EFiled: Apr 29 2016 05:38PM EDT

Transaction ID 58935276
Case No. 12283-

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

PEDRO RAMIREZ JR.,
Individually and on Behalf of all Others
Similarly Situated,
Plaintiff,
vs.
MARK ZUCKERBERG, SHERYL
SANDBERG, MARC ANDREESSEN,
ERSKINE B. BOWLES, SUSAN
DESMOND-HELLMANN, REED
HASTINGS, JAN KOUM, PETER A.
THIEL, and FACEBOOK, INC.,
Defendants.

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C.A. No.

VERIFIED CLASS ACTION COMPLAINT

Plaintiff Pedro Ramirez Jr. (Plaintiff), by and through his undersigned
counsel, alleges upon knowledge as to himself and his own actions, and upon
information and belief as to all other matters, based upon the investigation
conducted by and through his attorneys, which included, inter alia, a review of
documents filed by Defendants with the United States Securities and Exchange
Commission (the SEC), news reports, press releases and other publicly available
documents, as follows:
SUMMARY OF THE ACTION
1.

Plaintiff brings this action on behalf of himself and as a class action

on behalf of the Class A shareholders of Facebook, Inc. (Facebook or the

Company), other than the named defendants, for breaches of fiduciary duty
arising from an effort to reclassify the Companys shares. The Defendants to this
action are Facebook, Inc. (Facebook) and the members of Facebooks Board of
Directors. As detailed herein, the reclassification effort is a transparent attempt to
entrench Defendant Mark Zuckerberg (Zuckerberg) as Facebooks dominant
shareholder by creating a non-voting class of Facebook stock in order to preserve
his voting power into perpetuity. Presently, Facebook has Class A shares, which
have one vote per share, and Class B shares, which have ten votes per share.
Zuckerberg owns more than 76% of all Class B shares and an irrevocable voting
proxy covering an additional 8.9% of all Class B shares. Zuckerberg also owns
3,999,241 Class A shares, less than 1% of the Class A common stock. In all,
Zuckerberg holds more than 60% of voting power over Facebook.
2.

Under the Reclassification, if not enjoined, Facebooks Certificate of

Incorporation will be amended to reclassify stock, increase the authorized shares of

Class A stock, implement an equal treatment provision, and implement
triggering events under which Zuckerbergs Class B shares could be required to be
converted into Class A shares.
3.

Under the proposed reclassification, once implemented, Facebook

would issue a third class of stock, Class C shares, which will have no voting rights.
All Class A shareholders will receive a dividend of two shares of non-voting Class
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C stock for each Class A share they own. So although Class A shareholders would
receive what amounts to a 2-for-1 stock split, receiving 2 Class C shares for every
Class A share they own, Facebooks voting proportions remain unchanged. This
distribution of non-voting stock will allow Facebook to use Class C stock to
purchase other companies or issue stock to employees without diluting
Zuckerbergs voting power or diminishing his vise-like grip over Company
management and operations (which includes the ability to appoint the entire Board
of Directors).
4.

Facebooks preliminary proxy statement filed April 27, 2016

(Preliminary Proxy) states that the Class C issuance will (and is intended to)
ensure that the Company continues to be controlled by Zuckerberg. This will only
exacerbate the effect of entrenching him in power and insulating him from having
to pay attention to the views of the shareholders who own the vast majority of the
shareholder equity. Zuckerberg wishes to retain this power, while maintaining the
right to transfer or sell large amounts of his stockholdings, reaping billions of
dollars in proceeds. The issuance of the Class C stock will effectively gift billions
of dollars in equity to executives and directors, for which they will pay nothing.
Moreover, this is done with the explicit intent of ensuring Zuckerbergs continued
domination of the Company, as an incentive.

5.

