Meta Shareholder Settlement Spares Zuckerberg From Testifying, Eases Pressure on Delaware Courts
A last-minute settlement between Meta Platforms (NASDAQ:META) and its shareholders brought an abrupt end to an $8 billion trial last week, shielding CEO Mark Zuckerberg from having to testify about alleged mishandling of user data—and easing mounting pressure on Delaware’s judicial system.
The settlement was announced just before the second day of an eight-day trial was set to begin in Delaware’s Court of Chancery on Thursday. While the full terms of the agreement are still being finalized, the resolution avoids a case that could have intensified the recent exodus of companies from Delaware incorporation, a trend some have dubbed “Dexit.”
Over the past year, prominent business leaders—including Elon Musk—have criticized Delaware’s courts, claiming they make it too easy for shareholders to sue company boards. Musk has encouraged firms to relocate, and companies like Dropbox (NASDAQ:DBX), Trump Media & Technology, Roblox, and Simon Property Group (NYSE:SPG) have already reincorporated in other states.
Critics argue that Delaware’s courts are increasingly biased against founders and executives, a sentiment that loomed over the Meta trial, which involved 11 high-profile defendants, including Mark Zuckerberg, Sheryl Sandberg, Marc Andreessen, Peter Thiel (Palantir co-founder), and Reed Hastings (Netflix co-founder).
Observers noted that either outcome in the trial would have put the court in a difficult position. A ruling in favor of Meta’s leadership could have appeared as though the court was yielding to elite pressure, while a verdict for the shareholders might have further fueled corporate departures from the state.
“It was going to be really awkward for the court,” said Ann Lipton, a law professor at the University of Colorado.
The lawsuit accused Meta’s current and former leaders of failing to protect Facebook users’ privacy and sought to have them personally reimburse the company for $8 billion in damages, including a $5 billion fine paid to the Federal Trade Commission in 2019.
Though Meta, its legal team, and the shareholder plaintiffs have not commented, the case drew national attention to Chancellor Kathaleen McCormick, the judge presiding over the matter. McCormick made headlines last year for voiding Elon Musk’s $56 billion Tesla pay package, a ruling now under appeal.
The Meta trial intensified concerns about Delaware’s business climate, particularly after Andreessen Horowitz—the venture capital firm founded by defendant Marc Andreessen—announced it was moving its incorporation to Nevada. In a blog post, the firm cited perceptions that Delaware courts may be biased against tech founders and pointed to McCormick’s ruling in the Musk case as an example.
Earlier this year, Meta executives met with Delaware’s governor, prompting the state to pass changes to its corporate law aimed at reducing shareholder lawsuits over deals involving controlling stakeholders, such as Zuckerberg. Delaware lawmakers said the amendment was designed to keep major firms from leaving, as the state derives over 25% of its budget from incorporation fees.
Still, companies like Affirm Holdings (NASDAQ:AFRM) have left, citing uncertainty about how the revised law will be interpreted by Delaware courts.
Despite the turmoil, some experts praised the resolution of the Meta case. Lawrence Cunningham, director of the Weinberg Center for Corporate Governance, said the settlement highlighted Delaware’s ability to manage complex corporate disputes.
“It was a very desired judicial outcome,” Cunningham noted, pointing to the court’s effectiveness in steering the case toward resolution—something he said may be hard to replicate in other states.
