“The disclosure neither mentions Target’s upcoming 2023 Pride Month campaign nor Target’s plan to avoid any potential reputational damage or control negative publicity associated with the campaign,” the judge stated.
The investors argued that these omissions misled them about the risks, accusing Target and its board of betraying both its core customer base and shareholders with false or incomplete statements about its ESG and DEI strategies.
Target’s Defense
Target contended that the investors’ claims were baseless, arguing that the risks of backlash were already public due to the company’s history of LGBTQ+ support and prior controversies. It also stated that disagreement with business decisions does not constitute securities fraud.
However, Judge Badalamenti rejected this defense, pointing out that the specifics of the 2023 campaign were not publicly known and could be seen as a significant shift from previous practices.
“The court finds that — based on the totality of the information available to investors — it is premature to dismiss this case,” he said.
Scienter and Loss Causation
The judge also determined that the investors adequately alleged scienter, claiming that Target’s misrepresentations were either intentionally deceptive or recklessly made. Furthermore, he found sufficient evidence to link the alleged misstatements to the losses caused by the backlash.
Next Steps
The case now proceeds toward further litigation, with the court examining whether Target and its board acted unlawfully in handling disclosures about the campaign.