A Special Committee of Facebook directors approved this deal, but

did not bargain hard with Zuckerberg to obtain anything of meaningful value in
exchange for the extraordinarily valuable benefit that is being bestowed upon
them. The Special Committee: (a) agreed to allow Zuckerberg to approve this deal
by fiat at the upcoming annual meeting, without any provision for approval by a
majority of the public shareholders, who therefore are accorded no say; (b) never
sought or received an opinion from its financial advisor that the Reclassification is
fair to the public Class A shareholders; (c) obtained concessions from
Zuckerberg that are essentially meaningless, thus negating any possible claim that
there was arms-length bargaining; (d) never had its financial advisor place a value
or range of values on the Reclassification, from Zuckerbergs perspective; (e) did
not prearrange for compensation for the Special Committee, leaving its eventual
compensation to be decided by the compensation and governance committee; (f)
failed to bargain for the right of public Class A shareholders to elect even one
independent director, so that such shareholders might have a voice; (g) adopted no
independent oversight mechanism to ensure that future issuances of Class C shares
do not unduly benefit Zuckerberg at the expense of Facebooks public
shareholders; and (h) failed to provide for any compensation for the Class A
shareholders whose investments will be adversely affected by having their
holdings cleaved into voting and non-voting shares, without their consent or
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approval. As to this last point, Google and Under Armour recently adopted similar
Reclassifications, and have seen Class C non-voting shares trade at a discount: on
April 28, 2016, Under Armour Class C stock closed at $41.66, a 6.2% discount to
the Public voting stock, while Google Class C stock closed at $691.02, a 2%
discount.

A discount here of 2-6% would cost Facebook public shareholders

billions of dollars. Whereas Google and Under Armour (after shareholder

challenges) addressed this disparity by offering compensation to such shareholders,
Facebook has not done this.
6.

In addition to the foregoing, the Defendants have failed to disclose all

material information regarding the Reclassification. Specifically, on April 27,

2016, Facebook filed its preliminary Proxy Statement with the SEC which fails to
provide the Companys shareholders with all material information concerning the
Reclassification, as detailed herein.
7.

Although Class A shareholders cannot block approval of the

Reclassification, the proxy solicitation is essential to the lawful adoption of

Zuckerbergs Plan. Therefore, a truthful and complete Proxy is mandated by law.
8.

The Director Defendants have a fiduciary duty to act in the best

interests of Facebooks shareholders, and to treat them with loyalty, care, and
candor. Unfortunately, the Director Defendants failed to live up to their fiduciary

obligations, agreeing to a Reclassification of the Company which benefits

Zuckerberg to the detriment of Plaintiff and the Class.
9.

For these reasons and as set forth more fully herein, Plaintiff seeks to

enjoin Defendants from proceeding with the Reclassification. In the event that the
Reclassification is consummated, Plaintiff seeks to recover damages from the
Director Defendants for their breaches of fiduciary duty.
PARTIES
10.

Plaintiff is, and at all relevant times has been, a holder of Facebook

11.

Defendant Facebook is a Delaware corporation that maintains its

stock.

corporate headquarters in Menlo Park, California.

12.

Defendant Mark Zuckerberg (Zuckerberg) is the Chief Executive

Officer and Chairman of the Board of Directors at Facebook. Zuckerberg founded

Facebook in 2004 while studying computer science at Harvard University. He is
the largest and controlling shareholder of Facebook.
13.

Defendant Sheryl Sandberg (Sandberg) is the Chief Operating

Officer (COO) and a Director of Facebook. She has been the COO since 2008,
and has served on the Board of Directors since 2012. Ms. Sandberg has also served
as a Director of the Walt Disney Company since December 2009, and
SurveyMonkey since June 2015.
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14.

Defendant Marc L. Andreessen (Andreessen) has served as a

Director of Facebook since June 2008. In addition, Mr. Andreessen is a co-founder

and has served as a General Partner of Andreessen Horowitz, a venture capital
firm, since July 2009. He also serves on the board of directors of the HewlettPackard Enterprise Company and other private companies.
15.

Defendant Erskine B. Bowles (Bowles) has served as a Director of

Facebook since September 2011.

