Speaking Sustainability

On May 15, 2023, a district court judge sitting in the Eastern District of California ruled that California Assembly Bill No. 979 violates the Equal Protection Clause of the U.S. Constitution’s Fourteenth Amendment and 42 U.S.C. § 1981. As enacted, Assembly Bill No. 979 (“AB 979”), California’s Board Diversity Statute, required public companies with headquarters in the state to include a minimum number of directors from “underrepresented communities” or be subject to fines for violating the statute. AB 979 defines a “director from an underrepresented community” as “an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender.”

On February 3, 2023, the U.S. Securities and Exchange Commission (SEC or the “Commission”) announced a settled enforcement action involving Activision Blizzard, the maker of popular video games Call of Duty, World of Warcraft and Candy Crush. The company agreed to pay $35 million to settle novel allegations that it failed to maintain disclosure controls related to tracking workplace complaints and, separately, that language in the company’s separation agreements with departing employees violated one of the SEC’s whistleblower protection rules. Activision Blizzard allegedly failed to collect and evaluate employee workplace complaints, which prevented management from having adequate information to assess whether its public disclosures concerning its workforce were “fulsome, accurate, and not misleading by omission.” The SEC found this conduct to be a violation of Exchange Act Rule 13a-15(a), which requires Activision Blizzard to maintain “disclosure controls and procedures.”

The High Court of England and Wales (the “High Court”) recently ruled¹ that the U.K. government’s Net Zero Strategy (NZS) breached the detail and reporting requirements of the Climate Change Act 2008 (“CCA 2008”). In this post, Akin provides readers with the background to the NZS and the judicial review process, and then turns to a discussion regarding the content and significance of the proceedings themselves.

Two recent rulings by California state court judges have struck-down California statutes that were intended to foster diversity at California-based public companies. In the first case, Crest v. Padilla, No. 20-STCV-37513 (“Padilla I”), the court held that a California statute – Assembly Bill 979 (or AB 979) – that sought to expand boardroom diversity by requiring such companies to seat at least one person from historically underrepresented communities, was unconstitutional. In the most recent case, captioned Crest v. Padilla, No. 19-STCV-27561 (“Padilla II”), the court similarly ruled that a statute – Senate Bill 826 (or SB 826) – requiring California-based public companies to seat a minimum number of women on the boards of directors of those companies, was unconstitutional. We previously wrote about AB 979 here and SB 826 here.

On Monday, March 21, 2022, the Securities and Exchange Commission (SEC) in a 3-1 vote proposed amendments to require public companies to provide certain climate-related information in their registration statements and annual reports. The amendments are intended to enhance and standardize certain climate-related disclosures in order to address investor demands for more consistent and comparable information about climate-related risks and impacts and supporting emissions disclosure. In a detailed client alert titled “Sea Change: The SEC Makes Waves with New Proposed Climate Disclosure Rules,” Akin Gump summarized the proposed rules, provided information on the public comment period and offered recommendations on how to prepare for the potential disclosure requirements.

Recently, we have been closely following a number of ongoing and fresh lawsuits brought in the English courts involving some interesting Environmental Safety Group (ESG) related issues. We explore below two notable decisions, which have potentially wider implications for those who may find themselves parties to such claims.

Less than a year after the board of directors of the Williams Companies, Inc. adopted a one-year stockholder rights plan with a five percent trigger (the “Williams Plan”), the Delaware Court of Chancery, under the Unocal standard, permanently enjoined it, and found that the directors had breached their fiduciary duties, thereby rendering it unenforceable. To read more, please click here.