The Lawyers Who Ate California: Part I
Part One: The Feds. A small group of regulators out West tests out a new theory of corporate enforcement, with disastrous consequences.
A while ago I got a tip, suggesting a look into a high-profile lawsuit. You likely know the case: video game titan Activision, makers of Call of Duty and World of Warcraft, sued by the state of California for discrimination and harassment. The firm was acquired by Microsoft earlier this year for a staggering $68 billion, and with regulators in countries around the world awaiting resolution of California’s action before approving or denying that mega-deal, Department of Fair Employment and Housing (DFEH) vs. Activision Blizzard Inc. now becomes perhaps the most portentous lawsuit in the world.
The company filed a lengthy motion in its defense last Friday, detailing its side of a sordid-sounding case it believes should be wrapped up in its favor. However, the self-defense pleas of a leading current corporate Nosferatu received little bounce in popular press, which in the moral mania era isn’t much for “maybe they didn’t” stories.
At first, this sounded like a straightforward story in which the only question was whether Activision is run by misogynist dinosaurs who deserve their brutal public fragging, or whether they’re merely a bunch of rich gamers blindsided by unproven allegations in the latest example of social justice politics run amok. Not the kind of dispute where a disinterested party would have an obvious rooting interest. Someone would find the storyline fascinating, but that person, I guessed, was unlikely to be me.
Sometimes in journalism, however, a story you think is about one thing, turns out really to be about something very different. The tale is barely about Activision. The real protagonists are the regulators.
In the spirit of California, long the cradle of American innovation, a small group of government litigators spent nearly a decade dreaming up an aggressive new vision of corporate regulation, one that’s seen agencies like California’s DFEH act like high-end plaintiffs’ firms. They laugh off mediation, jump quick as you can to litigation they may be mandated to avoid, then couple blunt public accusations with eye-catching damage demands that open at ten or fifteen times the size of previous record awards. Also in the California spirit there are ruthless box-outs of other regulatory agencies, private attorneys, and even the agency’s own in-house lawyers for the sole rights to be claimants in each of the target firms’ stories, told by media pals who act more like production partners than journalists.
Few noticed, because this is California, where every fourth-rate character actor breaking wind makes the front pages but the inner workings of the state governing the world’s 5th most powerful economy are left to a handful of overworked reporters at the Sacramento Bee. “With all due respect to your profession,” one source unconnected to Activision quipped, “it’s kind of amazing none of you have looked under the hood here.”
Sexual harassment and pay discrimination of the type not just condoned but mandated in the highest corporate boardrooms have no place in modern America. Whether the offender is a senior executive who spent years overdue for a personal appearance on the dock (à la Harvey Weinstein), or a leftover from a bygone era who never got the memo about “compliments,” “banter,” “unwanted physical touching,” and inappropriate “jokes,” few dispute the issue needs dealing with, whether at Activision or anywhere else.
What follows is not about whether or not harassment and discrimination should be punished. This is a complex legal story of a debate within the regulatory community about, first, how such offenses should be proved, and second, how they should be remedied. An Obama-era initiative designed to make issues like pay inequity easier to address ironically ended a string of humiliating defeats for government investigators and would-be discrimination claimants. Meanwhile, disputes between federal employment regulators and their opposite numbers in states like California over whether to sanction individuals for alleged abuse, or to aim higher up the company directory for harder-to-define cultural offenses like the “failure to prevent” it, led to some of the bitterest bureaucratic turf wars this country has seen.
The story also turns out to be in part about why California, which had a growth streak dating back to the gold rush, saw it broken in 2020, when the population shrank by 182,000 and caused a first-ever loss of a congressional seat. More tellingly, over 265 companies moved their headquarters out between 2018 and 2021, with the rate of flight doubling just during those years.
Bear with me, for I fell way down the rabbit hole on this one. Based on interviews with current and former executives, congressional and legislative sources from both parties, past and present employment regulators, a handful of public and private litigators with knowledge of the relevant cases, and review of thousands of excruciating pages of court records, here’s the background to sensational cases like Riot Games, Activision, and Tesla that no one told you about — the story of the Lawyers Who Ate California: