Vice chancellor rules Facebook gives green light for stockholder groups to inspect books, records

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Delaware Vice Chancellor Joseph Slights hasruled that plaintiffs have a right to inspect Facebook’s records and books.

The case has been closely watched, given the publicity over Facebook’s policies and calls for greater regulation of social media after the 2016 election amid evidence that Russian and other operatives interfered through targeted posts.

The Chancery Daily (subscription)noted that reports in 2015, indicated that a company behind a Facebook app nominally intended to gather users’ data for academic research had sold millions of users’ data to Cambridge Analytica, in violation of Facebook policies.

Facebook blocked the app. However, in 2018, media reports stated that Cambridge Analytica had lied about destroying the data and instead used it to profile American voters in connection with the 2016 presidential election and that multiple government investigations were underway.

Reports of additional data privacy issues at Facebook followed, and private and governmental lawsuits were reported.

Since that time, a number of Facebook stockholders made demand for inspection of books and records.

Facebook did produce 1,700 pages, nearly all completely redacted. Company lawyers cited privacy issues

Facebook argued that plaintiffs failed to demonstrate a credible basis to infer wrongdoing

The Court ruled in favor of the plaintiffs and rejected Facebook’s arguments. It went on to reject the argument that relying on media reports was not sufficient in ruling in favor of plaintiffs seeking access to books and records.

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