Attorneys for Meta Platforms and its current and former leaders, including founder Mark Zuckerberg, are seeking the dismissal of a shareholder lawsuit accusing the company of neglecting to safeguard users from human trafficking and child sexual exploitation on its social media platforms.
The lawsuit, filed by investment funds, asserts that Meta's directors and executives were aware of the prevalence of human trafficking and child exploitation on Facebook and Instagram but did not take adequate measures to address the issue.
Plaintiffs argue that Meta's failure to implement oversight and controls allowed these illicit activities to thrive on its platforms. Meta's defense contends that the lawsuit lacks evidence of 'corporate trauma' as required by Delaware law and is based on speculative claims of potential future harm.
The plaintiffs claim that Meta has already suffered consequences, such as significant drops in share price and market capitalization following media reports on trafficking and child abuse linked to its platforms, as well as substantial legal defense costs and reputational damage.
Meta also argues that the lawsuit should be dismissed because the plaintiffs did not demand action from the board before filing the complaint. The plaintiffs argue that such a demand would have been futile due to the directors' alleged liability and lack of independence from Zuckerberg.
The plaintiffs highlight various red flags that Meta's board allegedly ignored, including lawsuits, media reports, shareholder resolutions, and regulatory scrutiny. They point out a lack of documented board discussions on human trafficking and child exploitation.
Delaware law holds corporate directors accountable for oversight lapses related to legal compliance. However, there is debate on whether this extends to addressing business risks beyond legal obligations. The judge presiding over the case indicated that neglecting a significant issue like child exploitation could potentially trigger liability for the directors.
A ruling on the lawsuit is pending, with the judge expected to make a decision at a later date.
