IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE FACEBOOK, INC.

SECTION 220 LITIGATION

:

:

 CONSOLIDATED

 C.A. No. 2018-0661-JRS

MEMORANDUM OPINION

Date Submitted: March 7, 2019

Date Decided: May 30, 2019

Samuel L. Closic, Esquire of Prickett, Jones & Elliott, P.A., Wilmington, Delaware 

and Frank R. Schirripa, Esquire and Daniel B. Rehns, Esquire of Hach Rose 

Schirripa & Cheverie LLP, New York, New York, Attorneys for Plaintiff 

Construction and General Building Laborers’ Local Union No. 79 General Fund and 

Co-Lead Counsel.

Peter B. Andrews, Esquire, Craig J. Springer, Esquire and David M. Sborz, Esquire 

of Andrews & Springer, LLC, Wilmington, Delaware; Geoffrey M. Johnson, 

Esquire of Scott+Scott Attorneys At Law LLP, Cleveland Heights, Ohio; and 

Donald A. Broggi, Esquire, Scott R. Jacobsen, Esquire and Jing-Li Yu, Esquire of 

Scott+Scott Attorneys At Law LLP, New York, New York, Attorneys for Plaintiff 

City of Birmingham Relief and Retirement System and Additional Counsel for 

Plaintiffs.

Ryan M. Ernst, Esquire of O’Kelly Ernst & Joyce, LLC, Wilmington, Delaware and 

Thomas J. McKenna, Esquire and Gregory M. Egleston, Esquire of Gainey 

McKenna & Egleston, New York, New York, Attorneys for Plaintiff Lidia Levy and 

Additional Counsel for Plaintiffs.

David E. Ross, Esquire and R. Garrett Rice, Esquire of Ross Aronstam & 

Moritz LLP, Wilmington, Delaware; Orin Snyder, Esquire of Gibson, Dunn & 

Crutcher LLP, New York, New York; Kristin A. Linsley, Esquire and Brian M. Lutz, 

Esquire of Gibson, Dunn & Crutcher LLP, San Francisco, California; Paul J. Collins, 

Esquire of Gibson, Dunn & Crutcher LLP, Palo Alto, California; and Joshua S. 

Lipshutz, Esquire of Gibson, Dunn & Crutcher LLP, Washington, D.C., Attorneys 

for Defendant Facebook, Inc.

SLIGHTS, Vice Chancellor
1

In July 2018, Facebook, Inc. (“Facebook” or the “Company”) experienced one 

of the sharpest single-day market value declines in history when its stock price 

dropped 19%, wiping out approximately $120 billion of shareholder wealth. This 

unprecedented misfortune followed news reports that, in 2015, the private data of 

50 million Facebook users had been poached by Cambridge Analytica, a British 

political consulting firm.1 Facebook did not disclose this security breach to its users 

upon discovery or at any time thereafter. Users first learned of the breach when they 

read or heard about it in the news. 

At the time of the Cambridge Analytica breach, Facebook was subject to a 

consent decree entered by the Federal Trade Commission (the “FTC”) in 2011 

(the “Consent Decree”) after the FTC determined that the Company’s data privacy

measures were not protecting users’ private information. Among other things, the 

Consent Decree required Facebook to implement more robust and verifiable data 

security protocols. 

Soon after news of the Cambridge Analytica breach broke, reports surfaced 

that Facebook’s business model included incentives to monetize its users’ data 

without their consent. These reports were followed by news that the FTC, Federal 

Bureau of Investigation (“FBI”), Securities and Exchange Commission (“SEC”),

 

1 The more current data indicates that the breach affected more than 87 million users. 

JX 52.
2

Department of Justice (“DOJ”), European Information Commissioner’s Office 

(“ICO”) and other European authorities had all opened investigations into 

Facebook’s data privacy practices. 

On April 11, 2018, Plaintiff, Construction and General Building Laborers’ 

Local No. 79 General Fund (“Local No. 79”),served a demand to inspect Facebook’s 

books and records (the “Demand”) under Section 220 of the Delaware General 

Corporation Law (“Section 220”).

2

 As required by statute,3 Local No. 79 stated that 

its purpose for inspection was to “investigate and assess the actual and potential 

wrongdoing, mismanagement, and breaches of fiduciary duties by the members of 

the Company's Board” in connection with the data privacy breaches and “to 

investigate the independence and disinterestedness” of the Company’s directors.4 In 

response, Facebook produced about 1,700 pages of significantly redacted books and 

records. 

 

2 8 Del. C. § 220. As explained below, several other Facebook stockholders followed Local 

No. 79 in directing Section 220 demands to Facebook. By order dated October 11, 2018, 

the Court deemed Local No. 79’s Demand to be the operative demand. D.I. 17.

3 8 Del. C. § 220(b).

4

JX 54 (Local No. 79’s Demand to Inspect Books and Records) at 6.
3

When discussions between the parties regarding the scope of Facebook’s 

production broke down, Local No. 79 filed its Verified Complaint to Compel 

Inspection on September 6, 2018.

5

 In its answer to that Complaint, Facebook denied 

Plaintiff had stated a proper purpose for inspection and maintained that, even if a 

proper purpose had been stated, Plaintiff was not entitled to inspect any documents 

beyond those already produced.6 Specifically, Facebook asserted the Complaint 

failed to plead a credible basis to infer that Facebook’s directors breached their duty

of oversight, or any other aspect of their fiduciary duties, because the Cambridge 

Analytica breach resulted from the unanticipated acts of third parties who had 

managed to compromise Facebook’s existing (and adequate) data privacy systems. 

The parties agreed to a “paper record” trial (i.e., without deposition or live 

testimony). After carefully reviewing the evidence and the arguments of counsel, 

I conclude in this post-trial decision that Plaintiffs have demonstrated, by a 

preponderance of the evidence, a credible basis from which the Court can infer that 

 

5

I cite to Local Union No. 79’s Verified Complaint (“Complaint”) as “Compl. ¶ __.” 

(D.I. 1). Plaintiffs, City of Birmingham Retirement and Relief System (“Birmingham”) 

and Lidia Levy (together with Local 79, “Plaintiffs”), also filed complaints seeking to 

enforce their inspection rights under Section 220. The Court has designated the Local 

Union No. 79 Complaint as the operative complaint for purposes of this consolidated 

action. See D.I. 17. I cite to the Pre-Trial Stipulation and Order (“PTO”) as “PTO ¶ __.” 

(D.I. 32).

6 Defendant’s Answer and Defenses to Plaintiff’s Verified Complaint Pursuant to 8 Del. C. 

§ 220 (“Answer”) ¶¶ 3, 4. (D.I. 11).
4

wrongdoing occurred at the Board level in connection with the data privacy breaches 

that are the subject of this action. In so finding, I reject, as a matter of law, 

Facebook’s implicit suggestion that I must adjudicate the merits of Plaintiffs’

Caremark claim before allowing an otherwise proper demand for inspection to stand. 

This is not the time for a merits assessment of Plaintiffs’ potential claims against 

Facebook’s fiduciaries. The “credible basis” standard applicable in this Section 220 

action imposes the lowest burden of proof known in our law and asks a 

fundamentally different question than would be asked at a trial on the merits: has the 

stockholder presented “some evidence” to support an inference of wrongdoing that 

would justify allowing the stockholder to inspect Facebook’s books and records?

7

 

While this court consistently reminds stockholders that a Caremark claim 

“is possibly the most difficult theory upon which a plaintiff might hope to win a 

judgment,”8that admonition does not license this court to alter the minimum burden 

of proof governing a stockholder’s qualified right to inspect books and records. 

 

7 Seinfeld v. Verizon Commc’ns, Inc., 909 A.2d 117, 118 (Del. 2006) (“We reaffirm the 

well-established law of Delaware that stockholders seeking inspection under Section 220 

must present ‘some evidence’ to suggest a ‘credible basis’ from which a court can infer 

that mismanagement, waste or wrongdoing may have occurred.”).

8

In re Caremark Int’l Deriv. Litig., 698 A.2d 959, 967 (Del. Ch. 1996).
5

In the wake of the Consent Decree, Facebook was under a positive obligation 

to take specific steps to protect its users’ private data. That obligation was firmly in 

place at the time of the Cambridge Analytica breach. Delaware courts traditionally 

have viewed stockholder allegations that a board failed to oversee the company’s 

obligation to comply with positive law, or positive regulatory mandates, more 

favorably in the Caremark paradigm than allegations that a board failed to oversee 

the company’s efforts generally to avoid business risk. Plaintiffs have presented 

“some evidence” that the Board failed to oversee Facebook’s compliance with the 

Consent Decree resulting in unauthorized access to its users’ private data and 

attendant consequences to the Company. In other words, Plaintiffs have sustained 

their minimal burden to demonstrate a credible basis of wrongdoing justifying the 

inspection of certain of the Company’s books and records.9 

Judgment is entered for Plaintiffs. Facebook shall produce for inspection the 

books and records designated herein as essential to Plaintiffs’ pursuit of their proper 

purpose.

 

9 At the risk of prolixity, I emphasize this Opinion stops well short of concluding that 

Facebook fiduciaries engaged in any wrongdoing in connection with any data privacy 

breaches that may have occurred at the Company. That merits-based determination awaits 

another day. 
6

I. FACTUAL BACKGROUND

The Court presided over a one-day trial on March 7, 2019. The following 

facts were proven by a preponderance of the evidence against the backdrop of the 

credible basis standard.

10

A. The Parties 

Local No. 79 has continuously owned Facebook stock since June 17, 2015.11

Defendant, Facebook, is a Delaware corporation that operates the Facebook social 

 

10 At the outset of this recitation of facts, I acknowledge that Plaintiffs’ evidence, by 

necessity, is comprised of publically available information, including a heavy dose of 

newspaper and other news media reports. I am mindful that these reports are hearsay. 

Even so, in a Section 220 proceeding, “[h]earsay statements may be considered, provided 

they are sufficiently reliable.” Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 778 (Del. 

