Daily Management Review

US Court Rules Vast Overpayment By Facebook In Data Privacy Settlement To Protect Zuckerberg


US Court Rules Vast Overpayment By Facebook In Data Privacy Settlement To Protect Zuckerberg
A court ruling earlier this week indicated that the social media company Facebook Inc might have been forced to pay about may $4.9 billion more than it would have required under a maximum penalty for which it had come to a settlement with regulators over charges of the company’s social media platforms not being able to handle user privacy. 
The information was taken out by a Delaware judge, who also made this information public, from a “white paper” prepared for Facebook’s board of directors by a law firm advising the board during a debate over a proposed $5 billion settlement with the Federal Trade Commission.
That agreement also protected Chief Executive Officer Mark Zuckerberg.
In his ruling, Vice Chancellor Joseph Slights of the Court of Chancery directed Facebook to turn over documents to shareholders who are trying to estimate whether Facebook had overpaid to protect Zuckerberg. In the ruling the judge cited parts from the paper prepared by Gibson Dunn attorneys.
“The documents already produced provide no insight into why Facebook would pay more than its (apparently) maximum exposure to settle a claim,” said Slights in the ruling. The judge said that shareholders were “right to question whether internal communications among Facebook fiduciaries might shed light on the Board’s thinking in this regard.”
There was no immediate response on the issue from Facebook in the media.
Allegations of Facebook having mishandled user privacy were se3ttled by the company in July 2019. The company did not admit wrongdoing.
According to the Gibson Dunn paper, a maximum penalty of about $104 million should have been applicable for Facebook, Slights said in the ruling.
There was no comment on the issue from the FTC.
During a hearing last year, an attorney for the Facebook shareholders, Joel Fleming,  tolf Judge Slights the shareholders wanted to know: “Did anyone say, ‘Go ask the FTC, would you take less money if Mr. Zuckerberg is personally liable’?” before the shareholder group decided to sue the company over the FTC settlement.
Facebook had earlier said that the documents of the agreement in question were protected by attorney-client privilege and the judge however declined requests to order Facebook to turn over documents to the shareholders. The judge noted that this decision was taken partly because the shareholders could get insights about the settlement agreement form the non-privileged electronic communications that he had also ordered to be disclosed by the social media platform.