The $62 billion company behind 'Call of Duty' is embroiled in a major sexual harassment lawsuit. Here's what's going on.

• The game company behind "Call of Duty" and "Diablo" is being sued by the state of California.
• A two-year investigation into the company found a pervasive "frat boy" culture.
• Female employees faced "constant sexual harassment," the suit claims.

The blockbuster video game company behind some of the world's biggest video game franchises is being sued by the state of California.

The suit - filed on July 20 to the Los Angeles Supreme Court - comes after two years of investigation conducted by California's Department of Fair Employment and Housing. It accuses "Call of Duty" maker Activision of fostering a "pervasive frat boy" culture where women are paid less for the same jobs that men perform, regularly face sexual harassment, and are targeted for reporting issues.

In particular, the suit claims that female employees face "constant sexual harassment," from "having to continually fend off unwanted sexual comments" to "being groped." When employees report issues to human resources and management, the suit says, no action is taken.

"The company's executives and human resources personnel knew of the harassment and failed to take reasonable steps to prevent the unlawful conduct," a press release from DFEH says, "and instead retaliated against women who complained."

What the lawsuit is about

The suit focuses on two primary violations - sexual harassment and discriminatory practices - and offers several examples of each.

"A newly promoted male supervisor delegated his responsibilities to his female subordinates in favor playing 'Call of Duty,'" the suit claims. One female employee who had taken on management responsibilities on the games team was told she couldn't be promoted by her male supervisor because, "she might get pregnant and like being a mom too much."

In the case of sexual harassment, female employees reported being hit on, having comments made about their breasts, and jokes about rape being made at work. In one example cited in the lawsuit, "a female employee committed suicide while on a company trip due to a sexual relationship she had been having with her male supervisor."

In the wake of California's DFEH making the litigation public, several Activision executives have stepped down - including the head of beloved "Diablo" studio Blizzard Entertainment, J. Allen Brack, and the company's head of human resources.

An additional lawsuit, on behalf of investors, was filed in early August by Rosen Law Firm. It seeks unspecified damages on behalf of Activision investors, who it says were misled by Activision executives as a result of not disclosing details about workplace culture detailed in the DFEH lawsuit.

Activision's initially defiant response

Meanwhile, Activision's official statement on the lawsuit took a defiant tone.

"The DFEH includes distorted, and in many cases false, descriptions of Blizzard's past," the statement said. "We have been extremely cooperative with the DFEH throughout their investigation, including providing them with extensive data and ample documentation, but they refused to inform us what issues they perceived."

Moreover, Activision's statement called the investigation, "irresponsible behavior from unaccountable State bureaucrats," and claimed that these types of investigations are, "driving many of the State's best businesses out of California."

A similarly defiant email was circulated internally by chief compliance officer Fran Townsend, a former Homeland Security advisor to President George W. Bush.

"A recently filed lawsuit presented a distorted and untrue picture of our company, including factually incorrect, old, and out of context stories," Townsend said in an email to employees. "We cannot let egregious actions of others, and a truly meritless and irresponsible lawsuit, damage our culture of respect and equal opportunity for all employees."

Activision employees protest

In response, more than 2,000 of Activision's approximately 9,500 employees signed a letter to the company's management criticising its response to the lawsuit.

"To put it clearly and unequivocally, our values as employees are not accurately reflected in the words and actions of our leadership," the letter, which was published on July 26, said. "Categorizing the claims that have been made as 'distorted, and in many cases false' creates a company atmosphere that disbelieves victims."

Activision CEO Bobby Kotick responded a day later, on July 27, with an apology to employees.

"Our initial responses to the issues we face together, and to your concerns, were, quite frankly, tone deaf," he wrote. "It is imperative that we acknowledge all perspectives and experiences and respect the feelings of those who have been mistreated in any way. I am sorry that we did not provide the right empathy and understanding."

Kotick also promised to clean house by terminating, "anyone found to have impeded the integrity of our processes for evaluating claims and imposing appropriate consequences."

The following day, on July 28, Activision employees staged a walkout and demanded changes at the company.

"We stand by the victims and are appalled by what we read," a walkout representative told The Verge. "This only makes us more committed to our task."

Activision stock value has taken a major hit since the lawsuit went public, to the tune of nearly $8 billion, and it has yet to bounce back.

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