Ch. 2016). See also, In re Plains All Am. Pipeline, L.P., 2017 WL 6066570, at *3–4 

(Del. Ch. Aug. 8, 2017) (ORDER) (relying on Los Angeles Times article to find that

stockholder had stated a credible basis to suspect wrongdoing for purposes of Section 220); 

Paul v. China MediaExpress Hldgs., Inc., 2012 WL 28818, at *4 (Del. Ch. Jan. 5, 2012) 

(finding plaintiff stated credible basis to suspect wrongdoing, in part, based on the 

plaintiff’s identification of “numerous third-party media reports alleging fraudulent 

conduct by the [company’s] officers and directors”); Leonard v. Texas, 137 S.Ct. 847, 848 

(2017) (denying certiorari and relying on articles from the Washington Post and The New 

Yorker for factual propositions concerning civil forfeiture). For the most part, I have 

referred to the news reports as chronological markers of the events that have unfolded since 

the entry of the Consent Decree. Unless otherwise indicated, I have not viewed these 

reports as standalone evidence of wrongdoing at the Company. As discussed below, many 

of the reports either have been acknowledged by the Company or have been corroborated 

by other investigations. 

11 JX 54 at 11. The other Plaintiffs also owned Facebook stock at the time they submitted 

their demands—Birmingham since June 22, 2012 (JX 56) and Levy since May 12, 2012 

(JX 58).
7

media platform.12 Facebook’s principal executive offices are in Menlo Park, 

California.13

B. Facebook’s Business

Mark Zuckerberg founded Facebook in 2004. He serves as the Company’s 

CEO and Chairman of its Board of Directors (the “Board”).14 Facebook is a social 

media platform that enables its more than 2.2 billion active users to stay in touch

with friends and family, develop connections, learn about world events and circulate 

individual commentary.

15

As part of its business model, Facebook allows independent third-party 

developers to place their applications or links to their websites (collectively, “apps”) 

on the Facebook platform.16 Once apps are placed on the platform, Facebook’s users 

can open the apps to interact with their Facebook “friends” through games or other 

app content.17 In turn, Facebook, by agreement, allows the third-party app providers 

to “whitelist,” or access, not only the data of a user that has opened the app but also 

 

12 PTO ¶ 2.

13 Id.

14 Id. ¶ 3.

15 Answer ¶¶ 7, 8.

16 JX 103 (the Parliamentary Committee’s report on “Disinformation and ‘Fake News’”) 

(the “Parliamentary Report”).

17 Id.
8

the data of that user’s Facebook “friends.”

18

 According to Plaintiffs, this practice of

allowing its partners to whitelist Facebook user data has made Facebook much more 

vulnerable to data breaches. 

C. The FTC Consent Decree 

In November 2011, Facebook entered into the Consent Decree with the FTC 

as the culmination of the FTC’s investigation into Facebook’s allegedly inadequate 

data privacy practices.19 The Consent Decree mandates that Facebook develop and 

maintain a comprehensive privacy program subject to regular assessments by a thirdparty data security firm.20 The privacy program was required to (1) address privacy 

risks correlated with the development and management of new and existing products 

and services for consumers; and (2) protect the privacy and confidentiality of 

“covered information”––personal consumer information Facebook gathered from

consumers’ interactions with the Facebook platform.21 

 

18 See Tr. 18:9–12 (“[T]here’s a concept in Facebook, it’s a term of art . . . and it’s called 

whitelisting. And it essentially gives a third party access to the entire data profile of a user 

and in some instances can also give the third party access to data profiles of the user’s 

friends.”). See also, JX 12; JX 103. 

19 Answer ¶ 8; JX 1.

20 JX 1; JX 37.

21 JX 1 at § IV.
9

To implement the Consent Decree’s broad mandate, Facebook was required 

to execute a plan to secure its user’s private data that was commensurate in scale 

with the size of the Company’s user base and the complexity of its platform.22 It also

was required to track data protection outcomes in writing and to place specified

employees in positions where they could execute privacy risk assessments and 

develop steps to protect the covered information as defined in the Consent Decree.

23

 

The Company’s compliance with these mandates was to be subject to initial and 

biennial assessments by an independent, experienced privacy and data protection 

professional for a period of 20 years.

24 During this prescribed monitoring period, 

Facebook was required to inform all current and future principals, officers, directors 

and managers of the specific content of the Consent Decree.

25

 The implementation 

of the Consent Decree was to be monitored at the Board level by Facebook’s Audit

Committee.

26

 

22 Under the privacy program, Facebook must undergo fixed internal privacy and security 

risk assessments, require employees to participate in privacy training programs, guarantee 

that its user and developer privacy policies and controls are crystal clear and easily 

accessed, and measure and strengthen its privacy program under the direction of its privacy 

governance team. See JX 37 at 7–14; JX 24 at 660.

23 JX 1 at § IV.

24 JX 1 at § V.

25 Id. at §§ VII, X. 

26 JX 39 at 1468; JX 41 at 1593; JX 29 at 998; JX 13 at 401.
10

In the three bi-annual assessments completed after the entry of the Consent 

Decree, an independent data privacy firm attested that Facebook had invoked 

privacy controls “meet[ing] or exceed[ing] the protections required” under the 

Consent Decree.27 The independent firm additionally verified that Facebook’s 

privacy program “has built-in procedures to evaluate and adjust the Privacy Program 

in light of testing and monitoring results, as well as other relevant circumstances.”28

In 2017, Facebook’s privacy team detected 370,000 noncompliant apps and took 

corrective measures that varied from instituting constraints, to delivering cease-anddesist letters, to eliminating the apps from the Platform.29

 

D. The Cambridge Analytica Breach

In 2013, Aleksandr Kogan, a Cambridge University professor and data 

researcher, created a personality “quiz” app called “thisisyourdigitallife.”30 In 2014,

the app went live on the Facebook Platform, positioning itself as a “research app 

used by psychologists” and assuring users that the results of the quiz would be 

utilized only for academic purposes.31 About 270,000 users installed the app and 

 

27 JX 37 at 19; JX 6; JX 27.

28 JX 37 at 14; see, e.g., JX 42 at 1627–29, 1637; JX 35 at 1352.

29 JX 67 at 9.

30 JX 44 at 2.

31 Id.
11

agreed to share their personal data, as well as aspects of their Facebook friends’ 

personal data.32 At the time, Facebook’s policies permitted this data sharing to 

varying degrees depending on the friends’ privacy and application settings.33

In December 2015, The Guardian published a story reporting that Kogan’s

company, Global Science Research (“GSR”), sold the data of millions of Facebook 

users as collected on the “thisisyourdigitalife” app to Cambridge Analytica in 

violation of Facebook’s data use and platform policies.34 The article reported

Cambridge Analytica used the data to develop psychological profiles of U.S. 

voters.35 Following the article’s release, the Company blocked Kogan and his app 

from Facebook and obtained written verifications from Kogan, GSR, Cambridge 

Analytica, a Cambridge Analytica employee and others that all Facebook user data 

in their possession had been destroyed.36 Cambridge Analytica’s CEO, Alexander 

Nix, then testified before the Parliament of the United Kingdom and later confirmed

 

32 Id.

33 JX 10; JX 30.

34 JX 30; JX 98; see JX 53 (At an April 10, 2018 combined hearing of the Senate Judiciary 

and Commerce, Science and Transportation Committees (the “April 10 Senate Hearing”), 

Senator Richard Blumenthal noted that the terms of service between Facebook and Kogan 

explicitly allowed Kogan to sell that data.).

35 JX 30.

36 JX 44 at 2; JX 50.
12

in writing to the House of Commons that Cambridge Analytica neither owned nor 

utilized Facebook user data.37 With that, Facebook believed the issue was resolved.

On March 17, 2018, The New York Times and The Guardian reported that, in 

2015, Cambridge Analytica had misappropriated Facebook user data via Kogan’s 

app––resurfacing the issue.

38 This time, though, the articles went a step further,

revealing Cambridge Analytica lied when it conveyed to Facebook in 2016 that it 

had deleted all the user data.39 Instead, according to the reports, Cambridge 

Analytica kept the data and deployed it in connection with the 2016 Presidential 

campaign.40 The New York Times also reported that, in response to multiple requests

for information, Facebook “downplayed the scope of the leak and questioned 

whether any of the data still remained out of its control.”41 After these reports 

 

37 JX 43; JX 46.

38 JX 45; JX 46. See also,JX 53 (Zuckerberg acknowledged at the April 10 Senate Hearing, 

“[w]hat we know now is that Cambridge Analytica improperly accessed some information 

about millions of Facebook members by buying it from an app developer.”).

39 JX 45; JX 46. See JX 53 (Zuckerberg further testified at the April 10 Senate hearing,

“[w]hen we first contacted Cambridge Analytica, they told us that they had deleted the 

data. About a month ago, we heard new reports that suggested that wasn’t true.”).

40 JX 45; JX 46. See also, JX 53 at 17 (At the April 10 Senate Hearing, Senator Maria 

Cantwell stated, “Cambridge Analytica was providing support to the Trump campaign 

under Project Alamo[.]”); JX 103 at 42 (the Parliamentary Report describing the use of 

Cambridge Analytica’s data in the 2016 Presidential campaign).

41 JX 45 at 2.
13

surfaced, Facebook suspended Cambridge Analytica and its employees from the 

Facebook platform.42

On March 20, 2018, Bloomberg News provided further color by detailing the 

many investigations that had been launched into Facebook’s data security 

practices.

43

 Among the investigations mentioned, the article reported that the FTC 

had opened an investigation into whether Facebook violated the 2011 Consent 

Decree.

44

 According to the article, the FTC would soon deliver a notice to Facebook 

detailing its concerns that the Company was not complying with the Consent Decree 

and generally was not protecting its users’ private data.45 Six congressional 

committees likewise had opened investigations into how Cambridge Analytica 

managed to access the personal data of 50 million Facebook users.46 In response, 

Facebook reportedly led staff-level briefings to prepare for inquiries by the 

 

42 JX 44; JX 50.

43 JX 47.

44 Id. See JX 51 (the FTC’s March 26, 2018 press release confirming it was currently 

pursuing a non-public investigation into Facebook’s privacy practices and compliance with 

the Consent Decree).

