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Coca-Cola offered no details when it announced a tentative settlement of a racial discrimination suit last month. The message to 2,000 members of a potential class was “Trust us.” Whether Coke’s problems are over will depend in large part on class members’ willingness to extend that trust. “The one thing they [Coke executives] did not get with this settlement is global peace, which is always important for a corporate defendant,” says Decatur, Ga. attorney Keenan R.S. Nix of Nix, DelCampo, Thornton & Graddock. Nix is suing Norcross, Ga.�based Waffle House Inc. for widespread discriminatory employment practices similar to those attributed to Coke. “What remains to be seen is whether Coke can satisfy the demands of the individual plaintiffs,” says Nix. “My feeling is that the company ought to pursue a resolution of the individual claims as aggressively as they did the class claims.” In June, Coke announced it had reached a tentative settlement with four named plaintiffs and members of a prospective class of 2,000 current and former African-American employees who allege in Abdallah v. Coca-Cola Co., No.1-98-cv-3679 that they were discriminated against in pay and promotions.. The company and plaintiffs’ lawyers, who hammered out the tentative settlement with help from a mediator, said they couldn’t release details of the settlement until October. Ten lawyers from four firms — Cyrus Mehri of Mehri, Malkin & Ross in Washington, D.C.; H. Lamar Mixson, Jeffrey O. Bramlett, Joshua R. Thorpe and Steven J. Rosenwasser of Bondurant, Mixson & Elmore of Atlanta; James E. Voyles of DeVille, Milhollin & Voyles of Marietta, Ga.; and Robert L. Wiggins Jr., Samuel Fisher, Byron R. Perkins and Rusty Adams of Gordon, Silberman, Wiggins & Childs of Birmingham, Ala. — are representing four of the plaintiffs and the potential class in settlement talks. Coke is being defended by their in-house lawyers and the Atlanta firm King & Spalding. Lawyers with Paul, Hastings, Janofsky & Walker and Thomas, Kennedy, Sampson & Patterson also have joined the litigation on Coke’s behalf. Meanwhile, Coke faces a new race discrimination suit and continuing litigation by three people removed in April as lead plaintiffs and potential class representatives. The new discrimination suit, filed in Fulton State Court last month on the day Coke announced the settlement, seeks $1.5 billion in compensatory and punitive damages for four African-American women, all current or former Coke employees. Two high-profile litigators, Florida’s Willie E. Gary and Los Angeles’ Johnnie E. Cochran Jr. represent the plaintiffs in Goodman v. Cola-Cola Co., No.00-cv-006139. The three removed as lead plaintiffs from the original suit and a fourth woman who left the potential class action suit voluntarily have not yet filed new suits but have hired Gary to represent them. After two years of discovery, negotiations and mediation, Coke, as well as the lawyers who represent plaintiffs in the original suit, believe Gary and Cochran have emerged just in time to complicate a hard-fought settlement. “Make no mistake about it. They wanted to resolve this with one fell swoop,” Nix says. “The decision by several of the individual claimants to retain new counsel made that impossible.” Attorneys who are hammering out the details of the settlement with Coke won’t discuss how the plaintiffs they dismissed from the suit or Gary, who is now their lawyer, may affect the outcome of their settlement. U.S. District Judge Robert W. Story barred Gary from the mediation talks, and Gary says he intends to pursue individual rather than class claims against Coke. But Atlanta lawyers who have engaged in class actions say the attorneys for four plaintiffs seeking a class settlement now may be forced to work hand-in-hand with Coke. Plaintiffs lawyers fear Gary will erode the potential class, and thus the amount of the settlement, by encouraging employees to take individual legal action. And the company is banking on a class-wide settlement to remove the matter from the public spotlight. “I think it’s important economically to Coca-Cola to do this,” says Edward D. Buckley III of Greene, Buckley, Jones & McQueen. “It’s been a factor in their stock dropping. I think there are a lot of shareholders who want to see this suit settled because of that.” A class action trial, says Buckley, who recently won a $2.9 million judgment against Fulton County commissioners for discriminating against two of its white employees, “would have enormous financial repercussions. It’s hard to say with a company the size of Coca-Cola which would more economically be a problem — the ultimate payout or the loss of value in the stock and good will. … I think that Mr. [Douglas] Daft [Coke's chairman and chief executive officer] really wanted to see this thing resolved early in his watch so that this doesn’t become his legacy.” But Buckley says successful settlement now depends on how many members of a prospective class elect to participate. “I don’t know whether it [the settlement] will be highly favorable to class members or simply a token,” he says. “Coke is probably going to be allies with Mehri in this and urge the court to get Willie Gary out of things,” he says. “I’d be surprised if they did anything but that. If they are going forward and agreeing to a stipulated class, they, in essence, are holding hands and working in unison. That’s not a bad thing� That’s just the way it’s done.” Nix agrees. “The prospect of having to face a class action is not only economically precarious, but it’s also publicly embarrassing,” he says. “So the resolution of the class claim enables the company to move forward with their business agenda without the cloud of class action litigation hanging over its operations, depressing its stock price, demoralizing employees and generally disrupting business operations.” If a handful of individual suits remain after settlement, that probably doesn’t present a major problem for Coke. “They don’t take on the same public dimension that class action cases do typically,” says Nix. “And the economic exposure from individual cases typically is not as daunting or staggering as the economic fallout from class actions, both in terms of the cost of resolution and the impact on publicly traded stock.” But Nix says individual claims probably will be strengthened by evidence of discrimination obtained through the class action. And if each claim has merit, filing serial claims can be an effective tactic, he says. But, Nix notes, “If individual claims lack