Domino's Pizza, Inc. v. McDonald

(Slip Opinion) OCTOBER TERM, 2005 1

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is

being done in connection with this case, at the time the opinion is issued.

The syllabus constitutes no part of the opinion of the Court but has been

prepared by the Reporter of Decisions for the convenience of the reader.

See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

DOMINO’S PIZZA, INC., ET AL. v. MCDONALD

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE NINTH CIRCUIT

No. 04–593. Argued December 6, 2005—Decided February 22, 2006

Respondent McDonald, a black man, is sole shareholder and president

of JWM Investments, Inc. (JWM). He sued petitioners (collectively

Domino’s) under 42 U. S. C. §1981, alleging, inter alia, that JWM and

Domino’s had entered into several contracts, that Domino’s had bro-

ken those contracts because of racial animus toward McDonald, and

that the breach had harmed McDonald personally by causing him to

suffer monetary damages and damages for emotional injuries. The

District Court granted Domino’s motion to dismiss on the ground that

McDonald could bring no §1981 claim against Domino’s because

McDonald was party to no contract with Domino’s. Reversing, the

Ninth Circuit acknowledged that an injury suffered only by the cor-

poration would not permit a shareholder to bring a §1981 action, but

concluded that when there are injuries distinct from those of the cor-

poration, a nonparty like McDonald may nonetheless sue under

§1981.

Held: Consistent with this Court’s case law, and as required by the

statute’s plain text, a plaintiff cannot state a §1981 claim unless he

has (or would have) rights under the existing (or proposed) contract

that he wishes “to make and enforce.” The statute, originally enacted

as §1 of the Civil Rights Act of 1866, now protects the equal right of

“[a]ll persons” to “make and enforce contracts” without respect to

race, §1981(a), and defines “make and enforce contracts” to “includ[e]

the making, performance, modification, and termination of contracts,

and the enjoyment of all benefits . . . of the contractual relationship,”

§1981(b). This cannot be read to give McDonald a cause of action be-

cause he “made and enforced contracts” for JWM as its agent. The

right to “make contracts” protected by the 1866 legislation was not

the insignificant right to act as an agent for someone else’s contract-

2 DOMINO’S PIZZA, INC. v. MCDONALD

Syllabus

ing, but was rather the right, denied in some States to blacks, to give

and receive contractual rights on one’s own behalf. The statute’s text

makes this common meaning doubly clear by speaking of the right to

“make and enforce” contracts. When the 1866 Act was drafted, a

mere agent, who had no beneficial interest in a contract he made for

his principal, could not generally sue on that contract. Any §1981

claim, therefore, must initially identify an impaired “contractual re-

lationship,” §1981(b), under which the plaintiff has rights. McDon-

ald’s complaint identifies a contractual relationship between Dom-

ino’s and JWM, but it is fundamental corporation and agency law

that a corporation’s shareholder and contracting officer has no rights

and is exposed to no liability under the corporation’s contracts.

McDonald’s proposed new test for §1981 standing—whereby any per-

son may sue if he is an “actual target” of discrimination and loses

some benefit that would otherwise have inured to him had a contract

not been impaired—ignores the explicit statutory requirement that

the plaintiff be the “perso[n]” whose “right . . . to make and enforce

contracts,” §1981(a), was “impair[ed],” §1981(c), on account of race.

Shaare Tefila Congregation v. Cobb, 481 U. S. 615, 618; Runyon, supra,

at 168; and Goodman v. Lukens Steel Co., 482 U. S. 656, 669, distin-

guished. McDonald’s policy argument that many discriminatory acts

will go unpunished unless his reading of §1981 prevails goes beyond

any expression of congressional intent and would produce satellite

litigation of immense scope. Pp. 4–10.

107 Fed. Appx. 18, reversed.

SCALIA, J., delivered the opinion of the Court, in which all other

Members joined, except ALITO, J., who took no part in the consideration

or decision of the case.

Cite as: 546 U. S. ____ (2006) 1

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the

preliminary print of the United States Reports. Readers are requested to

notify the Reporter of Decisions, Supreme Court of the United States, Wash-

ington, D. C. 20543, of any typographical or other formal errors, in order

that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

_________________

No. 04–593

_________________

DOMINO’S PIZZA, INC., ET AL., PETITIONERS v.

JOHN MCDONALD

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE NINTH CIRCUIT

[February 22, 2006]

JUSTICE SCALIA delivered the opinion of the Court.

