American court dismisses lack of diversity allegations against Facebook
On March 22, 2021, a California federal magistrate judge granted Facebook’s motion to dismiss a shareholder class action arising out of an alleged lack of diversity on Facebook Inc.’s Board and other alleged discriminatory practices. Since July 2020, activist investors have filed a number of lawsuits against the directors of at least 11 companies accusing the boards of misleading behavior. Plaintiffs alleged that Facebook’s directors breached their duties to the company and shareholders by ignoring red flags about the company’s alleged (i) lack of diversity (both on the board and in the workplace), (ii) discriminatory practices in housing advertising, and (iii) failure to curb hate speech (notably including postings by former President Trump that are alleged to have incited violence).
Judge Beeler’s current decision suggests claims based on aspirational statements, such as the commitments to diversity and inclusion that form the basis of board diversity lawsuits, are routinely dismissed because such statements are “immaterial puffery”. Applying existing case law shows that it may be very challenging for plaintiffs to plead demand futility in cases like this one.
More about the decision and its impact on anti-discrimination practices at: https://www.dandodiary.com/2021/03/articles/director-and-officer-liability/facebook-board-diversity-lawsuit-dismissal-motion-granted/
Material submitted by M21F