Settlement Moves Ahead in Pinterest Derivative Litigation Over Discriminatory Practices

Pinterest Inc. and the shareholders who sued the company over allegations of widespread race and sex discrimination stemming from its treatment of minority female employees, have received preliminary approval for their proposed settlement. In Wednesday’s ruling, Judge William H. Alsup found the parties’ agreement, which principally provides that Pinterest dedicate a $50 million fund to corporate governance reforms over a period of up to ten years, adequate, fair, and reasonable.

The opinion recounted the case’s history, starting with the events giving rise to the complaint itself. Reportedly, the company mistreated two public-policy team members, women identifying as Black and one also as Japanese. They were eventually and allegedly unfairly ousted from Pinterest under fraught circumstances, including threats to their personal safety, while the board stood idly by and failed to intervene in the face of overt discrimination. 

In addition, Francoise Brougher, the company’s first COO, also a Black woman, was allegedly “underpaid and less favorable backloaded equity grants as compared to her white male peer even though Brougher allegedly grew revenues from $500 million to $1.1 billion in about two years, among other accomplishments.”

The corporate mismanagement complaint took aim at high-ranking officers and directors including the company’s CEO, Benjamin Silberman, who allegedly retaliated by firing Brougher after she made her pay concerns known to the company. The opinion noted that Pinterest settled with Brougher for $22.5 million after she filed a discrimination lawsuit.  

This week’s grant of preliminary approval primarily considered “the extent of the benefit to be derived from the proposed settlement by the corporation, the real party in interest.” Judge Alsup then analyzed the efficacy of the settlement’s proposed corporate governance reforms. “In general, the agreement would make the [diversity, equity, and inclusion (DEI)] goals into ‘business imperatives’ and give the board of directors power to oversee DEI accomplishments, improving chances for meaningful change,” the court opined.

Judge Alsup discussed the proposed initiatives, such as increased board oversight, pay equity and transparency measures, and the release of non-disclosure agreements for individuals who claimed race or gender discrimination against Pinterest, ultimately deeming them adequate to remedy the harm complained of.

In evaluating the fairness of the settlement, the court honed in on the experience of counsel, and on one attorney in particular, former San Francisco City Attorney Louise Renne. “The Court places great faith in the word of Attorney Renne and trusts her judgment. But for her strong endorsement, the Court might have qualms about the true efficacy of this deal,” the opinion said.

The order set several deadlines in advance of the final approval hearing scheduled for May 26, 2022.

The plaintiffs are represented by Cohen Milstein Sellers & Toll PLLC, Renne Public Law Group, Weisslaw LLP, Bottini & Bottini Inc., and Robbins LLP. Pinterest is represented by Freshfields Bruckhaus Deringer US LLP.