News Article

Interview with Cyrus Mehri

Corporate Crime Reporter

Published: November 27, 2000

(Reprinted by permission)

WASHINGTON - Last week, in a stunning agreement, Coca-Cola agreed to pay $192.5 million to settle a race discrimination class action.

In addition to an approximately $113 million cash settlement, Coca-Cola agreed to make future pay equity adjustments that plaintiffs' experts estimate will cost about $43.5 million, and to implement unprecedented programmatic reforms that plaintiffs estimate will cost about $36 million.

"This settlement sets a new standard for corporate diversity. In short, the 'World of Coke' will be going through a 'World of Change,'" said co-lead counsel Cyrus Mehri of Mehri, Malkin & Ross, PLLC. "By settling this case in near-record time, we have obtained swift justice for this class. "

The settlement is on behalf of a class of approximately 2,000 African Americans who have worked for The Coca-Cola Company in the United States in salaried exempt and non-exempt positions since April 22, 1995.

The wide-sweeping programmatic reforms agreed to by Coca-Cola span the company from top to bottom and require directors, officers, managers and all company employees to fundamentally change the way they treat employees.

These reforms are forward-looking and are designed to ensure that in the future the Company will treat all African-American employees fairly, Mehri said.

A significant feature of the settlement includes the creation of an outside, seven-member independent task force mandated to ensure compliance with the settlement agreement and to provide independent oversight of Coca-Cola's diversity efforts.

Mehri cut his teeth on this kind of case while with the law firm of Cohen, Milstein, Hausfeld & Toll, where he played a key role in a race discrimination case against Texaco. In that case, the company paid $141 million and put in place a task force to oversee personnel matters.

We interviewed Mehri on November 20, 2000.

CCR: How did you become involved with this case?

MEHRI: In January 1998, I left Cohen, Milstein, Hausfeld & Toll. After leaving, Linda Ingram contacted me. She is one of the lead plaintiffs in this lawsuit. She first contacted me in April 1998. At that time, I had just left my old firm. I had no staff. I barely had an office - I was answering my own phones. I was starting from scratch.

It took from April 1998 to September 1998 before we hired some lawyers and staff - and after the hires we were ready to roll with the investigation. Linda got a hold of me through Bari-Ellen Roberts. She read Bari-Ellen's book about the Texaco case. The title of the book is Roberts v. Texaco. She sent Bari-Ellen an e-mail. Bari-Ellen responded back with my phone number.

CCR: In a nutshell, what was Roberts v. Texaco about?

MEHRI: That was a race-discrimination class action focusing on glass ceiling issues - promotions, compensation. I started that investigation in the fall of 1993. We filed the case in the spring of 1994. We litigated for a couple of years.

In mid-November 1996, we announced a historic settlement, which was by far the largest race-discrimination class action in history. It had $115 million in cash, $26 million in pay adjustments, and unprecedented reform. We put together an independent task force with real power that oversees the various reforms spelled out in the settlement.

That was a groundbreaking settlement. It was announced in 1996 and went into effect in 1997.

When we filed the case, there had been a 95 percent decline in employment class discrimination class actions from the late 1970s to the early 1980s.

CCR: Why had it declined?

MEHRI: A number of horrendous Supreme Court case decisions and the private bar recognized that it was too risky, that the costs were so extraordinary. So, they had essentially given up on this area - with a few notable exceptions that were still doing this kind of work.

Lawyers were certainly more afraid of race class action lawsuits than gender class action lawsuits. This area was untouchable, unwanted, and undesirable. Fortunately, my old firm, Cohen, Milstein, with some urging on my part, decided to take the case. It was the first employment case I had ever done and the first employment class action the firm had ever done. We fought Texaco toe to toe and we won.

CCR: Linda Ingram reads the Bari-Ellen Roberts book on the Texaco case and she calls you.

MEHRI: She explains the issues she is confronted with at Coca-Cola. She said she tried to raise the issues internally, and the company shut them down.