In addition, Bowles helped found Bowles

Hollowell Connor & Co., and Kitty Hawk Capital. He served as White House
Chief of Staff from 1996 to 1998.
16.

Defendant Susan D. Desmond-Hellmann (Desmond-Hellmann) has

served as a Director of Facebook since March 2013. She also serves on the board
of directors of Procter & Gamble Company.
17.

Defendant Reed Hastings (Hastings) has served as a Director of

Facebook since June 2011.

18.

Defendant Jan Koum (Koum) has served as a Director of Facebook

since October 2014. He serves as the co-founder and Chief Executive Officer of
WhatsApp Inc., a wholly-owned subsidiary of Facebook.
19.

Defendant Peter A. Thiel (Thiel) has served as a Director of

Facebook since April 2005. Mr. Thiel has served as President of Thiel Capital

since 2011, has been a Partner of Founders Fund, a venture capital firm, since
2005, and has been President of Clarium Capital Management since 2002.
20.

Zuckerberg, Sandberg, Andresseen, Bowles, Desmond-Hellmann,

Hastings, Koum, and Thiel are collectively referred to as the Director

Defendants.
ADDITIONAL SUBSTANTIVE ALLEGATIONS
A.

Background

21.

Mark Zuckerberg launched TheFacebook.com on February 4, 2004,

while he was a student at Harvard University. On July 29, 2004, TheFacebook.com

was formally incorporated in Delaware.
22.

Facebook rapidly grew from a site aimed at Harvard students into a

global phenomenon. Hundreds of millions of people use Facebooks social

network, through either facebook.com or through mobile applications.
23.

Facebook announced its intention to commence an IPO on February 1,

2012. On May 18, 2012, Facebooks Registration Statement became effective.

Ultimately, Facebooks IPO sold more than 421 million shares of Facebook Class
A common stock at a value of more than $16 billion.
24.

The IPO created a Class A common stock class that had voting power

of one vote per share. Class B common stock, of which 1,504,592,619 shares were

outstanding after the IPO, maintained (and still maintains) voting power of 10
votes per share.
25.

Following the IPO, Facebook remained a controlled company, with

Facebooks prospectus reflecting that Zuckerberg would have the ability to

control the outcome of matters submitted to our stockholders for approval,
including the election of our directors, as well as the overall management and
direction of our company. In the event of his death, the shares of our capital stock
that Mr. Zuckerberg owns will be transferred to the persons or entities that he
designates.
26.

This control was maintained in large part through the dual tier

structure, with Class A common stock being purchased by the public through the
IPO and subsequent public transactions and Class B stock, which was allocated
primarily to Facebook directors and management maintaining vastly greater voting
power (10:1). Class B common stock is not publicly traded, but is convertible into
one share of Class A common stock at any time at the option of the holder or upon
most transfers of such shares by Class B common stockholders.
27.

According to Facebooks 10-Q dated November 5, 2015, this voting

disparity now permits Class B common stockholders to control all matters

submitted to shareholders for approval so long as the shares of Class B common

stock represent at least 9.1% of all outstanding shares of [Facebook] Class A and
Class B common stock.
28.

Facebooks dual class stock structure had its intended effect and

solidified management and permitted Zuckerberg to continue to dominate

Facebook, allowing him the ability to continue to appoint all directors unilaterally
and insulate himself from dissenting views. At the time of the IPO, however, there
was certainly no plan announced to perpetuate the Zuckerbergs domination if he
lost such dominance due to share sales or otherwise. Nor was there a plan
announced to allow Zuckerberg to remain in control through a reclassification that
would effectively turn half the publicly-traded Class A shares into non-voting
shares, under a plan in which all detriments would be borne by the Class A
shareholders, and all benefits would be enjoyed by Zuckerberg.
B.

The Reclassification Zuckerbergs Attempt to Retain Control

29.

