A costly mistake: Court ruling exposes downside of corporate diversity targets

By Mitch Kokai

Raleigh, NC – David Duvall was a standout employee by Novant Health’s standards.

photo by Drazen Zigic

Working in North Carolina, Duvall “performed exceptionally in his role, receiving strong performance reviews and gaining national recognition for himself and the marketing program he developed for Novant Health,” according to a March 12 opinion from the 4th US Circuit Court of Appeals.

There was one significant problem for Duvall: He is a white man.

His race and sex led to his dismissal in 2018, according to both a trial court and the 4th Circuit. Appellate judges upheld a judgment of more than $3 million against Novant for Duvall’s lost compensation.

Duvall claimed in a federal lawsuit that Novant Health fired him “merely to achieve racial and gender diversity — or more specifically, to hit certain diversity ‘targets.’”

A jury agreed. Jurors were willing to give Duvall another $10 million in punitive damages beyond the lost wages. The trial judge cut that award to $300,000. Appellate judges struck punitive damages completely.

The Appeals Court determined that Duvall failed to meet the standard of proof required for punitive damages. Yet Judge Steven Agee’s 30-page decision spelled out a clear case of Novant Health targeting Duvall’s job for “diversity” reasons.

Duvall’s tenure with Novant started in 2013. Jesse Cureton, the company’s executive vice president and chief consumer officer, hired Duvall that year to serve as senior vice president of marketing and communications. Duvall reported for five years to Cureton, who is black.

When Cureton fired Duvall in July 2018, the decision “came as a shock to both Duvall and his colleagues,” Agee wrote. “Moreover, Novant Health — a multibillion-dollar company with tens of thousands of employees and an extensive human resources department — had no record of any documented criticism of Duvall’s performance or reasons for his termination.”

In December 2018, Cureton “spoke very highly of Duvall and praised his performance” during a conversation with an executive recruiter. Cureton indicated he would hire Duvall again.

“Immediately after firing Duvall, Novant Health elevated two of Duvall’s deputies, a white woman and a black woman, to take over his duties,” Agee wrote. “It then later hired another black woman to permanently replace Duvall.”

All three candidates for the permanent job were black women. Novant Health rated one of the interim replacements as a “lower performer” than Duvall.

Agee added more context.

In 2015, two years into Duvall’s employment with Novant Health, the company’s CEO appointed a senior vice president for diversity and inclusion. A companywide Diversity and Inclusion Strategic Plan followed. Novant agreed “to fully ‘embed’ D&I by 2019.”

Cureton and Duvall both served on a company D&I Council. It reviewed data in May 2018 showing a “decline in female leaders” and a “higher representation of whites” in leadership positions. In addition, “the data reflected that ‘African-American representation in management decrease[d] at each level [of management] with the exception of the executive team,’” Agee wrote.

Within two months, Duvall was gone.

In February 2019, seven months after Duvall’s firing, the diversity council reviewed a report showing that the “company still had a gap in black leadership as compared to industry benchmarks and census data. … To address that gap, the report recommended a ‘3-4 percentage point increase’ in black leaders over the next three years.” The report also “recommended explicit targets” for addressing Hispanic and Asian workforce gaps.

A September 2019 report detailed results of D&I targeting efforts. “The report showed a 3.9 percent decrease in the white workforce and a 5.6 percent decline in white leaders from 2016 to 2019, compared to a 2 percent increase in the black workforce and a 0.9 percent increase in black leaders over the same period,” Agee wrote. “The report also reflected a 21.1 percent increase in female leaders from 2018 to 2019 alone.”

Agee delivered the unanimous Appeals Court’s conclusion.

“In sum, the jury heard evidence that Duvall performed well in his role but was nonetheless fired and replaced, at one point or another, by three women, two of whom were racial minorities, amid a substantial D&I initiative that called for remaking Novant Health’s workforce to reflect a different racial and gender makeup,” he wrote. “And it also heard conflicting and uncorroborated reasons for Duvall’s termination.”

“[W]e do not find that ‘the only conclusion a reasonable jury could have reached is one in favor of [Novant Health].’ Quite the opposite,” Agee added. “There was more than sufficient evidence for a reasonable jury to determine that Duvall’s race, sex, or both motivated Novant Health’s decision to fire him.”

Now Novant has at least 3 million reasons to question its strategy for boosting diversity.

Mitch Kokai is senior political analyst for the John Locke Foundation.