A judge on the state’s influential Court of Chancery has ruled there is sufficient evidence that Facebook dropped the ball on the privacy of its users, thereby ordering the social media giant to produce records around its relationship with the controversial political data-mining company Cambridge Analytica.
Vice Chancellor Joseph Slights ruled on Thursday that there was a ‘credible basis’ to believe Facebook’s board of directors failed in their duty to protect the personal data of users of the site. The ruling came as part of a 57-page decision released after a “paper record” trial (without deposition or live testimony) on a complaint brought by Facebook shareholders that the board of directors’ failure in oversight in the Cambridge Analytica matter caused a precipitous loss in the company’s value.
According to the opinion:
In July 2018, Facebook, Inc. (“Facebook” or the “Company”) experienced one of the sharpest single-day market value declines in history when its stock price dropped 19%, wiping out approximately $120 billion of shareholder wealth. This unprecedented misfortune followed news reports that, in 2015, the private data of 50 million Facebook users had been poached by Cambridge Analytica, a British political consulting firm. Facebook did not disclose this security breach to its users upon discovery or at any time thereafter. Users first learned of the breach when they read or heard about it in the news.
Slights concluded, “that Plaintiffs have demonstrated, by a preponderance of the evidence, a credible basis from which the Court can infer that wrongdoing occurred at the Board level in connection with the data privacy breaches that are the subject of this action.”
The court’s ruling clears the way for Facebook shareholders to obtain records on how the company’s board managed investigations by several government agencies including the FBI, Federal Trade Commission and the SEC. Those records would also include emails from senior Facebook executives including founder Mark Zuckerberg and chief operating officer Sheryl Sandberg.
Cambridge Analytica was a UK-based political consulting business that officially closed operations in 2018 after it was reported that the personal data of millions of Facebook users had used for targeted political communications without their knowledge or consent.
Click here for Vice Chancellor Slights’ full opinion.