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Why the Supreme Court is hearing a TV mogul's $20 billion racial bias case against Comcast

·Deputy Managing Editor
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The U.S. Supreme Court on Wednesday will hear a dispute that pits Comcast (CMCSA), America’s biggest cable provider, against an African-American TV mogul accusing it of racial bias because it declined to carry any of his channels.

Entertainment Studios Inc., whose chief executive and founder is TV mogul Byron Allen, is accusing Comcast in a $20 billion lawsuit of violating a part of the Reconstruction-era law known as the Civil Rights Act of 1866 that makes it illegal to discriminate based on race when enforcing contracts.

The Supreme Court is being asked to decide whether Allen must show race was the driving factor behind its decision not to carry his shows, or whether it can be just one motivating factor. If the Supreme Court sides with Allen, he’ll be able to pursue his case against Comcast and in theory be awarded billions in damages if he prevails — but this is about more than one TV mogul and one cable giant.

“It’s a really important law in terms of making sure employers shouldn’t discriminate based on race,” Deborah Widiss, a law professor at Indiana University, told Yahoo Finance. The Civil Rights Act of 1964 only applies to companies with over 15 workers; that means workers employed by smaller companies can only bring discrimination cases under the 1866 law, according to Widiss, who signed an amicus brief backing Allen’s company.

And, as Widiss noted, “An awful lot of people in this country work for really small employers.”

NEW YORK, NY - OCTOBER 29:  Byron Allen speaks at the Broadcasting & Cable Hall Of Fame In New York's Historic Ziegfeld Theatre on October 29, 2019 in New York City.  (Photo by Dave Kotinsky/Getty Images for  Entertainment Studios / Allen Media Group)
Byron Allen speaks at the Broadcasting & Cable Hall Of Fame In New York's Historic Ziegfeld Theatre on October 29, 2019 in New York City. (Dave Kotinsky/Getty Images for Entertainment Studios / Allen Media Group)

Those really small employers, on the other hand, are likely hoping the Supreme Court makes it harder to bring cases under the law. If the court rules against Comcast, it could expose small businesses to baseless litigation that will be difficult to dismiss, according to Karen Harned, the executive director of the National Federation of Independent Business Small Business Legal Center.

“It’s just going to make it so that it’s going to be easier for the bottom feeders of the trial bar to shake down small businesses,” said Harned, whose organization filed an amicus brief in the case, “and say, ‘We’re going to sue you unless you give us money.’”

‘We’re not trying to create any more Bob Johnsons’

This particular case did not start with a small business. It began with a now-58-year-old former comedian Byron Allen, and his company, Entertainment Studios, which has seven “lifestyle channels” including including Cars.TV, Comedy.TV, and Pets.TV.

Allen and his company claim in their Supreme Court brief that, for eight years, Entertainment Studios offered up its channels to Comcast but just got the “run-around with false promises of carriage.” Comcast said it lacked “sufficient bandwidth” to carry the channels, the brief stated.

But Entertainment Studios claimed that since 2010, Comcast launched 80 networks including “lesser-known, white-owned” channels. At one point, a Comcast executive explained why it was refusing to carry any of Allen’s channels, according to an account by Entertainment Studios. The executive allegedly said, referring to the founder of Black Entertainment Television (BET), “We’re not trying to create any more Bob Johnsons.”

SUN VALLEY, ID - JULY 07:  BET Founder Bob Johnson attends the Allen & Company Sun Valley Conference on July 7, 2011 in Sun Valley, Idaho. The conference has been hosted annually by the investment firm Allen & Company each July since 1983 and is typically attended by many of the world's most powerful media executives.  (Photo by Scott Olson/Getty Images)
BET Founder Bob Johnson attends the Allen & Company Sun Valley Conference on July 7, 2011 in Sun Valley, Idaho. (Photo by Scott Olson/Getty Images)

In 2015, Entertainment Studios sued Comcast (and other defendants, including Time Warner Cable, which was later voluntarily dismissed), alleging discrimination under the 1866 Civil Rights Act’s contract provision, known as Section 1981. A federal judge dismissed the case, but the U.S. Court of Appeals for the 9th Circuit reversed, ruling Entertainment Studios only had to allege race was a “motivating factor” under Section 1981 in order for the case to avoid being dismissed at an early point in the litigation.

In doing so, the appeals court rejected a standard known as “but for” causation for Section 1981. Under that standard, Allen would have to show that if it weren’t for his race, Comcast would have carried the channels. Under the 9th Circuit’s interpretation, plaintiffs would have a lower burden of proof when bringing cases under Section 1981, only having to show that race was just one motivating factor in order to avoid dismissal.

The 9th Circuit’s decision was “pretty radical,” in part, because it diverged from other appeals court’s decisions that found Section 1981 does require “but for” causation, according to Richard Samp, who filed an amicus brief siding with Comcast on behalf of the Washington Legal Foundation, a public interest law firm that advocates for businesses.