On April 27, 2016, Facebook unveiled a controversial plan (the

Reclassification) designed to issue new shares in a new class of common stock

without diluting Zuckerbergs voting power or threatening his domination of
Facebook. The Reclassification would, through an amendment of the Certificate of
Incorporation, allow the Company to create a new class of non-voting shares that
could be distributed to existing Class A common stock shareholders in what is
effectively a 2-for-1 stock split, termed a dividend to Class A stockholders. Once
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the Reclassification occurs, the Class A shareholders would be issued two shares of
Class C stock for each Class A share they hold. The Class C shares will have no
voting rights. As a result of the Reclassification, Facebook will be able to issue
stock to compensate workers or make acquisitions using the new Class C stock,
without loosening Zuckerbergs iron-clad grip over the Company. In fact, the
Reclassification is specifically taken with the purpose of ensuring his complete
control.
30.

According the Proxy Statement, the Reclassification came to be

proposed after discussions between Zuckerberg and the Board of Directors

beginning in August 2015. Those discussions involved Zuckerbergs indication
that if he were to donate or otherwise dispose of his shares of Facebook stock,
Facebook might cease to be controlled by him.
31.

According to the proxy statement, Following these discussions, the

Facebook Board of Directors decided to establish a Special Committee to review,

analyze, evaluate, and negotiate a potential reclassification of our capital stock or
voting structure in order to maintain our founder-controlled structure, (ii) make a
recommendation to the board of directors regarding such a reclassification, and
(iii) to the extent delegable by our board of directors to the Special Committee
under applicable law, approve or disapprove such a reclassification on behalf of the
board of directors.
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32.

The board then appointed a Special Committee comprised of

Defendants Desmond-Hellmann, Andreessen, and Bowles (collectively, the

Special Committee). The Special Committee retained legal counsel and a
financial advisor and proceeded to meet numerous times between August 2015 and
April 14, 2016.
33.

During these meetings, the Preliminary Proxy reflects that the Special

Committee negotiated four automatic sunset triggers Zuckerbergs death,

Zuckerbergs disability, Zuckerbergs removal for cause (which is narrowly
defined in the amended certificate), or Zuckerbergs voluntary resignation as an
Approved Executive Officer. The Special Committee also negotiated to reduce the
scope of certain exceptions to the trigger for voluntary resignation.
34.

The Special Committee unanimously determined that creating the

Class C common stock and issuing the stock as a dividend to Class A

shareholders and the new Certificate were in shareholders best interest. They
further recommended that the Board of Directors adopt the resolutions approving
the creation of Class C capital stock, issuing the dividend, adopting the New
Certificate, amending the Companys corporate governance guidelines, and the
Founder Agreement.
35.

The Special Committees negotiations reflect an intention to maintain

Zuckerbergs control regardless of its advisability. Their negotiations resulted in a

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largely meaningless Founder Agreement and extremely limited protections within

the Certificate itself.
36.

The Founder Agreement adds little to protect shareholders, only

offering protection in the event that Zuckerberg elects to surrender control by

requiring Zuckerberg to convert his Class B common stock to Class A common
stock before his ownership drops below a majority of Class B shares.
37.

Similarly, the Founder Agreements Equal Treatment Provision,

whereby in any takeover or merger Class B shares would receive the same
consideration of Class A shares, is largely meaningless. As a practical matter,
Facebooks market capitalization of over $320 billion makes it the sixth largest
publicly-traded company in the United States; in other words, it is not a realistic
takeover candidate. Nor, given Delaware precedent, would a plan involving
disparate treatment likely succeed.
38.