45 JX 47.

46 Id.
14

Judiciary, Commerce and Intelligence Committees of both congressional 

Chambers.47

On the same day the Bloomberg News story was published, The New York 

Times reported that Alex Stamos, Facebook’s Chief Information Security Officer, 

had decided to leave the Company.48 According to this report, Stamos advocated 

for transparency regarding Russian agents’ use of Facebook to influence the 2016 

Presidential election, but faced immutable “resistance” from the Company.49

On March 21, 2018, Bloomberg News reported a former Facebook operations 

manager, Sandy Parakilas, had advised British lawmakers that he warned senior 

executives at the Company about inadequate data protection guidelines but the 

warnings were ignored.50 Parakilas made clear he had mapped out the data security 

weaknesses within the platform, including a list of bad and potentially bad actors, 

how these actors might exploit user data and the risks to which the Company might 

 

47 Id. at 2–3. 

48 JX 48. See Tr. 44:10–14.

49 Id. JX 103 at 74 (The U.K. House of Commons Digital, Culture, Media and Sports 

Committee (the “Parliamentary Committee”) was “left with the impression that either 

Simon Milner [Policy Director for the U.K., Middle East and Africa, at Facebook] or Mike 

Schroepfer [Facebook’s Chief Technology Officer] deliberately misled the Committee or 

they were deliberately not briefed by senior executives at Facebook about the extent of 

Russian interference in foreign elections.”).

50 JX 49. See JX 53 at 35 (Senator Richard Blumenthal submitted a letter from Parakilas 

indicating “not only a lack of resources, but lack of attention to privacy [at the 

Company].”).
15

be exposed if a data breach occurred.

51 Parakilas stated Facebook could have

avoided the Cambridge Analytica breach, but instead permitted third parties to 

obtain users’ personally identifiable data in furtherance of its whitelist agenda.

52

On March 26, 2018, the FTC issued a press release confirming it was pursuing 

a non-public investigation into Facebook’s privacy practices and compliance with 

the Consent Decree.

53 In the press release, the FTC’s acting director, Thomas Pahl, 

explained that the FTC’s primary means for maintaining consumer privacy was to 

initiate enforcement actions when companies, like Facebook, failed to honor 

commitments they made to maintain their customers’ privacy.

54 He then emphasized

Facebook had an affirmative obligation to comply with the Consent Decree’s 

privacy and data security requirements.55

On April 4, 2018, The New York Times reported the number of Facebook users 

affected by the Cambridge Analytica data breach had grown from 50 million to 

87 million.

56 The article made a point to report that Facebook had not disclosed that 

 

51 JX 49. 

52 Id.

53 JX 51.

54 Id.

55 Id.

56 JX 52.
16

figure voluntarily, and then made the disturbing revelation that certain Facebook 

search and account recovery functions may have exposed “most” of its 2 billion 

users to outside parties’ information harvesting.

57

The bad reports kept coming. On April 30, 2018, The New York Times

reported that Jan Koum, the founder of Facebook subsidiary, WhatsApp, and a 

member of Facebook’s Board, had announced his plans to leave the Company amidst 

reports that he had “grown increasingly concerned about Facebook’s position on

user data in recent years,” “was perturbed by the amount of information that 

Facebook collected on people” and “wanted stronger protections for that data.” 58

Mr. Koum reportedly “personally got along with Mark Zuckerberg, Facebook’s 

chief executive, [but] felt the company’s board simply paid lip service to the privacy 

and security concerns he raised.”59

 

57 Id. See also, JX 103 at 22 (the ICO “fined Facebook because it allowed applications and 

application developers to harvest the personal information of its customers who had not 

given their informed consent—think of friends, and friends of friends— and then Facebook 

failed to keep the information safe.”).

58 JX 57.

59 Id.
17

E. Zuckerberg Testifies Before Congress

On March 21, 2018, USA Today reported that Zuckerberg, for the first time, 

had spoken on behalf of Facebook about the Cambridge Analytica breach.

60

Zuckerberg characterized the controversy as “a breach of trust between Facebook 

and the people who share their data with us and expect us to protect it.”61 In response

to his remarks, analysts observed, “Facebook exhibits signs of systemic 

mismanagement, [] a new concern [] not contemplated until recently.”62

Within weeks of the USA Today article, Zuckerberg testified at the April 10 

Senate Hearing, where he acknowledged that Facebook discovered the Cambridge 

Analytica data breach in 2015, but elected not to conduct an audit concerning the 

scope of that breach.

63 After Facebook told Cambridge Analytica to erase and 

discontinue using the collected data, the Company “considered it a closed case,” 

particularly when Cambridge Analytica represented it had erased the user data.64

 

60 JX 104.

61 Id.

62 Id.

63 JX 53 at 11.

64 Id.
18

Having determined that the case was “closed,” Facebook did not notify the FTC or

any other outside party of the massive intrusion into its users’ private data.65

During the April 10 Senate hearing, Senator Richard Blumenthal opined that 

Facebook was on notice that it was in violation of the Consent Decree, as evidenced 

in part by the terms of service it had agreed to with Aleksandr Kogan and others like 

him.

66 These agreements, according to Senator Blumenthal, revealed Facebook’s 

“willful blindness” to the fact that third parties would sell user data in violation of 

the Consent Decree.

67 In response, Zuckerberg stated, “[Facebook] should have 

been aware that this app developer submitted a term that was in conflict with the 

rules of the platform.”68

F. The Regulators Investigate

On June 5, 2018, The New York Times reported Facebook persisted in 

maintaining data-sharing partnerships with a minimum of four Chinese electronics 

companies––including Huawei Technologies Co., Inc., a manufacturing company 

that maintained a close relationship with the Chinese government and was identified

 

65 Id.

66 JX 53 at 35.

67 Id.

68 Id.
19

by American intelligence officials as a national security threat.69 Agreements 

providing access to private user data had been in place since at least 2010 and 

continued in effect through the date of the reporting.

70 The New York Times also 

revealed Facebook permitted access to private user data to many other large 

manufacturers as well––including Amazon.com, Inc., Apple Inc., BlackBerry Ltd.

and Samsung Electronics Co., Ltd.

71

On July 2, 2018, The Washington Post reported the FBI, SEC and DOJ had 

teamed up with the FTC in its investigation of Facebook’s data security practices.

72

 

The federal investigations widened in scope to address the extent to which Facebook

 

69 JX 62. See also, JX 53 at 87 (Senator Jon Tester stated at the April 10 Senate hearing, 

“Facebook allowed a foreign company to steal private information. They allowed a foreign 

company to steal private information from tens of millions of Americans, largely without 

any knowledge of their own.”).

70 JX 62. See also, JX 103 at 25 (The FTC’s 2011 complaint revealed “from May 2007 to 

July 2010, [Facebook] allowed external app developers unrestricted access to information 

about Facebook users’ personal profile and related information[.]”).

71 JX 62. 

72 JX 68. The Parliamentary Report revealed the specifics of the FBI’s criminal complaint, 

including:

the work of ‘Project Lakhta’, in which individuals have allegedly ‘engaged 

in political and electoral interference operations targeting populations within 

the Russian Federation and in various other countries, including, but not 

limited to, the United States, members of the European Union, and 

Ukraine[.]’ Since at least May 2014, Project Lakhta’s stated goal in the 

United States was to spread distrust towards candidates for political office 

and the political system in general.

JX 103 at 78.
20

knew that its users’ data had been misappropriated and disseminated in 2015 and the 

reasons the Company failed to inform its users or investors of the breaches in real 

time.73 Investigators reportedly also concentrated on inconsistencies in more recent 

accounts from Facebook executives, including Zuckerberg’s testimony before 

Congress.74

On November 12, 2018, The New York Times obtained an internal Facebook 

document detailing agreements Facebook entered into with device manufacturers

whereby the Company provided the personal data of hundreds of millions of its 

users.

75 The Company reportedly failed to monitor the behavior of these third parties 

after allowing them to access user data, a failure discovered in 2013 by Facebook’s 

FTC-approved privacy monitor.76 Once again, Facebook never told its users of these 

agreements with device manufacturers even though the vast majority of users had 

not given the Company permission to distribute their information.77

 

73 JX 68. 

74 Id.

75 JX 80.

76 Id.

77 Id.
21

The joint investigations discovered that, in 2013, in furtherance of its 

commitments to the FTC, Facebook engaged PricewaterhouseCoopers (“PwC”) to 

conduct an assessment of its partnerships with Microsoft and Research in Motion, 

the makers of Blackberry.

78 PwC discovered only “limited evidence” that Facebook 

oversaw or assessed its partners’ compliance with its data use policies.79

An unredacted version of a letter from PwC uncovered by a Senate aide suggested 

that PwC found “no evidence that Facebook had ever addressed the original 

problem.”80

G. Facebook’s Data Protection Problems Continue 

On September 28, 2018, The New York Times reported that an attack on 

Facebook’s computer network had exposed the private data of 50 million users.81

The breach allowed the hackers to gain access to user accounts and potentially take 

control of them.82 Then, on October 31, 2018, Business Insider reported on the 

ineffectiveness of Facebook’s ad transparency tools as evidenced by the fact that 

 

78 Id.

79 JX 80 at 2.

80 Id.

81 JX 77.

82 Id.
22

reporters had been permitted to run advertisements “paid for” by Cambridge 

Analytica.83

On November 14, 2018, The New York Times reported that Alex Stamos, then 

Facebook’s Chief Security Officer, told the Board on September 6, 2017, that the 

Company had not eliminated suspicious Russian activity on its platform.84

In response, Board member, Sheryl Sandberg, allegedly yelled at Stamos, “[y]ou 

threw us under the bus!”85 This exchange occurred after Zuckerberg and Sandberg 

asked Stamos and other Facebook executives to update Facebook’s Audit 

Committee on data privacy issues and after Stamos had been rebuked by Zuckerberg 

and Sandberg for providing too much information.86 The article further revealed

that Zuckerberg and Sandberg intended publicly to disclose the Cambridge 

Analytica breach the same day as the Company’s quarterly Board meeting in 

September 2017.87 Stamos wrote the proposed report of Facebook’s findings to 

 

83 JX 79.

84 JX 82. See also, JX 103 at 74 (The Parliamentary Report noted, “[i]n September 2017, 

Alex Stamos, the then Chief Security Officer, told the members of Facebook’s Executive 

Board that that Russian activity was still not under control.”).

85 JX 82 at 1.

86 JX 82 at 9–10.

87 JX 82 at 9.
23

assist Sandberg in her public comments.

88

 Sandberg, however, sent the report back 

to Stamos because she wanted it to be less specific.89

On December 5, 2018, the Parliamentary Committee released internal 

Facebook documents, including executive emails and internal presentations.90

These internal documents revealed Facebook’s business plan, first conceived in 

2013, was to monetize its platform by “privatizing” user data through agreements 

with certain preferred partners to “whitelist” apps and services integrated into the 

platform so that Facebook and its partners could reciprocally share user data.91 

Facebook entered into whitelisting agreements with companies in varied industries, 

like the Royal Bank of Canada and Walgreens Co.

