There may be a conflict of interests that are muddying the waters.
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Stick with me on this, because this is probably going to be a little confusing. At the end of September 2021, Activision Blizzard settled a lawsuit brought on by the U.S. Equal Employment Opportunity Commission (EEOC) for the lowly amount of $18 million (USD). This lawsuit would be used to "compensate and make amends" for employees impacted by the rampant sexual discrimination and harassment that has been well documented by now.

This was all well and good, right? Well, apparently not. New information has surfaced about the legal battle between the EEOC and Activision Blizzard that shows potential ethical violations may have occurred that may have an impact on the other lawsuit between Activision Blizzard and California's Department for Employment and Housing (DFEH).

This conflict of interest was first noted by PC Gamer. According to their report, the DFEH objected to the settlement between Activision Blizzard and the EEOC on the basis that the terms of the settlement could lock away evidence that is necessary to their own case. It could also possibly cause harm to their (DFEH's) lawsuit against Activision Blizzard.

"The proposed consent decree also contains provisions sanctioning the effective destruction and/or tampering of evidence critical to the DFEH's case, such as personnel files and other documents referencing sexual harassment, retaliation and discrimination."
A response filed by the EEOC to DFEH's complaint included a number of points that oppose the DFEH's appeal. It also contained a major revelation that really muddies the waters: The short of it is that the DFEH case has been led by two lawyers who had previously worked for the EEOC. While working for the EEOC they had investigated Activision Blizzard in relation to the claims that eventually led to the previously mentioned settlement. Yes, the very same settlement that they are now objecting to.

So if this is all true, it would be a massive conflict of interest, plus a breach of professional ethics, plus a violation of California law that deals with the conduct of attorneys.

"Specifically, two DFEH attorneys—who play leadership roles within the organization—previously served as EEOC who helped to direct the EEOC's investigation into Commissioner's Charge No. 480-2018-05212 against Activision Blizzard, Inc. These same attorneys then proceeded to represent DFEH in connection with these intervention proceedings, which seek to oppose the consent decree that arose out of the very investigation they helped to direct while at the EEOC."
The DFEH seems to have realized their potential breach of the California Rule of Professional Conduct as they attempted to get out of the issue by claiming they had hired new lawyers.

"After being informed of this conflict, DFEH retained new counsel but appears to have filed the present intervention motion just hours after this counsel was retained, strongly suggesting that the motion is a product of the prohibited representation. For this reason, the intervention motion should be disallowed and DFEH attorneys should be barred from providing work product to, or advising, new counsel in connection with these intervention proceedings."
The two lawyers at the heart of this issue were apparently confronted by the EEOC about this conflict of interest prior to the legal documents being filed. When this happened, both lawyers apparently left the call.

"DFEH Attorney 2 began to speak regarding the merits of the intervention motion, but Ms. Park reiterated EEOC's objections regarding the conflict-of-interest rules [...] After EEOC counsel continued to voice objections to discussing the merits of the case with DFEH attorneys, Ms. Wipper and DFEH Attorneys 1 and 2 disconnected from the call."
Despite this just all focusing on just two specific lawyers, the entire legal department of the DFEH could be barred from pushing this objection forward. They say that the work done so far by the DFEH is now "a product of prohibited representation and should bar DFEH attorneys from providing work product or advice to current counsel relating to these proceedings." They also note that the current DFEH appeal against the EEOC's settlement should be thrown out. They also say that if the DFEH wants to continue their objection the new legal council should not have access to it.

"There can be no claim that there was timely 'isolation of [these] lawyer[s] from any participation' in representing DFEH in connection with the intervention proceedings, as would be necessary to show that timely screening took place. Thus, all DFEH attorneys were and should remain barred from representing DFEH in this matter."
PC Gamer provides some insight from a Harvard educated lawyer, Andrew Torrez, who runs the Opening Arguments podcast. Here is what Torrez has to say about all of this.

"The EEOC, understandably, freaked out [about the two lawyers]. DFEH quickly engaged outside counsel and put new folks in charge of the intervention, but if the facts are as they appear, the *entire* DFEH investigation may violate Rule 1.11(a)(2) of Calif. Rules of Prof Conduct which explicitly prohibit former governmental employees from "represent[ing] a client in connection with a matter in which the lawyer participated personally and substantially as a public official or employee" without prior written consent which apparently didn't happen. If DFEH just *failed to screen* the former EEOC lawyers, it's in trouble. But if it let those lawyers RUN THE INVESTIGATION OF ACTIVISION without permission from the EEOC, things are going to get very ugly. Can't wait to see DFEH's side!"
Another attorney, Richard Hoeg, says that this is all "a pretty massive thing, and if true, would call into question large portions of the DFEH process. It might even provide Activision with its own defense to the original suit."