The Special Committees negotiation of certain trigger provisions

that would automatically convert Zuckerbergs Class B common stock to Class A

common stock are no more effective. Rather, they largely entrench Zuckerbergs
authority without any meaningful benefit to shareholders. For instance, while the
conversion can be triggered by termination for Zuckerberg for cause, the
Certificate limits cause to (i) [Zuckerbergs] willful and continued failure
substantially to perform his duties and responsibilities to the corporation (other
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than a failure resulting from incapacity due to physical or mental illness) that is
materially and demonstrably injurious to the corporation; (ii) [Zuckerbergs]
deliberate violation of a policy of the corporation applicable to [Zuckerberg] that is
materially and demonstrably injurious to the corporation; (iii) [Zuckerbergs]
commission of any act of fraud, embezzlement, willful dishonesty or any other
willful misconduct with respect to [Zuckerbergs] duties as an Approved Executive
Officer that has caused a material and demonstrable injury to the corporation; (iv)
[Zuckerbergs] deliberate unauthorized use or disclosure of any proprietary
information or trade secrets of the corporation or any other party to whom the
Founder owes an obligation of nondisclosure as a result of his duties as an
Approved Executive Officer that is materially and demonstrably injurious to the
corporation; or (v) [Zuckerbergs] willful breach of any written agreement or
covenant with the corporation that is materially and demonstrably injurious to the
corporation . . . . The Special Committees certainty that Facebook currently
derives value from Zuckerbergs presence will, in effect, become a permanent
adjudication. Zuckerberg would, even if removed for incompetence, continue to
control the Company, wholly precluding any ability on the Boards part to act on
behalf of the vast majority of shareholders.
39.

The Special Committees efforts did not approximate arms length

hard bargaining.

The Special Committee: (a) agreed to allow Zuckerberg to

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approve this deal by fiat at the upcoming annual meeting, without any provision
for approval by a majority of the public shareholders, who therefore are accorded
no say; (b) never sought or received an opinion from its financial advisor that the
Reclassification is fair to the public Class A shareholders; (c) obtained
concessions from Zuckerberg that are essentially meaningless, thus negating any
possible claim that there was arms-length bargaining; (d) never had its financial
advisor place a value or range of values on the Reclassification, from Zuckerbergs
perspective; (e) did not prearrange for compensation for the Special Committee,
leaving its eventual compensation to be decided by the compensation and
governance committee; (f) failed to bargain for the right of public Class A
shareholders to elect even one independent director, so that such shareholders
might have a voice; (g) adopted no independent oversight mechanism to ensure
that future issuances of Class C shares do not unduly benefit Zuckerberg at the
expense of Facebooks public shareholders; and (h) failed to provide for any
compensation for the Class A shareholders whose investments will be adversely
affected by having their holdings cleaved into voting and non-voting shares,
without their consent or approval.
40.

The Proxy Statement does not reflect any indication that the Special

Committee ever threatened to simply walk away from the deal. Rather, the paucity
of discussion of the Special Committees negotiations reflect that they obtained
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anemic and meaningless concessions that baldly accepted the proposition that
being wholly controlled by Zuckerberg was essential to the Companys success
now and forever.
41.

As a result of the Reclassification, which can be ratified with

Zuckerbergs voting power alone, Zuckerbergs control can be insulated for life.
While Zuckerberg may serve a key role to Facebooks success, this lifelong
authority to control the company has transparently negative effects for Facebook
shareholders, because Zuckerberg will be able to remain in power even if his
performance deteriorates, and even if he would otherwise be removed for poor
performance.
42.

In short, the Reclassification should be seen for what it is a thinly

veiled effort to further entrench Zuckerbergs voting power and control over the
Company without any legitimate business purpose. Moreover, this ploy will harm
Plaintiff and the Class by further distancing them from Facebooks corporate
governance and leaving them without a voice on important issues that the
Company will face in coming years.
43.

Moreover, as this entrenchment device is relatively novel and largely

untested in American corporate culture, it injects an element of uncertainty into

what should be a blue-chip investment made by Facebooks shareholders. For
example, Class C shares may, and likely will, trade at a discount to Class A shares,
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or the market for these shares may not fully develop, creating liquidity issues for
Facebooks shareholders. In addition, while the Company has said that it may use
Class C non-voting stock for acquisitions, it cannot be said with certainty how
companies will value non-voting shares and it is possible that acquisition targets
will discount Class C shares forcing Facebook to pay a high premium for such
companies.
44.