We decide whether a plaintiff who lacks any rights

under an existing contractual relationship with the defen-

dant, and who has not been prevented from entering into

such a contractual relationship, may bring suit under Rev.

Stat. §1977, 42 U. S. C. §1981.

I

Respondent John McDonald, a black man, is the sole

shareholder and president of JWM Investments, Inc.

(JWM), a corporation organized under Nevada law. He

sued petitioners (collectively Domino’s) in the District

Court for the District of Nevada, claiming violations of

§1981. The allegations of the complaint, which for present

purposes we assume to be true, were as follows.

JWM and Domino’s entered into several contracts under

which JWM was to construct four restaurants in the Las

Vegas area, which would be leased to Domino’s. After the

first restaurant was completed, Domino’s agent Debbie

Pear refused to execute the estoppel certificates for JWM

required by the contracts to facilitate JWM’s bank financ-

ing. The relationship between the parties further deterio-

2 DOMINO’S PIZZA, INC. v. MCDONALD

Opinion of the Court

rated when Pear persuaded the Las Vegas Valley Water

District to change its records to show Domino’s, rather

than JWM, as the owner of the land JWM had acquired for

restaurant construction. McDonald had to go to the Water

District to prove JWM’s ownership of the land. In the

course of what were apparently many and fruitless discus-

sions between McDonald and Pear, McDonald “explained

that he intended to see [the contracts] through to comple-

tion,” even though Pear made clear that unless he agreed

to back out of the contractual relationship, he would suffer

serious consequences. App. to Pet. for Cert. 12–13. At one

point Pear said to McDonald “ ‘I don’t like dealing with you

people anyway,’ ” refusing to specify what she meant by

“ ‘you people.’ ” Id., at 13. Pear threatened to use Dom-

ino’s attorneys to “bury” McDonald if he should sue. Ibid.

The contracts between Domino’s and JWM ultimately

remained uncompleted.

At least in part because of the failed contracts, JWM

filed for Chapter 11 bankruptcy. The trustee for JWM’s

bankruptcy estate initiated an adversary proceeding

against Domino’s for breach of contract. For whatever

reason, the trustee chose not to assert a §1981 claim alleg-

ing Domino’s interference with JWM’s right to make and

enforce contracts. The breach of contract claim was set-

tled for $45,000, and JWM gave Domino’s a complete

release. Consequently, no further claims arising out of the

same episode could be pursued on JWM’s behalf.1 While

the bankruptcy proceedings were still ongoing, McDonald

filed the present §1981 claim against Domino’s in his

personal capacity.

——————

1 Since JWM settled its claims and is not involved in this case, we

have no occasion to determine whether, as a corporation, it could have

brought suit under §1981. We note, however, that the Courts of Ap-

peals to have considered the issue have concluded that corporations

may raise §1981 claims. See, e.g., Hudson Valley Freedom Theater, Inc.

v. Heimbach, 671 F. 2d 702, 706 (CA2 1982).

Cite as: 546 U. S. ____ (2006) 3

Opinion of the Court

The gravamen of McDonald’s complaint was that Dom-

ino’s had broken its contracts with JWM because of racial

animus toward McDonald, and that the breach had

harmed McDonald personally by causing him “to suffer

monetary damages and damages for pain and suffering,

emotional distress, and humiliation.” Id., at 16. The

complaint demanded that Domino’s discharge its “obliga-

tions under the contracts which McDonald would have

received, but for the discriminatory practices, including,

but not limited to front pay, back pay and other lost bene-

fits,” as well as “compensatory damages for pecuniary

losses, including pain and suffering, emotional distress,

mental anguish, and humiliation,” and punitive damages.

Id., at 17.

Domino’s filed a motion to dismiss the complaint for

failure to state a claim. It asserted that McDonald could

bring no §1981 claim against Domino’s because McDonald

was party to no contract with Domino’s. The District

Court granted the motion. It noted that Domino’s had

“rel[ied] on the basic proposition that a corporation is a

separate legal entity from its stockholders and officers,”

id., at 6, and concluded that a corporation may have

“standing to assert a §1981 claim” but that “a president or

sole shareholder may not step into the shoes of the corpo-

ration and assert that claim personally.” Id., at 7 (citing

Guides, Ltd. v. Yarmouth Group Prop. Management, Inc.,

295 F. 3d 1065, 1072–1073 (CA10 2002)).

The Court of Appeals for the Ninth Circuit reversed. It

agreed that an “injury suffered only by the corporation”

would not permit a shareholder to bring a §1981 action.

