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September 10, 2024

Private Affirmative Action

Issues in Extending SFFA to the Private Sector

Joseph McDonald

The United States Supreme Court held that Harvard College and the University of North Carolina each violated the Equal Protection Clause of the Fourteenth Amendment of the U.S. Constitution and Title VI of the Civil Rights Act of 1964 in using race as a factor in their undergraduate admissions processes. Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, 600 U.S. 181 (2023) (“SFFA”). This spelled the end for state-funded affirmative action. Relying on SFFA, district courts have extended the decision ruling that similarly race-conscious programs violate the Fifth Amendment. The law is clear: Statefunded affirmative action is unconstitutional. But what about affirmative action in the private sector under Title VII and 42 U.S.C. §1981? In this article, I will examine several cases attempting to extend SFFA into the private sector, Justice Gorsuch’s theory supporting the strategy, and the standing issue that could result in widespread dismissals.

Title VII and § 1981: Government Officials Challenge Diversity Programs Without Success . . . So Far

SFFA stands for the proposition that state-funded affirmative action programs are unconstitutional. The decision has no legal effect on the private sector’s diversity, equity, and inclusion (DEI) programs and policies. However, the decision is influential nonetheless. Just two weeks after the SFFA decision was published, thirteen state attorneys general signed and issued a warning to the CEOs of Fortune 100 companies, threatening “serious legal consequences” for continued race-based employment preferences and diversity policies.” Specifically, the letter threatened litigation if companies employed racial quotas in hiring practices and preferences for contractors with diverse staff or minority leadership. The logic for the warning stemmed from Justice Gorsuch’s concurrence in SFFA where he reasoned that principles of individual equality in Title VI are parallel to Title VII and other laws restricting race-based discrimination in employment and contracting.

Justice Gorsuch’s theory is currently being litigated. In Roberts & Freedom Truck Dispatch v. Progressive Preferred Ins. Co., et al., a plaintiff brought a class action suit against Progressive Insurance alleging that the company’s grant program for Black entrepreneurs violates 42 U.S.C. § 1981. 1:23-cv-01597 (N.D. Ohio, 2024). At present, voluntary affirmative- action policies in the private sector are permissible under both Title VII and 42 U.S.C. § 1981. As the Equal Employment Opportunity Commission (EEOC) explained in its brief in Roberts, “Courts have interpreted section 1981 to allow voluntary race-based affirmative action as well, in employment and non-employment cases, guided by the framework established in the Supreme Court’s Title VII affirmative-action caselaw. . . . Reasonableness governs the process: once a Title VII-covered employer concludes, through a reasonable self-assessment, that it has a reasonable basis to take affirmative action, it can then take action that is reasonable in relation to the problems disclosed by the self-analysis to address the effects of past discrimination.”

Because the EEOC is charged by Congress to enforce Title VII and the agency maintains promulgated rules recognizing the reasonableness of affirmative action programs that remedy the effect of past racial discrimination, the EEOC’s interpretation of voluntary affirmative action in the private sector is the guiding authority. However, the Supreme Court’s several pending administrative law cases, including two consolidated cases whereby the Supreme Court could overturn the Chevron Doctrine, are all the more relevant to the future of affirmative action programs under Title VII and Section 1981.

Title VII and § 1981: Private Diversity Programs Remain Intact Despite Challenges

American Alliance for Equal Rights (AAER), an organization founded by Edward Blum who also founded SFFA, has spearheaded the effort to challenge diversity programs sponsored by law firms. AAER brought suit against Morisson & Foerster LLP, Perkins Coie LLP, and Winston & Strawn, alleging that each firm’s diversity clerkship program violated 42 U.S.C.§ 1981. AAER voluntarily dismissed each case after each firm amended fellowship eligibility language to include race-neutral terms. Adams and Reese received a pre-litigation demand and ended their diversity fellowship program.

AAER is not alone in these challenges to legal institutions. The Wisconsin Institute for Law & Liberty brought suit against the State Bar of Wisconsin, alleging that their diversity clerkship program is unconstitutional and constituted compelled speech and compelled association. Suhr v. Dietrich, No. 2:23-cv-01697- SCD (E.D. Wis. 2023). The parties settled, with the State Bar of Wisconsin amending program eligibility to include race-neutral eligibility language. However, the State Bar released a statement assuring members that “the diversity clerkship program is continuing without any change in its operation.” This appears to be the ongoing issue that conservative advocates face: The ongoing fear that even where eligibility language changes, DEI programs will remain race-conscious for the purpose of diversifying industry because affirmative action in the private sector is permissible.

