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How is #MeToo Changing the Landscape of Corporate Responsibility and Commercial Litigation? | Episode 7



| Hosted by Teresa Barber, former IMS Director of Industry Relations

IMS client and Quinn Emanuel Partner, Manisha Sheth, joins us in this IMS Insights Podcast discussion as we delve into how the #MeToo movement is affecting corporate responsibility for employers and business leaders, and how the movement is shaping areas of commercial litigation. Sheth, who served as lead attorney on one of the most high-profile cases during the residential mortgage-backed securities (RMBS) crisis now serves as Co-Chair of the firm’s Government and Regulatory Litigation Practice and its Sexual Harassment and Employment Discrimination Practice.

Teresa Barber: I want to talk a little bit about corporate responsibility with respect to the #MeToo movement. There's been a lot of interesting ... A lot of studies, a lot of reports over the last few years. University of California San Diego Center on Gender Equity and Health released a study recently following up their 2018 work. There's also been some interesting counter discussions on #MeToo throughout social media with almost what sounds like paralyzed frustration. We've seen reports and studies suggesting that some men feel that they shouldn't mentor women or should avoid having one on one meetings with women. MarketWatch reported this year on research conducted by [inaudible 00:14:05] that 60% of male managers were reporting that they were uncomfortable mentoring, socializing or working alone with women in the workplace up from 46% in 2018. Is it possible for companies and employers to create a productive, inclusive, and safe environment and does it make business sense to do so?

Manisha Sheth: Yes. I mean, not only is it possible for companies and employers to create such an environment, but numerous studies have confirmed that it makes economic sense, it makes business sense for companies to foster such an environment because that will improve productivity across all of their employees. It is troubling to me to hear that this is a consequence or a result of the #MeToo movement. I appreciate the fact that individuals may be taking an effort to avoid being placed in a situation where such harassment or discrimination can occur. But I think it just has a negative ... It can't be the solution that men should not mentor women or should avoid having one on one meetings or interaction with women. I mean, that type of approach is extremely counterproductive because it deprives women of opportunities for advancement and development. A company that engages in such measures is not really helping the cause and is in fact putting women at a greater disadvantage in terms of career development.

Teresa Barber: And you think about statistics that we have, it's fewer than 7% of Fortune 500 CEOs are women today in 2019, and even fewer women of color. So it's certainly interesting. And we've been seeing a lot of public discourse about microaggressions and unconscious bias in the workplace. The Harvard Business Review has been conducting research over the last three years on the #MeToo movement and workplace sexual harassment. This year, that study found that while blatant sexual harassment had declined from 66% to 25%, there's been a significant increase in #MeToo gender harassment up to 92% from mid '70s. That kind of suggests the way the Harvard Business Review researchers were suggesting ... That suggests a concerning backlash in the American workplace like you were discussing.

Teresa Barber: How would you suggest employers take responsibility at a senior level for workplace harassment and prevention, and what can leaders do to fix this workplace culture problem?

Manisha Sheth: Right. That's a great question and those statistics are extremely troubling. Well, first, I would say there's got to be a commitment at the highest level of the company and that's probably the best way to change culture. Second, it's important to have a timely and rigorous process for dealing with complaints. So taking complaints seriously, having a prompt investigation when you get such a complaint, to do a thorough and appropriate investigation when you get a complaint. And that would include collecting, segregating, securing, and preserving relevant evidence. It would involve an interview process that consists of interviewers and investigators who are compassionate but yet neutral and also trauma informed. So they are conducting the interviews in a way that makes sense in this context.

Manisha Sheth: Also, it's important to have measures, whether they are disciplinary, and that could include warnings, mandatory trainings, suspensions, terminations, or some combination thereof for the alleged perpetrator of such conduct. It's important to also have interim measures because an investigation can take time to complete and there should be in place some interim measures to ensure that there's not an opportunity for the alleged misconduct, if it is happening, to continue to happen during the pendency of the investigation. And then finally, to have measures in place that I would describe as corrective measures or go forward measures to prevent such future occurrences from occurring. These may involve structural changes or changes to the policies and procedures at the company.

Teresa Barber: What are the consequences for businesses that can't fix that culture or don't take those steps?

Manisha Sheth: Well, I think we're seeing that the consequences are becoming increasingly more severe. There obviously can be direct actions against the company in the form under theories of vicarious liability, but also we're seeing a rise in recent years in the number of cases where the company is being held responsible for failing to take action, failing to investigate complaints, failing to take corrective or remedial action or from a disclosure perspective, failing to disclose the financial and legal risk associated with such complaints.

Manisha Sheth: We're also seeing that the line between private conduct and company business is getting blurred in the sense that what senior executives do behind closed doors is now the board's business, if it generates legal and financial risk for the company or results in the diversion or waste of company resources in the form of settlements or severance payments. And so I think we're seeing a trend where cases are allowing for relief beyond the single victim and the single perpetrator, but are now geared towards addressing this misconduct in preventing it from happening in the future to other individuals.

Teresa Barber: Let's talk a little bit about the future of the legal system with respect to #MeToo. How have #MeToo cases evolved over the recent years and where do you see these cases going in the future?

