Activision Harassment Case follows Broadside investor at Google
Activist shareholders, who have used litigation to force companies to tackle issues of discrimination and harassment in the workplace, may have found a new target: the video game industry.
A federal securities fraud claim from a
While the August 3 lawsuit seeks to compensate investors in the event of a decline in stock prices, it could be followed by shareholder derivative lawsuits aimed at changing internal policies and practices. Lawyers and industry watchers have said such lawsuits could be an effective tool to answer lingering questions about the workplace culture at Activision and the gaming world in general, as investors take note of the financial and public relations fallout from toxic employment practices.
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“These shareholder lawsuits are the ones that are really starting to make a difference in American businesses,” said San Diego attorney Frank Bottini. “They can have incredibly important real results and really be a catalyst for change in a business or industry.”
Advocacy and shareholder engagement “is exploding these days,” according to Michael Connor, executive director of the Open Media and Information Companies Initiative, a group focused on shareholder engagement and corporate responsibility.
“There are a much larger number of investors who are ready to engage directly with companies and certainly support shareholder proposals,” he said.
The Activision investor complaint alleges that after a California Department of Fair Employment and Housing lawsuit detailing the allegations of workplace harassment was revealed on July 21, the share price of the company plunged, causing a “precipitous drop in market value”.
The DFEH lawsuit in California, which followed an investigation that lasted more than two years, sparked employee action, with Activision employees staging a walkout and more than 2,000 current and former employees signing a petition supporting the pursuit of the agency.
Workers in the video game industry, like those in other industries, are often limited to litigation and public statements by mandatory arbitration and nondisclosure agreements.
Former Activision Blizzard employees told Bloomberg Law that the agreements, combined with a culture of secrecy around the release of new games, prevented employees from speaking out about alleged harassment.
This makes shareholder disputes significant, Bottini said. Investors don’t sign the same arbitration agreements or gag orders, and can step in and sue when employees can’t, he added. But he warned that change through litigation can come slowly.
The investor suit was filed the same day the company held its last earnings conference call. Analysts interviewed the business on the suits and the impact they would have on the company’s productivity, product pipeline and worker morale.
Jen Oneal, who was appointed one of the company’s new “co-leaders” after Blizzard president J. Allen Brack announced he was leaving the company, said she saw “great progress”.
“There is a lot of work ahead of us, but the passion and productivity is already there,” said Oneal.
The company also hired law firm Wilmer Cutler Pickering Hale and Dorr to investigate its culture. Activision CEO Bobby Kotick told employees in a July 28 statement that the review “will ensure that we have and maintain best practices to promote a respectful and inclusive workplace.”
A spokesperson for Activision Blizzard did not comment on the investor lawsuit, but said the company engages with shareholders and strives to address their “interests and concerns with respect to the compensation of our investors. leaders, corporate governance practices, human capital management and any other matter of importance “. . “
Molly Bowen, a lawyer at Cohen Milstein, said there are two main avenues that investors seeking to force change can take through the courts. Securities fraud claims, such as the Blizzard lawsuit, are ultimately aimed at redressing the damage caused to investors by alleged misconduct, while derivative shareholder lawsuits are aimed at redressing the damage caused by leadership. for the benefit of the company.
Derivative lawsuit against Google’s parent company Alphabet, which claimed executives failed to prevent sexual harassment, resulted in $ 310 million settlement and company pledges to address diversity issues and gender equality.
Such lawsuits could be on the horizon for Activision, lawyers predicted.
Bottini said his company, Bottini & Bottini, was investigating a spin-off case against Activision Blizzard, but it could be months before such a lawsuit is filed.
Courts have a high bar for such prosecutions, Bottini said, demanding lawyers for the plaintiffs to conduct a thorough investigation so that they can claim that company executives have failed in their obligations. This process can involve requests for non-public corporate documents, such as emails or minutes of board meetings, and can often include parallel litigation to force companies to comply with those requests. .
“If you file a spin-off case without getting these documents and without doing an investigation, it’s likely that the case will be closed,” Bottini said.
Shareholder lawsuits seeking remedies related to discrimination and harassment in the workplace are relatively new, and the law in this area has evolved rapidly, Bowen said.
“Shareholders have a very important role to play in righting these wrongs, but I don’t know if that’s how people thought it just eight years ago,” she said.
Lawyer Louise Renne, who has represented shareholders in similar litigation, called the lawsuits focused on issues of equity and diversity in the workplace a fairly new phenomenon, citing Alphabet’s July 2020 settlement as a historic moment.
Shareholders looking for changes in other companies should use this regulation as a model, Renne said.
As part of the settlement, Alphabet committed to expanding its diversity efforts and created an independent audit committee to oversee harassment issues.
Alphabet did not respond to Bloomberg Law’s request for comment.
In the case of L Brands, the company has a pending settlement to end shareholder lawsuits alleging a culture of sexual harassment. The settlement would see the company spending $ 90 million on workplace changes, including ending the use of nondisclosure agreements.
Pinterest is also facing derivative lawsuits from shareholders that allege a culture of discrimination and prejudice against female executives.
Connor of Open MIC said the shareholder lawsuits could bring about changes to the workplace culture in the gaming industry.
“I don’t think there is any question of there being more litigation to come,” he said.
—With help from Paige Smith