Sokol, had resigned from Berkshire Hathaway in March, after revealing that he had bought shares of Lubrizol Corp before pitching it as a possible acquisition. He has also been named in the lawsuit.
According to various financial experts, Sokol's action reflected front running. Front running is an unethical practice of buying stocks of a company and then recommending it to clients.
The lawsuit was filed in Delaware's Chancery Court by Mason Kirby. It calls for Sokol to give up any improper gains to Berkshire.
On March 30, Berkshire had announced that Sokol had bought 96,000 Lubrizol shares in January. And then he had pitched the idea of buying the company and informed about owing the company's shares. The acquisition would have increased Sokol's stake in Lubrizol by $3 million. The acquisition was announced on March 14.
The lawsuit against Buffett and other directors, demands compensation to Berkshire for the damage they caused to the company's reputation and goodwill.
Warren Bufffett has led the conglomerate since 1965 and there are 80 companies which are now part of the group. And since the Sokol incident has been reported, many have tighter controls.
The complaint said, "Sokol's actions and Buffett's inaction significantly impaired the reputation of Berkshire and constituted breaches of their duty of loyalty to Berkshire and its shareholders."
Many legal experts have opined that Sokol's trading in Lubrizol could be charged with insider trading.
Sokol has said that he had no inside information and his Lubrizol purchases were not unethical. Both Sokol and Buffett have said they believe Sokol did nothing unlawful.