The issues were about promotion, compensation and the evaluation system - similar kinds of issues that were involved in Texaco. I was intrigued by the case. We began an investigation. Myself, Pam Coukos, and a paralegal went to Atlanta. We began nine months of intensive interviewing. We interviewed about 40 employees. We started with a group meeting of about 20 or 30 employees. Then we did one-on-one interviews. Through those interviews, we were able to identify the problems with their systems.

Early on in the investigation, we received an anonymous package that had data in it that appeared to be a printout of a human resource database. We took the hard copies and put it into a database. Through that, we found there were wide disparities in pay, promotions and evaluations. We also identified exactly where the glass ceiling was, and exactly the location of glass walls - where African Americans were channeled away from the power centers of the company, the profit and loss centers.

When we filed that complaint in April 1999, it had great impact. By the time we filed it, we had the kind of factual record that you would want to have at a class certification stage. We had done our homework.

CCR: That was because of the internal data that you receive anonymously?

MEHRI: Yes, and because we had interviewed 40 people in depth and we had a very good sense of the problem by the time we filed the lawsuit.

During the nine month investigation, we were at the same time trying to find a larger, more substantial law firm to join us as co-counsel, because we knew we couldn't do this on our own. Without mentioning names, we went to six nationally prominent firms - substantial, well-respected plaintiffs firms - from New York to Washington, D.C. , to Atlanta. All six of these firms turned us down.

CCR: What was their reasoning?

MEHRI: One of them said - suing Coke in Atlanta was like suing the Pope in the Vatican. The number one reason was that Coke is too powerful in Atlanta. The other reason was Coke had cultivated this image of being extraordinarily progressive and generous in the African-American community. Both of which made the case even more compelling to me.

CCR: Are they in fact generous in the African-American community?

MEHRI: More than any other company in America.

CCR: But the statistics you had on how they treated blacks inside the company contradicted their image?

MEHRI: Yes. But that was the point. The company began to believe t heir own propaganda. They aggressively courted the African-American consumer.

They did that by being extremely generous in the African American community. The company gives a lot of money to civil rights groups, they give money to scholarships. If you look at Coke's world class contributions, it's extraordinary. Coke goes the extra mile in being generous to the African American community.

As a result, the African American consumer represented about 25 percent of sales of Coke, 36 percent of Sprite and 44 percent of the youth market.

The fact that the company had been so generous to African Americans outside the company, while at the same time so neglectful of African American concerns internally, that credibility gap made the case more compelling, not less compelling.

CCR: What was the response in Atlanta when you filed the lawsuit?

MEHRI: It was a shocker. Unless you live in Atlanta, you can't fully understand how audacious it was to file this lawsuit. The Wall Street Journal wrote one article in May 1999 that discussed the impact of this lawsuit on the community. The Atlanta Journal write in total maybe 100 articles about this case.

It just captured the imagination of the city. It was Coke, Atlanta and race. It was a shocker that someone would actually challenge the company on this issue.

When we filed the case, we didn't know how much this case would grip the city, nor did we know that the allegations we made in our complaint were in fact made in earlier years to high executives at Coke.

So, in April 1999, we filed the lawsuit and expected it would be a five-year battle. We made the complaint available on the Essential Action web site (www.essential.org) so people could see how detailed our allegations were, how powerful our allegations were. And the company never seemed to get its sea legs from the time we filed that complaint.

CCR: In Atlanta, what proportion of Coke's workforce is African-American?

MEHRI: It's a very high proportion in the lower salary grades.

CCR: What about the whole company?

MEHRI: Approximately 16 percent.

CCR: Where exactly is the glass ceiling?

MEHRI: About 36 percent of low level administrative positions are filled by African Americans. Then you get to the professional level, and it drops to 7 percent. At the management level, it drops to about 1.5 percent, at the time we filed the lawsuit.

CCR: You go into this litigation alone?

