Bloomberg Law
Free Newsletter Sign Up
Bloomberg Law
Welcome
Go
Free Newsletter Sign Up

Activision Braces for Crucial Ruling in Harassment Deal Turf War

Dec. 13, 2021, 10:30 AM

A federal judge is set to weigh in on the fight over Activision Blizzard Inc.‘s proposed $18 million sexual harassment and discrimination settlement, a decision that could raise the financial costs on the company and more broadly lay the ground rules for how competing regulators tackle the gaming industry’s workplace issues.

Activision reached the proposed settlement with the U.S. Equal Employment Opportunity Commission, which sued the company over its alleged unlawful treatment of women in the workplace. But in October, California’s Department of Fair Employment and Housing, which has its own suit against Activision, said it would seek to block that settlement, sparking unusual conflict between two agencies tasked with combating bias.

Following a Dec. 13 hearing, Judge Dale. S. Fischer of the U.S. District Court for the Central District of California will rule on the state’s request to intervene in the federal case “to avoid irreparable harm” to its own litigation. The ruling will have implications for the financial scope of litigation surrounding Activision, and for future cases involving the agencies, experts said.

“If the court allows the state agency into the case, it would create a lot of uncertainty among the employer community,” said Jackson Lewis P.C. attorney Drew Maunz.

Maunz, who previously served as legal counsel at the EEOC, said the impact of the upcoming ruling could reach well beyond Activision.

“It’s just one case, so it’s not necessarily going to be dispositive of the issue, but if the ruling goes against the EEOC, it could potentially limit the settlement terms the EEOC is willing to agree to elsewhere,” he said.

Money on the Line

Fischer’s decision could have serious financial consequences for Activision, because sexual harassment claims under state law could hold a significantly higher settlement value, said George Woolverton, president and firm manager at Stockwell, Harris, Woolverton & Helphrey.

Woolverton, a former California Fair Employment and Housing Commission chairman, said he expects the court to grant the DFEH’s request to intervene in the case.

“California’s interest would be to have the stricter standard of state harassment law applied, because FEHA is much more protective in terms of sexual harassment,” he said of the state’s Fair Employment and Housing Act.

State law has a higher ceiling for damages and doesn’t allow for mitigation, while under federal law, employers can reduce exposure, for example by firing the harassing employee, which could alleviate higher damages, Woolverton said.

The EEOC settlement with Activision, announced in September, would see the company pay $18 million into a fund for victims of sexual harassment and implement internal policy changes.

Some industry watchers, including the Communications Workers of America, called the settlement inadequate. “An $18 million settlement is mere pennies considering the resources available to this cash-rich corporation,” the union said in a September statement.

“I think the concern here is that EEOC’s settlement might be what some people would call a ‘reverse auction,’ an opportunity for the company to settle some claims on the cheap to prevent other claims from going forward,” said Elizabeth Kristen, director of Legal Aid At Work’s Gender Equity & LGBT Rights Program.

“It looks like maybe the company tried to settle the DFEH’s case out from under it,” Kristen said. “On the outside of course it looks like DFEH and EEOC are fighting, but in some ways, it’s the company that created this situation too, and perhaps was trying to benefit.”

Activision did not comment on the record for this story. In a statement announcing the settlement in September, the company said the agreement would “settle claims and further strengthen policies and programs to prevent harassment and discrimination in the company’s workplace.”

“We will continue to be vigilant in our commitment to the elimination of harassment and discrimination in the workplace,” CEO Bobby Kotick said at the time. “We thank the EEOC for its constructive engagement as we work to fulfill our commitments to eradicate inappropriate conduct in the workplace.”

Agency Tug of War

If the DFEH is allowed into the federal suit, it will likely make the Activision case harder to resolve, and could complicate future EEOC settlements, said Maunz.

“If the EEOC has concerns about a state agency intervening, it could complicate whether a settlement could be brought, whether parties will agree to certain terms without sign-off from a state agency, or whether an employer would want to agree to certain provisions,” he said.

The EEOC, for its part, told Judge Fischer in a November filing that the state agency lacked any ownership of sexual harassment claims under the worksharing agreement the two agencies signed.

EEOC said it received an anonymous complaint from a human resources employee at Blizzard Entertainment in 2018. And after EEOC opened an investigation into that employee’s allegations, DFEH explicitly agreed not to investigate harassment claims, and instead probe discrimination, including in pay and promotion.

Woolverton said the most likely explanation for the power struggle is that “both agencies are trying to make a policy statement.” And given the heightened potential for damages under state law, “California’s policy statement is much more consequential to any defendant.”

Regardless of Fischer’s ruling, Kristen, in San Francisco, downplayed the idea that the agency divisions over Activision would lead to clashes in other cases.

“The scenarios in which this decision would undermine EEOC’s ability to settle cases are very narrow,” she said. In most cases, only one agency takes the lead in investigating, Kristen said.

But how the agencies maneuver the forthcoming ruling will be closely watched.

The judge might decide there’s more benefit than harm in letting the state agency into the case, said Kristen. “It’s a government entity that has a responsibility for this part of California civil rights enforcement, and it’s saying it wants to enter the case to protect the rights of claimants, I think that would be very hard for a judge to turn away.

“Of course, allowing them to come in doesn’t dictate a particular outcome,” Kristen added. “But it might create more of a feeling of due process. Let them in so they can participate and say their piece, and the outcome will be decided another day.”

To contact the reporter on this story: Maeve Allsup in San Francisco at mallsup@bloomberglaw.com

To contact the editors responsible for this story: Meghashyam Mali at mmali@bloombergindustry.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com

To read more articles log in.

Learn more about a Bloomberg Law subscription