Activision Blizzard Inc. fired back at a shareholder who sued the interactive entertainment company and its leaders for allegedly failing to disclose employment-related investigations which artificially buoyed the company’s stock price. Activision’s motion to dismiss asserts that the shareholder’s revised class action complaint fares no better than the previous iteration.
The 130-page lawsuit centers on allegations that Activision lied about investigations conducted by state and federal agencies into workplace misconduct, including sexual harassment and gender discrimination. According to the shareholder, the defendants misled investors by suggesting that the probes “were not significant and were not likely to have a material adverse effect on the Company.”
As proof of the misconduct that insiders knew about yet kept quiet, the complaint cites an agreement reached by the Equal Employment Opportunity Commission (EEOC) and Activision for $18 million aiming to curb workplace harassment and discrimination. Yet the investigations’ omission and fall out for the company caused Activision’s share price to tumble when the market eventually found out, the filing says. It also argues that some individual defendants enriched themselves by making gains through stock sales during the class period.
Activision’s motion recounts how, previously, Judge Percy Anderson ruled against the plaintiff for failing to establish the falsity of the statements at issue made in Securities and Exchange Commission (SEC) and other filings. In addition, the court faulted the plaintiff for failing to allege the requisite intent on part of company leaders and the company itself.
“Not only did it lack factual allegations establishing any Defendant’s knowledge of facts concerning the investigations that contradicted a challenged statement, or awareness of ‘endemic’ harassment and discrimination … Plaintiffs’ fallback arguments – based on statements made by Activision after DFEH filed suit, speculative assertions that the DFEH investigation had been ‘obstructed,’ ‘boilerplate’ references to Sarbanes-Oxley certifications, and generalized motive allegations – were inadequate to establish a strong inference of fraudulent intent,” the motion said.
Now, Activision argues that the revised allegations, focusing solely on statements made in SEC filings, are “inconsequential.” Newly presented facts do not turn the tide of falsity, the defendants say, arguing that updates to the board of directors, human resource division procedure revisions, and conduct-related terminations at Blizzard, Activision’s gaming subsidiary, do not show that the what the company presented to the public was false or known to be false.
Further, the amended complaint ostensibly hinges on the defendants’ alleged failure to disclose the regulatory investigations, but stops short of pleading that disclosure of the omitted information caused Activision’s stock price to decline, the company defends.