Conservative groups have also challenged diversity programs outside of the legal industry. AAER brought suits against the Smithsonian Institute’s Latino Museum Studies Program and Fearless Fund Management challenging private diversity programs. E.g. American Alliance for Equal Rights v. Fearless Fund Management, No. 23-13138 (11th Cir. 2023). In Fearless Fund Management, plaintiff’s alleged that the defendant company’s small business grant violated Title VII and § 1981 because it was only available to Black women. Plaintiff sought injunctive relief, which the district court granted reasoning that the § 1981 was not likely to succeed because the program constituted protected speech. However, the district court struggled to clarify the conflict of law created by 303 Creative and Runyon. On appeal, the Eleventh Circuit reversed  and granted AAER’s motion for an injunction pending appeal, reasoning that the company did not provide expressive services and, “although the First Amendment protects the defendants’ right to promote beliefs about race, it does not give the defendants the right to exclude persons from a contractual regime based on their race.”

Do No Harm, a conservative medical advocacy group, has similarly filed suits against the National Association of Emergency Medical Technicians, the State of Montana, Vituity, and Pfizer.

Equal Protection Clause

Challenges under the Fifth and Fourteenth Amendment’s Equal Protection Clause, while present, are outnumbered by the types of Title VII and Section 1981 challenges described above. AAER sued the Director of the National Museum of the American Latino, a part of the Smithsonian institute, alleging that the museum’s internship program, in targeting Latino, Latina, and Latinx undergraduates, violates the Fifth Amendment’s Equal Protection Clause. American Alliance for Equal Rights v. Zamanillo, No. 1:24-cv-509-JMC (D.D.C. 2024). The museum settled a month later and revised the eligibility requirements to include students of all races and ethnicities.

In Mid-America Milling Company v. U.S. Department of Transportation, the plaintiff alleged that the Department of Transportation’s affirmative action program awarding contracts to minority-owned and woman-owned small businesses violates the Fifth Amendment’s Equal Protection Clause. No. 3:23-cv-00072-GFVT (E.D. Ky. 2023). After initial litigation regarding a temporary restraining order and preliminary injunction, the case has reached briefing on a motion to dismiss for lack of standing.

In Alliance for Fair Board Recruitment v. SEC, the Fifth Circuit rejected a constitutional challenge to the SEC’s approval of NASDAQ’s Board Diversity Rules, which requires companies listed on Nasdaq’s U.S. exchange to (1) publicly disclose board-level diversity statistics annually using a standardized template, and (2) have diverse directors or explain why they do not. 85 F.4th 226 (5th Cir. 2023). The plaintiff organization sought en banc review, after which 24 conservative state attorneys general filed amicus briefs supporting the request, arguing that the rule violates the Equal Protection Clause and states’ rights.

Future Litigation May Be Limited Due To Standing

While SFFA created binding precedent overturning affirmative action under Title VI, the Court’s discussion of membership organization standing appears to be a case-specific anomaly. The court found that SFFA had standing as an organization representative of its members for three reasons: (1) the members would otherwise have standing to sue in their own right; (2) the interests it sought to protect were germane to the organization’s purpose; and (3) neither the claim nor the relief requested required the participation of individual members in the lawsuit. At the time of filing, SFFA identified itself as a nonprofit organization with forty-seven members, but failed to identify a single member who would otherwise have standing to sue in their own right. Despite challenges to standing based on this failure to disclose a single qualified member at the time of filing, the Court chose not to further scrutinize or examine SFFA’s membership or operations.

Conservative groups have relied upon this litigation strategy, often to their demise. For example, in Do No Harm v. Pfizer, a conservative medical advocacy group challenged Pfizer’s diversity fellowship program, but the case was dismissed for lack of standing when the group failed to name at least one injured member. No. 1:22-cv-07908 (S.D.N.Y. 2022), aff’d, No. 23-15 (2d Cir. 2023). Plaintiff has petitioned for en banc review with four amicus briefs arguing that anonymity in sensitive cases with vulnerable plaintiffs is necessary and required disclosure violates the First Amendment. Dozens of live cases are addressing the issue of whether an anonymously or pseudonymously injured member can sufficiently establish an organization’s standing. For example, in American Alliance for Equal Rights v. Ivey, the court ordered AAER to confidentially disclose the identity of “Member A,” the alleged injured party, and submit briefing on why “Member A” should remain anonymous. No. 2:24-cv-00104-RAH-JTA (M.D. Ala. 2024).

Standing has taken center stage in challenges to affirmative action policies in the private sector and thus far, courts are more suspect of anonymous and pseudonymous members than the SFFA Court.

Conclusion

Challenges to diversity programs in all of their iterations are in limbo. Affirmative action programs under Title VII and Section § 1981 currently remain permissible, but circuit splits are bound to appear. Underneath these Title VII challenges is a tenuous future for Chevron and the EEOC’s continued authority to promulgate rules permitting voluntary affirmative action programs in the private sector. And at the heart of these political efforts is a standing analysis suspicious of opaque advocacy organizations who bring suit under confidential pseudonyms.

 

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    Joseph McDonald

    Founder, McDonald Legal Practice LLC

    Joseph McDonald is the founder of McDonald Legal Practice LLC. He maintains a criminal and civil litigation practice. He has taught for the University of Wisconsin-Madison Law School and School of Education and engages in extensive pro bono legal aid. He currently lives in Germany on military relocation with his wife, Maj. Dr. Kat Weber.