.
"So, in the past the [Communication] Decency Act has kind of shielded, especially digital platforms, less so tech companies, from litigation. We're starting to see perhaps the cracks in that."
Could this case strengthen data protection?
The origins of Meta's most recent lawsuit stem from more than a decade ago.
At the end of 2011, Facebook reached a deal with the US Federal Trade Commission over allegations it had a deceptive privacy policy. It required Facebook to seek user permission before making privacy changes.
David Vaile, a cyberspace legal expert at the University of New South Wales, said the agreement with the commission had been the "benchmark for weak" regulation of platforms such as Facebook.
"Facebook is a rogue state in that they're the exemplar of the cult of disruption they say, and they use their motto, forgiveness, not permission," Mr Vaile said.
Meta's been more aggressive than other tech companies in accessing data for AI, Mr Vaile said.
In January, court documents revealed the tech company used Library Genesis (LibGen), an online trove of pirated books and academic papers, to train its generative AI language model.
"They're being sued in a number of different jurisdictions for grabbing material and absorbing and regurgitating material through these generative tools that they had no right to, they had no permission for," he said.
It's why Mr Vaile believes this case presents an opportunity to strengthen protections against data harvesting as tech companies continue to develop AI.
"Having this litigation succeed would be a very useful disciplinary corrective. If this litigation fails, it'll be basically all bets are off on whatever they feel like doing with the AI stuff," he said.
ABC/Reuters