This Week in Chancery Court: Sanctions Over Lost Facebook Emails

Former Facebook directors face sanctions in the Delaware Chancery Court this week over the loss of emails related to litigation over the Cambridge Analytica scandal.

Here’s more from the court’s calendar:

Monday: In re Facebook Inc. Derivative Litig., Del. Ch., No. 2018-0307, oral arguments 12/9/24.

At issue: Vice Chancellor J. Travis Laster ruled in May 2023 that Facebook founder Mark Zuckerberg and former directors of the social-media company had to face claims they turned a blind eye to rampant privacy violations, including allowing a firm hired by Donald Trump’s 2016 presidential campaign to collect data on millions of users. He’ll now consider a motion alleging Sheryl Sandberg and Jeffrey Zients, who’s currently White House chief of staff for President Joe Biden (D), used personal email accounts to communicate about the Cambridge Analytica scandal, Meta Platforms Inc.'s $5 billion settlement with the Federal Trade Commission, and regulatory inquiries. Sandberg allegedly used a fake name for her email account, and she and Zients intentionally destroyed emails even after being told to preserve all documents related to the pending litigation, according to the motion. The directors’ attorneys said in a brief that the plaintiffs “have not backed up that claim, and their requests for sweeping and disproportionate relief should be denied.”

Court action: Oral arguments on the motion for sanctions will be held in Wilmington, Del.

Facebook Must Face Privacy Suit Over Cambridge Analytica (2)

Monday: Buddenhagen v. Clifford, Del. Ch., No. 2019-0258, oral arguments 12/9/24.

At issue: Vice Chancellor Nathan A. Cook in May ordered the unwinding of a merger involving the wreck of the Whydah Gally, a slave ship captured by pirate “Black Sam” Bellamy that sank in 1717 off Cape Cod, Mass. Cook’s post-trial opinion sided with a shareholder who alleged underwater explorer Barry Clifford and his late partner breached their fiduciary duties for decades and manipulated a 2018 merger of their various Whydah-related entities to sideline minority shareholders. The shareholder now seeks to have Clifford cover his legal expenses totaling $3.25 million, according to a brief. Clifford’s attorneys oppose the fee application, saying in a brief that the shareholder “used this litigation to pursue a personal vendetta” and could have achieved better results in an earlier stage of litigation without going to trial.

Court action: Oral arguments on the fee application will be heard in Wilmington, Del.

Unfair Shipwreck Merger Is Unwound by Chancery Court

Monday: Neem Int’l CV v. Shulman, Del. Ch., No. 2022-0187, trial 12/9/24.

At issue: An offshore investment firm filed a lawsuit in March 2022 against Ukrainian businessman Vadim Shulman, alleging he looted the now defunct biotech company Pathway Genomics Corp. while its board looked the other way. Former Joint Chiefs of Staff Chairman Peter Pace was initially named as a defendant, but Vice Chancellor Lori W. Will dismissed him without prejudice from the case in December 2022. The matter now goes to trial, and Shulman’s attorneys say he won’t be able to attend in person because he’s not permitted to enter the country, according to a joint pre-trial brief.

Court action: A five-day trial will be held in Wilmington, Del.

Joint Chiefs Ex-Chairman Named in Pathway Genomics Investor Suit

Friday: In re Hemisphere Media Grp. Inc. S’holders Litig., Del. Ch., No. 2023-0555, settlement hearing 12/13/24.

At issue: Laster must give final approval to Hemisphere Media Group Inc.'s proposal to pay $15 million to end a class action over its take-private buyout by Searchlight Capital Partners LP and a related side deal with TelevisaUnivision Inc. The settlement would resolve shareholder claims targeting the 2022 transactions, a private equity acquisition that valued the company at $285 million, and the sale of a Spanish-language streaming service for $125 million. Attorneys for the investors leading the litigation seek a $2.94 million fee award. Two hedge funds pursuing separate litigation against Hemisphere have objected to the settlement, saying in a brief that they “do not want to receive their portion now if receiving it will be considered an election against pursuing their potentially greater appraisal remedy, which they intend to pursue.”

Court action: A settlement hearing will be held via videoconference.

Hemisphere Media Buyout Challenge Case Settles for $15 Million

Friday: Lincolnshire Police Pension Fund v. Taylor, Del. Ch., No. 2020-0487, settlement hearing 12/13/24.

At issue: Laster also has to approve a proposed $8 million settlement to resolve investor claims that Floor & Decor Holdings Inc.'s private equity backers used misleading sales data to pump its stock for a public offering, then sold $466 million worth before it tanked. The deal also includes a stronger insider trading policy, the addition of an independent director, and a requirement for the board’s chair to be an independent outsider, among other corporate governance improvements. The investors’ attorneys have asked for a $2.1 million fee award.

Court action: A settlement hearing will be held in Wilmington, Del.

Floor & Decor Investor Accuses Ares Management of Insider Trades

Friday: Reith v. Lichtenstein, Del. Ch., No. 2018-0277, settlement hearing 12/13/24.

At issue: Vice Chancellor Morgan T. Zurn has to sign off on a proposed $6 million settlement to end a shareholder’s lawsuit that alleged Steel Connect Inc. and its board allowed insiders linked to a partial parent company to take majority control. The accord also requires the board maintain an independent audit committee, among other corporate governance changes. The shareholder’s attorneys seek $1.15 million for fees and expenses, plus a $1 million mootness fee to be paid by the company.

Court action: A settlement hearing will be held in Wilmington, Del.

Steel Connect Board Must Face Claims It Gave Insiders Control