Activision ‘Frat Boy’ Case Spawns a State v. Federal Tug-of-War

The California agency charged with protecting workers rights will face off its federal counterpart Tuesday in a clash over which regulator has primacy to rein in an allegedly anti-female “frat boy” culture at the videogames maker Activision Blizzard Inc.

California’s Civil Rights Department contends the US Equal Employment Opportunity Commission’s $18 million consent decree with Activision is being used to thwart the CRD’s rights to pursue remedies for state violations on Californians’ behalf, undermining incentives for claimants to cooperate in legal proceedings.

The agency wants the US Court of Appeals for the Ninth Circuit to set aside or amend that decree, narrowing its scope to federal claims so the CRD can exclusively prosecute state-based violations. It also seeks safeguards to protect evidence and ensure such proof will be available to it in the state’s parallel lawsuit.

The EEOC argued, and the trial court agreed, it adequately represents and protects any interest the state might possess “as the federal agency charged with preventing and remedying employment discrimination nationwide.”

Like its videogame character “Pitfall Harry,” Activision finds itself navigating hazards between two unrelenting agencies intent on exacting concessions and cash for what the CRD said is a “frat boy” culture at the Southern California-based company, even as it works toward change.

The case is an outlier, said Jackson Lewis PC attorney Drew Maunz, who previously served as legal counsel at the EEOC. “It’s not often you see the EEOC and a state civil rights agency going at it, especially publicly.”

The CRD “has been something of a pioneer in pushing the boundaries of what state bodies can accomplish, and their tactics are increasingly being copied in other states (primarily those with Democrat-funded state legislatures),” said Ann Olivarius, partner with McAllister Olivarius, a transatlantic law firm specializing in cases of race and gender discrimination.

Employers will increasingly monitor state regulatory bodies’ rapid rise, she said via email.

Boundaries

The federal regulator lacks formal power to settle California’s claims and doesn’t have any independent power to compromise California’s employment law with the consent decree, said Loyola Law Professor Adam Zimmerman.

California, even under the consent decree, still has the formal power as a state law agency to bring its own claims against Activision, and as part of any judgment or settlement, provide as much restitution as it can get to victims, the professor said.

“But by creating a fund where many potential victims will practically give up most of their state rights to sue, before the California case has even gotten off the ground, it will have the practical effect of reducing the total restitution that the California agency will be able to pursue for California victims, thus reducing California’s leverage in its own settlement negotiations,” he said.

The EEOC after nearly three years of investigation sued Activision in September 2021, raising claims of sexual harassment, pregnancy discrimination, and related retaliation in violation of Title VII of the Civil Rights Act. It simultaneously submitted a consent decree that the court approved.

The state investigated the company for two years before suing Activision in Los Angeles Superior Court in July 2021 for alleged sexual discrimination and misconduct. The CRD, formerly known as the Department of Fair Employment and Housing, then appealed the federal court’s denying its bid to intervene.

An Individual Grievance

Former Activision employee Jessica Gonzalez, who claims she was retaliated against and objected to the settlement, also sought unsuccessfully to intervene. She challenged the apparent loss of workers’ state law rights, and the trial court ignoring the affected employees’ protests. The Ninth Circuit will hear argument from her attorney too, immediately after the CRD’s case.

“Individuals who resolve their Title VII claims through the process created by the consent decree are entirely foreclosed from state law-based recovery against Activision for parallel violations of the California Fair Employment and Housing Act,” Gonzalez’s most recently-filed brief said.

This impairment harms claimants and potential class members because it unnecessarily removes claimants from the class, thereby reducing the overall recovery, Gonzalez argued.

The California Employment Law Council, a statewide organization of 70 private sector employers, supports EEOC.

In a friend-of-the-court brief the business group said the state agency’s intervention after EEOC has reached a settlement “would adversely affect the CELC and its members” and undermine “the purposes of Title VII and other federal laws by permitting state agencies to derail settlements for their own financial and political gain.”

While each agency has a lane in this drag race, each accuses the other of invading their turf despite an agreement to cooperate at the start of the investigation.

Dueling Arguments

The EEOC argues that even if granted intervention status, CRD couldn’t appeal the consent decree itself. The CRD lacked standing, waited too long, and the district court had rejected the arguments CRD wanted to make on remand, the EEOC said.

California counters it indeed has standing and the trial judge got it wrong “by shutting out the institutional party authorized by statute to advance the rights of thousands of California workers affected by the settlement.”

The three-way scrum has sprawled across four courts—two federal, two state—as Activision punched back with a failed attempt to get sanctions against the CRD for its bid to intervene.

Activision maintains the California regulator has had plenty of opportunities to comment as a court-approved amicus.

“DFEH filed these consolidated appeals not because it wants to be heard by the district court (to which DFEH has nothing left to say), but because it wants to frustrate and embarrass the EEOC by derailing its settlement through yet more rounds of briefing and appeals and resulting delays,” Activision told the appellate panel.

Loyola Law’s Zimmerman said he doesn’t know if he’s ever seen a case where a court found that having one party settle ahead of another gives that other party—whether it’s a state authority or class action attorney—power to intervene in a rival action.

“But it’s precisely this practical problem that gives authorities a big incentive to coordinate, as they appeared to do at the beginning of the litigation here,” he said.

EEOC represents itself. Paul Hastings LLP and Munger, Tolles & Olson LLP represent Activision. Outten & Golden LLP represents the state. Weinberg, Roger & Rosenfeld APC represents Gonzalez.

The case is EEOC v. Activision Blizzard Inc., 9th Cir., No. 22-55587, oral arguments 6/13/23.