Defending Litigation Attacks on DEI Programs: A Status Update

At a Glance

• Before the Supreme Court’s ruling in Students for Fair Admissions vs. Harvard, four Fortune 150 companies were sued over their diversity, equity and inclusion, and environmental, social and governance practices. This alert provides an update on those cases.

As we noted in our prior alert, the American Alliance for Equal Rights (Alliance), following the U.S. Supreme Court’s June opinion in Students for Fair Admissions vs. Harvard (SFFA), has sued two large law firms alleging that the fellowship programs they offered to law students violated Section 1981 of the Civil Rights Act of 1866 (Section 1981). But as an earlier alert recognized, law firms are not the only targets of these emerging types of claims, as many prominent businesses — including Fortune 150 stalwarts Starbucks, Amazon, Pfizer and Comcast — faced legal scrutiny regarding their diversity, equity and inclusion (DEI) and environmental, social and governance (ESG) practices even before the SFFA decision. Below, we describe how four notable pre-SFFA cases have proceeded.

• Pfizer. As we’ve previously discussed, in September 2022, a group of anonymous physicians, healthcare professionals, medical students, patients and policymakers — organized as “Do No Harm” in early 2022 — filed suit in the U.S. District Court for the Southern District of New York against Pfizer, seeking to block further implementation of the company’s Breakthrough Fellowship Program (BFP).¹ This program, which was designed to address gaps in recruiting, retaining, and promoting students and young professionals of “Black/African American, Latino/Hispanic and Native American” descent, was challenged as “categorically” discriminating against white and Asian American applicants through claims under Section 1981, Title VI, and other federal, state and city laws. In denying Do No Harm’s emergency motion for a preliminary injunction, Judge Jennifer L. Rochon most notably held that Do No Harm lacked “associational standing” to bring its federal claims. By failing to name any of its members, the organization was unable to establish that at least one identified member had suffered or would suffer harm. Further, Do No Harm was also unable to demonstrate that any of its members were “ready and able” to apply to the BFP or able to meet the minimum program qualifications. Do No Harm has appealed the District Court’s decision to the Second Circuit.² While the appeal is pending, Pfizer’s description of the BFP now reads that it “works to advance students with demonstrated commitment and ability to advance diversity, equity and inclusion for Black/African American, Latino/Hispanic and Native Americans at Pfizer.”³
• Starbucks. In August 2022, Starbucks and certain of its officers and directors were sued in state court (which Starbucks removed to the U.S. District Court for the Eastern District of Washington) by the National Center for Public Policy Research (NCPPR) for setting hiring goals for people of color, awarding contracts to diverse suppliers, and fixing some executive pay to diversity benchmarks.⁴ In its essentially stockholder derivative suit (it owns 56 shares of the approximately 1.15 billion outstanding shares of Starbucks), NCPPR sought a declaratory judgment regarding the legality of these policies, contending that they violated Section 1981, Title VII, the civil rights acts of several states and exposed Starbucks to material liabilities. Additionally, NCPPR contended that the implementation of these policies breached various duties and obligations to shareholders. Since our last alert discussing this case, however, a September 11, 2023, order (confirming an August 11 oral ruling) granted the defendants’ motion to dismiss with prejudice and right for Starbucks to seek recovery of its legal fees, holding that the issues raised by NCPPR had “no business being before this Court” and noting that “[w]hether DEI and ESG initiatives are good for addressing long simmering inequalities in American society is up for the political branches to decide.” In short, Chief Judge Stanley A. Bastian held that “a corporation’s board of directors have exclusive authority to make decisions concerning the management of the corporation’s business,” and NCPPR’s suit exceeded these bounds.
• Amazon. In July 2022, Amazon was served with a class action lawsuit in the U.S. District Court for the Eastern District of Texas for its delivery service partners (DSP) agreements.⁵ The complaint alleged that Amazon racially discriminates against whites and Asian Americans by allegedly providing a $10,000 stipend only to “Black, Latinx and Native American entrepreneurs” who work as its delivery service partners. Specifically, the suit contends that these stipends violate Section 1981 of the Civil Rights Act of 1866 (Section 1981), which prohibits certain types of racial discrimination in contracting. The plaintiff alleges that she “cannot apply to…become an Amazon delivery service partner without subjecting herself to racial discrimination.” Amazon, however, has moved to dismiss the complaint, contending, among other things, that the plaintiff lacks Article III standing to bring her claim because she alleges that she “wishes” to participate in the program but further alleges discrimination “as between people who are already DSP owners,” which plaintiff is not. Amazon further argues that “it remains purely speculative as to whether she would ever be offered a contract” which “is fatal to her claim.” Fully briefed as of May 15, 2023, the court has taken the motion under submission to further consider the motion. Stay tuned.
• Comcast. In April 2022, four individuals sued Comcast in the U.S. District Court of the Southern District of Indiana for operating the RISE program, which was offered to businesses primarily owned and operated by someone who identified as a person of color or a female, and which provided selected businesses various tools and resources.⁶ As in the Amazon case, the plaintiffs in the Comcast matter alleged violations of Section 1981, seeking a preliminary injunction and contending that the RISE program discriminated against them. But District Court Judge James Patrick Hanlon — in a June 2022 opinion preceding SFFA by nearly a year — denied the plaintiffs’ motion, declining to find “irreparable harm inherent or presumed in a private company’s use of racial classifications” and finding that the plaintiffs did not “allege that they have been singled out among white male small-business owners,” did not identify any “personal reputational or dignitary harm,” and did not argue “that their businesses will suffer irreparable harm from the loss of RISE services.” In December 2022, the parties stipulated to dismissal, and, in the meantime, the RISE program has now “expanded to include all small business owners, while maintaining a focus on diversity inclusion and community investment.”

As these four cases preceding SFFA demonstrate, organizations attacking various DEI and ESG initiatives will assert assorted grounds for relief, and businesses and organizations should be prepared to assert appropriate defenses, including that individual or association plaintiffs lack standing to bring suit. While this approach has steadily garnered some success in these types of suits to date, be on the lookout for a future alert discussing in-depth the myriad defenses that have been asserted in these cases.