92 In September 2013, Facebook 

executed a business strategy to “review access” to user data by documenting the

business partners it would allow to have paid access to user data through the 

 

88 Id.

89 Id.

90 JX 3–5, 7–9, 12, 21–22, 26.

91 JX 12 at 3–4, 30. As noted, “whitelisting” a third party at Facebook means to provide 

that third party with complete access to user data and the data of that users’ friends, 

irrespective of whether the users’ friends use the third-party app. JX 103 at 29.

92 JX 8, 22, 26.
24

“whitelist” and those who would be denied access because they were deemed to be 

a competitive threat to the Company.93

According to the documents released by the Parliamentary Committee, 

Zuckerberg was the first to conceive of the plan to monetize user data within the 

Facebook platform and he emailed the idea and the implementing steps to Sandberg 

and the Vice Presidents of the Company.94 Zuckerberg hoped to engage in 

“reciprocity” in the sharing of user data if the information generated by a Facebook 

business partner was valuable to the Company.95

The documents also revealed Facebook accessed users’ Android phone data 

without permission and designed the Facebook platform so that it could readily 

retrieve that data.96 The Facebook application installed on Android phones read 

users’ call log histories and messaging histories without permission, and was 

specifically engineered to “upgrade” users to this level of access without clearly 

alerting them that the “upgrade” was occurring.

97 Facebook’s executives believed

 

93 JX 7 at 1–3.

94 JX 3, 4, 5.

95 JX 5 at 1 (Sandberg wrote by email, “I think the observation that we are trying to 

maximize sharing of Facebook, not just sharing in the world, is a critical one. I like full 

reciprocity and this is the heart of why.”).

96 JX 21.

97 Id. at 1.
25

this effort to avoid obtaining Android’s user permissions was “a pretty high risk 

thing to do.”98 Nevertheless, the plan was approved at the highest levels of 

Facebook.

99

On December 18, 2018, The New York Times published the latest in its series 

of articles on Facebook, this time providing additional reporting regarding the 

Company’s failure to disclose that it had allowed its business partners broad access 

to users’ personal data.100 The New York Times interviewed former employees of 

the FTC consumer protection division who were involved in the investigation 

leading to the Consent Decree, and each stated that Facebook’s ongoing data sharing 

partnerships likely violated the agreement.101 The New York Times also interviewed 

Facebook employees, who revealed that many of these partnerships were not

captured by the Company’s privacy compliance program because they were deemed

business contracts outside of Facebook’s data policies.102 The Facebook privacy 

 

98 Id.

99 JX 21 at 2.

100 JX 90. JX 103 at 30 (“Apps were able to circumvent users’ privacy of platform settings 

and access friends’ information, even when the user disabled the Platform.”).

101 JX 90 at 3.

102 Id. at 11–12.
26

team allegedly had no means to review or propose modifications to the data-sharing 

agreements that the Company’s senior officials negotiated.

103

H. The Fallout

Multiple lawsuits have been filed—some as direct consumer class actions, 

some as government enforcement actions and some as derivative actions against 

Facebook fiduciaries—alleging that Facebook’s implementation of a business model 

that exposed private user data to unauthorized third-party access has caused harm to 

consumers and harm to the Company.104 Indeed, according to Fortune magazine, 

Facebook is facing “dozens” of “data lawsuits.”105

On February 14, 2019, The Washington Post reported Facebook was currently 

negotiating with the FTC over a “multi-billion dollar fine” for Facebook’s 

 

103 Id.

104 See, e.g., Sbriglio v. Zuckerberg, C.A. No. 2018-0307-JRS (derivative action in 

Delaware); Leagre v. Zuckerberg, C.A. No. 2018-0675-JRS (same); In re Facebook, Inc., 

Consumer Privacy User Profile Litig., C.A. No. 3:18-md02843 (a multidistrict privacy 

litigation in the U.S. District Court in the Northern District of California); Yuan v. 

Facebook, Inc. et al., C.A. No. 3:18-cv-01725 (a federal securities action pending in the 

U.S. District Court in the Northern District of California); District of Columbia v. 

Facebook, Inc., C.A. No. 2018-CA-008715 (a consumer class action brought by the United 

States Government pending in the District of Columbia); State of Illinois ex rel. Foxx v. 

Facebook Inc., et al., Case No. 2018-CH-03868 (Cook Cty. Cir. Ct.) (a consumer action 

brought by the Cook County State’s Attorney in Illinois).

105 Jeff John Roberts, FACEBOOK HAS BEEN HIT BY DOZENS OF DATA LAWSUITS. AND 

THIS COULD BE JUST THE BEGINNING (2018), http://fortune.com/2018/04/30/facebookdata-lawsuits/ (last visited May 30, 2019).
27

mishandling of user data and violation of the Consent Decree.

106 On that same day,

the Parliamentary Committee published the Parliamentary Report, revealing emails 

from Zuckerberg and Sandberg that the Parliamentary Committee read as confirming 

Facebook “intentionally and knowingly” violated both data privacy and competition 

laws.107 The Parliamentary Report further determined that the “Cambridge 

Analytica Scandal was facilitated by Facebook’s policies,” observing that the 

“incident displays the fundamental weakness of Facebook in managing its 

responsibilities to the people whose data is used for its own Commercial 

purposes.”108

I. Procedural History

After The Guardian and The New York Times published articles on the 

Cambridge Analytica breach in March 2018,109 the Company received inspection 

demands from multiple Facebook stockholders under Section 220, including each of 

the three plaintiffs in this consolidated action. On April 11, 2018, Plaintiff Local 

No. 79 sent its Demand to Facebook’s Board. The Demand focused on Facebook’s 

failure to secure its users’ private data and specified three purposes for inspection of 

 

106 JX 102.

107 JX 103.

108 Id.

109 JX 45; JX 46.
28

Facebook’s books and records: (1) to “investigate and assess the actual and potential 

wrongdoing, mismanagement, and breaches of fiduciary duty by members of the 

Company’s Board[;]” (2) to “assess the ability of the Company’s Board to 

impartially consider a demand for action (including for the filing of a derivative 

lawsuit on the Company’s behalf[;]” and (3) to “take appropriate action in the event 

the members of the Company’s Board did not discharge their fiduciary duties, 

including the preparation and filing of a shareholder derivative lawsuit, if 

appropriate.”110

The Demand sought eight categories of “Board Materials” that, by definition, 

encompassed both Board and committee materials, to include “all presentations, 

board packages, recordings, agenda, summaries, memoranda, charts, transcripts, 

notes, minutes of meetings, drafts of minutes of meetings, exhibits distributed at 

meetings, summaries of meetings, or resolutions.”111 As for timeframe, the Demand 

sought “all books, records, and documents within the Company’s possession, 

custody, or control for and/or relating to the period February 3, 2017 to present.”112

 

110 Compl. Ex. A at 6 ¶ 47.

111 Compl. Ex. A at 5–6, n. 5.

112 Id. at 6.
29

In its May 1, 2018 response to the Demand (the “Demand Response”), 

Facebook asserted that the Demand failed to meet the requirements of Section 220

by failing to “provide a credible basis to support a finding of actionable 

mismanagement,” primarily because the news articles identified in the Demand did 

not directly implicate Facebook’s directors.113 Further, Facebook stated that if Local 

No. 79 sought to investigate a Caremark claim, the Demand failed to provide any 

evidence that Facebook “‘utterly failed to implement a reporting system or ignored 

red flags.’”114 Facebook also maintained that the stockholder’s eight inspection 

requests were overbroad because the requests were “akin to civil litigation discovery 

requests, seeking broad categories of documents relating to the Company’s privacy 

policies, risk management and compliance issues, and Board issues.”115

While maintaining its objections to the Demand and subject to the parties 

entering into an appropriate confidentiality agreement, Facebook agreed to produce 

certain Board minutes and related materials apparently in hopes of avoiding 

litigation.116 On June 12 and 18, 2018, Facebook produced 1,694 pages of its books 

 

113 JX 60 at 3.

114 Id. at 4 (quoting Beatrice Corwin Living Irrevocable Tr. v. Pfizer, Inc., 2016 

WL 4548101, at *5 (Del. Ch. Sept. 1, 2016)).

115 Id. at 5–6.

116 Compl. Ex. B; see Compl. ¶ 54. See also, JX 59; JX 60.
30

and records.117 Of that total, 1,612 pages were redacted completely and marked as 

“non-responsive,” containing no information, or produced with only a title or other 

information identifying the document.118 Ignoring the date parameters stated in the 

Demand, the production included documents dated between January 2014 and

December 2017.119 Rather than identify the category of documents identified in the 

Demand to which the produced documents were responsive, the Demand Response 

created its own category, “all documents relating to unauthorized access of thirdparty user data.”120

On September 6, 2018, Local No. 79 filed its Complaint in which it repeated 

the allegations of wrongdoing stated in its Demand but omitted certain of the specific 

categories of documents it had originally sought in the Demand.

121

On September 28, 2018, Facebook answered the Complaint and raised the same 

defenses it had stated in its Demand Response, including that Plaintiffs lack a proper 

purpose for the Demand and seek an overbroad production of books and records 

 

117 PX 1–22.

118 Id.

119 Id.

120 JX 97 at 6.

121 D.I. at 1. 
31

given the stated purposes for inspection.

122 On October 11, 2018, the Court entered 

a Stipulation and Order consolidating this action with two related Section 220 

actions—the Birmingham action and the Levy action.

123 Under the consolidation 

order, the Local No. 79 Complaint became the operative complaint, and the Demand 

became the operative demand.124 The trial occurred on March 7, 2019.

In a commendable effort to clarify the issues for trial, the parties met on 

September 12, 2018, to discuss the scope of documents Plaintiffs sought to inspect. 

The following day, Plaintiffs provided a revised (and broader) list of requested books 

and records, identified custodians from whom documents should be collected and 

clarified that the Company should collect documents generated from January 1, 2011 

through the present.

125

 The documents requested were:

 Board and Committee Meeting Materials

o Minutes, presentations, agendas, and resolutions for the Board 

and Board Committees of Facebook;

o Any notes taken or other written materials generated by the 

Board members in connection with any meeting of the Board of 

Facebook or any committee of the Board; and

o Unredacted versions of relevant non-privileged documents 

produced in response to Shareholder’s Demand for Books and 

Records. 

