DEI Claims in Higher Education: Why Control over the Claims Resolution Process Matters and What Universities Need to Know to Maximize Their Influence over the Outcome

Natasha Romagnoli and Anna K. Milunas

When more than just university dollars are at stake, understanding and maximizing control over the claims resolution process in advance is essential for higher education policyholders.

Diversity, equity, and inclusion (“DEI”) have always been controversial topics at colleges and universities, but the last several years have seen DEI debates amplified to the greatest degree as more educational institutions take open and affirmative steps toward addressing discrimination and intolerance on campus.

At a time when issues of racial injustice and implicit bias are so much in the forefront of the national conscious, even nascent allegations of student or employee discrimination (or reverse discrimination) can subject institutions to instantaneous and major public relations (“PR”) crises that come at a great cost to a university’s reputation, which is paramount to its continued success.

Negative PR, however, is not the only thing schools must contend with in this new environment. Claims that universities and colleges have violated federal or state anti-discrimination laws, or failed to adhere to their own anti-discrimination or DEI policies, are now more than ever resulting in formal lawsuits, in addition to complaints filed with state anti-discrimination commissions and other similar oversight bodies.

Consider Smith College, for example, where a former employee plans to sue the school—in addition to filing a claim with the Massachusetts Commission Against Discrimination, for creating a “racially hostile workplace” after Smith mandated anti-bias training for its white employees in the aftermath of an alleged July 2018 racial profiling complaint by a student. Or a community college in San Diego, where five current and former Black employees are suing for a “palpable climate of anti-Blackness at Southwestern College.” DePaul University was sued twice in six months by Black professors for alleged discrimination in the form of “irregularities,” “increased scrutiny,” and “microaggressions” in the tenure track evaluation process that violated DePaul’s anti-discrimination policies. A former employee of Cal State University, Northridge also filed a lawsuit against the university for discrimination, harassment, retaliation, and failure to accommodate a disability. Further, in May 2020, U.S. District Court Judge Indira Talwani permitted a breach of contract and section 1981 claim by a former student disciplined by Harvard University for sexual assault to move forward against the university on grounds that the university racially discriminated against the student in its handling of a Title IX complaint.

These claims come at a significant cost to educational institutions—not only in terms of immediate crisis management response and defense costs—but in settlements, which are often expensive, multifaceted, and even at times, unconventional. The University of Iowa, for example, reportedly agreed to pay a former field hockey coach and her partner a total of $6.5 million to settle two discrimination lawsuits. New York University recently reached a settlement that reportedly involved an agreement to effectuate new anti-discrimination policies and training, in addition to maintaining records of discrimination complaints and the university’s response to them.

To read our full client alert, please click here.

Under Pressure to Diversify: Availability of D&O Coverage for Corporate Diversity Claims

Natasha Romagnoli and Hannah K. Ahn

With the recent rise in novel diversity lawsuits, which have targeted some of the leading companies across the country, and are sure to be a hot topic of litigation this year and beyond, policyholders are highly encouraged to review their existing directors and officers (“D&O”) insurance policies to ensure that they have adequate protection in place to cover diversity claims.

If you are one of the more than 100 million people who watched the Super Bowl, you noticed that companies are starting to be more vocal about the importance of diversity. With ads featuring all Black actors and more modern families, companies are celebrating inclusion and promising to join the fight to end systemic racism. The NFL itself is a prime example of this change in messaging. Years after Colin Kaepernick faced backlash for kneeling to protest inequality, the NFL ran its own ad this year that highlighted its pledge to spend $250 million to end racism.

Talk of diversity and inclusion has been growing—and growing more insistent—starting with the first Black Lives Matter protests in 2013 and building to last year’s protests following the murder of George Floyd, who died while being forcibly detained by Minneapolis police. Despite their messages of support for diversity and inclusion, however, many companies have struggled to promote diversity in their own ranks, especially with respect to their boards of directors and C-suite executives. But consumers and investors alike are now pressuring companies to meaningfully respond to their demands for internal change. Of late, this includes shareholder derivative lawsuits that use federal securities law not only to target the company’s lack of success in diversifying, but also to challenge the commitment of the company’s directors and officers to enact change. These novel “diversity lawsuits” open a new realm of potential liability, in addition to forcing companies to consider how to promote diversity in their ranks and respond to internal and customer demands for change.

While there have only been a handful of diversity lawsuits filed as of today’s date, the allegations against some of the best known names in business, like Facebook, Oracle, and Monster Beverages, could easily apply to other publicly-traded companies across the country. The individual details vary from case to case, but the common charge against the directors and officers of the sued companies is that they breached their fiduciary duties and violated Section 14(a) of the federal Securities Exchange Act by failing to include diverse directors on their boards and in their senior executive ranks, while at the same time touting their commitment to diversity, equality, and inclusion in the company’s proxy statements and other corporate publications. Corporate counsel can forget about their old playbook for dealing with employee discrimination complaints or outside groups threatening a boycott. This is new legal terrain being staked out by stakeholders in companies (in some cases, institutional investors) and the class action lawyers representing them.

To read our full client alert, please click here.

This client alert was reprinted in Wolters Kluwer Legal & Regulatory Solutions U.S. in April 2021.