A shareholder has launched a legal battle against the board of directors and executive officers of a prominent educational technology company, accusing them of serious misconduct. On December 1, 2025, David Murphy filed a verified stockholder derivative complaint in the United States District Court for the Eastern District of Virginia against Stride, Inc., its board members, and executives. The lawsuit alleges breaches of fiduciary duties, gross mismanagement, waste of corporate assets, unjust enrichment, and violations of federal securities laws.
According to the complaint, Murphy claims that between October 22, 2024, and October 28, 2025, Stride’s leadership engaged in a series of misleading practices that misrepresented the company’s financial health and operations. The plaintiff argues that Stride inflated enrollment numbers using “ghost students,” cut staffing costs below statutory limits, ignored compliance requirements such as background checks and licensure laws for employees, and lost student enrollments. These actions allegedly led to materially false statements about the company’s success as an educational platform provider across the United States.
The complaint highlights specific instances where Stride’s CEO James Rhyu and CFO Donna Blackman made public statements projecting robust growth and profitability for the company while concealing these alleged issues. For example, on August 5, 2025, during a call with analysts discussing quarterly results, Rhyu boasted about double-digit enrollment growth projections without disclosing internal challenges affecting customer satisfaction and retention.
Murphy seeks several forms of relief from the court on behalf of Stride. He requests damages to compensate for harm caused by defendants’ actions and equitable relief to address governance failures within the company. Additionally, he demands restitution from defendants who were unjustly enriched through bonuses or compensation tied to inflated performance metrics.
Representing Murphy are attorneys Matthew T. Sutter from Sutter & Terpak PLLC in Virginia and Shane T. Rowley along with Danielle Rowland Lindahl from Rowley Law PLLC in New York. The case is presided over by Judge (name not provided) under Case ID: 1:25-cv-02222.
Source: 125cv02222_Murphy_v_Rhyu_Complaint_Eastern_District_Virginia.pdf