merit, then filing them back to back won’t make any of them any stronger. That’s the whole point. Individual claims are less intimidating to the company than class claims. But individual claims with merit cannot be ignored in terms of their cumulative effect.” And Gary can’t be ignored, either, Nix notes. “Willie Gary is a well-known, formidable lawyer,” he says. “Obviously, his presence in this case has attracted the attention of potential class members. To the extent those potential class members opt out of any proposed class relief in favor of individual claims asserted by Mr. Gary, then that complicates the class action settlement.” Rather than wage another court battle, Nix says, Coke needs to settle its dispute with the employees now represented by Gary and Cochran, particularly because among them are several original plaintiffs. Four “were named plaintiffs in the class matter just resolved,” Nix says, “so it’s illogical to suggest these individual claims don’t have merit. … It was those allegations that gave rise to the class action to begin with.” Coke and the lawyers who have mediated with the company need to release specific details of a settlement as quickly as they can before Gary siphons off the plaintiffs with the strongest claims, Nix says. “Right now, none of these folks have anything certain in their hands,” Nix says. “One of the most difficult things in a matter like this is keeping everyone patient. The more time passes, the less patient people get. They want to know, ‘What have you done for me lately?’ It’s that impatience that may cause many of them to seek out an audience with Mr. Gary.” Atlanta attorney Patrick W. McKee, who persuaded a federal judge last year to junk Fulton County’s affirmative action program because it was deemed biased against whites, thinks class members will be reluctant to trust a secret settlement. He says Coke’s only hope now is to agree to certify a class as part of the settlement agreement instead of fighting it. Simply telling all prospective class members to trust them and trust Coke is failing as a strategy, he says. “And in the meantime, Gary is pulling the settlement apart.” Instead, McKee says, “I think a good strategy for Bondurant, Mixson would be to get a firm settlement and tell the plaintiffs immediately. That would probably take the wind out of Gary’s sails.” Until then, he says, “Their settlement’s bleeding to death while Gary’s out there beating the bushes. Ultimately, it’s a bad thing for the plaintiffs, and it’s a bad thing for Coke … because Coke wants to put an end to all of it.” Mehri insists that “When the fog clears in a few months, class members will have the opportunity to evaluate for themselves whether the settlement is fair and whether to partake in the recovery,” he says. But Mehri and Bondurant, Mixson lawyers are still seeking to stop Gary from signing up any more former and current black Coke employees with claims — at least until October when their announced settlement in principle with Coke becomes final. In a motion challenging Gary’s ethics filed in U.S. District Court in Atlanta on June 30, the lawyers sought to bar Gary’s firm “from soliciting illegal fee contracts” from prospective class members. The motion accused Gary of “in large measure serving the interests of the Coca-Cola Company, which would vastly prefer to face employees in individual cases, where it has the opportunity to use its superior resources to defeat their claims entirely, rather than in a class action in which it must compensate all class members. ” And it also claimed that by filing the $1.5 billion state court suit, the Florida lawyer was “ creating unjustified expectations.” In his response, Gary claimed he never solicited any potential Coke litigants. “The issue is, they can’t stop the multitudes of people from calling my office,” he says. “If they had a settlement they thought people would be proud of … they wouldn’t have anything to worry about,” Gary adds. Last week, Story issued a consent order barring Gary from actively soliciting fee agreements from prospective class members and from lobbying them not to participate in the settlement. Gary may discuss the suit with prospective class members who contact his firm on their own. The order mirrored a nearly identical order the judge issued at Coke’s request last year that placed a similar ban on Mehri and his co-counsel. “A TREMENDOUS PR PROBLEM” Marketing strategist Al Reis, a partner at Reis & Reis consulting firm in Roswell, Ga., says Coke “still has a tremendous PR problem.” “They didn’t settle nearly soon enough,” says the author of “11 Immutable Laws of Internet Branding and 22 Laws of Branding.” “Believe me, this is something that should have been settled a long, long time ago� Every day this thing drags on is a day lost for Coke. And it just hurts their reputation.” According to Reis, Coke has allowed its lawyers to wage the battle as if the allegations were solely a legal problem. But Reis says, “These are all public relations battles. That’s the problem. Coke is being advised by lawyers on the basis of what is legally right when they need some help on what is right in the minds of the public.” Reis says any race discrimination suit is a blot on the Coke name, which he calls “the most valuable brand in the world.” “They can win it in court and lose it in court of public opinion,” he says. “It’s not just a lawsuit. … This is a battle being fought out in the press.” Coke’s brand and sales are easily jeopardized because “It’s a fashion product,” Reis says. “It’s an in thing to drink, but it could be an out thing. These things are driven by fashion trends. When a brand gets tarred, there are plenty of alternatives.” But Kenneth L. Bernhardt, a Regents professor of marketing at Georgia State University’s Robinson College of Business, says that with the settlement announcement, “Coke is over the hump.” “I think it would have been far more damaging to have a court rule against Coke,” he says. “It’s one thing to be accused and found guilty of discriminating against one person or four people�. It’s another thing to be found guilty of discriminating against a class of people.” Coke must balance the legal cost against the impact on public opinion, he says. “The idea would be to settle it and make it go away, which might save legal costs and have the least impact on public opinion. On the other hand, that could just encourage more lawsuits, which keeps Coke in a bad light,” he says. Says Bernhardt, “You’ve got to feel for Coke.”

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