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Business Organizations Keyed to Bauman
United Food and Commercial Workers Union and Participating Food Industry Employers Tri-State Pension Fund v. Zuckerberg
Citation:262 A.3d 1034 (Del. 2021).
In 2016, Facebook’s board voted in favor of a stock reclassification (“Reclassification”) that would allow Zuckerberg to sell most of his stock in the company, but maintain voting control, in order for him to fulfill a pledge to donate most of his wealth for philanthropic purposes. Stockholders brought several class actions after the Reclassification was approved. A trial court consolidated the actions and, shortly before trial, Facebook withdrew the Reclassification. Due to the class action, Facebook spent $20 million defending the suit and paid plaintiff’s counsel more than $68 million in attorneys’ fees.
Tri-State then brought this derivative suit without making a demand on the board. The demand board was composed of nine directors. Of those nine, Tri-State conceded Chenault and Zients could have impartially considered the demand and Facebook did not argue that Zuckerberg, Sanderberg, or Andreessen were impartial. Therefore, as to this appeal, the impartiality of Thiel, Hastings, Bowles, and Desmond-Hellman was at issue. The pertinent facts and basis of Tri-State’s argument for partiality were as follows: Hastings was a Netflix founder; Thiel was an early investor in Facebook; and Bowles was granted a waiver of mandatory retirement by Facebook and was a board member for Morgan Stanley, Facebook’s financial advisor.
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