MEHRI: At the time we filed the lawsuit, we had with us a solo civil rights practitioner with us. But we did not have a significant firm with us. The weekend before we filed the lawsuit, I had to do a lot of soul searching. I had to decide - am I willing to risk the entire future of this little start-up firm on this case. I thought about it, slept on it on a Friday night, woke up that Saturday morning and said - the answer is unequivocally yes. I believe in this case. I've had success before. I believe in it enough, and believe in myself enough to know that we can do t his case successfully and win - without any major firm for sure on our team.

At the time we filed, we were in discussions with what I call my lucky seventh firm - Bondurant, Mixson & Elmore firm. But they had not agreed to join us at the time we filed. Two weeks after we filed, they agreed to come on board.

Bondurant, Mixson is a highly respected firm - about 25 lawyers - that does plaintiff and defense work in Atlanta. More importantly, they are the only firm in Atlanta that has a reputation of taking on Coke.

CCR: Who was representing Coca-Cola?

MEHRI: They brought in King & Spalding, the law firm that has been with the company for 50 years. They brought in Paul, Hastings, Janofsky & Walker which is the firm that has the best reputation for defending these cases. They brought in an African-American firm, Thomas, Kennedy, Sampson & Patterson in Atlanta.

And they also had an in-house counsel, which acted as the fourth law firm.

CCR: How did discovery proceed?

MEHRI: At the first hearing after we filed the case, we had with us a case management plan that we had developed. The company wasn't really fully prepared to respond. We presented the plan, and the judge adopted most of our position.

The case management plan required the company to give us documents and databases on a date certain. So, we got an aggressive fast track discovery schedule in place early in the case.

They were required to give us the database in complete usable and readable form by July 1, 1999. We didn't get that fully completed until February 2000.

But with the case management plan, every time they departed from giving us what we were entitled to, they were in violation of an existing court order.

CCR: What was the company's strategy?

MEHRI: To take a scorched earth approach, and fight us every step of the way. In July 1999, we had a hearing on a motion to dismiss. They tried to take a novel position on the 1991 Civil Rights Act, which was actually designed to expand the rights of employees, and designed to overturn those very Supreme Court cases that led to the 90 percent decline in the private bar's role in this.

They took the position that the 1991 Civil Rights Act created a circumstance where class actions can never be certified in the employment area if they seek damages. This is a position I personally think is intellectually dishonest.

Yet, the defense bar has been trumpeting this theory around the country, and they have got a number of courts, including the Fifth Circuit Court of Appeals, to adopt it.

It is a radical idea, it is a poorly thought out idea. And I believe that in the end, the Supreme Court will have to step in. I firmly believe that the Supreme Court will not roll back the law another 30 years as requested by the defense bar.

CCR: The defense position was that you cannot file a class action if you are seeking damages in an employment case?

MEHRI: Right. If you ask for damages, you can't have a class action in the employment area.

CCR: Because?

MEHRI: Because damages are too individualistic. What they don't tell you is that Section 1981, which goes back to the 1870s, has always carried a damage provision historically. No one said that because there are damages attached (to) Section 1981, you can't be certified as a class action.

There have been classes certified under Section 1981. They also do not tell you that the Supreme Court essentially addressed this issue in Teamsters, am case decided in 1977, by bifurcating the trial with common issues in stage one and individual issues in stage two.

CCR: On the substantive issue, you had data showing that there were serious problems within the company in terms of hiring, promotion, compensation. What did they say about your data?

MEHRI: They never said that the data was wrong. They said the data did not "fairly depict" what was going on inside the company.

CCR: In 1999, how are you feeling about the case?

MEHRI: I believe in the case and I'm going to fight tenaciously to get the best possible result for this class. The architecture of that is the case management plan, and defeating the company's wrong-headed motion to dismiss, which we did in July 1999.

And we were going to use that time period to collect as many affidavits as we could. The phone was off the hook. Many Coca-Cola employees were too afraid to give us an affidavit. But over 150 employees executed affidavits.

Keep in mind, that in the Texaco case, we only had 15 to 20 affidavits of employees. So, we had 10 times as many in this case.

That is a very labor intensive endeavor. We had to devote an enormous amount of staff time.

