January 1, Meta’s Leadership Faces Dismissal Request in Child Exploitation Lawsuit

Meta Platforms, along with several of its current and former leaders, including founder Mark Zuckerberg, are seeking to have a shareholder lawsuit dismissed. The lawsuit alleges that the company has knowingly failed to protect its social media users from human trafficking and child sexual exploitation.

The lawsuit was filed last year by multiple investment funds. They assert that Meta’s directors and senior executives have been aware of the rampant human trafficking and child sexual exploitation taking place on Facebook and Instagram, yet have failed to address this predatory behavior.

Christine Mackintosh, the plaintiffs’ attorney, stated during a hearing,
“For years, Meta’s directors and senior executives have known that pedophiles and human and sex traffickers have been using Facebook and Instagram to facilitate their noxious activities. But despite this, Meta’s directors utterly failed to implement board level oversight and controls to ferret out these heinous activities and to stop them from proliferating on Meta’s platforms.”

David Ross, an attorney for Meta, argued for the dismissal of the lawsuit. He claimed that the alleged conduct of the company’s leaders has not resulted in Meta suffering “corporate trauma” as required by Delaware law. The company also argues that the lawsuit’s claims are based on speculation that it might face future harm or loss.

However, the plaintiffs contend that Meta has already suffered harm. They cite sharp drops in its share price and market capitalization amid media reports about trafficking and child sex abuse involving its platforms. They also point to “massive legal defense costs” in related litigation and allege that Meta also has suffered “reputational harm.”

Meta also argues that the lawsuit must be dismissed because the plaintiffs failed to demand that the board take action before filing their lawsuit. This demand is typically required before a shareholder can file a “derivative complaint” on behalf of a corporation over alleged harm to the company caused by its officers or directors.

The plaintiffs argue that the demand requirement should be excused as “futile” because board directors are defendants who face a substantial likelihood of liability, and many are beholden to Zuckerberg instead of being independent.

Mackintosh stated that Meta directors have ignored several red flags, including lawsuits, media reports, shareholder resolutions, and increasing scrutiny by lawmakers and regulators of online activity. These should have alerted the board to act. Documents provided by the company in response to the lawsuit suggest little if any board discussions regarding human trafficking and child sexual exploitation.

In a statement, Meta spokesman Andy Stone said the company has spent “over a decade fighting these terrible abuses both on and off our platforms and supporting law enforcement in arresting and prosecuting the criminals behind it.”

Under Delaware law, corporate directors can be held liable for failing to exercise proper oversight to ensure legal compliance with relevant statutes. However, Vice Chancellor J. Travis Laster noted that there has been debate in legal circles on whether Delaware’s law regarding director oversight can be applied to business risks, not just legal compliance.

Laster stated, “If we were going to have a business risk that actually could trigger this, it seems like not dealing with a massive child porn problem might be a good one.” He will rule on the case at a later date.

Why It Matters (op-ed)

Meta’s attempts to dismiss the shareholder lawsuit demonstrate the company’s continued negligence and lack of accountability for its platforms’ role in enabling human trafficking and child sexual exploitation.

The plaintiffs’ arguments about Meta’s already suffered damages, such as share price drops, market capitalization loss, and reputational harm, show that the far-right concerns about big tech’s negative impact on society are valid.

The fact that the plaintiffs argue the demand requirement is “futile” due to board directors’ loyalty to Zuckerberg rather than independence is a clear indication that big tech’s unchecked power needs to be addressed.

It is high time that companies like Meta are held responsible for their actions and inactions, and this lawsuit is a step in the right direction.

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