 

122 D.I. at 11. 

123 D.I. at 17.

124 PTO ¶ 15.

125 JX 76.
32

 Senior Management Material

o Relevant written materials generated by or provided to Mark 

Zuckerberg including emails, reports, presentations, and 

business plans;

o Relevant written materials generated by or provided to 

Facebook’s internet security, regulatory affairs or other relevant 

departments; and

o Non-privileged relevant written materials generated by or 

provided to Facebook’s legal department. 

 Relevant policies or procedures of Facebook;

 Documents produced to the government in connection with the 2011 consent 

decree and Cambridge Analytica and the resulting investigations;

 Board independence materials—any board questionnaires for each board 

member;

 Organizational charts for Facebook’s relevant departments;

 All documents produced to other stockholders in response to Section 220 

demands or otherwise;

 Privilege log as set forth in paragraph four of the June 2018 Confidentiality 

Stipulation; and

 Electronic communications by and between the board, executives and senior 

management relating to the subject matter in the Demand and Complaint.126

Needless to say, the revised list sought a substantially expanded scope of documents 

than Plaintiffs requested in the Demand. 

On January 2, 2019, the parties met again to discuss the scope of production 

and Facebook ultimately asked Plaintiffs to prepare a form of order they would ask 

the Court to enter if the parties litigated the matter through trial.

127 Plaintiffs agreed 

 

126 Id.

127 JX 92.
33

and, on January 16, 2019, provided their proposed form of order that defined the 

categories of documents to be produced as follows:

(1) the 2011 Consent Decree and related correspondence with the FTC; 

(2) the investigations conducted by the Department of Justice, 

Securities and Exchange Commission, and Federal Bureau of 

Investigation regarding Defendant’s sharing of personal 

information and related correspondence with each of those 

agencies; 

(3) third party access to and handling of Facebook user data, including 

but not limited to agreements with other companies regarding the 

same; 

(4) how the Facebook platform shares user data, including but not 

limited to design decisions regarding the Facebook application 

programming interface (“API”) and third party access to the 

Facebook platform; 

(5) Defendant’s general compliance policies and procedures respecting 

data privacy and access to user data; 

(6) Defendant’s internal investigation policies, procedures and 

protocols; 

(7) the Atlas (SOC1 & SOC 2/3), Custom Audience (SOC 2/3) and 

Workplace (SOC 2/3) audits performed by or on behalf of 

Defendant, and any other internal investigations or audits 

performed regarding topics 1–6; 

(8) any other regulatory, criminal, and civil investigations and civil 

lawsuits regarding topics 1–6; and 

(9) documents relating to the independence of Defendant’s directors 

and committees of the Board.128

Plaintiffs provided their proposed list of custodians a week later, including

(1) all members of Facebook’s Audit Committee since 2011; (2) any person who 

presented to the Audit Committee since 2011; (3) a list of seven Facebook officers, 

 

128 JX 94.
34

including its general counsel; and (4) Facebook officers/directors Zuckerberg and 

Sandberg.129 Ultimately, this exercise did not lead to an agreement.

In the Pre-Trial Order, the categories of books and records and the custodians 

from whom Plaintiffs sought records changed again. There, Plaintiffs sought:

[H]ard-copy and electronic documents from the period of January 1, 

2011 through December 31, 2018, received or authored by any member 

of Facebook’s Board relating to the following topics are necessary and 

essential to the purposes stated in the Local No. 79 Section 220 

Demand: 

(1) the Consent Decree that Facebook entered into with the United 

States Federal Trade Commission in November 2011 and related 

correspondence with the [FTC]; 

(2) the investigations conducted by the United States Department of 

Justice, Securities and Exchange Commission, and Federal Bureau 

of Investigation regarding Facebook’s sharing of personal 

information and related correspondence with each of those 

agencies; 

(3) compliance with the European Union’s General Data Privacy 

Regulation and related correspondence with European regulators; 

(4) third party access to and handling of Facebook user data, including 

but not limited to agreements with other companies regarding the 

same; 

(5) how the Facebook platform shares user data, including but not 

limited to design decisions regarding the Facebook application 

programming interface (“API”) and third party access to the 

Facebook platform; 

(6) Facebook’s general compliance policies and procedures respecting 

data privacy and access to user data; 

(7) Facebook’s internal investigation policies, procedures and 

protocols; 

(8) the Atlas (SOC1 & SOC 2/3), Custom Audience (SOC 2/3) and 

Workplace (SOC 2/3) audits performed by or on behalf of 

 

129 JX 95.
35

Facebook, and any other internal investigations or audits performed 

regarding topics 1–7; 

(9) any other regulatory, criminal, and civil investigations and civil 

lawsuits regarding topics 1–7; and 

(10) documents relating to the independence of Facebook’s directors 

and committees of the Board (collectively, “Plaintiffs’ Responsive 

Topics”).130

Plaintiffs also requested electronic communications, including emails, concerning 

these topics from the following custodians: Erskine B. Bowles, Sam Lessin, Sheryl 

Sandberg, Alex Stamos, Colin Stretch and Mark Zuckerberg.131 Defendants 

addressed this version of Plaintiffs’ demand for inspection in their Pre-Trial Brief 

and at trial. 

Plaintiffs’ demand took on yet another form in Plaintiffs’ Pre-Trial Brief, 

where the categories were stated to include: 

(1) The 2011 FTC Consent Order and related correspondence with the FTC;

(2) Investigations conducted by the [DOJ], [SEC], [FBI] and [ICO] regarding 

Facebook’s sharing of personal information and related correspondence 

with each of those agencies;

(3) Third party access to and handling of Facebook user data, including but 

not limited to, design decisions regarding the Facebook application 

programming interface (“API”) and third-party access to the Facebook 

platform;

(4) Facebook’s general compliance policies and procedures respecting data 

privacy and access to user data;

(5) Facebook’s internal investigation policies, procedures and protocols;

(6) Facebook’s Atlas (SOC1 & SOC 2/3), Custom Audience (SOC 2/3) and 

Workplace (SOC 2/3) audits performed on behalf of the Company, and 

 

130 PTO ¶ 18.

131 Id. at ¶ 19.
36

any other internal investigations or audits performed regarding the topics 

identified in items 2–6 above; and

(7) The independence of Facebook’s directors and committees of the 

Board.

132

The temporal range remained from January 1, 2011 to the present.

133 And Plaintiffs

again requested electronic communications, including emails, concerning the

designated topics from Erskine B. Bowles, Sam Lessin, Sheryl Sandberg, Alex 

Stamos, Colin Stretch and Mark Zuckerberg.134 This latest iteration formed the basis 

of Plaintiffs’ arguments at trial.135 

II. ANALYSIS

Plaintiffs argue the evidence presented at trial provides a credible basis from 

which the court can infer that mismanagement, waste or wrongdoing may have 

occurred. Specifically, they contend they have presented some evidence that

members of the Board and Facebook senior management knowingly implemented 

policies that placed user data at risk of misappropriation and failed to monitor 

Facebook’s compliance with the Consent Decree and, more generally, its efforts to 

protect its users’ private information. The books and records identified in the 

 

132 Pls.’ Pre-Trial Br. 33–38.

133 Id. at 39.

134 Id. at 40–42.

135 Tr. at 41:2–43:23.
37

Demand, say Plaintiffs, are necessary and proper to investigate this potential 

wrongdoing. 

Facebook responds that Plaintiffs have failed to demonstrate a credible basis 

to infer Facebook’s directors breached their Caremark obligations. Even if a 

credible basis to infer wrongdoing has been demonstrated, Facebook argues 

Plaintiffs’ inspection requests are not “circumscribed with [requisite] precision 

[because they are not] limited to those documents that are necessary, essential and 

sufficient to the stockholder’s purpose.”136

There is no dispute that Plaintiffs have satisfied Section 220’s so-called “form 

and manner” requirements.137 Accordingly, I begin my substantive analysis by 

addressing whether Plaintiffs have stated a proper purpose for inspection. After 

concluding that they have, I turn to the dispute regarding the scope of the documents 

to be produced.

A. Section 220’s Minimal Burden of Proof

The standard for evaluating a demand for books and records under 

Section 220 is well settled. A stockholder of a Delaware corporation may inspect 

the corporation’s books and records for any “proper purpose” rationally related to 

 

136 Marathon P’rs, L.P. v. M&F Worldwide Corp., 2004 WL 1728604, at *4 (Del. Ch. 

July 30, 2004).

137 See Amalgamated Bank v. Yahoo!, 132 A.3d at 775–76 (discussing “form and manner” 

requirements).
38

the stockholder’s “interest as a stockholder.”138 An intent to investigate

mismanagement or wrongdoing is a proper purpose if supported by the requisite 

evidentiary showing.

139

 To demonstrate that an investigative purpose is proper, the 

stockholder must prove, by a preponderance of the evidence, “a credible basis from 

which the court can infer that mismanagement, waste or wrongdoing may have 

occurred.”140 The “credible basis” standard is the lowest burden of proof known in 

our law; it requires merely that the plaintiff put forward “some evidence” of 

wrongdoing.141 After demonstrating a proper purpose, “[a] plaintiff seeking 

inspection must [next] demonstrate that ‘each category of books and records 

requested is essential and sufficient to [its] stated purpose.’”142 

 

138 8 Del. C. § 220(b) (“A proper purpose shall mean a purpose reasonably related to such 

person’s interest as a stockholder.”). 

139 Seinfeld, 909 A.2d at 121 (“It is well established that a stockholder’s desire to 

investigate wrongdoing or mismanagement is a ‘proper purpose.’”).

140 Id. at 118 (internal quotation marks omitted).

141 Id. at 118 (explaining that to satisfy the credible basis standard the stockholder must 

present “some evidence” of wrongdoing); Id. at 123 (“Although the threshold for a 

stockholder in a section 220 proceeding is not insubstantial, the ‘credible basis’ standard 

sets the lowest possible burden of proof.”).

142 Henry v. Phixios Hldgs., Inc., 2017 WL 2928034, at *11 (Del. Ch. July 10, 2017) 

(quoting Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d 1026, 1035 (Del. 1996)). 

