Coca-Cola investors threaten suit over law firm diversity policy

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A group of shareholders of Coca-Cola Co threatened legal action against the company’s board on Friday unless it ends what they allege are illegal policies that the company adopted in January to promote diversity among outside lawyers.

A bottle of Coca-Cola in Encinitas, California. REUTERS/Mike Blake

The unidentified shareholders said Coke’s board breached its fiduciary duty to stockholders with the policy because it exposed investors to potentially material legal liability, according to the American Civil Rights Project, which represents the investors.

The advocacy group wrote to Coke’s board, claiming the diversity policy violates the Civil Rights Act and the Americans with Disabilities Act.

“Adoption and retention of the policies may give rise to suits by lawyers and their staff and also by the U.S. Department of Justice and any number of state attorneys general,” said the letter.

Coca-Cola did not immediately respond to a request for comment.

In January, Bradley Gayton, then the company’s general counsel, said that outside law firms handling new matters would have to commit to having at least 30% of billed associate and partner time be from diverse attorneys – people of color, LGBTQ people, women and people with disabilities.

At least half of that billed time would have to be from Black lawyers specifically.

Gayton resigned in April, after only eight months on the job.

The American Civil Rights Project also said the investors would use their corporate law rights to demand access to internal records to investigate if board members breached their fiduciary duties.

When such demands are rebuffed, it can lead to drawn-out and potentially costly legal battles. Walmart Inc spent years fighting its shareholders over access to corporate records regarding alleged bribery payments in Mexico.

For investors: Daniel Morenoff of the American Civil Rights Project