Manisha Sheth: Okay. In the first instance, we're seeing cases where the company may be liable to the victim based on the acts of its executives or other employees. And this would be under a vicarious theory of liability. And to the extent the company tolerated such misconduct, we may also see a theory of liability that's based on respondent superior or some sort of ratification of the conduct. But in addition to those traditional theories, we're seeing more recently a trend towards shareholder derivative actions against the company's board of directors based on a failure to act once they've learned about complaints of sexual harassment or discrimination and also cases where as a result of multiple settlements or severance payments, there could be allegations that the management committed waste or breached their fiduciary duties by approving such settlements and authorizing such large payouts.

Manisha Sheth: Okay. So one notable example is the shareholder derivative suit against Wynn Resorts. In February of 2018, The Wall Street Journal exposed allegations that Steve Wynn had engaged in a longstanding pattern of sexual harassment and assault against Wynn employees, and in response a shareholder derivative suit was filed against the board of directors of Wynn Resorts. And the complaint alleged that the directors knew about, but did not disclose this pattern of misconduct. And by doing so or by failing to do so, they breached their fiduciary duties. And they issued public reports that conceal this information, which would be deemed to be material information about Steve Wynn from their shareholders and also from regulators. This exposed the company to the potential for billions of dollars of losses and the risks of losses.

Manisha Sheth: I mean that was one of the most notable shareholder derivative cases, and it's telling because just recently the case survived a motion to dismiss and it illustrates how the court that decided that case has departed from former precedent, and maybe will provide some potential for these kinds of cases to go forward and survive motions to dismiss.

Teresa Barber: It's clear that you are leading a movement here and investing quite a bit of passion and quite a bit of drive into this practice. You've got to have some hopes and some goals for this. So what are you hoping to achieve by starting a #MeToo practice with Quinn Emanuel and just thinking not just at the firm but more broadly, what's your vision for this, Manisha?

Manisha Sheth: In the immediate term, our vision is to level the playing field, both in the context of filed litigation and also pre-complaint settlement discussions. I think in the more intermediate term, our goal is as a result of the #MeToo movement, and as a result of existing litigation and future litigation that companies will affirmatively and voluntarily improve their internal policies and procedures so that if and when complaints of discrimination or harassment arise, they're addressed promptly and that they're investigated appropriately. And then in the long term, and this is always long term, we are looking for a change in culture and a change in mindset. Hopefully, if we're successful, there won't be a need for this practice, right? This kind of conduct will be eliminated. Not only because it's inappropriate, but also because it doesn't make financial sense or business sense from the company's perspective.

Teresa Barber: Right. Excellent. I want to ask you also, mentorship is something that we track that definitely we're seeing it on the rise and becoming increasingly important in corporate America, but it's also incredibly important for law firms, for succession planning and for talent retention. Can you talk to me about how mentoring, if it has, how it shaped your career and you as a leader?

Manisha Sheth: Yes. I think mentoring, I mean there's different ... I know the term sponsorship has been also thrown out in recent years. I think mentorship and sponsorship has been a huge part of my success as a lawyer. No one else in my family is a lawyer. I come from a family of two doctors who probably weren't thrilled that I decided to go to law school. So I think all of this was new to me in the sense of not having someone in the family who had gone to law school and could counsel me on various career issues. But I feel that I've been very blessed and fortunate to have worked with so many talented individuals throughout the course of my career, both in private practice, but also in the public sector to have mentors who I can go to and ask the tough questions, talk about career moves because I have moved from private to public back to private again and to have frank discussions about that, and people who have taken the time to really develop my skills as a lawyer.

Manisha Sheth: Now that I'm more senior, I definitely want to do that and pass that forward going forward to younger lawyers because I think it's ... I don't know how helpful it is to have a formal mentorship process, but I think, particularly here at Quinn, where a lot of those relationships grow organically through the course of working on matters and cases with people. It's just a wonderful way to really be an example for younger lawyers and to help them further their career and really help them to be successful at becoming lawyers.

Teresa Barber: So Manisha, can you talk to me a little bit about the evolution of #MeToo cases and how do NDAs fit into that?

Manisha Sheth: Yes, that's a great question. So NDAs, non-disclosure agreements have been used in settlements for many, many years and there recently have been a lot of public discourse about whether they should be used, whether they should be eliminated, or whether they should be restricted in any way.

Manisha Sheth: There are pros and cons to NDAs. On the one hand, they can be used and historically they have been used to ensure that either the misconduct or the settlement resolving such misconduct ever sees the light of day, and that has the effect of preventing other victims from coming forward with their allegations of misconduct.

Manisha Sheth: One very recent example is the Weinstein matter, which involved numerous NDAs, non-disclosure agreements in the settlements. It took about 20 years for the misconduct that he was responsible for to come to light. As a result of that, I think since 2018, lawmakers in about 26 States and the District of Columbia have introduced bills to restrict the use of NDAs in instances of sexual harassment and assault. But only 12 of these states have actually passed new laws and only New Jersey has gone so far as to effectively negate an NDA by making them unenforceable if the victim violates their provisions.

Manisha Sheth: It is a challenging area. It's an area where I think we will see increased legislation, and it may not be to eliminate them in their entirety because they may have some benefit to the victim who may have an interest in keeping the details of the event private. And it also may facilitate reaching a settlement if the allegations are not in the public domain. So I think we're likely to see greater legislation that will impose either limits or some form of restrictions on the use of those NDAs rather than an outright ban.

Teresa Barber: Thank you Manisha. Well, Manisha, it's been wonderful speaking with you today. Really compelling topic and really just appreciate you taking the time to join us for IMS Insights.

Manisha Sheth: Well, thank you Teresa. You've had some great questions and I really enjoyed talking with you.