Risk Update

Conflicts News — Facebook (New Name TBD) Conflict Fight, Activision Accusation De-Activated

Denied lead in Facebook derivative suit, Block & Leviton cries conflict, seeks appeal” —

  • “The shareholder firm Block & Leviton is refusing to walk away quietly from a high-profile derivative suit against Facebook Inc board members. The firm has asked a Delaware Chancery Court judge for permission to appeal his Oct. 5 order appointing three other plaintiffs firm to lead the breach-of-duty case, which accuses Facebook directors of protecting CEO Mark Zuckerberg at the company’s expense in a $5 billion settlement with the U.S. Federal Trade Commission in 2019.”
  • “Block & Leviton contends that rival shareholder lawyers from Scott + Scott, Kaplan Fox & Kilsheimer and Prickett, Jones & Elliott cannot represent Facebook’s interests in the derivative suit because Scott + Scott is also representing plaintiffs in two antitrust cases seeking big-money damages from the company.”
  • “Block & Leviton’s request to bring an appeal at the Delaware Supreme Court argues that no Delaware court has previously allowed a shareholder firm to pursue derivative claims on behalf of a corporation while simultaneously representing different clients asserting direct claims against the company. ‘This is an exceptional matter,’ the filing said. ‘The Court of Chancery affirming that lawyers can act as fiduciaries for a Delaware corporation in derivative litigation while simultaneously representing other clients in other actions … is a statement that will have dramatic implications for the way that the stockholder-plaintiff bar operates.'”
  • “The judge gave considerable attention to the conflicts issue, acknowledging that other Delaware courts – most notably in transcript orders from then-vice chancellor Leo Strine in 2012’s In re Duke Energy and then-vice chancellor Tamika Montgomery-Reeves in 2018’s In re Towers Watson & Co. – have expressed reservations about shareholder firms suing derivatively on behalf of a corporation while also suing the corporation directly.”
  • “But Slights cited two other Delaware Chancery Court decisions – former vice chancellor John Noble’s ruling in 2014’s In re Ebix Inc and his own 2018 opinion in In re Tesla Motors Inc – holding that a lead shareholder can pursue simultaneous derivative and direct claims against board members.”

Activision Loses Bid to Halt Bias Suit Over Ethics Claims” —

  • “Activision Blizzard Inc. failed to convince a California court on Friday to temporarily halt an ongoing sexual harassment and discrimination case filed by the state’s Department of Fair Employment and Housing.”
  • “Activision asked the court on Oct. 19 to pause the case to give it time to investigate ethics allegations against the agency, and to potentially bring a motion to disqualify certain attorneys.”
  • “The state agency said its lawsuit followed a two-year investigation which found company leadership consistently failed to take steps to prevent discrimination in terms compensation, promotion, and termination, among other areas. It later accused Activision of suppressing and destroying evidence, which the game maker vehemently denied.”
  • “The company’s request to halt the case stemmed from a parallel federal lawsuit against Activision involving the U.S. Equal Employment Opportunity Commission. That federal agency reached a proposed $18 million settlement with Activision in September to resolve discrimination and retaliation claims, but DFEH objected, arguing the deal includes a procedure to release Activision from state claims that the EEOC lacks standing to prosecute.”
  • “The EEOC asked the federal court to block DFEH’s bid to intervene in the case, claiming its investigation of Activision was directed by two lawyers who later joined DFEH and hold leadership roles in the state agency. ‘After being informed of this conflict, DFEH retained new counsel but appears to have filed the present intervention motion just hours after this counsel was retained, strongly suggesting that the motion is a product of the prohibited representation,’ the EEOC said in a brief.”