“It was not at all surprising that the Supreme Court granted review,” he said.

‘Bet the farm’ liability for small businesses

In asking the Supreme Court to hear the case, Comcast argued that the 9th Circuit ruling conflicted with previous rulings from the high court and other courts of appeal. Comcast also pointed out that it had legitimate business reasons not to carry Entertainment Studios’ channels — including a preference for sports and news and limited bandwidth.

But Comcast’s interpretation of the law makes it very difficult for plaintiffs to sue under Section 1981, according to several law professors who signed onto amicus briefs for Allen.

“It’s incredibly hard for a plaintiff to win a race discrimination case and if you set the standard so high that you have to show ‘but for cause’ it’s just going to pull the rug out from underneath individuals who have to prove that,” Michael Foreman, director of the civil rights clinic at Penn State Law, told Yahoo Finance.

That’s partly because it would be easy for businesses to argue that they had a mixed motive for their actions that was not entirely based on race, according to several law professors.

“Presumably, a defendant can say, yeah, ‘Well maybe we said discriminatory things ... But there was a mixed motive. We also had an economic motive. ...The former slave owners had mixed motives, too,” said University of Hawaii at Manoa law school dean and professor Avi Soifer, referring to the fact that Section 1981 was passed in part to stop discrimination against freed slaves.

Comcast Corporation Chairman and CEO Brian Roberts attends a ceremony marking the announcement of a strategic partnership between Alibaba Group and Universal Beijing Resort to pioneer a next-generation theme-park experience in Beijing, China October 17, 2019.  REUTERS/Thomas Peter       REFILE - CORRECTING WORDING
Comcast Corporation Chairman and CEO Brian Roberts attends a ceremony marking the announcement of a strategic partnership between Alibaba Group and Universal Beijing Resort in Beijing, China October 17, 2019. (REUTERS/Thomas Peter)

Erwin Chemerinsky, the dean of Berkeley Law, who’s representing Allen’s company and making the arguments before the Supreme Court on Wednesday, called the case “a very important civil rights case.”

“‘But for’ causation is a very difficult standard to meet. If ‘but for’ causation is required for 1981, then many meritous race discrimination cases won’t be able to go forward,” said Chemerinsky, telling Yahoo Finance that most courts have not required “but for” causation though some have.

In explaining why “but for” causation is a difficult standard to meet, he said, “We live in a world where there are multiple causes for events.”

Those in favor of the “but for” causation standard for Section 1981 are quick to point out that they’re not in favor of discrimination. “There are practical reasons we believe why Section 1981 should be subject to ‘but for’ causation,” noted Rae Vann, managing partner at employment law firm NT Lakis and author of an amicus brief filed on behalf of Comcast.

“We in no way, shape, or form mean to suggest that a little bit of discrimination is okay. That’s not what we’re saying,” Vann added.

Unlike the more recent Civil Rights Act of 1964, Section 1981 has no cap on damages. And unlike the Civil Rights Act, which doesn’t apply to businesses with fewer than 15 employees, Section 1981 applies to businesses of any size. “It seems apt in our view that Section 1981 would have a stricter proof burden given the breadth of potential damages provided under that law,” Vann noted. “Some employers depending on their size are faced with ‘bet the farm’ potential monetary liability.”

If it’s easier for Section 1981 cases to survive a motion to dismiss, then smaller companies may end up settling cases early on just to make them go away and avoid the costs of protracted litigation.

“We are fearful that defendants could never get a case like this dismissed and then of course once a case gets beyond the pleading stage it can become extremely expensive for the defendant,” noted Samp, who filed the amicus brief on behalf of Comcast.

In a statement, a Comcast spokesperson stressed that the company is not trying to roll back any civil rights laws and called such laws an “essential tool” for protecting African Americans and others.

“We have been forced to appeal this decision to defend against a meritless $20 billion claim, but have kept our argument narrowly focused. This case cannot detract from Comcast’s strong civil rights and diversity record or our outstanding record of supporting and fostering diverse programming from African-American owned channels,” the spokesperson stated. “There has been no finding of discriminatory conduct by Comcast against this plaintiff by any court, and there has been none.”

In a recent interview with Yahoo Finance’s Editor-in-Chief Andy Serwer, Allen suggested that this case is about much more than the $20 billion his company is trying to get from Comcast. Rather, the case is about seeking “economic opportunity for all Americans,” noted Allen, who has also filed similar suits against other cable companies, including AT&T (T) and Charter (CHTR).

“I'm not a woman so I can't sue on behalf of women,” Allen says. “I can't sue on behalf of Hispanic people. I can't sue on behalf of gay people. If I could, I would.”

While Allen’s sentiment is noble, he may have an uphill fight ahead of him. The Supreme Court’s conservative majority could very well hesitate before paving the way for more litigation under a 153-year-old civil rights law — especially when some other courts have already reined it in.

Erin Fuchs is deputy managing editor at Yahoo Finance.

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