- COURT: Del. Ch.
- TRACK DOCKET: No 2023-0304
Mark Zuckerberg and other senior leaders of Meta Platforms Inc. are facing shareholder litigation over claims they’ve spent years ignoring “rampant” sex trafficking and child exploitation that have “flourished” on Facebook and Instagram.
A group of pension and investment funds filed a shareholder derivative lawsuit in Delaware, targeting current and former members of the tech giant’s board and management. The suit accuses them of doing nothing despite being “well aware” that “predatory criminal activities” are thriving on the company’s social media platforms.
“For the past decade, Meta’s platforms have assisted, supported, and facilitated perpetrators of widespread systemic sex trafficking, human trafficking, and child sexual exploitation that has occurred on a massive scale on Meta’s platforms,” the complaint says. “Although the board and management have known about this increasing trend, both management and the board have consciously turned a blind eye.”
The allegations represent the latest in a wave of legal challenges confronting Meta, which has faced growing scrutiny from courts, investors, and lawmakers in recent years over its data practices, alleged antitrust violations, and mental health impact on users, particularly children and teens.
Andy Stone, a spokesperson for Meta, said Tuesday in a statement provided to Bloomberg Law that the company “prohibits human exploitation and child sexual exploitation in no uncertain terms.”
“The claims in this lawsuit mischaracterize our efforts to combat this type of activity,” Stone said. “Our goal is to prevent people who seek to exploit others from using our platform, and we work closely with organizations like Polaris, the National Center for Missing and Exploited Children and Stop the Traffik to inform these efforts.”
A partly redacted version of the 201-page suit was made public Tuesday. The complaint was originally filed under seal March 8 in Delaware’s Chancery Court.
‘Online Slave Market’
Reports by human rights groups have shown that a majority of sex trafficking takes place online, with a majority of that online trafficking happening on Meta’s platforms, according to the complaint. The trafficking activity allegedly includes an “online slave market” used to “sell” hundreds of Saudi women.
Internal company records show that after Apple Inc. threatened to pull Facebook and Instagram from its App Store over the trafficking reports, company leaders privately conceded they’d been “underreporting this behavior,” the suit says.
They also acknowledged in internal communications that “our platform enables all three stages of the human exploitation lifecycle (recruitment, facilitation, exploitation) via complex real-world networks,” according to the complaint.
Zuckerberg and other company leaders had ample notice and plenty of time to address the “heinous” situation, the suit says. Courts in the US have allegedly issued scores of opinions involving trafficking through Facebook and Instagram, while news outlets have published “at least 175 articles” about those cases.
Zuckerberg himself “repeatedly testified before Congress” about the issue, which shows that the company and its leaders are “well aware” of the problem, according to the complaint.
“The only logical inference is that the board has consciously decided to permit Meta’s platforms to promote and facilitate sex/human trafficking,” the suit says.
‘A Mass Scale’
Besides Zuckerberg, the complaint’s nearly two dozen targets include Netflix co-founder Reed Hastings, former UK deputy prime minister Nick Clegg, leading Silicon Valley venture capitalists Marc Andreessen and Peter Thiel, and former Meta chief operating officer Sheryl Sandberg.
The suit accuses them of breaching their fiduciary duty to oversee the company loyally. It cites the axiom that “a Delaware fiduciary cannot be loyal to a Delaware company while causing it to break the law.”
That’s especially true “when the category of crimes being facilitated involves commercial sex acts induced by force, fraud, coercion, and abuse,” including “involuntary servitude, peonage, debt bondage, slavery,” and “child sexual exploitation—all on a mass scale,” the complaint says.
The allegations come three weeks after Meta’s board beat a different pension fund case in the same court. That suit accused the company’s leaders of steering it into legal peril by overseeing a business model based on antitrust violations. It targeted Meta’s acquisitions of Instagram and WhatsApp.
Pension Fund Lawsuits
The new complaint was filed by the Employees’ Retirement System of the State of Rhode Island, the Cleveland Bakers and Teamsters Pension Fund, and affiliates of Fisher Funds Management Ltd., which identifies itself as New Zealand’s “largest specialist investment manager.”
The Rhode Island pension fund previously accused Zuckerberg and other company leaders of negotiating a larger-than-necessary $5 billion fine with the Federal Trade Commission to keep themselves out of the legal crosshairs over the company’s cooperation with Cambridge Analytica, a data-crunching firm used by former President Donald Trump’s 2016 campaign.
Rhode Island Treasurer James A. Diossa said in a statement Tuesday that the new suit is aimed at ensuring the company “implements meaningful change to address the illegal conduct occurring on its platforms.”
“Meta’s executives and board members can no longer consciously fail to address the rampant sex trafficking, human trafficking, and child sexual exploitation,” Diossa said.
The funds are represented by Grant & Eisenhofer PA, Motley Rice LLC, and U.S. Market Advisors Law Group PLLC. Meta and its board are represented by Ross Aronstam & Moritz LLP.
The case is Emp. Ret. Sys. of the State of R.I. v. Zuckerberg, Del. Ch., No. 2023-0304, complaint unsealed 3/21/23.