Block & Leviton’s long quest to lead a shareholder derivative suit against Facebook’s board has come to an end. On Tuesday, a three-judge panel of the Delaware Supreme Court refused to grant the shareholder firm’s request for interlocutory appeal of the Chancery Court order appointing a rival group of plaintiffs’ firms as lead counsel in the breach of duty case, which stems from Facebook’s alleged failure to safeguard user data in the Cambridge Analytica controversy. The Supreme Court’s rebuff means that Scott + Scott, Kaplan Fox & Kilsheimer and Prickett, Jones & Elliott will head the case on behalf of a coalition of institutional investors led by the California State Teachers’ Retirement System. Vice Chancellor Joseph Slights of Delaware Chancery Court picked the CalSTRS group over Block & Leviton in October, finding that the 390-page CalSTRS complaint was more comprehensive and offered shareholders “more pathways to recovery.” Block & Leviton’s ill-fated attempt to re-open the competition for lead counsel provided Delaware courts with an opportunity to send a message to shareholder lawyers: Judges are obliged to pick lead counsel who, in their view, will do the best job of advancing shareholders’ interests. Lead counsel selection isn’t necessarily a reward for creative lawyering. That said, it’s easy to understand why Block & Leviton was so loath to walk away. The firm pioneered a theory that Facebook’s board was so intent on protecting CEO and controlling shareholder Mark Zuckerberg that directors paid billions of dollars more than Facebook owed in a 2019 settlement with the U.S. Federal Trade Commission in order to preclude individual claims against Zuckerberg for compromising users’ privacy. In addition to bringing a books-and-records case in Delaware Chancery Court, Block & Leviton litigated all the way through an appeal at the 1st U.S. Circuit Court of Appeals to obtain FTC documents through the Freedom of Information Act. Facebook has roundly denied overpaying the FTC to protect Zuckerberg. The overpayment theory was nevertheless intriguing enough to have been adopted by Block & Leviton’s lead counsel competitors. When Block & Leviton and the CalSTRS group filed competing proposed complaints for Slights’ consideration, both pleadings included the allegation that the Facebook board cost the company billions of dollars by agreeing to an FTC deal that shielded Zuckerberg from personal responsibility. (Facebook, you should know, contends that shareholders can’t show its directors were beholden to Zuckerberg or acted in bad faith.) Slights picked the CalSTRS group because those lawyers offered a broader range of theories, including allegations of insider trading by board members and an assertion that the board failed to provide assurance that Facebook complied with a previous FTC settlement. It’s very tough, as you know, for shareholders in derivative litigation to establish that it would have been futile to ask the board to sue directors on the company’s behalf. The vice chancellor decided that the CalSTRS complaint provided more options to surmount the hurdle of demand futility. Block & Leviton’s request to appeal the vice chancellor’s pick focused on Scott + Scott’s representation of plaintiffs suing Facebook in two big-money antitrust cases, arguing that the firm may be conflicted because it nominally represents Facebook in the derivative case. Block & Leviton insisted that Slights set “dramatic” precedent by appointing a shareholder firm to pursue derivative claims on behalf of a corporation while simultaneously representing different clients asserting direct claims against the company. Scott + Scott, Kaplan Fox and Prickett Jones pointed out in their Oct. 25 response that the vice chancellor already devoted considerable attention to the potential conflict issue in his decision appointing them to lead the case and concluded that the claims in the other Scott + Scott cases are consistent with the claims in the derivative suit. Moreover, there’s ample Delaware precedent, the firms said, for plaintiffs" firms to pursue simultaneous direct and derivative claims so there was no need to halt the case for Delaware Supreme Court review. Slights agreed in a Nov. 3 opinion denying his blessing for Block & Leviton’s appeal. The vice chancellor emphasized that he already analyzed the conflicts question – and, in fact, said that he would continue to be on guard for potential conflicts as the derivative case progressed. He also said that his ruling fits well within established Delaware precedent. But his most important point, Slights said, was “that the whole purpose of selecting lead counsel is to advance the best interests of stockholders.” Block & Leviton, he said, seemed to be harping on the conflict question to advance its own interest in appointment as lead counsel, not the interests of Facebook or its shareholders. Block & Leviton “put its complaint (and the litigation strategy it reflected) up head-to-head against the complaint and strategy devised by the CalSTRS group,” Slights wrote. “It lost that contest.” It would not serve shareholders, Slights said, to delay the case to ask the Supreme Court to delve into the fact-specific reasons why he exercised his discretion to pick the CalSTRS team. In Tuesday’s Supreme Court ruling, Chief Justice Collins Seitz and Justices Karen Valihura and Tamika Montgomery-Reeves simply said that the case did not present exceptional circumstances that merit interlocutory appeal, and that the drawbacks of reconsideration – including inefficiency, disruption, and probable costs – outweigh any benefits. Joel Fleming of Block & Leviton declined to comment. CalSTRS counsel Geoffrey Johnson of Scott + Scott, Frederic Fox of Kaplan Fox and Samuel Closic of Prickett Jones did not respond to my email.