Meta Trial Over Cambridge Analytica Scandal Tests Chancery Court

The first trial of oversight liability claims against a public company may prove riskier for Delaware’s elite business court and its chief judge than the expected star witness, Meta Platforms Inc. founder Mark Zuckerberg.

He’s expected to testify about fallout at Facebook’s parent company from the Cambridge Analytica data mining scandal, in a trial starting Wednesday at the state’s Chancery Court. Meta settled similar class action claims in a California federal court in 2022.

The company may view the derivative case as good for them, win or lose. The claims at issue are notoriously difficult to prove, and the trial comes as Meta explores other states for its corporate home in the wake of unpopular Chancery rulings blamed for pushing Tesla Inc., Dropbox Inc., and other companies out of Delaware.

“Maybe they think the possible threat of them also leaving is enough to sway the court to rule their way and they don’t need to settle anymore,” Southern Methodist University law professor Carliss Chatman said. “Or maybe they want a bad decision so they can justify to the shareholders why they’re moving.”

‘Caremark’ Claims

The main claims in the trial are named for the 1996 Chancery ruling in In re Caremark Int’l Inc. Derivative Litig., which set parameters for oversight liability under Delaware law.

A group of pension funds allege Zuckerberg and former COO Sheryl Sandberg led Facebook to violate a 2012 Federal Trade Commission consent order regarding data sharing. Facebook’s board also failed to monitor the platform’s compliance, they say. They also accuse Zuckerberg of insider trading.

The Delaware lawsuit predates the company’s $5 billion settlement with the FTC in 2019 over policies that allowed Cambridge Analytica, a UK consulting firm linked to President Donald Trump’s 2016 campaign, to acquire data from 87 million Facebook users. The pension funds say the board approved the accord to shield Zuckerberg from personal liability.

The FTC’s fine may have been crucial to the court’s 2023 decision allowing the claims to survive a motion to dismiss, but Zuckerberg’s and Sandberg’s high-profile personalities also likely advanced the case, Chatman said.

When corporate leaders’ identities become entwined with the branding, “it kind of makes sense that the Caremark claims should survive, because they give the public the perception that they are more aware and more involved in the company than a typical CEO,” she said. “It feels more like things are their personal decisions.”

Facebook thrived after reaching the FTC settlement, according to the defendants. It invested over $8 billion in its privacy program and preserved Zuckerberg’s reputation, they said.

“Cambridge Analytica was decidedly a traumatic episode for Facebook and its stockholders,” they said. “But it was the product of Cambridge Analytica’s studied deceit—not remotely the product of the bad faith inattention of Facebook’s fiduciaries.”

Evidence and Guidance

Earlier this year, the court sanctioned Sandberg over deleted emails. How the court handles the evidence will be interesting, said Joshua Newcomer of McKool Smith.

“The genesis of Caremark is lack of controls, right? So what does it say, if one of the board members is using personal email and the other board members go along with that, about the overall narrative of control?” Corporate attorneys and their clients want to know what remedies the court could impose if it finds the evidence points to a legal violation, he said.

“I really am going to be looking to see whether the Texas courts take any guidance from the Delaware courts regarding the appropriate relief at the end of a Caremark trial, particularly where the company has already made some adjustments, and whether that’s good evidence or bad evidence for the company,” Newcomer said. “And then what it means in terms of any order for remedial oversight requirements at the company, as opposed to just monetary damages.”

Other companies shouldn’t have anything to worry about so long as their internal controls are implemented in good faith, he said.

Dexit Drama

The trial is being overseen by Chancellor Kathaleen St. Jude McCormick, who took over the case in March without explanation, years into litigation that had been before Vice Chancellor J. Travis Laster.

The two judges have been lauded as “fearless,” but they’ve also weathered personal attacks from Elon Musk and other critics who believe their rulings illustrate a bias toward minority shareholders.

The venture capital firm co-founded by Meta director Marc Andreessen, who’s expected to testify during trial, cited “an unprecedented level of subjectivity” from the Chancery Court in its decision to relocate to Nevada.

Delaware lawmakers rewrote its corporate statutes in the last couple years in response to rulings by McCormick and Laster. Public records showed Meta executives participated in backroom meetings that led to a new law this year that lowered judge-made guardrails around insider deals, narrowed the definition of a “controlling stockholder,” and limited shareholder access to director texts and emails.

Meta might feel confident because of the unusual outside pressure that any judge in McCormick’s situation would have to acknowledge, said Renee Zaytsev of Boies Schiller Flexner LLP.

The tech giant might expect “that a court is going to be wary about putting out another decision against another really big company,” she said.

However McCormick eventually rules—a decision would follow months after post-trial arguments—the stakes are high for Delaware’s attempts to portray itself as balancing the needs of shareholders with those of corporate leaders.

A pro-Meta outcome would send a strong signal that Delaware is pro-company. With a ruling against Meta, however, “I think you’re going to hear renewed discussions about how Delaware remains an unfriendly place for companies,” Zaytsev said.

The case is In re Facebook Inc. Derivative Litig., Del. Ch., No. 2018-0307, trial 7/16/25.