Academic and institutional investors have long experience with non-

voting stock, and have concluded that it is far more detrimental than beneficial.
The basic concerns of institutions were summarized recently by Ann Yerger of the
Council of Institutional Investors:
The Council of Institutional Investors opposes dual-class stock
structures because we are opposed to unequal voting rights. While
dual-class structures may seem attractive when brilliant founders are
running the entity, we believe the structure is fundamentally flawed as
a long-term capital model. The Council has long believed that when it
comes to public equity markets voting power should be proportional
to the economic interests of the holders. When the Council formulated
its bill of rights after it was formed in 1985, the first provision was
one share, one vote. The vote is very important. Its a tool for
holding management accountable and having a say on major issues.
Council members want boards that are empowered to actively oversee
management and to make course corrections when appropriate. When
directors essentially can be hired or fired by a single person or a
family makes it difficult for directors to exercise fully their legal
duties to act in the best interest of all shareholders.
Finally, to those proponents who argue that the structure promotes
long term thinking which is in the best interest of the company and its
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shareholders, let me make this observation. Clearly, Council members

are long-term owners. They have long investment horizons, theyre
passive, so they applaud boards and management for focusing on the
long term. However, I think dual-class stock is created with short-term
thinking in mind, because this is really about entrenching leaders
those taking a company public at the expense of the companys
long term.1
45.

The Reclassifications entrenchment motive is well-acknowledged by

analysts, with headlines recognizing Facebooks ploy as How Facebook Is

Making Sure Zuckerberg Stays In Control Forever. As Bloomberg View reported,
Yesterday Facebook announced earnings, which were good. They
were so good, in fact, that Facebook also announced a little present
for Mark Zuckerberg, the co-founder and chief executive officer who
got it to this happy place. Facebook said that it will create a new class
of common stock, Facebook's third, to ensure that Zuckerberg
can control Facebook as long as he wants to. Right now, Facebook
has Class A stock, the normal publicly traded stock, with one vote per
share, and Class B stock, mostly held by Zuckerberg, which has 10
votes per share. This structure, combined with a proxy agreement in
which Zuckerberg gets to vote another shareholder's B shares, gives
him voting control of the company even though he only owns about 15
percent of it economically . . .
Under the new proposal, holders will get two new Class C shares for
each A or B share they now hold. The Class C shares will have zero
votes. . . .
Facebook will now have three times as many shares, each worth a
third as much as a share is worth now. But all those new shares won't
get any extra votes. Everyone's proportional ownership, by vote and
value, will stay the same. . . .

Ann Yerger, Dual Class Stock: Governance at the edge, Directors and Boards, Third Quarter
2012, at 38.
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So why do it? Well, because Zuckerberg has said he will give away a
lot of his shares during his lifetime. He elaborated on that plan
yesterday, noting that he and his wife Priscilla Chan have big plans
that include "helping to cure all diseases by the end of this century,
upgrading our education system so it's personalized for each student,
and protecting our environment from climate change." Curing all the
diseases will cost money. The vast majority of Zuckerberg's wealth is
in Class B shares, and if he gives away too many of those, he'll lose
voting control of his company. The cut-off is now about $6.1 billion
worth (ignoring the proxy agreements)
If he sells more than about $6.1 billion, he'll fall below a majority of
the votes. But in the new regime, he won't: Instead of selling his
voting shares, Zuckerberg could just sell $6.1 billion worth of zerovote C shares, so he wouldn't lose any voting power at all. The real
magic, though, is that he can sell up to about $32.7 billion worth and
stay above 50.1 percent . . .
46.

At its June 20, 2016 shareholders meeting, the proposal to amend the

Certificate to accomplish the Reclassification will be voted upon by Facebooks

shareholders. However, because of Zuckerbergs voting power, he will effectively
ratify his own entrenchment, regardless of the views of the majority of Facebooks
equity holders. Absent an injunction, Zuckerbergs entrenchment will be
accomplished without any representation of the views of Class A shareholders or
any majority of the minority vote.
C.

The Special Committee was Conflicted and Self Interested

47.