CCR: Was there any retaliation against employees who filed affidavits?

MEHRI: No, because the affidavits were never filed.

CCR: Did the judge know who they were?

MEHRI: He didn't know either. That gets you to June 14, 2000.

The affidavits were prepared for the motion for class certification. The more the company caused delay on turning over the database, the more time we had to get affidavits. Our class cert brief was not due until June 14, 2000.

In January 2000, we were ordered to start mediatio. The mediation didn't start until April 2000. The hammer we had was the threat to file the class certification papers, which included 150 affidavits and it included all of the statistical data.

On June 14, 2000, we had a team of paralegals with 30 boxes of documents in the courthouse. We had our brief on a CD-ROM, interactive, ready to roll. We had a labor economist's report.

On the negotiations with Coke, we had open issues until the last day, bot on the programmatic side and on the monetary side. If we didn't reach a settlement that day, we were going to file the class certification papers. If we filed those papers, we probably would never have reached a settlement, because the whole thing would have blown up.

There would have been years of fighting over class certification, with the company trying to vindicate its name.

But we also knew that there were certain reforms we wanted on the programmatic side. And we wanted fairness on the monetary side. It came down to the last minute on June 14, 2000.

We had the paralegals in the courthouse. At 3:45 p.m. , the paralegals were telling us - we need an answer. They said it was going to take them a whole hour to file all of the papers. And the clerk had a whole team of people ready to accept the papers.

We told the paralegals - give us another fifteen minutes. The paralegals told us okay, but that's it - then it's either yes or no. You are either dropping this bomb or you are not.

Exactly 15 minutes later, four o'clock, we reached a settlement in principle. We called the paralegals on the cell phone and said - do not file that brief.

CCR: So, since June 14, you have been working out the details.

MEHRI: Right. On June 14, we reached a settlement in principle - that's like putting up a frame on a house. Last week, we reached a settlement agreement - which is like putting up the doors, the walls, the roof - that took months.

One of the areas we could not agree on June 14 was how much money the company owed to make people whole for back pay shortfalls in compensation. We didn't want to compromise. We didn't want to make people a quarter whole, or a third whole - which typically happens in these cases. We wanted 100 percent on the dollar of what people were shortchanged.

We could not agree on a figure. Instead, we agreed on June 14 on a process, whereby the 100 percent on the dollar figure would be determined by a panel of experts. We got the panel of experts' decision on November 15, and we announced the settlement on November 16.

CCR: How did you choose the panel of experts?

MEHRI: The mediator was involved with that.

CCR: The other sticking point was the programmatic change. What was their position, what was your position, what did you agree on?

MEHRI: I can't tell you our negotiating positions. But there were some big issues that we needed.

What we got from Texaco on the programmatic side was considered unprecedented - and we were told it would never happen again. In Coca-Cola, we got Texaco plus.

In Texaco, t here was an independent task force that has binding power to ensure lasting reforms. It also searches for creative solutions to tough problems.

In Coca-Cola, there is even more reporting and transparency. The Coke task force has underneath it a panel of experts that are going to be doing a six-month study critiquing all of the different systems. They will have all of that work done before they have to get into a decision-making mode.

The Coke task force has the ability to reach into the board of directors. They are going to be interactive with the board, making sure the board, which includes Warren Buffett, Herbert Allen, Sam Nunn, is going to be very well-informed.

The compensation committee, headed by Herbert Allen, is going to link compensation of senior management to how well they do on EEO performance. The task force will be interacting with the board on compensation. And they will be looking at diversity of the board itself.

Every policy that is important in human resources will be subject to review and change by the task force.

CCR: And members of your class can pursue their own case?

MEHRI: Yes. Everyone in the class has three options. They can partake in the financial aspects of the settlement. They can opt-out. Or they can take the money from the $58.7 million in Compensatory Damages Fund, forgo the money from the $23.7 million Back Pay Make Whole Relief Fund, the one we have been working on since June, and instead get into an expedited procedure before a U.S. magistrate, if they believe they have a particularly strong promotion claim.

