Jacob Neusner, Invitation to Midrash: The Workings of Rabbinic Bible Interpretation (Atlanta: Scholars, 1998) 73.
Neusner discusses a passage from the Sifra (third century C.E.), specifically Negaim 1:4. The topic is the laws in Leviticus about the leper, or whatever the disease in question was (Leviticus 13-14).
We therefore find that the specification of colors of plagues are meant to produce a lenient ruling, but not to produce a strict ruling. One therefore examines the German in accord with his skin tone to produce a lenient ruling...And the Ethiopian is adjudged in accord with the intermediate pigment to produce a lenient ruling.
Neusner puts this in bold-face to indicate that the passage also occurs in the Mishnah and the Tosefta.
I can't find the passage in the Tosefta, but the Mishnah passage is Negaim 2:1. Here's Danby's translation of parts of it:
In a German the Bright Spot appears as dull white, and in an Ethiopian what is dull white appears as bright white. R. Ishmael says: The Children of Israel...are like boxwood, neither black nor white, but of the intermediate shade...R. Judah says[:] let a German be judged leniently by [the standard of the colour of] his own skin, and let an Ethiopian be judged leniently by [the standard of colour of] the intermediate shade. But the Sages say: Let both be judged by [the standard of colour of] the intermediate shade.
I can get pieces of what's going on here. The issue is the bright spot that indicates leprosy, which the priest looks at to determine if the leprosy is present, receding, or absent. If the leper is clean, then he can rejoin the Israelite community. On a white German, the Bright Spot appears as a dull white, whereas on an Ethiopian it is bright white. The Israelites, however, are of an intermediate shade between white and black, so the Bright Spot appears in a certain way on them.
The priests make their verdict on the condition of the leper based on the color of the Bright Spot. Leviticus 13:39 states, for example, that if the bright spot is dark white, then the leper is clean. But what is "dark white"? On a German, the Bright Spot is dull anyway! And on an African it will always be lighter than his own skin. So the debate seems to be this: Should the priest judge the German and African based on their own skin color, or on that of most Israelites?
That's my impression, and I may be wrong. Maybe the view that the priest should judge the African based on Israelite skin-color is saying that the Bright Spot stands out on black skin, so the priest can easily monitor if it becomes lighter or darker. With a German, however, that poses more of a problem, since the Bright Spot always appears darker, with the German being so white. Consequently, Rabbi Judah says the German should be judged according to the standard of German skin-color. The Sages, however, maintain that the priest should judge the German too according to Israelite skin-color. I don't understand this position.
Who are these Germans and Ethiopians? Are they resident aliens in Israel, gerim? Or are they people coming to Jerusalem for a festival, like the Ethiopian eunuch in Acts 8? I opt for the former because Leviticus 13-14 is about purity in the land of Israel: the residents of Israel need to be purified so that God will continue to dwell in their midst.