The lawsuit alleges that Darden Restaurants' board of directors misled shareholders by claiming that seafood chain was in decline and needed to be spun off, when in fact the business was poised for a rebound, CNBC reports.
The suit cites a confidential debt offering document from June 2014 in which Red Lobster, then part of Darden, assures that business is expected to improve.
"The management team believes that each of these issues are temporary in nature, correctable, and that they have plans in place to return the business to historic levels of profitability," the document said, according to CNBC.
The memorandum was used to market a $425 million loan to potential investors.
The lawsuit, which was filed by by Teamsters Local 443 Health Services & Insurance Plan of Connecticut, claims that Darden leadership misled shareholders in order to protect their roles on the board.
"The Board had very different, self-interested incentives when it downplayed Red Lobster's performance to Darden's shareholders," the lawsuit said, according to CNBC. "The Board knew at all relevant times that it was selling Red Lobster at an artificially low price to protect the Board members' directorships."
We reached out to Darden for comment on the lawsuit and will update when we hear back.