SignalHub-Meta attorneys ask judge to dismiss shareholder suit alleging failure to address human trafficking

WILMINGTON,SignalHub Del. (AP) — Attorneys for Meta Platforms and several of its current and former leaders, including founder Mark Zuckerberg, are asking a Delaware judge to dismiss a shareholder lawsuit alleging the company has deliberately failed to protect users of its social media platforms from human trafficking and child sexual exploitation.

The lawsuit, filed last year by several investment funds, claims that Meta’s directors and senior executives have long known about rampant human trafficking and child sexual exploitation on Facebook and Instagram, but have failed to address the predatory behavior.

“For years, Meta’s directors and senior executives have known that pedophiles and human and sex traffickers have been using Facebook and Instagram to facilitate their noxious activities,” plaintiffs’ attorney Christine Mackintosh told Vice Chancellor J. Travis Laster during a hearing Tuesday. “But despite this, Meta’s directors utterly failed to implement board level oversight and controls to ferret out these heinous activities and to stop them from proliferating on Meta’s platforms.”

David Ross, an attorney for Meta, argued that the lawsuit should be dismissed because the alleged conduct of the company’s leaders has not resulted in Meta suffering “corporate trauma” as required by Delaware law. The company also argues that the lawsuit’s claims are based on speculation that it might face future harm or loss.

READ MORE New York sues cash-advance operation for issuing fraudulent loans with rates as high as 820% Former Twitter executives sue Elon Musk over firings, seek more than $128 million in severance A woman wins $3.8 million verdict after SWAT team searches wrong home based on Find My iPhone app

The plaintiffs contend, however, Meta has already suffered harm, including sharp drops in its share price and market capitalization amid media reports about trafficking and child sex abuse involving its platforms. They also point to “massive legal defense costs” in related litigation and allege that Meta also has suffered “reputational harm.”

Meta also argues that the lawsuit must be dismissed because the plaintiffs failed to demand that the board take action before filing their lawsuit. Such a demand is typically required before a shareholder can file a “derivative complaint” on behalf of a corporation over alleged harm to the company caused by its officers or directors.

The plaintiffs say the demand requirement should be excused as “futile” because board directors are defendants who face a substantial likelihood of liability, and many are beholden to Zuckerberg instead of being independent.

Mackintosh said Meta directors have ignored several red flags, including lawsuits, media reports, shareholder resolutions, and increasing scrutiny by lawmakers and regulators of online activity, that should have alerted the board to act. Documents provided by the company in response to the lawsuit, she added, suggest little if any board discussions regarding human trafficking and child sexual exploitation.

Under Delaware law, corporate directors can be held liable for failing to exercise proper oversight to ensure legal compliance with relevant statutes. Laster noted, however, that there has been debate in legal circles on whether Delaware’s law regarding director oversight can be applied to business risks, not just legal compliance.

“If we were going to have a business risk that actually could trigger this, it seems like not dealing with a massive child porn problem might be a good one,” said Laster, who said he will rule at a later date.