Kahnert v. Kotick
United States District Court for the Central District of California
2023 WL 2628609 (2023)

- Written by Sean Carroll, JD
Facts
Activision Blizzard, Inc. (Activision) was investigated by multiple government agencies, including the California Department of Fair Employment and Housing (DFEH), based on allegations that Activision created a hostile work environment, including sexual harassment, physical assault, gender discrimination, and other issues. The DFEH filed a civil action against Activision based on its findings. In that action, DFEH alleged gender discrimination against women and retaliation against women who had complained about their work conditions. Luke Kahnert (plaintiff) was an Activision shareholder and filed a shareholder derivative suit against Robert Kotick and other current or former Activision board members (board members) (defendants). Kahnert alleged that the board members knew of the alleged activity but ignored it in violation of their fiduciary duties to the company. The board members filed a motion to dismiss for Kahnert’s failure to make a demand of the board before filing suit. Kahnert argued that demand was futile because the board members faced a substantial likelihood of liability because they had failed to adequately oversee the company’s compliance and oversight systems and had ignored the red flags of the DFEH activity. There was no dispute that Activision had implemented an internal oversight system.
Rule of Law
Issue
Holding and Reasoning (Anderson, J.)
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