Noah Feldman, Columnist

Will Courts Prevent Investors From Holding Managers Accountable?

In Lee v. Fisher, the 9th Circuit is weighing whether The Gap, Inc. can be sued by a shareholder who says the retailer lied about its diversity metrics.

December 12, 2022 at 8:30 PM UTC

By Noah Feldman

Noah Feldman is a Bloomberg Opinion columnist. A professor of law at Harvard University, he is author, most recently, of “To Be a Jew Today: A New Guide to God, Israel, and the Jewish People."

Subject of a suit.
Photographer: Allison Dinner/Getty Images North America

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What if corporations could opt out of being sued by their shareholders? That’s the issue facing the US Court of Appeals for the Ninth Circuit, which on Dec. 12 gathered en banc to consider whether an earlier decision made by a subset of its judges was correct.

The case, Lee v. Fisher, started with a shareholder derivative suit against The Gap, Inc. A shareholder derivative suit is conventionally defined as one brought by a shareholder against senior management and directors on behalf of the company, with damages to be paid to the company. Brought under federal law — specifically, section 14(a) of the Securities Exchange Act — the suit alleges that the Gap lied in its proxy statements about its level of workplace diversity.