Activision Blizzard shareholders have filed a class-action lawsuit against the company, alleging that it failed to disclose the severity of the problems it's been accused of in a recent lawsuit brought against the company by California.
Late last month, a lawsuit was brought against Activision Blizzard by the California Department of Fair Employment and Housing. The lawsuit alleges that female employees were not treated equally within the company and, in addition, specifically cites a number of harassment incidents over the last several years. This California lawsuit is still ongoing, but now Activision Blizzard is going to have another legal battle to contend with.
Activision Blizzard Shareholders Class-Action Lawsuit Alleges Company Made 'Materially False and/or Misleading' Statements
The Activision Blizzard shareholders class-action lawsuit specifically cites the company's Form 10-K filings over the last several years. The full text of the lawsuit hosted on Bloomberg Law has all of the specific filings, but the cited text is fairly similar from year to year.
Note this portion of the 2020 10-K cited in the shareholder lawsuit:
[Activision Blizzard is] party to routine claims, suits, investigations, audits, and other proceedings arising in the ordinary course of business, including with respect to intellectual property, competition and antitrust matters, regulatory matters, tax matters, privacy matters, labor and employment matters, compliance matters, unclaimed property matters, liability and personal injury claims, product damage claims, collection matters, and/or commercial claims. In the opinion of management, after consultation with legal counsel, such routine claims and lawsuits are not significant and we do not expect them to have a material adverse effect on our business, financial condition, results of operations, or liquidity.
Several weeks after the California lawsuit was introduced, Activision Blizzard employees staged a walkout to protest the allegations raised in that first lawsuit. Aside from this event, it appears that the esports division may have lost T-Mobile as a sponsor as well.
The bad press amplified by the employee walkout may very well be having a material effect on the company's profits, and that's the core of the issue raised in the lawsuit brought against the company by the Activision Blizzard shareholders.
"The statements contained [Activision Blizzard's Form 10-K filings] were materially false and/or misleading because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations and prospects, which were known to Defendants or recklessly disregarded by them," the lawsuit read.
This new lawsuit appears to be distinct from a separate investigation by shareholder rights company Robbins LLP that was announced late last month.
Ultimately, the class-action lawsuit alleges that Activision Blizzard failed to follow the law by not disclosing the severity of the issues allegedly ongoing at the company that was raised in the California lawsuit. The class-action lawsuit seeks a trial by jury and seeks unspecified damages.
Activision Blizzard has been making efforts to respond to the public outcry surrounding the allegations in the time since the California lawsuit was filed. Activision CEO Bobby Kotick issued a response to the allegations on the company's official website. Activision Blizzard later hired the law firm WilmerHale to audit and review the company, but that decision was criticized by a number of employees who said that it did not "meaningfully address" the problems raised in the California lawsuit.