ESG Litigation & Enforcement Tracking

Investors Pursue Derivative Claims Related to “Greenwashing” by Alternative Energy Company

December 5, 2023 | Browning v. Alexander, et al., No. 1:23-cv-03293 (D. Md. 2023).

Investors in Enviva Inc. filed a derivative suit on behalf of the company, alleging that Enviva’s management made false and misleading statements regarding the sustainability of the company’s wood pellet products as a replacement for coal and its cash flow from operations. Plaintiffs allege that the company portrayed itself in SEC filings and public statements as an ESG-focused addition to investors’ portfolios and stated that the company’s focus was on ensuring its business activities supported the best outcomes for people, forests, and the environment. On October 12, 2022, activist investment firm Blue Orca filed a short seller report alleging that Enviva procured wood from clear-cutting forests, in contrast with its public image of promoting environmental welfare, and otherwise engaged in “greenwashing.” The investors allege that Enviva’s stock price fell approximately 13% in response to the Blue Orca report. The derivative suit alleges similar facts to two securities class actions previously filed in federal court in Maryland.

Investors Follow Suit After Brazilian Mining Company Settles With SEC Over Misrepresentations in ESG-Related Disclosures

November 9, 2023 | Orbis Global Equity LE Fund (Australia Registered), et al., v. Vale S.A., et al., No. 1:21-cv-06590 (E.D.N.Y. 2023).

Investor funds filed a securities fraud suit against Vale S.A., a publicly traded Brazilian mining company, alleging that Vale made materially misleading statements regarding the company’s construction of dams and its commitment to safety and sustainability. The shareholders allege that Vale’s CEO prioritized cost management over dam safety and sustainability efforts despite stating publicly that sustainability was a “strategic pillar” for the company. The investors allege that between January 25, 2019, and February 24, 2020, Vale’s stock price fell precipitously in response to a series of partially corrective disclosures regarding the impact of the company’s corporate austerity measures on dam safety. The amended complaint arises out of similar underlying facts as an SEC enforcement action against Vale which settled in March 2023 and a securities class action in federal court in New York.

Peloton Facing Investor Suit for Safety-Related Misstatements in ESG Report

November 6, 2023 | Tian v. Peloton Interactive, Inc., et al., No. 1:23-cv-04279 (E.D.N.Y. 2023).

Peloton Interactive, the maker of the Peloton bike and treadmill, is facing a shareholder class action alleging that the company included misstatements related to product safety in its ESG Report. Peloton’s ESG report stated that product safety was a top priority and claimed that Peloton continually monitored member safety feedback and incorporated its learnings into product development. Plaintiff shareholders contend that this statement was misleading because Peloton concealed a product defect in the seat posts on Peloton bikes and continued selling bikes with recurring product defects. The shareholders allege that Peloton was on notice of the consequences of concealing a product defect after Peloton reached a settlement with the Consumer Product Safety Commission related to defects with the Tread+ product. According to the shareholders, Peloton’s stock price suffered a precipitous decline following a series of disclosures from February 2022 through August 2023 that either revealed defendants’ prior misrepresentations and omissions or the risks concealed by them.

Judge Dismisses Challenge to Diversity Policies

September 11, 2023 | National Center for Public Policy Research v. Schultz, et al., No. 2:22-cv-00267 (E.D. Wash. 2023).

Conservative think tank National Center for Public Policy Research’s claims against Starbucks were dismissed by a Washington federal judge who condemned the claims as a political attack. The plaintiff filed a shareholder derivative suit against certain Starbucks officers and directors that claimed that Starbucks’s effort to ensure that members of the BIPOC community made up at least 30% of the corporate workforce and 40% of the retail and manufacturing workforce by 2025 constituted racial discrimination and a breach of fiduciary duty. In its order dismissing the claims, the court noted that the plaintiff’s proposal did not have the support of the majority of Starbucks shareholders and that the question of whether DEI and ESG initiatives adequately address societal inequities was better decided by the political branches.

Delaware Chancery Court Denies Shareholder Request for Books and Records Concerning Florida “Don’t Say Gay” Legislation

June 27, 2023 | Simeone v. The Walt Disney Company, No. 2022-1120 (Del. Ch. 2023).

The Delaware Chancery Court denied a shareholder request made pursuant to 8 Del. C. § 220 for the pre-suit inspection of corporate books and records concerning Disney’s opposition to Florida’s “Don’t Say Gay” legislation, HB 1557, finding that the shareholder’s stated purposes in making the demand were “pretextual” and had been solicited by counsel. The shareholder contended that Disney’s fiduciaries put their own beliefs ahead of their obligations to shareholders in opposing HB 1557. The court found that the suit concerned a permissible business judgment by Disney’s board, further finding that there was no evidence the Disney board was conflicted, grossly negligent, or acted in bad faith in opposing HB 1557. The opinion also noted that the shareholder received all necessary documents for his purpose because Disney produced a series of board minutes and corporate policies. 

Shareholder Files Federal Securities Class Action Complaint for Alleged “Greenwashing”

April 3, 2023 Fagen, et al. v. Enviva Inc., et al., No. 8:22-cv-02844 (D. Md.).

A shareholder filed an amended proposed class action complaint against Enviva Inc., a wood pellet production plant that produces products that are used as a substitute for coal in power generation, for violations of Sections 11 and 15 of the Securities Act and Sections 10(b) and 20(a) of the Exchange Act. The complaint contends that the plant misrepresented its environmental practices in investor marketing and engaged in “greenwashing” of its wood procurement and production, which allegedly caused losses in the value of common stock.

Shareholder Files Breach of Fiduciary Duty Suit Against Meta Platforms Inc.

October 3, 2022 | McRitchie v. Zuckerberg, No. 2022-0890 (Del. Ch. 2022).

A shareholder filed a putative class action against Mark Zuckerberg, Meta Platforms Inc., and Meta’s board of directors in the Delaware Chancery Court for direct and derivative claims of breach of fiduciary duty. The complaint alleges that Meta has ignored the interests of its diversified stockholders by focusing on company profits without considering social impact.  

Shareholder Suit Against Deutsche Bank Alleging Oversight Deficiencies Settles for $26.25 million

September 27, 2022 | Karimi v. Deutsche Bank Aktiengesellschaft, No. 1:22-cv-02854 (S.D.N.Y. 2022).

In 2020, shareholders sued Deutsche Bank and recent chief executive officers alleging the bank materially misrepresented its “know-your-customer” and anti-money laundering controls, resulting in an artificial inflation of its stock price. The complaint also alleged that compliance staff was overruled in examining “high-risk” relationships with certain individuals, such as Jeffrey Epstein. The lawsuit settled for $26.25 million.

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