Activision Blizzard Defeats Investor Suit Over Government Probes, For Now

Activision Blizzard Inc. has won the dismissal of a California lawsuit accusing the game maker of misleading investors by belittling the severity of alleged sexual harassment and discrimination against female employees in their workplace.

ActivisionPhoto Credit: Shutterstock

In a Tuesday decision, Los Angeles-based U.S. District Judge Percy Anderson found that a group of Activision shareholders failed to cite specific false statements the gaming company made amid investigations by three separate agencies, therefore failing to prove their fraud claims.

Anderson provided the plaintiffs 30 days to file an amended complaint against Activision, which has vehemently denied tolerating discrimination and misleading shareholders since allegations began.

Anderson in his ruling said the plaintiffs failed to allege that Activision and its executives knowingly and intentionally made specific false statements about the discrimination claims, writing that the complaint was “wieldy in the extreme and rambles through long stretches of material quoted from external lawsuits.”

“The [first amended complaint] fails to plead sufficient facts to establish whether, for example, the cautionary language was deficient or meaningful, what the condition of Activision’s workplace was at the relevant period and other context,” Judge Anderson added.

The U.S. Equal Employment Opportunity Commission and a California anti-discrimination agency filed separate lawsuits last year accusing Activision of tolerating widespread bias against women, and the U.S. Securities and Exchange Commission is probing the company’s processes on disclosures about workplace misconduct.

“Plaintiffs contend that the media’s reaction to news of the regulatory investigations and defendants’ statement in response to the [California Department of Fair Employment and Housing] action ‘belies any notion’ that the regulatory investigations were ordinary or routine,” Judge Anderson said. “But such allegations constitute ‘fraud-by-hindsight’ and absent particularized, temporal facts, are insufficient to support a claim of securities fraud.”

Activision settled the EEOC case in March for $18 million. The California Department of Fair Employment and Housing’s lawsuit is still pending.

In a proposed class action lawsuit filed in August, the shareholders claimed Activision’s failure to disclose the gravity and scale of workplace discrimination artificially inflated the value of the company’s stock. Last year, Activision stock declined sharply in response to news reports about the SEC probe and the company’s alleged failure to address the rampant bias and sexual harassment.

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