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Activision Blizzard Hid Harassment Probe, Investor Suit Says (2)

Aug. 3, 2021, 4:21 PMUpdated: Aug. 3, 2021, 6:06 PM

An Activision Blizzard Inc. investor hit the video game giant Tuesday with federal securities fraud claims in Los Angeles claiming it kept shareholders in the dark about an ongoing state investigation into its toxic workplace culture.

The lawsuit, filed Tuesday in the U.S. District Court for the Central District of California, also targets Activision Blizzard’s CEO, chief financial officer, and ex-CFO.

The suit accuses the company of stuffing its securities filings with vague disclosures about “routine” legal claims to deflect attention from the existential threat posed by an investigation into its “frat boy” culture by the California Department of Fair Employment and Housing.

When the agency’s lawsuit against the company came to light July 21, its stock price plunged, leading to a “precipitous decline in the market value,” the complaint says.

Activision Blizzard failed to disclose “numerous complaints about unlawful harassment” despite knowing that “the pervasive culture of harassment, discrimination, and retaliation would result in serious impairments” to its operations, according to the proposed class action.

That concealment artificially inflated the company’s stock, the suit says.

The California agency said its two-year investigation found that Activision Blizzard discriminated against female employees in several areas of employment including compensation and promotion, and that company leadership failed to take steps to prevent harassment and discrimination.

The agency asked a state court in Los Angeles to force the company to comply with workplace protections and to offer unpaid wages, pay adjustments, and lost wages to female employees.

More than 2,000 current and former employees signed a petition supporting the DFEH lawsuit, and on Tuesday, Blizzard President J. Allen Brack announced he was leaving the company.

Activision Blizzard declined to comment on the investor lawsuit.

Cause of Action: Sections 10(b) and 20(a) of the Securities Exchange Act, along with related federal regulations.

Relief: Damages, costs, and fees.

Potential Class Size: Activision investors who acquired stock between May 2017 and January 2019.

Attorneys: The plaintiff is represented by Rosen Law Firm PA.

The case is Cheng v. Activision Blizzard Inc., C.D. Cal., No. 21-cv-6240, complaint filed 8/3/21.

—With assistance from Maeve Allsup.

(Updated with details on agency investigation.)

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Peggy Aulino at maulino@bloomberglaw.com; Meghashyam Mali at mmali@bloombergindustry.com

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