On May 27, 2020, in the latest #MeToo-related securities class action lawsuit to fail to survive initial pleading hurdles, Judge Gloria M. Navarro granted the defendants’ motion to dismiss the securities suit filed against Wynn Resorts based on allegations that the company had failed to disclose sexual misconduct of its former CEO, Stephen Wynn. The ruling joins several other recent dismissal rulings in #MeToo-related securities suits – although, as noted below, there have also been several noteworthy settlements in #MeToo suits as well. A copy of Judge Navarro’s opinion can be found here.
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Signet Jewelers Settles #MeToo-Related Securities Suit for $240 Million
In yet another significant #MeToo-related development, the parties to the Signet Jewelers securities class action lawsuit have agreed to settle the case for $240 million. There are a number of interesting features to the settlement, as discussed below; among other things, over $200 million of the settlement amount is to be funded by insurance. The settlement is subject to court approval. The plaintiff’s March 26, 2020 letter to the court regarding the settlement can be found here. The parties’ stipulation of settlement can be found here.
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Papa John’s #MeToo-Related Securities Suit Dismissed, For Now
Among the numerous companies hit with #MeToo-related management liability lawsuits in the late 2017 to early 2019 time frame was the national pizza restaurant company Papa John’s International Inc. The plaintiffs in the securities class action lawsuit alleged that company founder and former CEO John Schnatter and other executives sexually harassed company employees and cultivated a hostile workplace culture while the company misleadingly touted the Company’s culture and failed to divulge the true conditions to investors. The defendants’ moved to dismiss. In a March 16, 2020 order, Southern District of New York Judge Kimba Wood granted motion to dismiss, with leave to amend. Judge Wood’s order can be found here.
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Guest Post: Potential D&O Risks Arising from Corporate Social Responsibility
The long-standing and traditional view is that corporations’ objectives should be to maximize shareholder value. More recently, a variety of commentators and observers have argued that corporations have larger social responsibilities. However, as discussed in the following guest post from Eric C. Scheiner and Jennifer Quinn Broda, efforts by companies to fulfil corporate social responsibilities may involve their own risks and even result in D&O claims. By the same token, failing to take action could result in claims as well. These trends have important implications for insurers and for policyholders alike. Eric is a Partner and Jennifer is Of Counsel in the Chicago office of Kennedys. I would like to thank Eric and Jennifer for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Eric’s and Jennifer’s article.
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CBS #MeToo-Related Securities Suit Largely Dismissed, Though Some Allegations Survive
As the various stories and revelations came to light during the peak of the #MeToo movement, there were also a number of D&O lawsuits filed against companies whose executives were the target of the stories. Among these lawsuits was the #MeToo-related securities class action lawsuit filed against CBS. On January 15, 2020, in a lengthy and detailed opinion, Southern District of New York Judge Valerie Caproni largely granted the defendants’ motion to dismiss the lawsuit, although the lawsuit did survive as to one set of allegations involved alleged statements by former CBS executive Leslie Moonves. The court’s ruling underscores the difficulty for plaintiffs in trying to translate sexual misconduct allegations into securities claims.
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Alphabet Board Hit With Derivative Suits Over Alleged Sexual Misconduct at Google
In the now more than a year since the #MeToo phenomenon first arose, there have been a number of D&O lawsuits filed against companies and their boards in which the plaintiffs allege that company officials either allowed the alleged sexual misconduct to take place or turned a blind eye. In the latest D&O lawsuits to follow in the wake of allegations of sexual misconduct, two Alphabet shareholders have filed separate derivative lawsuits in California state court against the company’s board based on underlying allegations of alleged sexual misconduct at the company’s Google unit.
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Securities Lawsuit Filed Based on Reports of Alleged Inappropriate Office Relationship
In several recent conversations, I have been asked whether I thought that the whole #MeToo movement might have more or less played out, and that we might not be seeing as many, or even any, more D&O claims based on underlying allegations of sexual misconduct. In response, I said that I didn’t think the phenomenon had played out but I did suggest that I thought that the phenomenon might be shifting and that the kinds of underlying allegations would change. Although it does not represent exactly the kind of thing I had in mind, a new securities class action lawsuit filed against Teladoc Health and based on alleged misconduct of one of its senior executives does at least represent a variant on the kinds of D&O claims following in the wake of allegations of sexual misconduct.
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Dismissal Motion Denied in Sexual Misconduct-Related Securities Suit
One of the things that has happened in the wake of revelations of high-profile sexual misconduct as part of the #MeToo movement has been the rise of D&O litigation following after the revelations. However, this type of sexual misconduct follow-on litigation didn’t start with the rise of the #MeToo movement. Even before the #MeToo movement there were D&O lawsuits arising from sexual misconduct allegations. One of these earlier cases involved the retail jewelry chain Signet Jewelers. On November 26, 2018, Southern District of New York Judge Colleen McMahaon denied the defendants’ motion to dismiss in the case, in a ruling that may provide an interesting perspective on the many subsequent #MeToo follow on lawsuits. The November 26, 2018 opinion in the case can be found here.
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Nike Board Hit with Sexual Misconduct-Related Derivative Suit
In the latest example of a D&O lawsuit following in the wake of allegations of sexual misconduct, three shareholders have filed a state court derivative lawsuit in Oregon against Nike’s Board of Directors alleging that the defendants failed in their oversight duties and allowing a toxic “boys club” culture of sexual harassment and bullying to take hold. The Nike complaint shows yet again that the accountability process that has emerged as part of the #MeToo movement in many cases has involved efforts to hold company’s boards accountable for permitting misconduct or turning a blind eye. The Nike derivative complaint can be found here.
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Plaintiff’s Sexual Assault Complaint Asserts Claims Against Michigan State’s Board of Trustees
Stories of alleged sexual misconduct have dominated recent headlines. Allegations of sexual assault raised against Supreme Court Brett Kavanagh have been the lead story all week, and there has also been extensive coverage of the criminal sentencing of Bill Cosby for sexual assault. These stories arise as part of a broader series of revelations of sexual misconduct involving media figures, politicians, and corporate executives.
In the midst of this depressing litany one of the most disturbing sets of disclosures has been the revelations of the sexual misconduct involving former Michigan State University and U.S. Olympic gymnastics team physician Larry Nassar. Allegations relating to Nassar are back in the news again because of a new lawsuit a former MSU athlete has filed. The plaintiff’s allegations raise a number of issues. As discussed below, the new complaint contains extensive allegations against MSU’s Board of Trustees, underscoring how the allegations raised in the current wave of sexual misconduct allegations can lead to claims against organization’s directors and officers.
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