Eisner v. Meta Platforms, Inc.

District Court, N.D. California·Decided May 28, 2024·No. 3:24-cv-02175·Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN FRANCISCO DIVISION 7 8 MATT EISNER, Case No. 24-cv-02175-CRB (PHK) 9 Plaintiff,

10 v. ORDER DENYING MOTION FOR EXPEDITED DISCOVERY 11 META PLATFORMS, INC., et al., Re: Dkt. 10 12 Defendants.

13 14 INTRODUCTION 15 Plaintiff, a current shareholder of Meta Platforms, Inc. (“Meta”), brings this action 16 pursuant to Section 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a) and the SEC 17 rules promulgated thereunder, seeking declaratory and injunctive relief against Meta and its 18 founder, Chairman, and Chief Executive Officer, Mark Zuckerberg (collectively, “Defendants”) in 19 connection with Meta’s proxy statement made in advance of its upcoming annual shareholder 20 meeting. [Dkt. 1]. The case has been referred to the undersigned for all discovery purposes. See 21 Dkt. 13. 22 Presently before the Court is Plaintiff’s motion seeking expedited discovery in connection 23 with Plaintiff’s concurrently filed and still pending motion for a preliminary injunction. [Dkt. 10]. 24 Defendants have filed an opposition to the instant motion, and Plaintiff has filed a reply. [Dkts. 25 32, 35]. The Court has carefully reviewed the materials submitted by the Parties and heard oral 26 argument from counsel for the Parties on May 24, 2024. See Dkt. 38. As discussed herein, the 27 Court DENIES Plaintiff’s motion for expedited discovery [Dkt. 10]. 1 BACKGROUND 2 Upon commencing this action, on April 19, 2024, Plaintiff moved under Federal Rule of 3 Civil Procedure 65 for a preliminary injunction seeking an injunction compelling Defendants (i) to 4 make certain additional disclosures in Meta’s 2024 annual proxy statement (Form 14A filed with 5 the Securities and Exchange Commission) regarding its internal controls relating to key enterprise 6 risks, including protection of minors from sexual exploitation; and (ii) to postpone Meta’s annual 7 shareholder meeting, which is currently set to take place on May 29, 2024, allegedly to allow 8 sufficient time for the requested additional disclosures to be made to and reviewed by Meta’s 9 shareholders in advance of the annual shareholder meeting. [Dkt. 9]. The preliminary injunction 10 motion is currently set to be heard by the presiding District Judge on June 21, 2024. [Dkt. 12]. 11 On April 19, 2024, Plaintiff also filed the instant motion pursuant to Federal Rule of Civil 12 Procedure 26(d)(1) seeking expedited discovery of certain documents from Defendants “to ensure 13 that the Court has a complete and comprehensive record to rule on plaintiff’s preliminary 14 injunction motion.” [Dkt. 10]. Specifically, Plaintiff requests that Defendants produce the 15 following eight categories of documents on an expedited basis:

16 • All reports and board packages presented to the Meta Board of Directors in the last two years regarding exploitation of minors and inappropriate sexual content 17 directed to minors on Meta’s Instagram and Facebook social media platforms, 18 as well as all documents regarding the existence and status of internal controls and enforcement measures designed to prevent and remediate such issues. 19 • All reports and presentations prepared by or presented to senior Meta executives 20 in the last two years regarding exploitation of minors and inappropriate sexual 21 content directed to minors on Meta’s Instagram and Facebook social media platforms, as well as regarding the existence and status of internal controls and 22 enforcement measures designed to prevent and remediate such issues.

23 • All reports prepared by or presented to Meta’s internal task force during the last two years, which task force Meta has stated was formed to address the problem 24 of exploitation of minors on its social media networks. 25 • All evidence underlying the statistics and information pertaining to exploitation 26 of minors and sexual content directed to minors contained in the last two Community Standards Enforcement Reports issued by Meta. 27 inappropriate material to be directed to minors on Meta’s social media networks. 1

2 • All internal complaints and “whistleblowing” communications regarding the exploitation of minors or harm to minors on Meta’s social media networks and 3 deficiencies or problems in Meta’s ability to adequately address such problems.

4 • All internal reports and communications regarding why Meta is unable to estimate the prevalence of child endangerment on Instagram and Facebook (as 5 stated in the Company’s Community Standards Enforcement Report) as well as 6 reports and communications regarding the Company’s current efforts to estimate such prevalence. 7 • All documents exchanged with the outside experts and consultants that Meta 8 states it regularly consults with on the topic of child endangerment on its social 9 media networks, as well as all proposals and suggestions received from such persons for improvements in the area. 10 Id. at 5-6. 11 Plaintiff argues that “ample good cause exists for expedited discovery here because it 12 would provide the Court with a complete record for deciding Plaintiff’s preliminary injunction 13 motion before Meta’s annual shareholder meeting[.]” [Dkt. 35 at 5]. 14 Defendants argue that Plaintiff’s request for expedited discovery lacks merit because (i) all 15 discovery in this matter is stayed pursuant to the Private Securities Litigation Reform Act of 1995 16 (“PSLRA”), 15 U.S.C. § 78u-4(b)(3)(B), and (ii) even if discovery is not stayed, Plaintiff has not 17 demonstrated good cause for expedited discovery as required by Rule 26(d)(1). [Dkt. 32 at 8-16]. 18 Concurrently with the instant motion, Plaintiff filed an administrative motion to shorten 19 time for briefing and hearing on the instant motion for expedited discovery. [Dkt. 11]. 20 Defendants opposed that administrative motion. [Dkt. 20]. On April 29, 2024, this Court denied 21 that administrative motion. [Dkt. 28]. Oral argument was heard on May 24, 2024 (the original 22 hearing date for the instant motion as noticed by Plaintiff) and the matter submitted at that time. 23 [Dkt. 38]. 24 ANALYSIS 25 I. The PSLRA Discovery Stay Applies to this Case 26 The Court considers, first, whether Plaintiff’s claims are subject to the PSLRA’s discovery 27 1 WL 4417699, at *1 (N.D. Tex. Aug. 19, 2013) (“Plaintiff’s arguments that ‘good cause’ exists for 2 ordering expedited discovery under Fed. R. Civ. P. 26(d)(1) are inapposite as the threshold issue is 3 whether any discovery is appropriate [under the PSLRA] prior to the resolution of the pending 4 motions to dismiss.”). 5 “The PSLRA was enacted in 1995 ‘in response to several perceived abuses in securities 6 litigation, including discovery abuses.’” Petrie v. Elec. Game Card, Inc., 761 F.3d 959, 966 (9th 7 Cir. 2014) (quoting SG Cowen Sec. Corp. v. U.S. Dist. Ct. for N. Dist. of Calif., 189 F.3d 909, 911 8 (9th Cir. 1999)). The primary abuse the PSLRA sought to curb is the filing of “strike suits,” i.e., 9 shareholder derivative actions which are filed for their nuisance value with the goal of obtaining a 10 settlement driven by the transactional fees, costs, and burdens of litigation, rather than the merits. 11 Freeman Invs., L.P. v. Pac. Life Ins. Co., 704 F.3d 1110, 1114 (9th Cir.

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Eisner v. Meta Platforms, Inc., (N.D. Cal. 2024).

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