In addition to the foregoing, the process by which the Board of

Directors considered the Reclassification was deeply flawed and rife with conflicts.
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For example, the Proxy Statement says that the Special Committees compensation
for advising on the Reclassification would be determined at a later time. Given
Zuckerbergs initiation of the Reclassification, this effectively incentivized the
Special Committee to approve the Reclassification and created a de facto
contingency fee arrangement with the Special Committee by implicitly tying future
compensation to plan approval.
48.

The Special Committees lack of independence is reflected by its

apparent failure to negotiate for any shareholder approval or majority of the

minority protections for Class A shareholders. Nor did the Special Committee and
Board do anything to mitigate the financial harm public shareholders will suffer
from the discount that likely will develop as to their new Class C shares. If the
pattern for Facebook non-voting stock follows that of Google and other companies
who have recently adopted non-voting classes, these shareholders receiving Class
C shares stand to suffer losses that could equal billions of dollars. In similar
circumstances, Google (after shareholder challenges) adopted an adjustment
formula to lessen this harm, as did another public company, Under Armour.
Facebook and its Board have failed to do likewise.
49.

As such, Class A shareholders vote is strictly advisory and, given the

fait accompli with which they are presented, the result is effectively pre-ordained.
D.

The Proxy Statement is Incomplete and Misleading

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50.

In addition to the foregoing, the Reclassification is being

recommended to Facebooks shareholders through an incomplete and misleading

Proxy statement, in breach of the Defendants fiduciary duty of good faith and
candor to Facebooks investors, for example:
(a)

The Proxy fails to discuss that non-voting shares have

traditionally traded at a discount to voting shares, where issued by other public

companies. Instead, the Proxy treats the anticipated discount in a cursory manner,
and merely as a possibility, rather than as the historical certainty it truly is.
(b)

The Proxy Statement does not adequately detail the

qualifications of Evercore Group L.L.C. to advise the Special Committee on the

terms of the engagement or provide any analysis of the value of the
Reclassification to Zuckerberg or the shareholders of the Reclassification. This is
material information to Facebooks shareholders.
(c)

The Proxy Statement says that compensation for the Special

Committee will be determined at a later time, but gives no guidance on the

mechanism for determining whether to compensate the Special Committee and/or
the range of possible compensation. This is material information that should be
disclosed to Facebooks shareholders.
(d)

Accordingly, Plaintiff and the class seek injunctive and other

equitable relief to prevent irreparable harm to the Companys shareholders.

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IRREPARABLE HARM
51.

Plaintiff and class members has no adequate remedy at law. Only

through the exercise of the Courts equitable power will Facebooks shareholders
be protected from irreparable injury that would arise from Facebooks creation of a
non-voting class of shares and the entrenchment of Zuckerberg. In addition, Class
members are in danger of making investment decisions based on the incomplete
and misleading Proxy.
CLASS ACTION ALLEGATIONS
52.

Plaintiff, a shareholder in the Company, brings this action as a class

action pursuant to Rule 23 of the Rules of the Court of Chancery of the State of
Delaware on behalf of itself and all shareholders of Facebook (except the
Defendants herein, and any person, firm, trust, corporation or other entity related to
or affiliated with any of the Defendants) who are or will be harmed as a result of
the breaches of fiduciary duty and other misconduct complained of herein (the
Class).
53.

This action is properly maintainable as a class action.

54.

A class action is superior to other available methods of fair and

efficient adjudication of this controversy.

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55.

The Class is so numerous that joinder of all members is impracticable.

Consequently, the number of Class members is believed to be in the thousands and

are likely scattered across the United States. Moreover, damages suffered by
individual Class members may be small, making it overly expensive and
burdensome for individual Class members to pursue redress on their own.
56.

There are questions of law and fact that are common to all Class

members and that predominate over any questions affecting only individuals,
including, but not limited to:
(a)

whether the Director Defendants have breached and continue to

breach their fiduciary duties by entrenching themselves at the expense of the

Companys shareholders;
(b)

whether the Class is entitled to injunctive relief and/or

damages.
57.

