Earlier last month, Judge Vince Chhabbria of the United States District Court for the Northern District of California dismissed a novel complaint that the court noted stretched the bounds of when directors of a company could reasonably be held accountable for the actions of its executives. Notwithstanding the case’s amusing subject matter, the decision applies typical Delaware standards to dismiss a shareholder derivative complaint formed on the basis of an executive’s out-of-office behavior.
Another shareholder derivative suit claiming diversity shortcomings within the company was dismissed last week: A judge in the Northern District of California dismissed allegations that Cisco Systems Inc. falsely and improperly represented itself as an industry leader in diversity.
On July 30, 2021, L Brands, the parent company behind Victoria’s Secret and Bath & Body Works, settled a rash of derivatives actions which had alleged “toxic” workplace conditions and “a culture of misogyny” at the company. We previously detailed the allegations in this space as part of our ongoing review of shareholder attempts to hold companies liable for perceived diversity failures and workplace discrimination. As we noted, a New York Times report detailing specific allegations of a former Chief Marketing Officer led to the filing of shareholder actions across the country, including in Ohio, Oregon, and Delaware.
As we move into 2021, shareholders of public corporations continue to seek to hold corporate executives accountable for workplace discrimination and misconduct, a trend that began in connection with the Me Too movement and does not show any signs of stopping.