Lawyers have said that, despite a recent courtroom victory, pressure will continue to mount on corporate diversity, equity and inclusion (DEI) policies, with more DEI litigation cases expected to come to court.
The warning comes barely a week after Starbucks won a case in which a judge dismissed a claim brought by a right-wing think tank—the National Center for Public Policy Research (NCPPR), a shareholder in Starbucks—that the coffee brand had introduced an anti-white DEI policy that breached state and federal civil rights laws.
This week, lawyers signal that more litigation is in the works against DEI policies and that companies should prepare.
Writing for the Harvard governance blog, Martin Lipton, of law firm Wachtell, Lipton, Rosen & Katz, says DEI policies remain in the sights of many campaigners.
“While the law with respect to DEI programs has not changed, scrutiny will likely continue. Companies need to be prepared to face potential claims, in the court of law and in other public arenas, regardless of the merits of the claim.
“The recent Starbucks decision is an important and helpful reminder of the need to ground assessments of DEI programs in an informed and deliberate exercise of business judgements,” he writes.
Lipton adds that initiatives to “cultivate” diverse talent and promote equal opportunities remain legal in the US and should not be conflated with “affirmative action”.
Affirmative reaction
In June, the US Supreme Court ruled that race could not be used as a factor in deciding college admissions, ending years of affirmative action, or positive discrimination, applied to university applications.
DEI has become a major focus for corporate America in the wake of the pandemic and Black Lives Matter protests, sparked by the murder of George Floyd in 2020 by a police officer in Minneapolis.
Many now see DEI as a fresh target for conservative political activists, with more lawsuits anticipated. Jason Schwartz, an employment lawyer with Gibson, Dunn & Crutcher, tells Law.com, a trade title: “The use of shareholder lawsuits in this area is a real stretch. But I expect they will keep coming.”
In his ruling, US district judge Stanley Bastian said the Starbucks lawsuit was focused on an issue for boards to decide, according to Reuters.
“If the plaintiff doesn’t want to be invested in ‘woke’ corporate America, perhaps it should seek other investment opportunities, rather than wasting this court’s time,” Bastian said.
The NCPPR has made DEI policies a point of attack in a campaign against what it views as “woke” policy making. Its website currently carries an invitation for readers to report the companies which “offend” them most.
After the Starbucks decision, NCPPR spokesman Scott Shepard said the organisation would continue to “pursue relief from illegal discrimination on behalf of shareholders and employees”.
Such is the interest in DEI that global consultants have given the topic their attention. McKinsey recently sent out a newsletter headlined: “How CEOs can make DEI a priority.”
But the most significant aspect of the issue is that DEI litigation against companies may be emerging as a new and potentially costly element in the conflict over corporate governance that has become a feature of US culture wars. It’s a sign that governance across the Atlantic will be politically contested ground at least until the next presidential election and possibly beyond.