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Delaware Judge Will Not Dismiss Shareholder Lawsuit Against Facebook

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According to a report from ABC News, a Delaware judge has declined to dismiss a shareholder lawsuit that was filed against Facebook. The complaint alleges violations by high-ranking officers and directors at the social media giant related to major data privacy concerns. Here, our Miami shareholder litigation attorney explains the essential things to understand about this case.

Shareholder Data Privacy Lawsuit Will Continue to Move Forward 

Early this week, a Delaware judge decided to dismiss a shareholder lawsuit that accuses Facebook officers and directors of violating both the law and their fiduciary duties in failing to protect user data privacy. Vice Chancellor J. Travis Laster rejected arguments for dismissal. Facebook argued that the shareholder complaint should be dismissed on the grounds that as plaintiffs did not first demand that Facebook’s board take legal action. However, the Delaware judge agreed with the plaintiff’s counterargument that such a demand would be futile. As such, the proposed class action shareholder litigation claim will be allowed to proceed.

 Understanding the Demand Futility Standard in Shareholder Lawsuits 

Demand futility is a major issue in shareholder litigation, including shareholder lawsuits filed in Florida. It is crucial that you have an understanding of what the demand futility standard is and how it works. Along with Delaware and many other jurisdictions, Florida is a demand futility state. Here are some core things to understand about the demand futility and shareholder litigation:

  • Applies Direct and Derivative Lawsuits: A direct shareholder lawsuit is filed by a shareholder(s) on their own behalf. A derivative claim is a type of legal action brought by shareholders on behalf of the corporation against third parties, often including the corporation’s executives or directors.
  • Demand Requirement: In most cases, before initiating a derivative lawsuit, shareholders are required to make a demand on the corporation’s board of directors, asking them to address the alleged wrong. The defendant (corporation) can move for the dismissal of a claim on the grounds that no demand was made.
  • Exception Under the Demand Futility Standard: As occurred in the Facebook case, there is an exception. A demand is not required if plaintiffs (shareholders) can prove that making a demand on the board would be futile due to reasons such as bias, conflict of interest, or the board’s inability to act independently.

Demand futility is a complex legal matter. If you have questions or concerns about how exactly the standard operates, you are certainly not alone. An experienced Florida shareholder rights lawyer can help you navigate the demand futility requirements.

Call Our Miami Shareholder Litigation Attorney for Immediate Help

At Pike & Lustig, LLP, we are solutions-driven law firm devoted to protecting the rights and interests of our clients. If you have any specific questions or concerns about a shareholder lawsuit, our attorneys are ready to help. Call us now to arrange your confidential case review. From our Miami office and our West Palm Beach office, our firm serves communities throughout the area.



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