Meta Shareholders recover Billions in Lawsuit against Company’s Officers

Bit of a long story but in 2012 Meta agreed with the Federal Trade Commission (FTC) to stop collecting and sharing personal data from its customers without consent.  In violation of the Agreement, Facebook sold customers’ personal information to commercial partners.  The FTC fined Facebook $5.1 Billion to settle charges for this violation.  Meta shareholders sue its company executives for wasting the company’s money by violating the Agreement and subjecting the company to fines.

After one day of trial, Meta agreed to settle the lawsuit for a reported $8 Billion dollars. 

This is an interesting case because shareholders potentially benefited from the breach of the Agreement.  Although they were hurt by the fine and associated legal fees.  Then again, if the Settlement comes out of Meta’s money, it will hurt shareholders.  Although, the Settlement is paid to shareholders.  Convoluted.  Seems like a net zero transaction for shareholders.  Although, if Meta’s share price does not drop on the news of the Settlement, then the shareholders have a net gain of $8 Billion.

And then there is the aspect of who pays the Settlement.  Meta Executives were named in the lawsuit.  So they risked their personal assets.  However they would have either insurance to pay for their liability, or an indemnity from Meta.  Which brings us back to Meta paying the Settlement.

The case also brings into question the teeth of the FTC or regulators in Canada.  Meta may have done a cost benefit analysis to decide that any fine from the FTC would be less money than it expected to gain from selling the personal information.  Now however, companies will have to factor in the amount of the fine and the amount of a settlement with its shareholders.