See also, Sec. First Corp. v. U.S. Die Casting and Dev. Co., 687 A.2d 563, 569 (Del. 1997)

(When making a Section 220 demand, the plaintiff must show by a preponderance of the 

evidence “that each category of books and records is essential to the accomplishment of 

the stockholder’s articulated purpose for the inspection.”).
39

B. Plaintiffs Have Demonstrated Proper Purposes for Inspection

The preponderance of the evidence presented at trial provides a credible basis 

to infer the Board and Facebook senior executives failed to oversee Facebook’s 

compliance with the Consent Decree and its broader efforts to protect the private 

data of its users. I summarize that evidence below. 

First, Plaintiffs presented the Parliamentary Report where, after summarizing 

emails, meeting minutes, witness interviews and other evidence, the Parliamentary

Committee concluded the “Cambridge Analytica Scandal was facilitated by 

Facebook’s policies and the incident displays the fundamental weakness of 

Facebook in managing its responsibilities to the people whose data is used for its 

own Commercial purposes.”143 According to the Parliamentary Report, 

“[i]f [Facebook] had fully complied with the [Consent Decree], [the Cambridge 

Analatica scandal] . . . would not have happened.”144 The Parliamentary Report went 

on to summarize evidence that Facebook had implemented a business plan to 

 

143 JX 103 at 24–25, 92; JX 3–5, 7–9, 12, 21–22, 26. “In total, the Committee held 23 oral 

evidence sessions, reviewed over 170 written submissions, heard evidence from 

73 witnesses, asked 4,350 questions of these witnesses, and had many exchanges of public 

and private correspondence with individuals and organizations.” JX 103 at 10. 

See In re UnitedHealth Gp., Inc. Section 220 Litigation, 2018 WL 1110849, at *7 (Del. Ch. 

Feb. 28, 2018) (finding credible basis to suspect wrongdoing was evidenced by a complaint 

brought on behalf of the Department of Justice, which included “references to, and 

quotations from, the Company’s internal emails, letters, audit reports, charts, attestations, 

policies, presentation materials, and memoranda”).

144 JX 103 at 90. 
40

“override its users’ privacy settings in order to transfer data to some app developers” 

and “to charge high prices . . . for the exchange of that data.”145 And, importantly, 

the Parliamentary Report concluded that the Board was aware of data privacy 

breaches but attempted “to deflect attention” from these breaches to avoid 

scrutiny.146

Second, the Consent Decree demonstratesthat an enforceable regulatory order 

mandated that Company management and the Board implement and monitor 

Facebook’s compliance with specifically identified and detailed data privacy 

procedures.

147

 Lest there be any doubt about whether the Board was aware of the 

specific requirements of the Consent Decree, the document itself makes clear that it 

is to be “deliver[ed] . . . to . . . all current and future principals, officers, directors, 

and managers[.]”148 While there is certainly room to defend the claim, there is some 

evidence the Board knew of the Company’s obligations to implement data security 

 

145 Id.

146 JX 103 at 72. 

147 JX 1. The Consent Decree explicitly requires Facebook “and its representatives” to 

“disclose to [Facebook’s] users . . . the categories of nonpublic user information that will 

be disclosed to such third parties[,]” “the identity or specific categories of such third 

parties” and “obtain the user’s affirmative express consent.” Id. Facebook “and its 

representatives” must also “implement procedures reasonably designed to ensure that 

covered information cannot be accessed by any third party from servers under [Facebook’s 

control[.]” Id. And Facebook must “establish and implement, and thereafter maintain, a 

comprehensive privacy program[.]” Id. at § II. 

148 JX 1 at § VII.
41

measures, knew the Company had not implemented or maintained those measures 

as required by the Consent Decree and, nevertheless, condoned the Company’s 

monetization of its users’ private data in violation of the Consent Decree.149 

The Consent Decree was an affirmative obligation imposed on the Company 

much like positive law. The legal academy has observed that Delaware courts are 

more inclined to find Caremark oversight liability at the board level when the 

company operates in the midst of obligations imposed upon it by positive law yet 

fails to implement compliance systems, or fails to monitor existing compliance 

systems, such that a violation of law and resulting liability occurs.150 Professor 

 

149 The Parliamentary Report concluded, “[t]he Cambridge Analytica scandal was 

facilitated by Facebook’s policies. If it had fully complied with the FTC settlement, it 

would not have happened.” JX 103 at 28.

150 In other words, it is more difficult to plead and prove Caremark liability based on a 

failure to monitor and prevent harm flowing from risks that confront the business in the 

ordinary course of its operations. Failure to monitor compliance with positive law, 

including regulatory mandates, on the other hand, is more likely to give rise to oversight 

liability. See James D. Cox & Randall S. Thomas, Corporate Darwinism: Disciplining 

Managers in a World with Weak Shareholder Litigation, 95 N.C. L. Rev. 19, 55–56 (2016)

(“Indeed, the division between [In re Massey Energy Co.] and [In re Citigroup Inc. 

S’holder Deriv. Litig.] may be that Citigroup involved a challenge to legitimate business 

practices, whereas Massey is riveted, as was Caremark, on the directors’ conscious 

disregard of the corporation’s adherence with the law when implementing business 

strategies . . . . [T]he facts required to satisfy even Massey reflect such an abandonment of 

the directors’ monitoring role as to suggest outright complicity in the lawless acts rather 

than a want of oversight.”); Donald C. Langevoort, Caremark and Compliance: A TwentyYear Lookback, 90 Temp. L. Rev. 727, 735 (2018) (“[T]he moment the board is brought 

into the compliance risk discussion, liability exposure increases to at least a small extent, 

and Caremark itself no longer sets the applicable standard.”). See also, In re Citigroup 

Inc. S’holder Deriv. Litig., 964 A.2d 106, 131 (Del. Ch. 2009) (“There are significant 
42

Elizabeth Pollman aptly describes this as a circumstance where the board acts with 

“disobedience.”151 Our law does not countenance board level disobedience. 

Stated differently, 

Delaware law does not charter law breakers. Delaware law allows 

corporations to pursue diverse means to make a profit, subject to a 

critical statutory floor, which is the requirement that Delaware 

corporations only pursue “lawful business” by “lawful acts.” As a 

result, a fiduciary of a Delaware corporation cannot be loyal to a 

Delaware corporation by knowingly causing it to seek profit by 

violating the law . . . . Telling your parents that all the kids are getting 

caught shoplifting, cheating, or imbibing illegal substances is not, 

fortunately, a good excuse. For fiduciaries of Delaware corporations, 

there is no room to flout the law governing the corporation’s affairs. 

If the fiduciaries of a Delaware corporation do not like the applicable 

law, they can lobby to get it changed. But until it is changed, they must 

 

differences between failing to oversee employee fraudulent or criminal conduct and failing 

to recognize the extent of a Company’s business risk.”); In re Goldman Sachs Gp., Inc. 

S’holder Litig., 2011 WL 4826104, at *21 (Del. Ch. Oct. 12, 2011) (“As a preliminary 

matter, this Court has not definitively stated whether a board’s Caremark duties include a 

duty to monitor business risk.”); Asbestos Workers Local 42 Pension Fund v. Bammann, 

2015 WL 2455469, at *14 (Del. Ch. May 22, 2015) (“It is not entirely clear under what 

circumstances a stockholder derivative plaintiff can prevail against the directors on a theory 

of oversight liability for failure to monitor business risk under Delaware law; the Plaintiff 

cites no examples where such an action has successfully been maintained.”) (emphasis in 

original); Reiter on Behalf of Capital One Fin. Corp. v. Fairbank, 2016 WL 6081823, at 

*8 (Del. Ch. Oct. 18, 2016) (“In applying the Caremark theory of liability, even in the face 

of alleged red flags, this Court has been careful to distinguish between failing to fulfill 

one’s oversight obligations with respect to fraudulent or criminal conduct as opposed to 

monitoring the business risk of the enterprise.”); Okla. Firefighters Pension & Ret. Sys. v. 

Corbat, No. 12151, 2017 WL 6452240, at *18 (Del. Ch. Dec. 18, 2017) (“Banamex made 

a risky business decision that turned out poorly for the company. That suggests a failure 

to monitor or properly limit business risk, a theory of director liability that this Court has 

never definitively accepted. Indeed, evaluation of risk is a core function of the exercise of 

business judgment.”).

151 Elizabeth Pollman, Corporate Disobedience, 68 Duke L.J. 709, 756 (2019).
43

act in good faith to ensure that the corporation tries to comply with its 

legal duties.152

Plaintiffs have presented a credible basis to infer that the Board acted with 

disobedience by allowing Facebook to violate the Consent Decree. They are entitled 

to inspect books and records to investigate that potential wrongdoing. 

Third, Plaintiffs point to information released to the public sphere since they 

initiated their Demand indicating that a key component of Facebook’s business plan 

was to monetize access to user data through agreements with partners based on 

“reciprocity,” even after entering into the Consent Decree.

153

 Facebook’s long-term 

business model was to “go with full reciprocity and access to app friends,” 

permitting business partners to obtain full information from users, including the 

user’s Facebook friends.154 There is some evidence Facebook whitelisted these 

business partners, giving them unauthorized access to the Facebook platform and 

Facebook’s user data for a substantial fee.

155

 All the while, its users were left in the 

dark.156

 

152 In re Massey Energy Co., 2011 WL 2176479, at *20–21 (Del. Ch. May 31, 2011)

(internal footnote omitted) (Strine, V.C.).

153 JX 103 at 26–28.

154 Id. at 35–36.

155 JX 3–5, 7–9, 12, 21–22, 26; JX 103 at 29–31.

156 JX 103 at 30 (“Apps were able to circumvent users’ privacy of platform settings and 

access friends’ information, even when the user disabled the Platform.”).
44

Fourth, Plaintiffs presented a credible basis to infer the Board knew the 

Company was allowing unauthorized third-party access to user data. The New York 

Times reported Erskine Bowles, chairman of the Audit Committee, received a report 

from Stamos, then Chief Information Security Officer, and Colin Stretch, 

Facebook’s General Counsel, about Russian interference with the Facebook 

platform and potential data privacy violations.157 On the same day, Bowles 

questioned Zuckerberg and Sandberg at a full Board meeting regarding the extent to 

which they, and other Facebook senior management, had been transparent with the 

Board regarding data privacy issues.

158

 At that meeting, Stamos expressed concerns 

that the Company had not monitored the protection of user data carefully, prompting 

Sandberg, as noted above, to accuse Stamos of “throw[ing] us under the bus!”159 

According to The New York Times, the Company’s failure adequately to address data 

privacy ultimately led Whatsapp co-founder, Jan Koum, to resign from the Board.

