By Mike Scarcella
(Reuters) -Target has failed to persuade a judge in Florida to dismiss a lawsuit that accused the retailer of deceiving shareholders after its sales of LGBTQ-themed merchandise for Pride Month sparked a backlash and a customer boycott.
U.S. District Judge John Badalamenti in Fort Myers ruled that the plaintiffs had presented enough information for now to pursue claims that Target (NYSE:TGT) misled investors about its efforts to guard against social and political risks.
The lawsuit from investor Brian Craig claims that Target's board focused only on activist groups' calls for diversity, equity and inclusion (DEI) measures and overlooked potential negative responses to the Pride campaign in May 2023.
Target did not immediately respond to a request for comment on Wednesday.
America First Legal, the conservative group that filed the lawsuit last year, in a statement on Wednesday called the court ruling a "warning to publicly traded corporations’ boards and management." The group said the risk of DEI programs and environmental, social, and governance (ESG) initiatives "cannot be whitewashed with boilerplate language or ignored."
Target had urged Badalamenti to dismiss the lawsuit, arguing that there was no evidence backing the allegations, that it had warned investors about a potential DEI backlash, and that the complaint was based merely on Craig's disagreement with the company’s business decisions.
America First filed the lawsuit in Florida federal court in August 2023. The nonprofit group is headed by Stephen Miller, a close adviser to U.S. President-elect Donald Trump.
America First and other conservative groups have accused some major U.S. companies of undertaking diversity and inclusion efforts at the expense of shareholders.
Target pulled some LGBTQ-themed merchandise linked to Pride Month last year, citing increased confrontations between shoppers and employees and incidents of products being thrown on the floor.