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MONTH-IN-BRIEF (Feb 2021)

Data Privacy

Facebook Must Provide Electronic Communications Related to its FTC Settlement 

By Reuben Gottlieb, Young Conaway Stargatt & Taylor LLP 

In Employees’ Retirement System of Rhode Island v. Facebook, Inc., C.A. No. 2020-0085-JRS (Del. Ch. Feb. 10, 2021), an action under Section 220 of the Delaware General Corporation Law, the Delaware Court of Chancery examined whether stockholders of Facebook, Inc. were entitled to documents to investigate Facebook’s data privacy practices after the 2019 Cambridge Analytica Scandal.  Facebook and the FTC reached a $5 billion settlement, which stockholders alleged was made to protect Facebook CEO Mark Zuckerberg from substantial personal liability.  Under Delaware law, the stockholders had a right to demand books and records regarding the settlement.  Facebook refused to provided documents related to electronic communications and privileged documents concerning the FTC negotiations.  However, the court ruled that while the plaintiff successfully demonstrated the limited non-privileged communications were necessary and essential to pursue its purposes for inspection, they had failed to demonstrate good cause under the fiduciary exception to attorney-client privilege. 

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