A California judge has granted Activision’s motion to dismiss a class-action lawsuit filed by investors who claimed the company misled them about sexual harassment allegations, including investigations by the Equal Employment Opportunity Commission (EEOC) and the California Department of Fair Employment and Housing (DFEH).
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The judge decided that the plaintiffs did not reach the threshold to pursue their claims under federal securities law, as first reported by Bloomberg Law.
First filed in August 2021 by a group of private investors led by Jeff Ross and Gary Cheng, they claim Activision purposely minimized the EEOC and DFEH probes in SEC filings, referring to them as “normal.”
However, the judge argued that these investors’ statements were an example of “fraud-by-hindsight,” in which enterprises that suffer negative results are falsely accused of being able to forecast them.
“Plaintiffs contend that the media’s reaction to news of the regulatory investigations and Defendants’ statement in response to the DFEH Action ‘belies any notion’ that the regulatory investigations were ordinary or routine.
“But such allegations constitute ‘fraud-by-hindsight’ and absent particularized, temporal facts, are insufficient to support a claim of securities fraud,” Judge Percy Anderson of the US District Court of the Central District of California wrote.
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An $18 million settlement between the videogame firm and the EEOC was recently accepted by a US district court. The DFEH’s case against the state of California is currently underway. While the investors are disappointed by the move to dismiss, they have 30 days to file an amended case.