Kevin LaCroix has a typically detailed and thoughtful analysis of the suit:
In a recent post (here), I discussed the shareholder derivative suit filed against the board of directors of Oracle Corporation based on the alleged lack of racial diversity on the company’s board. Turns out that in addition to the lawsuit against Oracle’s board, the law firms that filed the Oracle lawsuit also have filed a shareholder derivative lawsuit against Facebook’s board alleging that the directors had violated their fiduciary duties by their inaction on diversity and inclusion issues; their tolerance of racially discriminatory practices both in its workforce and on its platform; and their failure to take action on hate speech on its platform. Along with the Oracle lawsuit, the new lawsuit against Facebook provides another example of how the current heightened focus on diversity and inclusion issues can translate into D&O claims. A copy of the complaint in the Facebook action can be found here.
I am reminded of the old aphorism: once is happenstance, two is a coincidence, but three is a trend. The lawyers behind these suits clearly think they have a winning formula.
The likelihood is that there will be further claims like this to come. Indeed, one of the lawyers responsible for filing both the Oracle and Facebook lawsuits, Frank Bottini of the Bottini and Bottini law firm, is paraphrased in a July 8, 2020 Law.com article about the two lawsuits (here) as saying that he “plans to bring more shareholder derivative lawsuits against Silicon Valley companies who allegedly do not follow through on their diversity initiative.” ...
Of course, it remains to be seen whether other companies will be sued on similar theories as those raised in these lawsuits or how far the litigation phenomenon might spread. At this point, with only two lawsuits filed, it would be premature to suggest that these diversity and inclusion lawsuits represents an important D&O litigation trend and that the possibility of these kinds of lawsuit represents a significant potential board litigation exposure. Just the same, the filing of these two lawsuits and the possibility for more does suggest that this type of litigation could be an important emerging trend and one that is worth watching.
Even if it's not a viable claim, it may be a lawsuit the companies will want to settle to make them go away. Also, as LaCroix points out, litigation can be part of an overall package of activist tactics:
In the current focus on social and racial issues, activists will use a number of means, including claims against corporate boards, to try to advance their diversity and inclusion goals. ...
Among the things these companies will have to consider is whether to make concessions and adopt measures the plaintiffs in the respective cases have proposed, in order to try to deflect the attention and adverse publicity these kinds of cases might produce in the current environment.
