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Landmark Settlement Approved in Shareholder Suits Against Victoria’s Secret’s Parent, L Brands

June 2022

Just two years after the New York Times exposed pervasive sexual harassment at Victoria’s Secret, Judge Watson in the Southern District of Ohio granted final approval of a landmark settlement between our client and other shareholders, and Victoria’s Secret’s parent company, L Brands.  On May 16, 2022, the Court approved the settlement resolving shareholder claims against the company arising out of the “toxic culture of sexual harassment and misogyny” that had “plagued the company and Victoria's Secret for decades.”  This groundbreaking settlement requires L Brands to implement significant corporate governance reforms for years to come.

            Mere days after the New York Times published its in-depth exposé in February 2020, Quinn Emanuel served a books and records demand on L Brands on behalf of a shareholder client to investigate the wrongdoing.  The books and records demand sought evidence of the board’s failure to address the hostile work environment at Victoria’s Secret that was perpetuated by top executives at the company.  Due to the company’s failure to produce any documents in response to the fairly routine demand—brought under Section 220 of the Delaware General Corporation Law—Quinn Emanuel’s next step was to file a Section 220 action in the Delaware Court of Chancery to compel the production of such documents.

            The parties litigated the action for months, including through document discovery and depositions.  Only after Quinn Emanuel filed its pre-trial brief did the company agree to produce a subset of the documents requested back in February in order to avoid a trial in the matter.  Quinn Emanuel teamed up with lawyers at other firms, including Bernstein Liebhard, Cohen Milstein, and Bernstein Litowitz Berger & Grossmann, which represented additional shareholders, to mediate the global dispute with L Brands.  After months of hard-fought negotiations over the corporate governance reforms needed to address past harms and prevent them from continuing in the future, the parties agreed to a groundbreaking settlement.

            In the settlement—the first of its kind for a company like L Brands, which counted prominent consumer brands like Victoria’s Secret among its main assets—the company agreed to revamp its policies and procedures regarding sexual harassment, retaliation, reporting and investigation of such complaints.  L Brands has agreed to commit $90 million to fund these reforms across L Brands and Victoria’s Secret, which has since been spun off into a separate entity.  These reforms include enhanced policies and procedures around sexual harassment, anti-retaliation, and reporting and investigating sexual harassment complaints, the elimination of Non-Disclosure Agreements (NDAs) and an agreement not to enforce past NDAs, and greater protection for models on the set of Victoria’s Secret photoshoots.  The company has also made a commitment to promote diversity, equity, and inclusion in the workplace, and will use data metrics relating to harassment, retaliation, and inclusion to ensure that those goals are being met.

            In approving the settlement, Judge Watson found that the shareholders conducted “comprehensive investigations,” engaged in “significant discovery”—including reviews of L Brands’ policies and protocols, special committee minutes, severance and settlement agreements, and internal complaints—and held “protracted arm’s length negotiations” with the Company before reaching the settlement.  Judge Watson also found that counsel’s extensive experience and the “substantial benefit” the Settlement confers weighed in favor of final approval.  In granting final approval of the settlement, Judge Watson agreed that the game-changing settlement is fair and reasonable and would benefit L Brands stockholders and the Company.