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by Jennifer Gibbs

A recent lawsuit filed in the US District Court for the Southern District of New York—Sarria v. Telus International (Cda) Inc. et al., No. 1:25-cv-00889 (S.D.N.Y. Jan 30, 2025)—involves two distinct risks associated with AI-related disclosures: the dangers posed by action and inaction alike. The Telus lawsuit highlights not only the importance of legally compliant corporate disclosures, but also the dangers implicated by corporate transparency.

On January 30, 2025, a class action was brought against Telus International (CDA) Inc., a Canadian company, regarding allegations of failing to disclose crucial information about its AI initiatives. The lawsuit claims that Telus failed to inform stakeholders that its AI offerings required the “cannibalization” of higher-margin products, that profitability declines could result from its AI development and that the shift toward AI could exert greater pressure on company margins than had been disclosed. When these risks became reality, Telus’ stock dropped suddenly, and the lawsuit followed. According to the complaint, the omissions allegedly constitute violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.

The Telus lawsuit highlights potential liability for both understating and overstating AI-related risks (the latter often being referred to as “AI washing”). These risks are growing. Indeed, according to Cornerstone’s recent securities class action report, the pace of AI-related securities litigation has increased, with 15 filings in 2024 after only 7 such filings in 2023.

The integration and implementation of AI into the market presents both opportunities and challenges. Corporations may wish to navigate these complexities with care, ensuring transparency in AI-related disclosures while leveraging insurance and shareholder involvement to prevent and defend against potential liabilities.