160

 

157 JX 82 at 9–10. The Board also received a presentation on the results of an audit 

regarding privacy and data use. PX 16 at 34; PX 22 at 21–23.

158 JX 82 at 9–10.

159 Id.

160 JX 57. See In re Plains All Am. Pipeline, L.P., 2017 WL 6066570, at *3–4 (Del. Ch. 

Aug. 8, 2017) (ORDER) (newspaper article deemed reliable evidence to support 

stockholder’s showing of a credible basis to suspect wrongdoing for purposes of Section 

220); Paul v. China MediaExpress Hldgs., Inc., 2012 WL 28818, at *4 (Del. Ch. Jan. 5, 

2012) (same).
45

Fifth, Plaintiffs have provided evidence that multiple regulatory authorities 

have opened investigations into Facebook’s data privacy lapses.

161

 Perhaps most 

troubling, following the Cambridge Analytica breach, the FTC opened an 

investigation to determine the extent to which Facebook violated the Consent 

Decree.162 News outlets have recently reported the investigation could result in a 

multibillion dollar fine against Facebook––the largest fine ever imposed by the 

FTC.163

After the Cambridge Analytica scandal, the ICO fined Facebook the 

maximum fine permitted under British law, £500,000, for permitting third party 

developers to access user information without sufficient consent.164 In addition, the 

Parliamentary Report revealed the ICO concluded that Facebook’s “business 

 

161 As noted, the FBI, DOJ and SEC have all opened independent investigations into the 

Company stemming from its data privacy violations. JX 68. See Freund v. Lucent Tech., 

2003 WL 139766, at *3 (Del. Ch. Jan. 9, 2003) (finding that a Securities and Exchange 

Commission investigation, financial restatements and pending civil suits comprised a 

“record [that] adequately supplies ‘some credible basis’ to support an inference of waste 

or mismanagement[.]”) (citing Sec. First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 

563, 567 (Del. 1997)).

162 JX 51, 52.

163 JX 102.

164 JX 78.
46

practices and the way applications interact with data on the platform have 

contravened data protections law.”

165

Finally, Facebook is subject to numerous lawsuits based on the same 

underlying misconduct.166 These complaints further support Plaintiffs’ credible 

basis to infer wrongdoing.

167

In light of the low Section 220 evidentiary threshold, I am satisfied Plaintiffs 

have proven “legitimate issues of wrongdoing.”168 Stated differently, Plaintiffs have

presented some evidence that Facebook’s directors and officers may have breached 

their Caremark duties, particularly in light of the Consent Decree in place at the time 

of most of the data privacy breaches alleged in this action.

169

 Accordingly, they have

 

165 JX 103 at 23.

166 Supra note 104 and accompanying text.

167 See Elow v. Express Scripts Hldg. Co., 2017 WL 2352151, at *6 (Del. Ch. May 31, 

2017) (“[P]leadings in [a private suit against defendant], coupled with the statements made 

by [defendant’s] management, are enough to meet the ‘lowest burden of proof’ set by 

Delaware law.”) (citing Seinfeld, 909 A.2d at 123); UnitedHealth, 2018 WL 1110849, at *7

(finding credible basis to suspect wrongdoing was evidenced by the contents of a complaint 

against the company brought on behalf of the Department of Justice).

168 Sec. First Corp., 687 A.2d at 568 (“[T]he threshold may be satisfied by a credible 

showing, through documents, logic, testimony or otherwise, that there are legitimate issues 

of wrongdoing.”).

169 Given my finding that Plaintiffs have presented some evidence of Board level 

knowledge of Facebook’s failure to implement data protection measures, and of the 

Board’s failure to monitor what measures were in place, I decline to address Plaintiffs’ 

argument that the “core operations doctrine” should be applied to infer Board level 

knowledge and involvement. See In re Fitbit, Inc. S’holder Deriv. Litig., 2018 

WL 6587159, at *15 (Del. Ch. Dec. 14, 2018), appeal refused, 2019 WL 190933 (Del. Ch. 
47

demonstrated a proper purpose to inspect certain documents related to this potential 

wrongdoing.

170

Having demonstrated a credible basis to investigate wrongdoing in connection 

with Facebook’s protection of data privacy, Plaintiffs have also supported their 

Demand to inspect books and records relating to director independence. Should 

stockholders elect to pursue claims against Facebook fiduciaries arising from the 

data privacy breaches, those claims most likely would be derivative claims asserted 

on behalf of the Company. It is well settled that the desire to investigate director 

independence is a proper purpose, particularly in instances where the stockholder 

seeks to investigate whether demand upon the board to pursue claims on behalf of 

the company would be futile.

171

 

 

Jan. 14, 2019) (denying a motion to dismiss based on the core operations doctrine and 

“well-pled facts” that the Board and management would have been aware of problems 

encountered in the development of a new product that was responsible for a substantial 

portion of the company’s revenue).

170 Facebook cites Marathon P’rs, L.P. v. M&F Worldwide Corp. to argue that Plaintiffs 

have presented only “speculation of mismanagement.” 2004 WL 1728604, at *7 (Del. Ch. 

July 30, 2004). Marathon is distinguishable on its facts, as the plaintiff there suspected the 

directors breached their Revlon duties when they rebuffed a single overture by a potential 

acquirer outside of any bidding process. Id. Unlike Marathon, this case involves a 

company that was under a positive obligation to implement certain data privacy protections 

and some evidence that the levers of control within the Company may have failed to 

oversee compliance with those obligations in a manner that has caused harm to the 

Company. 

171 Our courts regularly find that a stockholder states a proper purpose when he seeks to 

investigate director independence and disinterestedness as he investigates possible 

derivative claims. See, e.g., Amalgamated Bank v. Yahoo!, 132 A.3d at 784–85 

(“[T]he Delaware Supreme Court has indicated that a plaintiff could obtain ‘a file of the 
48

C. The Effect of Plaintiffs’ Ever-Changing Demand

Plaintiffs’ have reshaped their requests to inspect books and records from their 

initial Demand, through the parties’ meet and confer sessions, the pre-trial 

stipulation, Plaintiffs’ pre-trial brief and, finally, trial. This metamorphosis has 

confounded the Court’s analysis and justifiably frustrated the Company.172 

A stockholder’s right to inspect books and records must be balanced against the 

corporation’s right to be apprised of what the stockholder is asking for and why.173 

In Fuchs Family Trust v. Parker Drilling Co., the court denied the plaintiff’s 

demand for inspection, partly because its late-term modification of the demand was 

prejudicial to the defendants.174 There, the plaintiff’s initial demand letter sought 

eight categories of documents and described its purpose as the investigation of 

possible mismanagement and violation of law by the company.175 In its complaint, 

 

disclosure questionnaires for the board’ or similar materials that could ‘provide more detail 

about the thickness of the relationship[s]’ in the boardroom.”) (citing Del. Cty. Empls.’ Ret. 

Fund v. Sanchez, 124 A.3d 1017, 1024 (Del. 2015)).

172 I say metamorphosis rather than evolution because there has been no linear progression 

in Plaintiffs’ requests for books and records; they have expanded and contracted with no 

apparent pattern. 

173 Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d 1026, 1031 (Del. 1996)

(“Undergirding this discretion [to determine the scope of inspection] is a recognition that 

the interests of the corporation must be harmonized with those of the inspecting 

stockholder.”).

174 Fuchs Family Tr. v. Parker Drilling Co., 2015 WL 1036106 (Del. Ch. Mar. 4, 2015).

175 Id. at *3.
49

the plaintiff modified its purpose and narrowed the scope of its demand.

176

 The 

demand changed again eight days before trial and after both parties had filed pretrial briefs, when the plaintiff “updated” the demand by substantially broadening the 

scope of the documents requested.177 The court refused to enforce the eleventh-hour 

update upon finding the defendant had been prejudiced by the moving targets set by 

the plaintiff:

Given the circumstances, [the plaintiff’s] late attempt to expand its 

inspection must be rejected. ‘Strict adherence to the section 

220 procedural requirements for making an inspection demand protects 

the right of the corporation to receive and consider a demand in proper 

form before litigation is initiated.’ [The defendant’s] right to 

consider [the plaintiff’s] demand properly would be substantially 

impaired by forcing it to adapt its response and defense to [the 

plaintiff’s] evolving requests.178

The court then rejected the plaintiff’s effort to enforce its demand after finding the 

books and records plaintiff sought were not “necessary and essential” to fulfill its 

stated purpose.

179

 Other decisions of this court are in accord.180

 

176 Id. at *3–4.

177 Id. at *4 (emphasis in original).

178 Id. (“Even beyond concerns related to Section 220’s requirements, forcing [the 

defendant] to defend against issues raised only a week before trial would be at odds with 

fundamental fairness.”). 

179 Id. at *7.

180 See, e.g., Beatrice Corwin Living Irrevocable Tr., 2016 WL 4548101, at *7 (denying 

plaintiffs’ Section 220 demand because it “was not clearly made until after trial” and 

refusing plaintiffs’ attempts to expand the scope of their demand by adding participants in 

the alleged mismanagement and a new theory because the attempted expansions came too 
50

While Plaintiffs’ lack of precision in formulating its Demand, particularly 

with respect to the scope of documents requested, has provoked justified frustration

and has questions regarding possible abuse of the Section 220 process, I am satisfied 

there has been no such abuse here. Plaintiffs’ stated purposes for inspection have 

remained constant throughout the various iterations of their Demand. And their lack 

of focus regarding the documents they seek, while unfortunate, does not evidence a 

lack of good faith. In my view, the proper approach here is to hold Plaintiffs to the 

request for documents as stated in the Pre-Trial Order, a request that was refined by 

the parties’ several meet and confer sessions.

181

 This is the version of the Demand 

that Defendants addressed in their pre-trial brief and at trial. The scope of documents 

requested in that version, therefore, has been properly joined for decision.

 

late); Highland Select Equity Fund, L.P. v. Motient Corp., 906 A.2d 156, 167 (Del. Ch. 

