On Monday, a Facebook stockholder sued the company’s high-ranking officers and directors for breaches of their fiduciary duties and related abuses following a 14.3% stock slump last fall in the wake of a series of revelations about the company’s business practices.
The Northern District of California class action centers on those newly uncovered facts, including an alleged gap in content moderation policies and the attendant consequences including Facebook fomenting civil unrest and assisting in the commission of crimes like drug trafficking, human trafficking, and violent extremism. The complaint also faults Facebook for targeting pre-teens despite its knowledge that “significant mental health problems stemmed from using Instagram, and that teenage girls themselves linked suicidal throughs and eating disorders to their use of the app.”
In addition, the suit says the social media platform inflated its user base figures, despite its knowledge that many accounts were actually fake. Exaggerating these metrics combined with its allegedly inadequate safety measures artificially inflated the value of Facebook’s securities, the complaint said.
The securities suit is not the first Facebook has faced in the wake of the so-called “Facebook Files” and subsequent Congressional testimony of whistleblower Frances Haugen. One was filed last November by an Ohio public pension fund, and another by an unhappy shareholder a month before that.
The suits share facts and legal theories. In this week’s complaint, the litigant says Facebook both engaged in misconduct, as overseen and/or overlooked by the individual defendants, and misled the public about its practices and success. The complaint states claims for violations of the Securities Exchange Act as it pertains to officers and directors and for unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets.
The shareholder not only seeks damages but also injunctive relief requiring the company to reform its ways. Among other requests, the complaint asks that the company strengthen the board of director’s oversight and implement procedures for greater shareholder input into the company’s policies and guidelines.