Judge Approves $90 Million Fox Sexual Harassment Settlement

February 9, 2018

Chief Chancery Court Judge praises creation of oversight council that reports to Twenty-First Century Fox' board

The scandal at Fox began in 2016 when former anchor Gretchen Carlson filed a lawsuit accusing Fox News CEO Roger Ailes of sexual harassmentBy Maureen Milford

A Delaware judge on Friday approved a $90 million settlement in a lawsuit alleging directors and managers at Twenty-First Century Fox failed to monitor sexual harassment and racial discrimination developments at Fox News Channel.

But Chancellor Andre Bouchard, chief judge of Delaware Court of Chancery, gave special praise to the agreement’s non-monetary governance reforms. The enhancements provide for an independent oversight council to help ensure there’s a proper work environment at Fox News. The so-called Fox News Workplace Professionalism and Inclusion Council will report directly to the board’s nominating and corporate governance committee.

“There’s real meaning to the council,” Bouchard said.Chancellor Andre Bouchard, chief judge of Delaware Court of Chancery

The lawsuit was brought late last year by pension funds and some individual shareholders. It was settled simultaneously with the filing after undergoing mediation that was conducted by a retired federal judge. The shareholders, who sued the directors and some managers personally, allege the company’s board and senior management neglected to investigate when red flags appeared and did not put in protocols to address the toxic culture.

“They failed to implement controls sufficient to prevent the creation and maintenance of this hostile work environment,” the lawsuit alleges.

The monetary settlement, paid by directors and officers liability insurance, is one of the 10 largest settlements in the history of derivative lawsuits, according to Kevin LaCroix, an attorney and executive vice president of RT ProExec who consults with companies on directors’ and officers’ liability insurance. A derivative lawsuit is one in which shareholders sue a third party on behalf of the company for financial harm to the enterprise. Any proceeds from a successful lawsuit go to the corporation, not the plaintiffs.

In this case, shareholders allege the company suffered at least $200 million in harm because directors and managers abdicated their responsibilities of due care, loyalty and good faith. The shareholders were seeking to have the court find the board and some officers accountable for the damages.

The directors and officers named in the lawsuit denied any breach of duty to the shareholders and entered into the settlement to eliminate “the burden, expense and uncertainties inherent in further litigation,” according to court documents.

Lawyers for the shareholders said the agreement’s governance reforms could serve as a roadmap for other directors and top managers facing similar derivative cases involving sexual harassment. Earlier this week, a pension fund shareholder sued directors of Wynn Resorts Limited for disregarding a pattern of sexual harassment by company founder and former CEO Stephen Wynn.

“We hope it will be emulated by other companies facing these problems,” said Mark Lebovitch, a lawyer for the Twenty-First Century Fox shareholders. “We think it’s something that’s going to work and can be replicated.”

Lebovitch said the council has already met and the meeting was attended by a board member.  

The reforms provide for:

  • The Fox News Workplace Professionalism and Inclusion Council to be made up of experts in workplace and inclusion matters. Four independent members of the council include a retired federal judge.
  • The Fox council will have the authority to hire consultants and conduct investigations.
  • The agreement calls for the council to meet with the chair of the nominating and corporate governance committee at least twice a year and with the full committee at least once a year. The council will also provide written reports to the board.
  • Twenty-First Century Fox also agreed to fund anonymous periodic surveys of employees, consultants and others who work with Fox News.