2006) (holding the plaintiff’s multiple amendments to its demand reflected a lack of 

precision that, in turn, suggested the plaintiff had not articulated a proper purpose in the 

first place). But see Apogee Invs., Inc. v. Summit Equities LLC, 2017 WL 4269013, at *4

(Del. Ch. Sept. 22, 2017) (granting plaintiff’s motion for leave to amend its demand—after 

plaintiff had already modified the scope of its demand on several occasions—and rejecting 

the defendant’s argument that the amendment reflected a “creeping expansion” of claims 

on the eve of trial, and would have the same prejudicial effect on the defendant as identified 

in Fuchs Family). In Apogee, the court explained that, unlike in Fuchs Family, where the 

plaintiff broadened its demand after both parties had filed opening pre-trial briefs, and eight 

days before trial, the “trial in this case is weeks away, pretrial briefing has not yet taken 

place, and [the defendant] has been aware of the mismanagement and party loan purposes 

since at least December 2016.” Id. 

181 PTO ¶ 18, 19. See Apogee, 2017 WL 4269013, at *4 (enforcing post-litigation demand 

upon finding that the Company had been given an adequate opportunity to respond to it). 
51

D. Scope of Production

Plaintiffs seek to inspect seven categories of books and records they claim 

“address the crux” of their stated purposes.182 Some of these materials are 

“necessary and essential”; others are not.183 Specifically, I am satisfied that the 

following categories of non-privileged documents184 relating to the following topics

(the “Ordered Documents”) are “necessary and essential” to pursue Plaintiffs’ proper 

purposes and should be produced:

(1) Hard-copy documents provided to, or generated by, the Board 

relating to investigations conducted by the FTC, DOJ, SEC, FBI and 

ICO regarding Facebook’s data privacy practices (“Investigation 

Documents”);

(2) Facebook’s formally adopted policies and procedures respecting 

data privacy and access to user data, including those promulgated 

following the entry of the Consent Decree (“Policies and 

Procedures”);

 

182 Pls.’ Pre-Trial Br. 27 (quoting Wal-Mart Stores, Inc. v. Ind. Elec. Works Pension Tr. 

Fund IBEW, 95 A.3d 1264, 1271 (Del. 2014)). 

183 Wal-Mart Stores, 95 A.3d at 1278 (discussing the “necessary and essential” standard).

184 Plaintiffs have invoked the so-called Garner exception to the attorney-client privilege 

as a basis to defeat the Company’s assertion of privilege. See Garner v. Wolfinbarger, 

430 F.2d 1093, 1104 (5th Cir. 1970) (listing “good-cause” factors that would justify an 

exception to the privilege asserted by a fiduciary in response to a stockholder’s request for 

documents). This exception is “narrow, exacting, and intended to be very difficult to 

satisfy.” Wal-Mart Stores, 95 A.3d at 1278. Plaintiffs have not met their heavy burden 

under Garner because, on this record, they have not demonstrated that the privileged 

information they seek “is both necessary to prosecute the action and unavailable from other 

sources.” Buttonwood Tree Value P’rs, L.P. v. R.L. Polk & Co., 2018 WL 346036, at *4

(Del. Ch. Jan. 10, 2018). This is “the most important of the Garner factors. See id. at *3, 

*5 n.24 (declining to apply Garner where necessity/unavailability factor not met even 

though the other two principal factors were satisfied); Elow v. Express Scripts Hldg. Co., 

2018 WL 2110946, at *2 (Del. Ch. Apr. 27, 2018) (same).
52

(3) Facebook’s Atlas (SOC1 & SOC 2/3), Custom Audience (SOC 2/3) 

and Workplace (SOC 2/3) audits performed on behalf of the

Company, and any other formal internal audits performed regarding 

compliance with Facebook formal data privacy policies and 

procedures or with the Consent Decree (“Audit Documents”); 

(4) documents concerning the independence of Facebook’s directors 

and committees of the Board, particularly the Board disclosure 

questionnaires (“Independence Documents”); and 

(5) electronic communications, if coming from, directed to or copied to 

a member of the Board, concerning Facebook’s post-Consent 

Decree whitelist practices, post-Consent Decree government 

investigations into Facebook’s data privacy practices and 

compliance with the Consent Decree, to be collected from the 

following custodians: Erskine B. Bowles, Sheryl Sandberg, Alex 

Stamos, and Mark Zuckerberg (“Communication Documents”).

185

 

185 Plaintiffs have presented evidence that Board members were not saving their 

communications regarding data privacy issues for the boardroom. See JX 103 at 24, 30–

36 (Parliamentary Report found emails from Zuckerberg, Sandberg and other senior 

management relating to the extent to which Facebook was complying with data privacy 

laws and relating to the scope of its whitelisting agreements); JX 3, 4, 5 (emails among 

executives and Board members discussing Zuckerberg’s plan to monetize user data within 

the Facebook platform). See Yahoo!, 132 A.3d at 791–94 (ordering the production of 

electronic documents and emails because they were “corporate records” that would “show 

what [key players] knew and when”); KT4 P’rs, 203 A.3d at 754–55 (reversing trial court 

for not ordering production of emails upon finding the plaintiff had presented evidence that 

board members were communicating by email regarding the subjects of the stockholder’s 

investigation and defendant had “not buttressed its claims [that emails were not necessary] 

with any evidence that other materials would be sufficient to accomplish [the 

stockholder’s] purpose.”). Here, Plaintiffs’ Demand sought Board level documents 

concerning Facebook’s compliance with the Consent Decree and response to government 

investigations into Facebook’s data privacy practices. In response, Facebook produced a 

compilation of highly redacted Board minutes that contain essentially no information 

regarding the relevant subjects. See, e.g., PX 1–22. When considered against the backdrop 

of the evidence of Board level email communications Plaintiffs have introduced in this 

record, the Company’s production of redacted Board minutes hardly “buttresses” its claim 

that these books and records are sufficient “to accomplish [Plaintiffs’] purpose.” KT4 P’rs, 

203 A.3d at 754–55. 
53

Because many of Plaintiffs’ document demands landed with the precision of 

buckshot,186 I have tailored the inspection award to the purposes articulated in their

inspection Demand. Thus, I have denied Plaintiffs’ request for correspondence with 

the FTC at or near the time the Consent Decree was entered because those documents 

are far removed from what Plaintiffs seek to investigate now. I have similarly denied 

Plaintiffs’ request for documents relating to “third party access to and handling of 

Facebook user data, including agreements with other companies regarding the same” 

beyond any such documents that might be within the Ordered Documents. The full 

breadth of the third-party documents Plaintiffs seeks extend far beyond what is 

necessary and essential.187 Also, except for the Policies and Procedures and Audit 

Documents, I have limited the scope of production to Board-level documents (and 

communications) because management-level communications are not, on this 

record, necessary and essential to Plaintiffs’ investigation of their Caremark-based 

claims. Finally, I have limited the custodians from whom the Company must collect 

electronic communications to comport with the evidence in the record, or lack of 

 

186 Id. at 776 (“The production order ‘must be carefully tailored.’ Framed metaphorically, 

it should be ‘circumscribed with rifled precision’ to target the plaintiff’s proper purpose.”) 

(quoting Sec. First, 687 A.2d at 565, 570).

187 Cook v. Hewlett-Packard Co., 2014 WL 311111, at *5 (Del. Ch. Jan. 30, 2014) (holding 

that Section 220 demands should not amount to “fishing expeditions”).
54

evidence, regarding the role of specific Facebook executives in the Company’s postConsent Decree data privacy compliance.188

While the temporal scope of discovery should a derivative claim be brought 

may well be broader, I am satisfied that Plaintiffs’ demand for documents dating 

back to 2011 is too broad for a Section 220 inspection.

189

 Claims relating to conduct 

in 2011, or conduct giving rise to the Consent Decree, likely would be time-barred.190 

Moreover, the Cambridge Analytica events primarily took place in 2014 and 2015.191 

And, importantly, the original Demand sought documents for a “period February 3, 

2017 to present.”192 With these facts in mind, I am satisfied the scope of production 

of Communication Documents, for reasons of burden and expense, and Investigation 

 

188 I have also removed Facebook’s General Counsel, Colin Stretch, as a custodian both 

because Plaintiffs have failed to demonstrate that his documents are essential to accomplish 

their purpose and also to minimize the extent of post judgment privilege disputes. See Sec.

First Corp., 687 A.2d at 569 (holding that Section 220 plaintiff must show by a 

preponderance of the evidence “that each category of books and records is essential to the 

accomplishment of the stockholder’s articulated purpose for the inspection.”).

189 See, e.g., Okla. Firefighters Pension & Ret. Sys. v. Citigroup Inc., 2015 WL 1884453, 

at *7 & n.61 (Del. Ch. Apr. 24, 2015) (“substantially narrow[ing]” the starting date for 

defendant to produce documents to 2011, where plaintiffs requested materials from 2008); 

UnitedHealth, 2018 WL 1110849, at *10 (holding that Section 220 demand seeking 

documents over an eight year span too broad.). 

190 See Graulich, 2011 WL 1843813, at *1, *6 (finding derivative claims resulting from 

Section 220 action investigating possible corporate mismanagement from 6–8 years prior 

to the demand would likely be time-barred).

191 See JX 45; JX 46.

192 Compl. Ex. A at 6.
55

Documents, for reasons of temporal relevance and burden, should be limited to the 

time specified in the original Demand—February 3, 2017 to present. As for the 

Audit Documents, the scope of production shall be from January 2013 to present, in 

order to capture a time just prior to the Cambridge Analytica breach and far enough 

removed from the Consent Decree that the Company’s compliance with the privacy 

program and third-party audit requirements of that mandate should have been 

evident. As for the Policies and Procedures, the scope of production shall be from 

January 2013 to present, not only to capture the time prior to the Cambridge 

Analytica breach but also to reveal the Company and the Board’s response to the 

Consent Decree. Finally, as for the Independence Documents, the scope of 

production will be limited to the most recent Board questionnaires given that the 

Board’s independence for demand futility purposes will be measured as of the time 

the complaint alleging demand futility is filed.193 

III. CONCLUSION

For the foregoing reasons, a judgment shall be entered in favor of Plaintiffs

that directs Facebook to allow inspection of the books and records designated in this 

 

193 See Rales v. Blasband, 634 A.2d 927, 934 (Del. 1993) (“[A] court must determine 

whether or not the particularized factual allegations of a derivative stockholder complaint 

create a reasonable doubt that, as of the time the complaint is filed, the board of directors 

could have properly exercised its independent and disinterested business judgment in 

responding to a demand.”) (emphasis supplied).
56

Memorandum Opinion. The parties shall confer and submit a joint proposed 

implementing order and final judgment within fifteen (15) days.