Retailers Face Surge in Securities Litigation
Securities litigation against retailers is on the rise, with a 20% increase in cases since 2022. This year alone, 229 federal class action lawsuits have been filed, marking a significant growth in litigation prompted by various statements and policies.
The surge in litigation is driven by several factors. Greenwashing lawsuits and insufficient board diversity have emerged as grounds for litigation, with the 5th U.S. Circuit Court of Appeals recently ruling that NASDAQ exceeded its authority in requiring certain board diversity disclosures. Retailers are targeted in a small portion of annual securities litigation, but the number of cases is growing, with the number of claims rising between 20% and 40% over the past decade.
Securities lawsuits can be triggered by statements made at industry conferences, on websites, or in interviews, not just in official filings. Recent executive orders and changes in agency interpretation could further impact the civil litigation landscape for retailers. Adoption of ESG and DEI policies can also provide new grounds for litigation if companies fail to comply, adding to the increasing number of ways retailers can be named in a securities lawsuit.
With the rise in securities litigation against retailers, companies must be vigilant about their statements and policies. As the number of claims continues to grow, retailers should ensure they comply with regulations and maintain transparency to mitigate potential lawsuits.
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