The $8.78 billion Rhode Island Employees' Retirement System, Providence, has sued Facebook Inc. in Delaware Chancery Court to get documents related to its record $5 billion settlement with the Federal Trade Commission over the Cambridge Analytica scandal.
In May 2019, the chancery court already ordered Facebook to produce documents in the related "Caremark" shareholder lawsuit alleging oversight failures by Facebook's board related to the scandal, "but there is more here than just a Caremark case," said the latest filing, which was made public Feb. 17.
"Rhode Island seeks to evaluate the fairness of the agreement ..." said the lawsuit, which cites evidence that a $3 billion settlement was discussed at some point, and questions whether the final settlement was "more than it believed was required, in a bid to assuage regulators and win other concessions from the feds," including protection for Facebook CEO Mark Zuckerberg and other officers and directors.
"The tech giant's internal briefing materials reflected its willingness to cease settlement talks and send the matter to court, if necessary, to protect the executive from one of the most severe penalties the FTC could levy on him directly," according to the Rhode Island lawsuit.
The final FTC settlement, which two commissioners objected to because of the "unusual legal shield" it gave Facebook officers, "contained a broad release of all claims that the FTC might otherwise be able to bring against Facebook's officers and directors" for conduct prior to the settlement, the lawsuit said.
To see whether the company overpaid as much as $2 billion, the lawsuit wants the FTC to disclose the settlement agreement and investigation documents, including draft agreements and electronic communications with board members, to "investigate potential wrongdoing, mismanagement, and/or breaches of fiduciary duty by all current members of the board," the lawsuit said.
A Facebook spokesman said in an emailed statement that the company considers the lawsuit without merit. "After months of negotiations, we reached an agreement with the FTC that is in the best interests of the company and our community."