Discrimination in Advertising Claims Against McDonald’s Will Proceed to Trial

In December 2021, Entertainment Studio Networks (ESN) and other entities owned and controlled by Byron Allen, a Black entrepreneur, brought suit against McDonald’s. ESN, which operates seven television networks,  alleged that, although it reached out to McDonald’s’ advertising agency, OMD Worldwide (OMD), OMD never recommended that McDonald’s place ads on ESN. ESN alleges that it was directed to contact another advertising agency, Burrell Communications (Burrell), which McDonald’s used to reach Black audiences. ESN objected that its content is not exclusively targeted at the Black community, and yet it is shut out from general advertising revenues. ESN alleges that McDonald thus discriminates against Black-owned businesses, in violation of 42 U.S.C. § 1981, in the way it allocates its advertising dollars.

In Entertainment Studio Networks v. McDonald’s USA, LLC, the District Court for the Central District of California found that ESN’s allegations were sufficient to survive a motion for summary judgment. The case is a pretty good vehicle for teaching § 1981, for those who do so. In a guest post from a few years back, Charles Calleros shared his approach to teaching § 1981, which I adopted for a few years. By the way, the link to the case is behind a paywall. I could not find a free version.

In order to state a § 1981 claim, a plaintiff must allege: an attempt to contract for services; that those services are available to similarly-situated persons who are not members of a protected class; and that, but for racial animus, defendant would have contracted with plaintiff. There seems to be no dispute that ESN has alleged facts sufficient to satisfy the first prong of the test for the purposes of summary judgment. Because ESN has no direct evidence of discriminatory intent, it must make out a prima facie case of discrimination, at which point the burden shifts to McDonald’s to provide a non-discriminatory explanation for its conduct.

ESN attempted to establish its prima facie case by alleging that it and other Black-owned businesses were “relegated” to work with Burrell. Although ESN was able to meet with people from OMD, the OMD representatives were just “going through the motions” and never intended to direct advertising revenues to Black-owned businesses. McDonald’s responded by first questioning whether ESN’s comparators were similarly situated to the Black-owned organizations against which McDonald’s is alleged to have discriminated. The Court weighed the expert testimony and determined that material issues of fact remained.

McDonald’s proffered various non-discriminatory reasons for not working with ESN through OMD. After evaluating all of the arguments, the Court concluded  that “the question of whether plaintiffs have raised a genuine dispute of material fact on both of their discrimination theories is a close call.” Nonetheless, as the burden on plaintiff to raise a triable issue of fact as to pretext is not onerous, ESN had created triable issues of fact as to their claims.