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July 22, 2019 Articles

Is Overstating a Commitment to Diversity a Deceptive Trade Practice?

Employers should be very careful in touting their accomplishments when it comes to diversity.

By Carmen D. Caruso and Linda C. Chatman

What if a firm’s public commitment to diversity is merely a charade by which the enterprise hopes to maintain a positive public image—an empty promise to win business from clients or customers that demand diversity at every level of their supply chain?

In 2015, a prominent North Carolina law firm actively recruited an African-American female lawyer by promising that the firm was diverse and inclusive. However, despite her impressive credentials, including two federal judicial clerkships at both district-court and court-of-appeals levels, the firm failed to view or treat her as a full-fledged attorney. On its web page, the firm claimed to have been a leader in the areas of diversity and inclusion in its region for more than a decade—but the firm failed to disclose contrary facts, e.g. a paltry total of 10 black attorneys ever being hired at the firm and the firm’s black lawyers being relegated to a segregated Christmas party for Blacks only. This lawyer sued her firm.

Besides her discrimination claims, this lawyer has made a novel claim for violation of North Carolina’s Uniform Deceptive Trade Practice Act (UDTPA). The UDTPA requires (1) an unfair or deceptive act or practice, (2) in or affecting commerce, (3) which proximately injured the plaintiff. N.C. Gen.Stat. § 75-1.1. Under the North Carolina UDTPA, “an act is deceptive if it has a tendency or capacity to deceive.” Rahamankhan Tobacco Enterprises Pvt. Ltd. v. Evans MacTavish Agricraft, Inc., 989 F. Supp. 2d 471, 477 (E.D.N.C. 2013) (citations omitted).

The question is, do webpages proclaiming a commitment to diversity, when that commitment is missing, have a “tendency to deceive” that could be actionable? In Mayes v. Moore, 419 F.Supp.2d 775 (M.D.N.C. 2006), a district court construing the North Carolina UDTPA held that an employer could face statutory liability for deceptively advertising the job the plaintiff was hired for when, after he was hired, he faced unwanted sexual advances and harassment. That court stated that where an employer was “misleading a prospective employee to induce him to accept employment and face harassment” could be actionable even if it “occurred before the employer-employee relationship existed.”

The federal court in Mayes held that employers risk statutory liability for unfair or deceptive trade practices if they misrepresent material conditions of prospective employment. And, as this article goes to press, another federal court in North Carolina must decide under Rule 12(b)(6) whether its plausible for a diverse lawyer to state a UDTPA claim for the law firm’s allegedly overstating its claimed commitment to diversity.

No doubt this claim will raise many issues for trial if the claim proceeds that far. For example, would a reasonable person have construed anything the law firm said as representing facts that could be relied on, e.g., that the firm has, for many years, had in place a successful program for diverse candidates to be included and succeed, as opposed to aspiration? And, must a law firm claiming to be diverse and inclusive disclose facts such as having its African American lawyers attend a segregated Christmas party—just in case someone relegated to a “separate but equal” holiday celebration might come away feeling less than included in the firm? And, how will a court measure the delta between lofty claims and reality? Will getting an “A for effort” be a defense even when reality falls far short of what was claimed?

These are tough issues the courts must sort out. No doubt, there is much disappointment with the present state of diversity programs—including disappointment with the number of diverse employees or partners being hired and retained, and nagging concern on achieving actual inclusion. Consequently, we are likely to see more deceptive-trade-practice claims brought by individuals or as class actions, and employers should be very careful in touting their accomplishments in this field. Where an enterprise deceptively misrepresents the achievements of its diversity program, deceived employees are not the only victims. Injuries extend to customers or clients placing business with that enterprise in partial reliance (or greater) upon the claimed commitment to diversity. With law firms, the injuries extend further to our profession and the public we serve. And perhaps, the true injuries begin with self-deception, when non-diverse decision-makers start to believe their promotional materials without doing the hard work to achieve real progress.

Note: The authors were co-counsel for the plaintiff in pending litigation relating to this article, which resulted in settlement.

Carmen D. Caruso is a trial lawyer with his own firm in Chicago, Illinois, and is a former cochair of the ABA Section of Litigation Civil Rights Litigation Committee. Linda C. Chatman is a trial lawyer in Chicago with her own firm.

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