Investors in The Home Depot Inc. have settled their shareholder derivative suit against members of the retailer’s board of directors over a 2014 customer data breach. The proposed settlement information was filed in a Georgia federal court. The shareholders, who had accused current and former members of the board of breaching their duty of loyalty to the home improvement retailer by not preventing or immediately remedying the data breach, agreed to a series of policy reforms to settle the lawsuit just months after the investors had filed an appeal in the Eleventh Circuit, according to the docket.
Among other things, the reforms include documenting the responsibilities of Home Depot’s chief information security officer, maintaining an executive committee focused on data security, and requiring regular reports on the retailer’s information technology budget, including how much of that is spent on cybersecurity measures, according to the proposed agreement. The investors said in the filing:
These provisions make data security a corporate focus and improve the company’s ability to prevent and respond to future attacks.
The settlement constitutes an appropriate resolution of this litigation of substantial complexity and is well within the range of possible approval, thereby satisfying the test courts typically employ in reviewing a settlement for preliminary approval.” The settlement also calls for Home Depot to pay up to $1.125 million in attorneys’ fees to the lawyers who represented the investors.
The suit filed in August 2015 relates to the massive customer security breach in 2014 that compromised the financial data of up to 56 million Home Depot customers, resulting in a net loss to the company of $152 million, with a total cost exposure as a result of the breach expected to reach nearly $10 billion. In the suit, shareholders Mary Lou Bennek and Cora Frohman claimed the board members had breached their duty of loyalty by failing to institute necessary controls to guard against a security breach or to take immediate measures to address one, court records show.
In November, however, U.S. District Judge Thomas W. Thrash Jr. dismissed the shareholders’ claims, finding they couldn’t pursue their derivative suit against current and former officers including former chairman and CEO Francis Blake and executive vice president and chief information officer Matthew Carey. The judge said the Plaintiffs could not show beyond a reasonable doubt that most of the board faces substantial liability because it “consciously failed to act in the face of a known duty to act.” Judge Thrash wrote in that decision, “This is an incredibly high hurdle for the Plaintiffs to overcome, and it is not surprising that they fail to do so.”
The shareholders are represented by Marshall P. Dees and Corey Daniel Holzer of Holzer & Holzer LLC, Stuart Jay Guber of Faruqi & Faruqi LLP, Kenneth Bryant Hodges III of Ken Hodges Law and Willem Frans Jonckheer, Miranda Kolbe, Noah Schubert and Robert Schubert of Schubert Jonckheer Kolbe & Kralowec LLP. The case is In re: The Home Depot Inc. Shareholder Derivative Litigation (case number 1:15-cv-2999) in the U.S. District Court for the Northern District of Georgia.
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.