Law360 (July 30, 2021, 4:48 PM EDT) — Multichain specialty retailer L Brands announced a $90 million corporate governance reform agreement Friday to settle multiple derivative lawsuits seeking damages arising from “toxic” workplace conditions, including sexual harassment.
The global business, owner of Victoria’s Secret, Bath & Body Works and Pink, said the settlement would fund governance reform efforts over five years. Formal settlement proceedings will be managed through a pending case in Ohio, but will settle derivative actions in that state, Delaware, Oregon and elsewhere.
Included in the deal is an additional $21 million for attorney fees and expenses, according to the announcement.
Victoria’s Secret in particular has been targeted by a string of stockholder records demands and complaints alleging damages caused by what one Delaware records demand described as “a culture of sexual harassment and misogyny that has plagued the company and Victoria’s Secret” for decades.
“These measures, which continue the governance and management reforms the board has been implementing over the past year, will benefit L Brands stockholders and reflect L Brands’ ongoing commitment to fostering a safe, equitable and inclusive workplace,” the company’s announcement said.
The agreement will take effect when L Brands completes a spinoff of Victoria’s Secret on Monday, with both continuing as separate publicly traded companies. The two companies committed to separate $45 million, five-year workplace and corporate culture reforms.
Currently, the business operates 2,684 company-operated specialty stores in the United States, Canada and China, in addition to more than 700 franchised locations and online sites worldwide.
“We are extremely proud of this settlement and believe that it is a game changer” for Bath & Body Works and Victoria’s Secret, Geoffrey Johnson, partner at Scott + Scott Attorneys at Law LLP, the lead firm in the Ohio action, told Law360 in an emailed statement.
“The $90 million funding commitment is unprecedented for a company this size and the settlement establishes significant workplace and corporate governance reforms intended to ensure that the conduct that gave rise to this action will not occur in the future,” Johnson said.
Terms of the settlement were negotiated by a special committee of L Brands’ board, led by its chair, that had been formed to investigate allegations in the suits. Approval of the deal will provide “full and final resolution” of the claims, the company said.
A stipulation of settlement filed in the U.S. District Court for the Southern District of Ohio said the deal would resolve Rudi v. Wexner, et al., originally filed in May 2020 in Ohio’s Franklin County Court of Common Pleas and settled in District Court on Friday.
Also to be settled is Lambrecht v. Wexner, filed in January 2021 in Delaware’s Chancery Court and stayed on June 21, along with other stockholder books and records demands.
The complaints pointed to Leslie H. Wexner, company founder and former chairman and CEO, and former chief marketing officer Edward Razek as central figures in the company’s sexual harassment problems and “outdated,” exploitative public image and business model.
Although Razek was mentioned as a particular target of sexual harassment claims, others also were singled out in cases that sometime ended in settlements and nondisclosure agreements.
Months before the trouble came to light, activist investor Barington Capital Group called on the company to examine close ties between L Brands’ board and Wexner, as well as its failure to address changing expectations of consumers and investors regarding the treatment and depiction of women in company marketing, media and promotions.
Reform measures in the settlement include detailed requirements for sexual harassment prevention, reporting and anti-retaliation policies, along with data collection mandates.
The agreement also calls for maintenance of a diversity, equity and inclusion council and retention of a DEI consultant to assist in the effort.
The settlement agreement includes a rewording of a central corporate value statement from “inclusion makes us stronger” to “diversity, equity and inclusion make us stronger,” with those values to be integrated “into every level and aspect of our business.”
The Special Committee of the Board of Directors of L Brands Inc. is represented by Carole S. Rendon of BakerHostetler and Robert W. Trafford, James A. King and Kirsten R. Fraser of Porter Wright Morris & Arthur LLP.
Counsel for the settling shareholders include Scott + Scott Attorneys at Law for Milton Rudi and Detroit Police and Fire, and Bernstein Litowitz Berger & Grossmann LLP and Cohen Milstein Sellers & Toll PLLC for the Oregon Department of Justice and the Oregon Public Employee Retirement Fund.
Also, in Delaware Chancery Court, deLeeuw Law LLC and Greenfield & Goodman LLC for Nancy A. Lambrecht, co-trustee of the Amanda Greenfield 2012 Irrevocable Trust, and Quinn Emanuel Urquhart & Sullivan LLP, Bernstein Liebhard LLP and Smith Katzenstein & Jenkins LLP for John Giarratano and Maryann Kualii.
Current and former directors of L Brands are represented by Potter Anderson & Corroon LLP.
Leslie Wexner and Abigail S. Wexner are represented by Zeiger Tigges & Little LLP.
Former L Brands board member David T. Kollat is represented by Roger P. Sugarman.
The case is Rudi v. Wexner et al., case number 2:20-cv-03068, in the U.S. District Court for the Southern District of Ohio.
–Editing by Robert Rudinger.