Facing legal battles on numerous fronts, Activision Blizzard has won a skirmish with a federal judge’s dismissal of a lawsuit from shareholders alleging the company lied to them by minimizing the impact of allegedly widespread sexual harassment and discrimination against female employees.
U.S. District Judge Percy Anderson on Tuesday found that the investors failed to point to specific false statements that the company made and that there wasn’t a duty to disclose investigations by three separate government agencies. Anderson wrote that the shareholders “offer a speculative conclusion without sufficient details about Defendants’ conduct to raise a strong inference” of an intent to mislead them.
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Activision Blizzard shareholders alleged that sexual harassment and gender discrimination were endemic at the company, especially at Blizzard Entertainment, and that it failed to disclose the misconduct despite investigations by the California Department of Fair Employment and Housing, Equal Employment Opportunity Commission and the Securities and Exchange Commission. They cited statements in filings to securities regulators that the company was only “party to routine…investigations” and codes of conduct stating that it wouldn’t tolerate harassment, retaliation and discrimination.
Anderson concluded that the investors “failed to plead sufficient facts to establish falsity” because it “rambles through long stretches of material” from lawsuits by the DFEH and EEOC without sufficiently arguing that Activision Blizzard lied to and intended to deceive them.
Among the reasons for dismissal was that Activision Blizzard wasn’t obligated to tell shareholders about the federal and state investigations, the judge ruled.
Under securities laws, a company is required to describe pending legal proceedings from governmental authorities. But Anderson found that the Call of Duty maker had no duty to disclose either of the federal or state investigations because they weren’t technically legal proceedings.
The financial disclosures that shareholders cited in their complaint were made before DFEH and EEOC formally sued.
Anderson also held that Activision Blizzard isn’t liable for promoting general business ethics, especially because such statements are required by the SEC. For such a claim to be actionable, the judge wrote that the company would’ve had to take “no action at all in the face of blatant and pervasive violations” of its code.
“Based on the record, that does not appear to be the case,” reads the order.
Activision Blizzard disclosed April 15 that it’s cooperating with a lawsuit from the Department of Justice into suspected insider trading that might’ve been facilitated by CEO Bobby Kotick just days before the video game publisher was acquired by Microsoft, according to a filing to the SEC.
