Conservative Starbucks investor loses diversity challenge

By Jody Godoy

(Reuters) - (This Aug. 11 story has been corrected to say 'National Center for Public Policy Research v. Schultz et al., No. 22-00267, U.S. District Court, Eastern District of Washington,' not 'Craig v. Target Corp. et al., No. 23-00599, U.S. District Court, Middle District Of Florida,' in paragraph 16)

A U.S. judge on Friday dismissed as frivolous a conservative activist investor's lawsuit against Starbucks' board for the coffee chain's diversity, equity and inclusion policies.

The National Center for Public Policy Research (NCPPR) sued in August 2022 over Starbucks' setting hiring goals for Black and other people of color, awarding contracts to "diverse" suppliers and advertisers, and tying executive pay to diversity.

The nonprofit, which holds around $6,000 in Starbucks stock, said those policies require the company to make race-based decisions that violate federal and state civil rights laws.

Chief U.S. District Judge Stanley Bastian in Spokane, Washington, rejected the allegations at a hearing in the case on Friday, saying the lawsuit centered on public policy questions that are for lawmakers and corporations, not courts, to decide.

"If the plaintiff doesn't want to be invested in 'woke' corporate America, perhaps it should seek other investment opportunities rather than wasting this court's time," he said.

Starbucks said it was pleased with the decision and said it remains committed to "creating a culture of warmth and belonging."

Starbucks' attorney Gregory Watts argued at the hearing that NCPPR has condemned the "evils" perpetrated by "woke" corporate America, and that the group has made demands of many other corporations, including JPMorgan Chase and American Airlines Group Inc.

"The use of such language shows what is motivating plaintiffs, and it is not the business interests of Starbucks," he said.

The lawsuit is similar to those recently by conservative activist groups opposing corporate diversity and inclusion efforts in the wake of a June Supreme Court ruling.

The ruling declared unlawful the race-conscious student admissions policies used by Harvard University and the University of North Carolina.

On Friday, Daniel Morenoff of The American Civil Rights Project, who represents NCPPR, argued that Starbucks policies seeking to increase racial diversity among its suppliers, vendors, and employees were discriminatory and that NCPPR's cause was in the corporate interest.

Bastian rejected that argument, saying the group's complaint did not represent the interests of Starbucks shareholders and failed to follow required legal procedure.

NCPPR may not refile its complaint, and Starbucks may seek legal fees, he said.

NCPPR spokesperson Scott Shepard called the judge's comments "surprising and disappointing."

"We will continue to pursue relief from illegal discrimination on behalf of shareholders and employees," he said.

The case is National Center for Public Policy Research v. Schultz et al., No. 22-00267, U.S. District Court, Eastern District of Washington.

(Reporting by Jody Godoy in New York and Tom Hals in Wilmington, Delaware; Editing by Chris Reese and Marguerita Choy)