Espinoza v. ZuckerbergAnnotate this Case
In this derivative action, Plaintiff, a Facebook, Inc. stockholder, challenged the 2013 decision of Facebook’s board of directors to approve compensation for its outside, non-management directors, who comprised six of the eight directors on Facebook’s board. Plaintiff brought claims against the directors ("Defendants”) for breach of fiduciary duty, unjust enrichment, and waste of corporate assets. After the lawsuit was filed, Mark Zuckerberg, who controlled over sixty-one percent of the voting power of Facebook’s common stock and did not receive the 2013 compensation, expressed his approval in a deposition and an affidavit of the disputed compensation for the non-management directors. Defendants sought summary judgment against the fiduciary duty and unjust enrichments claims, arguing that because Zuckerberg ratified the compensation, the standard of review governing that transaction shifted from the entire fairness standard of review to the business judgment presumption. The Court of Chancery denied Defendant’s motion for summary judgment with regard to the fiduciary duty and unjust enrichment claims, holding (1) the entire fairness standard applies to the directors’ approval of the 2013 compensation; and (2) Defendants failed to demonstrate that the board’s compensation decisions were entirely fair. However, because Plaintiff failed to state a reasonably conceivable claim for waste, that claim was dismissed.