In other words, they can take the sure fire money for the compensatory damage and get before a magistrate on back pay. So, they have the best of both worlds - money in the pocket, and t hey can roll the dice on the promotion claim. If they opt out, they give up all of their money and they have to roll the dice on everything.

CCR: Has this settlement been approved by a judge?

MEHRI: No. The next step is preliminary approval, followed by a fairness hearing, and ultimately final approval.

CCR: You have not brought and settled two very high profile cases, where there have been big settlements and programmatic changes. You have to believe that these actions might reverse the decline in race discrimination class actions - that employees will be filing more of these cases.

MEHRI: I believe there will be a modest increase in these cases, but not a huge increase. The costs are still extraordinary and the risks are extraordinary. They are still undesirable cases. We are two for two with historic results. But the odds of winning these cases are still against the employee.

CCR: Do you want to continue doing these cases, or do you want to broaden out?

MEHRI: We have broadened out. We do fraud cases, False Claims Act cases - we have a number under seal. We have consumer cases - including one against Chrysler and one against Firestone

My hope is that five years from now there will not be as many of these glass ceiling issues and these cases won't be as necessary. But that would require a giant leap forward by getting a new federal law that would require disclosure of these practices.

CCR: Is there any evidence from Texaco that the settlement has forced the company to change?

MEHRI: Absolutely. We know that 67 percent of the new hires at Texaco have gone to women and minorities. The total number of African Americans and women in upper management has gone up modestly, but it has gone up in a downsizing environment. That's just on the pure numbers side.

The climate of fear at Texaco has all but been dissipated. Deval Patrick, the African-American civil rights lawyer who was the chair of the Texaco task force, is not the general counsel for the company. If that doesn't show a change in culture, I don't know what does.

They have had a burst of creativity - changes in the promotion system, compensation system, far greater transparency. Texaco is not a model of reform. It is a place where there really has been a cultural change. Peter Bijur, the CEO of Texaco, deserves a lot of credit for embracing the settlement, and carrying it out from the top down.

CCR: You said earlier that Coke's policy to this litigation was one of a scorched earth policy. When did that change?

MEHRI: They used scorched earth litigation tactics throughout the litigation. In the mediation setting, they were just as tough, jut as difficult as they were in the litigation setting. The mediation went from April to last week. They were just as tough there, if not more so, than in the litigation.

This case came one minute away from blowing up and not settling. This whole thing could have blown up on June 14. We finally got some concessions in that last ten or fifteen minutes…The key turning point came when the Board of Directors ousted the CEO Doug Ivester and replaced him with Doug Daft. Ivester was on notice of these problems as early as 1995 when the leading African American in the company went to him and said - there is a problem here, there are glass walls, glass ceilings. Ivester apparently took a detailed report, stuck it in his drawer and didn't do anything with it.

In 1997, the U.S. Department of Labor came in and charged that the company had a serious problem. Ivester stuck that report in the drawer and didn't do anything with it.

Then our clients came along in 1998 and confronted the company through internal channels, and the company ignored them. Litigation was the last resort.

In November 1999, Ivester demoted Carl Ware, the most senior African-American in the corporation. In December, Ivester was fired and replaced with Daft. Ware was promoted.

CCR: Coke was having serious bottom line problems worldwide. It wasn't just this issue that led to Ivester's ouster.

MEHRI: Yes, but this was part of the problem. Daft on the other hand is far sighted, enlightened. He is going to embrace this settlement.

CCR: What lessons can corporate America learn from this case?

MEHRI: One is when your folks come to you, as Carl Ware went to Ivester, instead of ignoring the issues, take them seriously. Two, aggressively monitor your systems and fix pay inequities.

The Board of Directors needs to get involved. Three, when you litigate these issues, enlightened management needs to be more involved. Reach out to the plaintiff's team and iron out a just, honorable and swift resolution.

You can't leave it to hardliners and the litigation team. The litigation team will just bring the company down by taking extreme positions. Management should be willing to overrule the lawyers.