Meta Attorneys Ask Judge To Dismiss Suit Claiming That Directors’ Obligations Extend Beyond Company

WILMINGTON, Del. — On Wednesday, attorneys for Meta and Mark Zuckerberg requested a Delaware judge to dismiss a shareholder complaint alleging fresh allegations about the roles of corporate executives and saying that Meta directors’ loyalties should not be solely with the social media behemoth.

Meta’s board, according to James McRitchie, who operates a website focusing on corporate governance and shareholder activism, has breached its duty to the firm by prioritizing profits over broader societal and economic interests, including shareholders’ investments in other companies.

While Delaware law requires corporate directors to act as fiduciaries in their stockholders’ best interests, including maximizing the value of their shares, McRitchie’s attorneys argue that Delaware courts should recognize a “portfolio theory” of corporate governance that considers external factors.

They contend that the company, which owns Facebook, Instagram, Messenger, and WhatsApp, prioritized profits while downplaying the negative effects of its products on society and the global economy. This, they argue, can hurt the investment portfolios of Meta shareholders who have also invested in other companies.

Meta Attorneys Ask Judge To Dismiss Suit Claiming That Directors’ Obligations Extend Beyond Company

“What we’re saying is that (board) decisions should look at the overall portfolio consideration,” said attorney Kurt Heyman, who was peppered with questions during a lengthy back-and-forth with Vice Chancellor J. Travis Laster.

The lawsuit faults Meta’s social media platforms for mental health issues among young Instagram users, online human trafficking, “vaccine hesitancy,” incitements to violence and harassment, misleading or deceptive political advertisements, and “election misinformation.”

The lawsuit states that “the portfolios of its diversified stockholders are likely to suffer financially from those decisions if the decisions that maximize the company’s long-term cash flows also imperil the rule of law or public health.”

Meta Attorneys Ask Judge To Dismiss Suit Claiming That Directors’ Obligations Extend Beyond Company

According to Meta’s attorneys, McRitchie’s claims contradict decades of Delaware corporation law and should be dismissed with prejudice. In their request to dismiss, they state that corporate directors have no duty under Delaware law to consider or defend a stockholder’s stakes in other firms. While directors of a corporation can consider broader populations beyond their shareholder base when making decisions under Delaware’s “business judgment” criterion, they do not need to do so, they say.

“The plaintiff’s claims are antithetical to core foundations of Delaware law,” Meta lawyer James Kramer told Laster.

According to defense attorneys, McRitchie is suing Zuckerberg as a test case “in which he can share his theories on how he thinks corporations should operate.”

“We’re not here to legislate,” Kramer explained to Laster. “We’re here on a motion to dismiss.”

Laster did not rule immediately but stated that the case would almost certainly end up at Delaware’s Supreme Court regardless of his ruling.

Meta Attorneys Ask Judge To Dismiss Suit Claiming That Directors’ Obligations Extend Beyond Company

Meta, formerly known as Facebook, is a multinational technology company that specializes in social media and metaverse technologies. The company was renamed as part of its shift in focus towards building a virtual reality-based online world.

The rebranding reflects the company’s broader vision and ambition beyond just social networking. As a result, Meta aims to create a more immersive and interconnected digital experience for its users, encompassing virtual reality, augmented reality, and other emerging technologies.

SOURCE – (AP)