WILMINGTON, Delaware, July 21 (Reuters) - A last-minute

settlement between Meta Platforms ( META ) shareholders and the

company's leadership last week ended an $8 billion trial and

spared Mark Zuckerberg from testifying about alleged violations

of Facebook users' data. It also took the heat off the state of

Delaware, which has been plagued by criticism from technology

and business leaders.

The second day of the eight-day trial in Delaware's Court of

Chancery was about to start on Thursday when the legal team for

the shareholder plaintiffs announced they had reached a deal to

resolve the case.

The terms are still being hammered out, but the agreement

ends a case that had the potential to fuel a trend of companies

abandoning the state as their legal home.

Since last year, Elon Musk and other business leaders have

attacked the state's courts, once the key reason companies

incorporated in Delaware, for rulings that they say made it

easier for shareholders to sue directors.

Musk encouraged companies to leave the state and in the past

year Dropbox ( DBX ), Trump Media & Technology ( DJT ),

Roblox ( RBLX ) and Simon Property Group ( SPG ) were among the

large public companies that reincorporated outside Delaware, a

trend dubbed "Dexit."

Critics claim the state's courts are biased against company

founders -- an uncomfortable backdrop for the Meta case, whose

11 defendants included the billionaires Zuckerberg, Sheryl

Sandberg, Marc Andreessen, Palantir Technologies ( PLTR )

co-founder Peter Thiel and Reed Hastings, who co-founded

Netflix ( NFLX ).

A ruling that spared the defendants might have given the

impression the court caved to pressure to let them off the hook,

while one that favored the plaintiffs could have led to further

calls for companies to leave Delaware.

"It was going to be really awkward for the court," said Ann

Lipton, a professor at Colorado Law School.

Meta, which owns Facebook, Instagram and WhatsApp, and

lawyers for Meta investors and the defendants did not respond to

requests for comment.

Meta shareholders alleged current and former officers and

directors of Facebook were liable for failing to protect users'

data. The shareholder plaintiffs wanted the court to order the

defendants to use their personal fortune to reimburse the

company for the $8 billion in legal costs that Facebook had

shelled out for violating user privacy, including a $5 billion

fine paid to the Federal Trade Commission in 2019.

The case put a spotlight on Delaware courts and the judge

handling the case, Chancellor Kathaleen McCormick, who gained

prominence last year for rescinding Musk's $56 billion pay

package from Tesla. That ruling is on appeal.

Adding to the high stakes, Andreessen's venture capital

firm, Andreessen Horowitz, said earlier this month it was moving

its incorporation to Nevada from Delaware and encouraged other

companies to follow. "In particular, Delaware courts can at

times appear biased against technology startup founders and

their boards," said a blog post on the firm's website, citing

McCormick's Musk pay ruling. The firm did not respond to a

request for comment.

Earlier this year, representatives from Meta met with

Delaware's governor and soon after the state changed its widely

used corporate law to make it harder for shareholders to sue

corporate boards over deals with controlling shareholders like

Zuckerberg.

Delaware's political leaders said the changes were meant to

keep Meta and other companies from fleeing the state. Delaware

gets more than a quarter of its budget revenue from fees

associated with chartering businesses.

Despite the new law, some companies, like Affirm

Holdings ( AFRM ), still opted to leave, saying it was unclear

how it would be interpreted by Delaware courts.

Lawrence Cunningham, director of the Weinberg Center for

Corporate Governance in Delaware, said the Meta shareholder

settlement highlighted the strengths of the Delaware court in

handling a complicated case and guiding it to a resolution,

which might be hard to replicate elsewhere. "It was a very

desired judicial outcome," he said of the case.