## Facts

- A Facebook stockholder filed a derivative action challenging the board’s 2013 compensation awards to Facebook’s outside, non-management directors.
- Six of eight directors were outside directors who received the challenged compensation, which included cash retainers, committee fees, and equity awards.
- The complaint alleged the directors breached fiduciary duties, were unjustly enriched, and committed corporate waste by approving excessive self-compensation.
- Mark Zuckerberg, Facebook’s controlling stockholder with over 61% of the voting power, did not receive the challenged director compensation.
- After suit was filed, Zuckerberg expressed approval of the compensation in a deposition and in an affidavit.
- Defendants argued that Zuckerberg’s post-suit assent constituted stockholder ratification that “cleansed” the alleged self-dealing and shifted review from entire fairness to the business judgment rule.

## Issues

1. Whether a disinterested controlling stockholder can ratify an interested-board transaction through informal assent (deposition/affidavit) rather than through DGCL-prescribed stockholder action.
2. If no valid ratification occurred, what standard of review governs directors’ decision to set their own compensation.
3. Whether the complaint stated a reasonably conceivable claim for corporate waste based on the challenged compensation.

## Decision

- The court held that cleansing stockholder ratification must be accomplished through statutory mechanisms for stockholder action (vote at a meeting or written consent under DGCL § 228), not through informal statements.
- Because Zuckerberg’s deposition and affidavit did not constitute valid stockholder action, the challenged director self-compensation was not cleansed.
- The court applied entire fairness to the fiduciary duty and unjust enrichment claims and denied defendants’ motion for summary judgment on those claims.
- The court dismissed the corporate waste claim for failure to plead facts supporting the extreme showing required for waste.

## Legal Principles

- Stockholder ratification invoked to alter the standard of review for a conflicted-board transaction must comply with DGCL formalities for stockholder action.
- Informal expressions of assent, including litigation testimony or affidavits, are insufficient to constitute corporate ratification that “cleanses” director self-interest.
- Absent effective cleansing, director decisions to approve their own compensation are reviewed for entire fairness when a majority of the board is interested.
- Corporate waste requires allegations of an exchange so one-sided that no person of ordinary, sound business judgment could view the corporation as receiving adequate consideration.

## Conclusion

The Court of Chancery refused to treat a controlling stockholder’s informal, post-suit approval as cleansing ratification, leaving director self-compensation subject to entire fairness and allowing fiduciary duty and unjust enrichment claims to proceed while dismissing waste as inadequately pled.


Espinoza ex rel. Facebook, Inc. v. Zuckerberg, 124 A.3d 47 (Del. Ch. 2015)