Pop culture toy maker Funko has agreed to pay over $2.1 million in plaintiff legal fees to resolve litigation alleging that former Funko CEO Brian Mariotti and others leading the company breached their fiduciary duties via alleged “false and misleading statements to Funko stockholders and the public.”
In various lawsuits in California and Delaware, Funko executives and board members have been accused of withholding information about the company’s lower-than-expected sales, growth, operational difficulties and inventory management, including a risk that Funko may need to write off slow-moving inventory, according to a Funko press release Friday. The result, according to the plaintiffs, is that “the price of the Company’s securities was artificially inflated, causing harm to Funko.”
Moreover, the plaintiffs alleged that the “defendants were unjustly enriched, and that certain of the individual defendants sold their personally held shares of Funko stock at allegedly artificially inflated prices while purportedly in possession of material nonpublic information.”
Several lawsuits on these issues from recent years had been consolidated. In agreeing to the settlement, Mariotti and the other defendants “dispute the allegations in the litigation and enter into the Stipulation and Settlement without in any way acknowledging any fault, liability, or wrongdoing of any kind,” Funko said.
A hearing is scheduled for Nov. 15 to determine whether the notice to Funko stockholders passes muster with federal regulations and due process requirements, and whether the terms of the settlement “are fair, reasonable, and adequate.”
The various allegations date back to at least 2020. Other defendants, beside Mariotti, include board members Gino Dellomo, Michael Lunsford, Charles Denson, Adam Kriger, Ken Brotman, Sarah Kirshbaum Levy and Diane Irvine. Also named in some of the litigation are, in addition to Mariotti, former president Andrew Perlmutter and former chief financial officers Russell Nickel and Jennifer Fall Jung.
