This Week in Chancery Court: Meta Pushes to Dismiss Abuse Claims

Meta Platforms Inc. will ask the Delaware Court of Chancery this week to dismiss a lawsuit alleging that Mark Zuckerberg, other senior corporate officers, and members of the tech giant’s board have deliberately ignored child sexual exploitation on Facebook and Instagram.

Here’s a look at what else is coming before the court:

Monday: Valhalla Partners II LP v. Vistar Media Inc., Del. Ch., No. 2019-0202, trial 3/4/24.

At issue: Digital advertising startup Vistar Media Inc. was ordered in 2019 to face claims that it tried to cut out early investors by preventing them from converting promissory notes into common stock. In a September 2023 bench ruling, Vice Chancellor Sam Glasscock III denied cross motions for summary judgment from Vistar and the group of venture capital investors suing them. The parties now go to trial over the investors’ claims that Vistar prevented them from converting notes totaling $1.3 million into equity, according to a joint pre-trial brief. Vistar, which seeks $3.5 million in damages, argues in its own brief that the investors breached the notes when they “improperly rejected payment.”

Court action: A five-day trial opens Monday in Georgetown, Del.

Vistar Media Loses Bid to Nix Suit Over Note-Equity Conversions

Tuesday: Emp. Ret. Sys. of R.I. v. Zuckerberg, Del. Ch., No. 2023-0304, oral argument 3/5/24.

At issue: The amended complaint filed by a group of investment funds last August depicts a business that’s dragging its feet when police, prosecutors, and victim advocacy groups seek its assistance to remove abusive content and break up child sex trafficking networks. Meta’s attorneys argue “no corporate trauma has occurred,” and the investment groups can’t back up their claims that there’s been a failure of oversight by Meta’s senior leaders, according to a brief supporting the company’s motion to dismiss. If the court won’t dismiss the lawsuit, the case should be stayed pending resolution of litigation in other venues over claims of child sexual exploitation on Facebook, the company said. Attorneys for the investment groups said in a letter to the court that they may play video from Zuckerberg’s testimony from a Jan. 31 US Senate hearing to support their case.

Court action: Oral arguments on the motion to dismiss will be held in Wilmington, Del.

Meta Still Facilitating Child Sex Trafficking, Updated Suit Says

Wednesday: In re Weber Inc. S’holder Litig., Del. Ch., No. 2023-0993, hearing 3/6/24.

At issue: Former Weber Inc. investors initially filed a lawsuit last October challenging the grill maker’s $2.3 billion take-private sale to billionaire investment banker Byron Trott. Chancellor Kathaleen St. Jude McCormick now must decide who will take the lead in consolidated litigation, out of three potential lead plaintiffs. Three investors known as the Costner group argue they have the best case because their complaint focuses on “how the merger price is unfair based on a discounted cash flow analysis” by a valuation expert. Two other investors say their complaint should prevail because the “only impediment to proceeding with discovery has been the delayed filing of other complaints by other plaintiffs with lesser economic interests at stake.” One last investor, Michael Levine, argues his case “has demonstrated the most vigor,” having successfully prosecuted a books and records action “which resulted in the production of critical documents and information that informed the superior allegations and additional claims in the complaint.”

Court action: Oral arguments on the leadership applications will be heard in Wilmington, Del.

Byron Trott, Weber Board Sued Over $2.3 Billion Buyout Deal (1)

Friday: Jeffries v. Abercrombie & Fitch Co., Del. Ch., No. 2023-1211, oral arguments 3/8/24.

At issue: Former Abercrombie & Fitch Co. CEO Michael Jeffries seeks to fast-track his claims against the apparel retailer, demanding that it cover legal fees he’s set to incur defending himself against sexual assault allegations raised by a federal lawsuit last October. Jeffries alleges that Abercrombie has ignored multiple requests for it to front his legal fees and expenses in connection with the proposed class action, which also targets the business. Abercrombie denies his allegations. Jeffries also filed a motion for summary judgment, which Abercrombie opposes, arguing the claims Jeffries faces in the federal lawsuit are not indemnifiable since they “are inherently personal in nature and not corporation-related.”

Court action: Oral arguments on the motion to expedite will be heard in Wilmington, Del.

Abercrombie Sued by Ex-CEO Facing Sexual Assault Allegations

Friday: Ky. Downs Mgmt. Inc. v. Ky. Downs LLC, Del. Ch., No. 2021-0251, hearing 3/8/24.

At issue: The ex-owners of the Kentucky Downs racetrack filed a lawsuit in 2021 against the track’s purchasers, alleging they refused to honor a provision in the sales agreement to turn over part of the deal price held back to cover pending litigation over gambling on “historical horse racing,” which resembles slot machine betting. “Despite favorable subsequent legal developments and their continued, uninterrupted ability to collect increasing HHR revenues at Kentucky Downs,” the buyers are holding onto a “windfall, protracting this litigation with arguments that contravene the plain language of the governing contract and common sense,” the ex-owners said in a brief supporting their motion for summary judgment. The ex-owners are “reasoning that subsequent legislative action by the Kentucky Legislature justifies a different triggering mechanism” for the holdback provision despite the plain language of the sales agreement, the buyers said in their own brief.

Court action: A hearing on the parties’ cross-motions for summary judgment will be held in Wilmington, Del.

Kentucky Downs Ex-Owners Stiffed After Racetrack Sale, Suit Says