We recently posted about the investor who sued Target Corporation for securities laws violations arising from Target's alleged failure to warn investors about the risks associated with rolling out its 2023 Pride Collection (its retail release of LGBTQ-themed apparel and other items marketed to celebrate Pride month). Target has now moved to dismiss that lawsuit, which is pending before a Federal District Court in Florida. The focus of Target's motion is the failure of the plaintiff to meet certain pleading standards required for a 10(b) claim, as well as plaintiff's failure to demonstrate standing and a few other legal hurdles. Target's motion highlights the dissonance between cause and effect when it comes to disclosure of ESG risks, which is at the core of this reverse-social-justice suit.
In essence, the plaintiff alleges that Target's Board failed to predict, plan for and address the business risks associated with ESG and DEI initiatives, of which the Pride Collection was a part. According to the plaintiff, this lack of planning invariably led to a failure of suitable disclosure and purported harm to him as an investor. Target's motion highlights that plaintiff's case is not premised on the alleged failure of Target’s Board to consider the risks associated with its ESG and DEI initiatives, but rather, Target moved forward with the Pride campaign fully risk-aware and risk-disclosed. As pointed out in the motion, plaintiff's argument self-destructs because the securities laws do not protect the investing public from the outcome of taking disclosed risks. Instead, those laws protect against taking action in the face of risk non-disclosure. Plaintiff’s quibble, therefore, was not with the inarguable business judgment of Target's Board to consider the various competing ESG and DEI concerns and desires of its stakeholders (which includes its customers, employees and investors) against market risks, but with the course of action the Board took, exercising its oversight and judgment, despite knowing those risks.
All of this goes to the heart of this lawsuit's pretense: if the Board failed to consider the short and long term consequences of DEI's impact on its stakeholders, could a claim be premised on that oversight failure. Darned if you do, darned if you don't? Target is not the only company with a bullseye on its back (and front). But that doesn't mean corporations should shy away from continuing to focus on its most basic of obligations - considering all the risks, which includes what is now becoming inevitable lawsuits with political agendas.