Lawsuit over NortonLifeLock’s diversity likely to be dismissed

A federal judge in San Francisco indicated Thursday he will dismiss a lawsuit accusing NortonLifeLock of misleading shareholders on its commitment to diversity because the plaintiffs do not point to any misrepresentative statements made by the software company.

"You have to give me some reason to believe or understand why you believe the statements were false other than the label: 'We think it's false,'" said U.S. District Judge Richard Seeborg.

Identical lawsuits against at least six other companies, including Facebook, Oracle and Qualcomm, have been filed by the Renne Public Law Group and Bottini & Bottini, which are representing shareholders in this case. They allege the companies breached their duty to shareholders by claiming success in achieving diversity.

The complaints were brought amid the Black Lives Matter movement and mass protests over police brutality after the death of George Floyd in Minneapolis. They seek the replacement of at least one board member by a Black person, that all directors return last year's compensation and the creation of a $500 million fund to hire minorities to management positions, among other demands.

The companies have maintained the firms are not looking to further diversity but are opportunistically capitalizing on social unrest. Esa v. NortonLifeLock, 20-cv-05419 (N.D. Cal., filed Aug. 5, 2020).

Judges overseeing two of the lawsuits against Facebook and Monster Energy have not allowed them to proceed, similarly finding they made conclusory allegations about the companies' allegedly false statements on diversity.

During the virtual hearing on the motion to dismiss, Seeborg noted the shareholders failed to meet the requirements to file a derivative complaint.

Lawsuits brought on behalf of a corporation must show they attempted to resolve disputes before suing. In these cases, the shareholders did not make such demands because they alleged it would be futile.

Bottini & Bottini attorney Yury A. Kolesnikov argued the board of directors would not have listened to the shareholders' complaints. Dismissal at this stage is not warranted, he said, because the court is "required to accept all claims as true and draw all reasonable inferences in the plaintiffs' favor."

"I don't have to accept conclusions," Seeborg replied. "Where's the factual support from which you can even make an inference?"

Kolesnikov stated NortonLifeLock had no Black senior executives at the time the complaint was filed while representing in financial filings that diversity was a key attribute it considers when it nominates people to the board of directors.

Seeborg remained unconvinced. He said the company was simply stating its commitment to foster diversity and there's nothing specific to draw from those statements.

Agreeing that NortonLifeLock's representations on diversity were aspirational, defense attorney William Trach emphasized the shareholders failed to allege any statements that the company's board of directors knew were not true.

"The only fact that the complaint attempts to rely on is the fact that NortonLifeLock did not have an African American on its board when the statements were made," the Latham & Watkins partner said. "For a statement to be false and misleading, you have to be saying something that shareholders don't know."

Trach also argued the lawsuits misdefine diversity to only encompass Black people. He said there are numerous Asians and women among the company's top ranks.

Seeborg took the matter under submission.