Nike Succeeds in Getting Shareholder Lawsuit Thrown Out — But It’s Not Over Yet

Sheena Butler-Young

Nike has cause to celebrate — even if only for the short-term.

An Oregon Circuit Court judge on Monday granted the athletic behemoth’s motion to dismiss a suit by a group of shareholders, who accused its board and several top executives of ignoring an allegedly hostile work environment.

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In her ruling, however, Judge Leslie Bottomly said the plaintiffs did not demonstrate that the directors were aware of supposed illegal conduct or that they “consciously disregarded” such behavior.

It’s an obvious win for the Swoosh, which has faced several lawsuits since a New York Times exposé last year reported on internal behavioral challenges at the company and about a dozen executives exited in what was widely viewed as management’s attempts to clean house.

Still, the celebration could be short-lived, as Gustavo Bruckner, an attorney for the plaintiffs and partner at Pomerantz LLP, said his firm has plans to refile the case. (The case was dismissed without prejudice to replead — meaning the plaintiffs could still file again.)

“We look forward to amending our filing to provide the court with information about the dozens of complaints that have come to light since we first filed our action last August,” Pomerantz told FN. “We must not allow the perpetrators of the hostile environment to be rewarded while talented female executives suffer.”

The suit — which also named Nike founder Phil Knight, former brand president Trevor Edwards and CEO Mark Parker as defendants — sought at least $10 million in damages from the company’s directors, as well as an additional $10 million from Edwards specifically. It had alleged that Knight, Parker, Edwards and the company’s board “facilitated and knowingly ignored the hostile work environment that has now harmed, and threatens to further tarnish and impair, the company’s financial position.” (Judge Bottomly also granted Edward’s motion to dismiss the plaintiffs’ claims of unjust enrichment on the part of the former Nike executive.)

For its part, a spokesperson for Nike said its board of directors “acted swiftly, responsibly and decisively to protect the interests of both Nike employees and shareholders and we’re pleased the court has granted our motion to dismiss.”

Filed by three Nike shareholders, the suit was the second sweeping legal complaint against Nike since the exposé and management shakeup last April.

In August 2018, two former employees, Kelly Cahill and Sara Johnston, filed a lawsuit against the sportswear giant alleging that it “intentionally and willfully” discriminated against women with regard to pay and promotions, and that its majority-male executives fostered a hostile work environment at its Portland, Ore., headquarters. (Since then, several other women have joined the suit as plaintiffs, and the group is seeking class-action status for the claim.)

Nike was dealt a blow in that case in February when Federal Magistrate Judge Jolie Russo recommended that the brand’s motion to dismiss class and collective claims — effectively limiting the number of parties that can be added to the complaint as plaintiffs — be denied.

Nike was also hit with a racial discrimination suit last month by a former software developer who claimed he was denied a promotion in favor of a white executive who had less experience.

Throughout the imbroglio, Nike has maintained that it “opposes discrimination of any type and has a long-standing commitment to diversity and inclusion. We are committed to competitive pay and benefits for our employees. The vast majority of Nike employees live by our values of dignity and respect for others.”

Nevertheless, it admitted last April that it had fallen short in promoting women and people of color, and in July, it announced a plan to raise salaries for 10 percent of its workforce to help correct pay inequity.

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