When lawyers tell you to be quiet, you should always listen to them. A federal judge is allowing a group of CBS shareholders to pursue the company over what investors were told about sexual misconduct allegations at the company.
Although sharply narrowing the focus of the suit that was filed in the wake of a New Yorker expose about ex-chairman Leslie Moonves, the legal action will nevertheless proceed. On Wednesday, U.S. District Court Judge Valerie Caproni issued a 48-page decision on CBS’ motion to dismiss.
The case focuses on top executives including Moonves who allegedly sexually harassed female employees behind the scenes for years. The plaintiffs are alleging that amidst the #MeToo movement, the risk of CBS losing its key leaders was high yet the company and its board of directors failed to disclose risks tied to a hostile workplace and issued misleading statements that all was well.
The judge isn’t impressed that certain statements from CBS and its leaders rise to securities violations. Judge Caproni dismisses claims tied to ethical standards promulgated in proxy statements as well as disclosures contained in a press release announcing CBS’ financial results. She doesn’t think its conceivable that a statement in a code of conduct could be deemed factual and finds other statements including what the company announced after the Charlie Rose departure to be “generic puffery.”
But the judge does identify something that Moonves stated during a Variety event in 2017 to be potentially actionable.
“#MeToo is a watershed moment,” said Moonves at the time. “It’s important that a company’s culture will not allow for this. And that’s the thing that’s far-reaching. There’s a lot we’re learning. There’s a lot we didn’t know.”
Judge Caproni remarks, “Although it is a very close case, it is barely plausible that a reasonable investor would construe his statement as implicitly representing that he was just learning of problems with workplace sexual harassment at CBS. His statement implied that he had not known of these problems previously, even though, in truth, he was at that time actively seeking to conceal his own past sexual misconduct from CBS and the public.”
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Written By: Tommy Lightfoot Garrett
Photographs are Courtesy: CBS
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