Nike Inc.’s board dodged a multimillion-dollar lawsuit in Oregon state court over gender discrimination in the company’s ranks — at least for now.
An Oregon Circuit Court judge on Monday granted the Nike directors’ motion to dismiss a suit by a group of shareholders, who accused the directors of enabling a toxic corporate culture they claimed demeaned and hindered female employees.
The judge granted the motion without prejudice, which gives the investors the chance to file a new and improved complaint within roughly the next two weeks. And they plan to do just that, according to an attorney for the plaintiffs, Gustavo Bruckner, the head of Pomerantz’s corporate governance practice.
“Since we first filed our complaint last summer, additional information has come to light about the toxic ‘boy’s club’ culture at Nike and the pervasive hostile environment that resulted in the flight of top female talent,” Bruckner said Tuesday. “We look forward to bringing this new information to the court’s attention in an amended complaint.”
The suit reflects the ongoing legal fallout after news reports last year that described workplace harassment and gender discrimination at the activewear giant. Nike has said it has reacted promptly to such allegations even before they made the news, in part by “separating certain employees from the company.” The internal reckoning at Nike seemingly led to the exits of executives including Trevor Edwards, then president of the Nike brand.
“Nike’s 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,” said a Nike spokesman.
The investors claimed in their suit that the directors’ inaction hurt the Nike’s brand and goodwill, and sought to recover well above $10 million in damages. The Oregon court’s ruling didn’t quite address the meat of their allegations, but said their suit doesn’t show the directors directly knew about any illegal conduct that they deliberately overlooked.
The suit claimed for instance, that the board knew about complaints that employees had submitted through an anonymous internal hotline, and about how women remained a minority within its executive leadership — less than a third of Nike’s vice presidents are women, according to the complaint.
But the judge found that such allegations don’t show that the directors specifically knew about gender discrimination. The hotline complaints the board allegedly didn’t act on, for instance, were not all about bias against women in the company, the judge said.
“Here, plaintiffs plead various events, indicators, purported red flags and reports to the board in support of its ‘where there’s smoke, there’s fire’ argument,” circuit court judge Leslie Bottomly wrote in her ruling. “These red-flag allegations…ultimately, however, fall short.”
The investors’ suit targets Nike’s workplace culture over two decades. It related anecdotes about business trips in 2002 that included strip-club jaunts that alienated female employees and described promotions of male executives who allegedly mistreated female subordinates. In its motion to dismiss, Nike argued that the company has “robust” internal controls to address workplace issues, including a code of ethics and an internal complaint hotline.
Nike is also facing a suit by a proposed class of female employees in Oregon federal court. The women, who include current and former corporate employees at Nike headquarters, accuse the company of discriminating against them for pay and promotions. Nike had also sought to get that suit dismissed, but in February, a magistrate judge recommended the case proceed.