107 Fed. Appx. 18 (2004). But relying on its earlier deci-

sion in Gomez v. Alexian Bros. Hospital of San Jose, 698

F. 2d 1019, 1021–1022 (1983), the Ninth Circuit concluded

that when there are “injuries distinct from that of the

corporation,” a nonparty like McDonald may nonetheless

bring suit under §1981. 107 Fed. Appx., at 18–19. The

4 DOMINO’S PIZZA, INC. v. MCDONALD

Opinion of the Court

Court of Appeals acknowledged that this approach set it

apart from other Circuits. Ibid. We granted certiorari.

544 U. S. 998 (2005).

II

Among the many statutes that combat racial discrimi-

nation, §1981, originally §1 of the Civil Rights Act of 1866,

14 Stat. 27, has a specific function: It protects the equal

right of “[a]ll persons within the jurisdiction of the United

States” to “make and enforce contracts” without respect to

race. 42 U. S. C. §1981(a). The statute currently defines

“make and enforce contracts” to “includ[e] the making,

performance, modification, and termination of contracts,

and the enjoyment of all benefits, privileges, terms, and

conditions of the contractual relationship.” §1981(b).

McDonald argues that the statute must be read to give

him a cause of action because he “made and enforced

contracts” for JWM. On his reading of the text, “[i]f Dom-

ino’s refused to deal with the salesman for a pepperoni

manufacturer because the salesman was black, that would

violate the section 1981 right of the salesman to make a

contract on behalf of his principal.” Brief for Respondent

12. We think not. The right to “make contracts” guaran-

teed by the statute was not the insignificant right to act as

an agent for someone else’s contracting—any more than it

was the insignificant right to act as amanuensis in writing

out the agreement, and thus to “make” the contract in that

sense. Rather, it was the right—denied in some States to

blacks, as it was denied at common law to children—to

give and receive contractual rights on one’s own behalf.

Common usage alone is enough to establish this, but the

text of the statute makes this common meaning doubly

clear by speaking of the right to “make and enforce” con-

tracts. When the Civil Rights Act of 1866 was drafted, it

was well known that “[i]n general a mere agent, who has

no beneficial interest in a contract which he has made on

Cite as: 546 U. S. ____ (2006) 5

Opinion of the Court

behalf of his principal, cannot support an action thereon.”

1 S. Livermore, A Treatise on the Law of Principal and

Agent 215 (1818).2

Any claim brought under §1981, therefore, must ini-

tially identify an impaired “contractual relationship,”

§1981(b), under which the plaintiff has rights.3 Such a

contractual relationship need not already exist, because

§1981 protects the would-be contractor along with those

who already have made contracts. We made this clear in

Runyon v. McCrary, 427 U. S. 160 (1976), which subjected

defendants to liability under §1981 when, for racially-

motivated reasons, they prevented individuals who “sought

to enter into contractual relationships” from doing so, id., at

172 (emphasis added). We have never retreated from what

should be obvious from reading the text of the statute:

Section 1981 offers relief when racial discrimination blocks

the creation of a contractual relationship, as well as when

racial discrimination impairs an existing contractual rela-

——————

2 McDonald’s “pepperoni salesman” analogy is imprecise. It would

better parallel the facts here if the analogy had been to a salesman

unable to collect on accounts receivable because he was black, rather

than to one who was unable to make the contract in the first place. The

fundamental point, however, is the same: An individual seeking to

make or enforce a contract under which he has rights will have a claim

under 42 U. S. C. §1981, while one seeking to make or enforce a con-

tract under which someone else has rights will not.

3 We say “under which the plaintiff has rights” rather than “to which

the plaintiff is a party” because we do not mean to exclude the possibil-

ity that a third-party intended beneficiary of a contract may have rights

under §1981. See, e.g., 2 Restatement (Second) of Contracts §304, p.

448 (1979) (“A promise in a contract creates a duty in the promisor to

any intended beneficiary to perform the promise, and the intended

beneficiary may enforce the duty”). Neither do we mean to affirm that

possibility. See, e.g., Blessing v. Freestone, 520 U. S. 329, 349 (1997)

(SCALIA, J., concurring) (“Until relatively recent times, the third-party

beneficiary was generally regarded as a stranger to the contract, and

could not sue upon it”). The issue is not before us here, McDonald

having made no such claim.

6 DOMINO’S PIZZA, INC. v. MCDONALD

Opinion of the Court

tionship, so long as the plaintiff has or would have rights

under the existing or proposed contractual relationship.

