QUALCOMM DODGES SHAREHOLDER LAWSUIT
Judge dismisses case, but lawyers say they’ll continue to demand diversity on chipmaker’s board of directors
A Delaware federal judge this week threw out a shareholder lawsuit against Qualcomm’s board of directors, which accused them of failing to bring Black people onto the board while repeatedly touting diversity efforts in public.
The lawsuit, filed in July 2020, fell short of certain legal standards around its allegations, according to a dismissal ruling handed down Monday. The judge gave shareholder lawyers three weeks to amend the complaint.
La Jolla attorney Frank Bottini, who originally filed the suit, said Friday that lawyers intend put forward a shareholder inspection demand on Qualcomm. This mechanism, which is codified under many state corporate codes, allows shareholders to inspect certain books and records prior to litigation. The additional documents will be used to amend the complaint, he said
Qualcomm declined to comment.
Initially filed in San Diego federal court, the derivative lawsuit was moved in March to Delaware, where Qualcomm is incorporated. It came in the wake of widespread Black Lives Matter protests over racial inequality and was one of three similar legal actions brought against big technology firms by Bottini & Bottini.
In November 2020, Qualcomm expanded its board to 14 members, adding Sylvia Acevedo, former chief executive of Girl Scouts of the USA, and Greg Johnson, head of the Consumer Group at Intuit, the maker of TurboTax and other software tools.
Johnson, an Air Force Academy graduate, is African American. Acevedo brought the number of women on Qualcomm’s board to four.
With derivative lawsuits, a shareholder brings legal actions against the board or management on behalf of the company itself, usually claiming breach of fiduciary duty or materially misleading statements.
In the Qualcomm case, shareholders alleged that board members made misleading statements touting diversity but failed to follow through — exposing the company potential fines, lawsuits and other risks. It also claimed that board members abused their control of the company and unjustly enriched
themselves.
Delaware District Court Judge Richard Andrews dismissed the lawsuit because the specifics in many of its allegations failed to pass legal muster.
For example, the Governance Committee of Qualcomm’s board said that it instructs recruiting firms to include minorities in the pool of candidates for open board seats. The lawsuit contends that because there were no Black board members in prior years, that statement was false or misleading.
But Andrews rejected the argument, finding that just because no African Americans were on the board in the past didn’t mean minorities weren’t included in the candidate pool, as Qualcomm disclosed.
When the lawsuit was filed, it called for at least three current company board members to immediately resign, so the company can put forward two Black nominees and an additional minority candidate. It also proposed the creation of an $800 million fund to hire Blacks and other minorities, among other things.