MIAMI, FLORIDA – JUNE 01: (L-R) Michelle Terris, Jill Dahne, and Marlene (did not want to provide … [+]
The legal battle against corporate diversity, equity and inclusion policies and related initiatives has escalated as the state of Florida filed a security fraud lawsuit against Target and Missouri sued Starbucks for violating federal and state civil rights laws.
DEI became a hot button issue after the Supreme Court ruled against Harvard University’s affirmative action admission policies in 2023 with implications for corporate hiring policies. It picked up political steam after President Trump signed an executive order against federal government DEI programs.
Part of that EO directed “all departments and agencies to take strong action to end private sector DEI discrimination, including civil compliance investigations.” Answering that call, the Justice Department is preparing a report to be presented on March 1 to identify steps, including possible criminal investigations, to “deter the use of DEI programs or principles that constitute illegal discrimination or preferences” in the private sector.
Adding more firepower to the White House’s anti-DEI efforts is the outspoken Stephen Miller, founder of America First Legal and now President Trump’s deputy chief of staff for policy. AFL is a partner in the Target lawsuit, and it has identified 45 companies that may violate federal anti-discrimination laws.
Among the retailers included on that hit list are Amazon, Dick’s Sporting Goods, Kontoor Brands, Macy’s, McDonald’s, Nike, Nordstrom, Shake Shake, Starbucks, Target, Walt Disney, Williams Sonoma and Yum! Brands.
Target Is Targeted
Just weeks after the Florida the City of Riviera Beach Police Pension Fund filed a class action lawsuit against Target claiming it defrauded investors by issuing “false and misleading” statements concerning actions supporting the company’s diversity, equity and inclusion mandates, the State of Florida upped the ante in a securities fraud lawsuit on similar grounds.
The State Board of Administration of Florida, which manages the state’s public pension fund, claims Target misled investors about the risks of its 2023 Pride Month merchandise line in financial reports and proxy statements.
The suit claims a consumer backlash against the company caused the loss of “tens of billions of dollars” for shareholders. It called the 2023 Pride Month displays “exceptionally offensive.” Target got the memo and withdrew displays in a number of its stores and ratcheted down its Pride merchandise selection in 2024.
“Target’s efforts to sexualize children caused its stock price to plummet,” Florida Attorney General James Uthmeier said in a post on X.
In a formal statement, Uthmeier warned, “Corporations that push radical leftist ideology at the expense of financial returns jeopardize the retirement security of Florida’s first responders and teachers. My office will stridently pursue corporate reform so that companies get back to the business of doing business—not offensive political theatre.”
As of posting, Target has made no statement about this suit.
Companies On Notice
Reuters reports Florida’s action is the first shareholder lawsuit by a U.S. state against “mismanagement of diversity, equity and inclusion matters.” But more may be coming as AFL’s senior vice president Reed Rubinstein warned, “America First Legal is proud to continue this fight.”
In July 2023, the Attorneys General of 13 states sent a letter to the CEOs of Fortune 100 companies stating that “discriminating on the basis of race, whether under the label of ‘diversity, equity and inclusion’” is against federal and state law and warned them they may face “serious legal consequences” if found to engage in racial discrimination.
Attorneys General from Alabama, Arkansas, Indiana, Iowa, Kansas, Kentucky, Mississippi, Missouri, Montana, Nebraska, South Carolina, Tennessee and West Virginia signed that letter. Now Missouri’s Andrew Bailey has made good on his promise.
Missouri Goes After Starbucks
The State of Missouri filed suit on February 11 claiming Starbucks violated federal and state laws against discriminating on race and sex. It alleged Starbucks enforced “race-and-sex based hiring practices, unlawfully segregates employees and provides exclusive training and employment benefits to select groups in violation of anti-discrimination laws.”
Taking his cue from the Supreme Court ruling banning race-based college admissions, Attorney General Bailey said the same principles apply to employment decisions. He asserted Starbucks links executive compensation to “racial and gender quotas” and that it discriminates on race and gender grounds in board membership.
“With Starbucks’ discriminatory patterns, practices, and policies, Missouri’s consumers are required to pay higher prices and wait longer for goods and services that could be provided for less had Starbucks employed the most qualified workers, regardless of their race, color, sex, or national origin,” he said in a statement as he argues for merit-based hiring and employment decisions, a position endorsed by President Trump in his executive order.
Starbucks disputes the suit’s allegations. “We disagree with the attorney general and these allegations are inaccurate,” it said in a statement to Reuters. “We are deeply committed to creating opportunity for every single one of our partners (employees). Our programs and benefits are open to everyone and lawful.”
Retailers Are On Uncertain Legal Ground
National retailers face growing risks from DEI policies which only a few years ago were considered the socially-responsible thing to do and good for business. But now DEI has become a political and social minefield.
Public opinion is divided but so far mostly positive. Last year, Pew found a majority of Americans (52%) believe DEI is a good thing versus only 21% saying it is a bad thing, but that was before the heightened rhetoric against DEI after President Trump’s executive order.
Seeing the writing on the wall, many retailers have dialed back their DEI programs, including Amazon, Walmart, Lowe’s, McDonald’s, Tractor Supply and Target. While others, notably Costco, Kroger, Giant, and Trader Joe’s, remain committed to their DEI policies and believe they do not violate federal or state laws.
University of Michigan assistant professor of marketing Marcus Collins told Supermarket News, “I think brands that aren’t as committed but don’t want to face backlash, boycotts, or loss of business are more likely to wait it out until they are forced to make a decision.”
But they may not want to wait till then to make that decision, given the costs associated with litigation and potentially damaging publicity.
Even if a company’s public statements on DEI have been carefully vetted by attorneys and PR professionals, the company could still be held accountable for private employee statements in emails and other communications that are uncovered during the discovery process in a lawsuit.
“Companies may have internal communications suggesting or even confirming that some hiring or promotion decisions were made on the basis of race or gender, which would violate federal anti-discrimination laws,” Dorsey and Whitney attorney Aaron Goldstein told CNN and warned “prepare for more lawsuits like this.”
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