Another lawsuit has been filed against Activision Blizzard. Just days after it was revealed the Activision board told shareholders to block a public report on sexual misconduct, Activision are being sued again.
The lawsuit, made by New York City officials, targets the CEO Bobby Kotick specifically. As reported by Axios, the complaint alleges that by rushing the Microsoft takeover, Kotick sought to escape liability for misconduct at the company. You can read the full complaint here.
Lawsuit takes issue with Kotick’s involvement in the Microsoft takeover
The lawsuit was filed in Delaware on April 26th but was made public to Axios on May 3rd. The lawsuit was made by the New York City Employees’ Retirement System and pension funds for the city’s teachers, police and firefighters. According to Axios, these groups are shareholders in Activision. They believe that Kotick’s actions have harmed the company and devalued the company’s value.
Furthermore, the lawsuit alleges that the Kotick was aware for years of the misconduct and sexual harassment claims but that he withheld the information from the board. In November 2021, a Wall Street Journal article claimed that Bobby Kotick knew about multiple sexual misconduct claims made at the company. The article claimed that the Activision CEO was emailed in 2018 about a rape allegation but didn’t tell the board. It also stated that Kotick repeatedly blocked the firing of Treyarch co-head Dan Bunting. Dan Bunting, the co-head of the Call of Duty studio, was investigated for several sexual harassment claims by Activision’s HR department. Bunting has since stepped down.
Lawsuit alleges that board wasn’t involved
It was then revealed in February this year that just days after this WSJ article, that Microsoft began acquisition talks with Activision. On November 19th, three days after the article, Phil Spencer – Microsoft Gaming CEO – and Bobby Kotick began talking about an acquisition. It was believed to be an opportunistic move, with Activision’s stock having fallen 11%.
The New York lawsuit takes issue with Kotick’s involvement in the acquisition talks. The officials state that: “Given Kotick’s personal responsibility and liability for Activision’s broken workplace, it should have been clear to the Board that he was unfit to negotiate a sale of the Company. But it wasn’t.”
However, the lawsuit also alleges that Kotick was negotiating with Microsoft without the board’s authorisation. It claims that although Kotick and Microsoft began talking on the 19th, the board did not discuss Microsoft’s interest until a meeting two weeks later on December 1st. During those two weeks, the lawsuit claims, “Kotick blithely informed Microsoft that he would be willing to accept an offer in the range of $90-$105 per share.” The acquisition then went on to be priced at $95 per share, with Microsoft purchasing Activision for $68.7 billion.
The lawsuit goes on to say: “Not only did the Merger offer Kotick and his fellow directors a means to escape liability for their egregious breaches of fiduciary duty, but it also offered Kotick the chance to realize substantial nonratable benefits. As detailed in the Subsequent 220 Demand, these included significant bonuses that Kotick could receive for simply ensuring that Activision complied with the law.” Essentially, the lawsuit claims that by rushing to finalise the takeover, Kotick hoped to escape liability for the misconduct as well as receive bonuses for the takeover.
The latest of many lawsuits
This New York lawsuit is one of a number of cases filed against Activision within the last year. Activision are currently facing the California lawsuit that alleges there is a “frat boy” work-culture at Activision Blizzard that promotes sexual harassment and discrimination. That case was filed in June 2021, before the WSJ article was published. Activision also faced a lawsuit filed by U.S. Equal Employment Opportunity Commission in September 2021, although that was settled on the same day for $18 million. According to Axios, Activision have also had 10 other cases filed against them, as well as SEC and Department of Justice investigations.
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