Plaintiffs claims and defenses are typical of the claims and defenses

of other class members and Plaintiff has no interests that are antagonistic or
adverse to the interest of other class members. Plaintiff will fairly and adequately
protect the interest of the Class.
58.

Plaintiff is committed to prosecuting this action and has retained

competent counsel experienced in litigation of this nature.

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59.

Defendants have acted in a manner that affects Plaintiff and all

members of the Class alike, thereby making appropriate injunctive relief and/or
corresponding declaratory relief with respect to the Class as a whole.
60.

The prosecution of separate actions by individual members of the

Class would create a risk of inconsistent or varying adjudications with respect to

individual members of the Class, which would establish incompatible standards of
conduct for Defendants; or adjudications with respect to individual members of the
Class would, as a practical matter, be dispositive of the interest of other members
or substantially impair or impede their ability to protect their interests.
CAUSE OF ACTION
COUNT I
Breach of Fiduciary Duty Against The Director Defendants
61.

Plaintiff repeats and realleges each and every allegation above as if set

forth in full herein.

62.

As Directors of Facebook, the Director Defendants owe to Facebooks

shareholders fiduciary duties of loyalty, good faith and candor. These fiduciary
duties required them to place the interest of Facebook and its shareholders above
their own interests and/or the interests of the Companys Executive Management
and Directors.

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63.

The Director Defendants breached their fiduciary duty when they

acted to create a new class of non-voting shareholders for the sole purpose of
entrenching Zuckerbergs domination over Facebook operations and filed an
incomplete and misleading Proxy Statement in defense of this coronation.
64.

As a result of the foregoing, Plaintiff and the Class have been harmed

as their influence over Company operations and strategy will be diminished and
they stand to be frozen out of management decisions on an ongoing, long-term
basis.
65.

Plaintiff and the Class and have no adequate remedy at law.

RELIEF REQUESTED

WHERFORE, Plaintiff demands judgment and preliminary and permanent

relief, including injunctive relief, in its favor and in favor of the Class and against
the Defendants as follows:
A.

Certifying this case as a class action, certifying the proposed Class

and designating Plaintiff and the undersigned as representatives of the Class;

B.

Enjoining Defendants and any and all other employees, agents, or

representatives of the Company and persons acting in concert with any one or more
of any of the foregoing, during the pendency of this action, from taking any action
to consummate the Reclassification until such time as Defendants have fully
complied with their fiduciary duties, including issuing a legally compliant Proxy;
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C.

Awarding Plaintiff and the Class appropriate compensatory damages,

together with pre- and post-judgment interest;

D.

Awarding Plaintiff the costs, expenses and disbursements of this

action, including an attorneys and experts fees and, if applicable, pre-judgment

and post-judgment interest; and
E.

Awarding Plaintiff and the Class such other relief as this Court deems

just, equitable and proper.

COOCH AND TAYLOR, P.A.
/s/ Blake A. Bennett
Blake A. Bennett (#5133)
The Brandywine Building
1000 West St., 10th Floor
Wilmington, DE 19801
Telephone: 302-984-3800
Facsimile: 302-984-3939
bbennett@coochtaylor.com

DATED: April 29, 2016

Counsel for Plaintiff Ramirez

OF COUNSEL:
HAUSFELD LLP
Michael D. Hausfeld
William P. Butterfield
Timothy S. Kearns (No. 4878)
1700 K Street, Suite 650
Washington, DC 20006
Telephone: 202-540-7200
Facsimile: 202-540-7201
mhausfeld@hausfeld.com
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wbutterfield@hausfeld.com
tkearns@hausfeld.com
THE PASKOWITZ LAW FIRM P.C.
Laurence D. Paskowitz
208 East 51 st Street, Suite 380
New York, NY 10022
Telephone: 212-685-0969
Facsimile: 212-685-2306
lpaskowitz@pasklaw.com

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