Bench Memos

Law & the Courts

Racial Discrimination Goes Better With Coke?

Coca-Cola’s new general counsel Bradley Gayton recently announced a new set of diversity guidelines for outside counsel. Under these guidelines, outside counsel will commit that for any new matter “at least 30% of each of billed associate and partner time will be from diverse attorneys, and of such amounts at least half will be from Black attorneys.” If outside counsel fails to meet the commitment over two quarters, it will incur “a non-refundable 30% reduction in the fees payable for such New Matter going forward until the commitment is met.”

The guidelines state that their “minimum commitments will be adjusted over time as U.S. census data evolves.” Gayton invoked the diversity dogma to justify them: The “issue of diversity and inclusion [is] a business imperative,” and the legal profession “needs to be representative of the population it serves.”

In announcing these new guidelines, Gayton observed that the countless diversity efforts that have been made up until now “are not working.” I wonder, though, if there is any better reason to expect these new guidelines to work. I further wonder how their explicit adoption of racially discriminatory criteria is lawful.

1. Let’s start with how the guidelines would operate. For purposes of illustration, I’ll focus on the minimum quotas for time billed by black attorneys.

Assume that for a new matter a law firm anticipates billing Coca-Cola for 1200 hours of associate time at $300 per hour and 600 hours of partner time at $600 per hour, evenly distributed over the course of a year, for a total fee of $720,000. In order to meet its commitments under the guidelines, 180 hours of associate time and 90 hours of partner time would need to be billed by black attorneys. If the law firm failed to meet its pro rata commitment over the first two quarters, its third-quarter fee of $180,000 would be reduced by $54,000.

Coca-Cola’s guidelines have the purpose and effect of dramatically increasing the value to the law firm of time billed by black attorneys. In my example, the law firm would need to bill 45 hours of black associate time, or $13,500, each of the first two quarters. If it failed to meet that minimum, it would forfeit four times that amount for the third quarter (and potentially for the fourth as well). In other words, it’s worth an additional $54,000 to the law firm (and potentially double that amount) to make sure that black associates meet the quota.

Likewise for black partner time: The law firm would need to bill 22.5 hours of black partner time—also $13,500 under my numbers—each of the first two quarters. If it failed to meet that minimum, it would forfeit four times that amount for the third quarter (and potentially for the fourth as well). It’s therefore worth an additional $54,000 to the law firm (and potentially double that amount) to make sure that black partners meet the quota. (I don’t think I’m doublecounting here, as the law firm would incur the 30% penalty if it fails to meet either the associate or the partner target.)

My hypothetical of course simplifies the numbers. But I’m confident—and Gayton is surely confident—that any law firm, using its own projections, would come to a similar conclusion. The guidelines “work” by giving law firms a huge artificial incentive to bill hours for black attorneys.

2. How would law firms meet these quotas for black attorneys?

The guidelines state that the quota of “at least” 15% of time billed by black attorneys is “approximately linked to U.S. Census population data.” But according to recent data only 5.9% of attorneys are black. The percentage of blacks among the attorneys with the credentials to be hired by the law firms that Coca-Cola typically enlists is probably much lower. But even if that percentage were the same 5.9%, that would mean that black attorneys would have to bill at more than two-and-a-half times their numbers in order to meet Coca-Cola’s quota.

What this means is that law firms doing work for Coca-Cola would be likely to consign black lawyers to Coca-Cola matters and deprive them of the breadth and quality of experience available to other lawyers. How is that a recipe for success?

One theoretical solution, of course, would be for law firms to hire black attorneys well above their numbers in the pool of attorneys. But no one familiar with the massive efforts that law firms have made over the decades to recruit and retain black lawyers could think that a promising approach. (The guidelines also contemplate that law firms could “work collaboratively” with minority law firms to “assemble matter teams that meet the commitments.”)

One big challenge in attracting and retaining highly qualified black attorneys is that the best and the brightest among them often have so many attractive alternatives: e.g., law professor, judge, general counsel. Being Coca-Cola’s “relationship partner” in the law firm might not rank high among their goals.

Gayton himself has recognized that there is a serious pipeline problem. In an interview last July reflecting on his diversity initiatives as a lawyer for Ford Motor Company, he stated:

It’s really important to me that we have a pipeline program. I came up with this idea to create a school [in inner-city Detroit] that would focus on nurturing and developing all the skills that are required to be an effective lawyer and get kids really excited about the possibility of going to law school.

There is also of course the broader question of who counts as black. Coca-Cola’s guidelines would encourage law firms to adopt a modern version of the “one drop” rule (under which a person with a single black ancestor, no matter how many generations back, is deemed black) and would also invite Rachel Dolezal-style impostors.

3. How are Coca-Cola’s new guidelines lawful?

Title VII of the Civil Rights Act of 1964 broadly prohibits employers from discriminating on the basis of race, including in assigning work. But that’s exactly what Coca-Cola would have law firms do.

It’s often thought that the Supreme Court’s anti-textual ruling in United Steelworkers v. Weber (1979) gives a green light to racial preferences that favor blacks. But the Court’s actual holding is much narrower than that:

Challenged here is the legality of an affirmative action plan — collectively bargained by an employer and a union — that reserves for black employees 50% of the openings in an in-plant craft training program until the percentage of black craft workers in the plant is commensurate with the percentage of blacks in the local labor force. The question for decision is whether Congress, in Title VII of the Civil Rights Act of 1964, left employers and unions in the private sector free to take such race-conscious steps to eliminate manifest racial imbalances in traditionally segregated job categories. We hold that Title VII does not prohibit such race-conscious affirmative action plans. [Emphasis added.]

While declining to “define in detail the line of demarcation between permissible and impermissible affirmative action plans,” the Court emphasized that the plan at issue was “a temporary measure” and was “not intended to maintain racial balance, but simply to eliminate a manifest racial imbalance” resulting from the systematic exclusion of blacks from craft unions.

Unlike craft workers in steel plants, the job category of law-firm lawyer has not been “traditionally segregated.” Far from adopting its guidelines as “a temporary measure” to “eliminate a manifest racial imbalance,” Coca-Cola contemplates that the guidelines will operate in perpetuity to achieve and “maintain racial balance.” Indeed, the guidelines explicitly state that their “minimum commitments will “be adjusted over time as U.S. Census data evolves.”

In short, there is little reason to think that the employment discrimination that Coca-Cola’s guidelines call for would fall within the Weber exception to Title VII. By incorporating its guidelines into its retention agreements with law firms, Coca-Cola might well face legal jeopardy for conspiring with those law firms to engage in unlawful racial discrimination.

For a more extensive analysis, see this article by Curt Levey on “The Legal Implications of Complying With Race- and Gender-Based Client Preferences.” Among other things, Levey points out that the diversity rationale that has been (controversially) recognized as a compelling interest in higher education has never been recognized as such in the workplace.

Coca-Cola’s law firms are also subject to the anti-discrimination laws of the various states in which they operate. Those laws might well provide separate bases of liability.

To be sure, Coca-Cola and its outside law firms might calculate that they will escape punishment for violating anti-discrimination laws, just as they’ve gotten away with their previous adoption of race-based measures. But such a scofflaw attitude would betray the ideals of the legal profession that Gayton purports to be advancing.

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