Meta Seeking Dismissal of Shareholder Lawsuit Against Corporate Directors
On December 20th, 2023, ABC News reported that Meta—the Silicon Valley-based social media giant—is seeking the dismissal of a shareholder lawsuit that was filed against several of its corporate directors. The lawsuit makes the relatively novel argument that officers at the Fortune 500 company owe duties not just to the corporation itself, but also to broader social and economic concerns. Here, our West Palm Beach shareholder lawsuit lawyers discuss the case in more detail.
The Complaint: Shareholder Raising Novel Complaint Against Meta Corporate Officials
James McRitchie is a shareholder activist. He has brought a unique lawsuit against the social media giant Meta. Most notably, Mr. McRitchie alleges that its directors breached their fiduciary duties by prioritizing profit over broader societal and economic interests. Within this complaint, the shareholder argues under a “portfolio theory” of corporate governance that Meta’s focus on profits—most notably through its platforms like Facebook, Instagram, and WhatsApp—has had adverse effects on society and the global economy.
Mr. McRitche contends that these indirectly harm the investment portfolios of Meta shareholders who have stakes in other companies. The complaint lists various societal ills attributed to Meta’s platforms, including mental health issues, online trafficking, and election misinformation. Mr. McRitchie is arguing that Delaware corporate law should “evolve” to allow shareholders to address these matters in court.
The Defense: Meta is Seeking a Dismissal of the Lawsuit
For its part, Meta is seeking the outright dismissal of the shareholder lawsuit. The corporate defense lawyers for Meta state clearly that the shareholders’ claims contradict long-standing Delaware corporate law. Among other things, they emphasize that under Delaware law, directors are not obligated to consider or protect a stockholder’s investments in other companies and have no duty to account for external societal impacts. The company asserts the discretionary nature of the “business judgment” rule, which allows directors to consider broader constituencies but does not mandate it.
Understanding the Law: Corporate Directors Owe a Duty of Care to their Company
There is no question that the activist shareholder in this case is bringing a novel legal claim that would, in the unlikely event that it is accepted by the court, radically transform Delaware law. Of course, Delaware corporate law matters for many shareholder disputes because it is the venue for a substantial share of these cases.
Under Delaware law, corporate directors are bound by a duty of care towards their company—which is primarily aimed at acting in the best interests of the business and maximizing value for shareholders. The fiduciary duty mandates directors to make informed and prudent decisions, considering the company’s welfare and shareholder interests.
Contact Our South Florida Shareholder Litigation Attorney Today
At Pike & Lustig, LLP, we are a commercial litigation law firm with the experience to take on the full range of shareholder disputes. Have questions about shareholder litigation? Contact us today to arrange your completely confidential, no commitment initial case review. From our office in West Palm Beach, we handle shareholder disputes all across Southeastern Florida.