City of Monroe Employees' Retirement System v. Rupert Murdoch, et al.

Labaton Sucharow LLP recently represented Seattle City Employees’ Retirement System (“SCERS”) in connection with a historic monetary and corporate governance settlement involving 21st Century Fox, Inc. (“21CF”) and its subsidiary Fox News Network LLC (“Fox News”) (together with 21CF, “Fox”). The shareholder derivative lawsuit arose out of the numerous and widely-reported sexual harassment scandals at Fox News, beginning with Fox’s $20 million settlement in September 2016 with Gretchen Carlson, who had alleged sexual harassment and other misconduct towards her by Fox News CEO Roger Ailes. Following Ms. Carlson’s public allegations against Ailes, various other Fox News employees came forward publicly alleging repeated episodes of sexual harassment and other workplace misconduct against Ailes, Bill O’Reilly, and other Fox News executives and personalities. The allegations collectively described a pervasive and long-running culture of sexual misconduct, discrimination, and workplace retaliation at the company, including that Fox had made numerous payments to the tune of tens of millions of dollars to settle sexual harassment allegations over a nearly 20-year period.

In light of these public allegations, SCERS retained Labaton Sucharow to assert its statutory right of inspection of Fox’s books and records in order to investigate potential wrongdoing by the Fox board of directors and certain Fox executives. As more and more facts came to light, the company agreed to engage in a constructive dialogue with SCERS and other Fox shareholders about adopting meaningful corporate governance reforms. The company provided document and witness discovery and engaged in mediation with SCERS and other shareholders. Following nearly a year of discovery and complex settlement negotiations, SCERS and other shareholders reached a historic settlement with Fox consisting of two key components.

First, the settlement secured a $90 million recovery for the company, which is one of the largest ever financial recoveries involving a corporate oversight dispute. Second, the company agreed to adopt and implement an ambitious and historic corporate governance program to address harassment, discrimination, and other workplace misconduct. Namely, the company created the Fox News Workplace Professionalism and Inclusion Council (“WPIC”), a six-member council consisting of the chief human resources officers of both 21CF and Fox News and four independent appointees, including former federal judge Barbara Jones and three renowned policy experts in the area of corporate discrimination and harassment (Sylvia Hewett, Brande Sterling, and Virgil Smith). The WPIC has the ability to oversee and recommend policies aimed at preventing and addressing various forms of workplace misconduct, including the ability to conduct internal investigations and hire outside consultants. The WPIC will provide the 21CF board with reports detailing its investigations and other work (including minority reports), and descriptions of the WPIC’s work will be included in the company’s annual filings. The WPIC has been established for a term of five years and cannot be disbanded or modified unless the 21CF board of directors provides a public explanation of the reasons for the change. The corporate governance reform reached in the settlement with Fox will not only have an impact at Fox, but may also serve as a model for other corporations seeking to improve oversight functions and internal mechanisms to better deal with sexual harassment, discrimination, and other workplace misconduct issues.

The case is City of Monroe Employees’ Retirement System v. Rupert Murdoch, et al., C.A. No. 2017-0883 (Del. Ch.). Labaton Sucharow served as additional counsel.