Absent the requirement that the plaintiff himself must

have rights under the contractual relationship, §1981

would become a strange remedial provision designed to

fight racial animus in all of its noxious forms, but only if

the animus and the hurt it produced were somehow con-

nected to somebody’s contract. We have never read the

statute in this unbounded—or rather, peculiarly

bounded—way. See, e.g., Patterson v. McLean Credit Un-

ion, 491 U. S. 164, 176 (1989); Burnett v. Grattan, 468 U. S.

42, 44, n. 2 (1984); General Building Contractors Assn., Inc.

v. Pennsylvania, 458 U. S. 375, 396 (1982).

Nor has Congress indicated that we should. We held in

Patterson that the prior version of §1981 did “not apply to

conduct which occurs after the formation of a contract and

which does not interfere with the right to enforce estab-

lished contract obligations.” 491 U. S., at 171. In 1991,

Congress amended the statute, see 105 Stat. 1071, adding

§1981(b), which defines “make and enforce” to bring post-

formation conduct, including discriminatory termination,

within the scope of §1981. See Jones v. R. R. Donnelley &

Sons Co., 541 U. S. 369, 383 (2004). But while Congress

revised Patterson’s exclusion of postformation conduct, it

let stand Patterson’s focus upon contract obligations. In

fact, it positively reinforced that element by including in

the new §1981(b) reference to a “contractual relationship.”

McDonald’s complaint does identify a contractual rela-

tionship, the one between Domino’s and JWM. But it is

fundamental corporation and agency law—indeed, it can

be said to be the whole purpose of corporation and agency

law—that the shareholder and contracting officer of a

corporation has no rights and is exposed to no liability

under the corporation’s contracts. McDonald now makes

light of the law of corporations and of agency—arguing, for

instance, that because he “negotiated, signed, performed,

Cite as: 546 U. S. ____ (2006) 7

Opinion of the Court

and sought to enforce the contract,” Domino’s was wrong

to “insist that [the contract] somehow was not his ‘own.’ ”

Brief for Respondent 4. This novel approach to the law

contradicts McDonald’s own experience. Domino’s filed a

proof of claim against JWM during its corporate bank-

ruptcy; it did not proceed against McDonald personally.

The corporate form and the rules of agency protected his

personal assets, even though he “negotiated, signed, per-

formed, and sought to enforce” contracts for JWM. The

corporate form and the rules of agency similarly deny him

rights under those contracts.

As an alternative to ignoring corporation and agency

law, McDonald proposes a new test for §1981 standing:

Any person who is an “actual target” of discrimination,

and who loses some benefit that would otherwise have

inured to him had a contract not been impaired, may bring

a suit. Under this theory, an individual is the “actual

target” if he was the reason a defendant chose to impair its

contractual relationship with a third party. McDonald’s

formulation simply ignores the explicit statutory require-

ment that the plaintiff be the “perso[n]” whose “right . . .

to make and enforce contracts,” §1981(a), was “im-

pair[ed],” §1981(c), on account of race. It is just the statu-

tory construction we have always rejected.

McDonald points to several of our prior cases involving

plaintiffs whose status as contracting parties was unclear.

Because they nonetheless prevailed, McDonald reasons,

contractual privity cannot be a sine qua non of a §1981

claim. In those cases, however, we did not discuss, much

less decide, the privity question. In Shaare Tefila Congre-

gation v. Cobb, 481 U. S. 615 (1987), we decided the narrow

question whether Jews are a separate and protected race

under §1982. Id., at 618. Similarly, in Runyon, supra, the

arguments and the opinion addressed “only two basic ques-

tions: whether §1981 prohibits private, commercially oper-

ated, nonsectarian schools from denying admission to pro-

8 DOMINO’S PIZZA, INC. v. MCDONALD

Opinion of the Court

spective students because they are Negroes, and, if so,

whether that federal law is constitutional as so applied.”

Id., at 168 (footnote omitted). And in Goodman v. Lukens

Steel Co., 482 U. S. 656 (1987), we decided only the two

contested issues: that §1981 was subject to the state per-

sonal injury limitations period, id., at 660–664, and that it

violates Title VII of the Civil Rights Act of 1964 and §1981

for a union to decline to press black employees’ grievances

under the governing collective-bargaining agreement, id., at

669. “The Court often grants certiorari to decide particular

legal issues while assuming without deciding the validity of

antecedent propositions, and such assumptions—even on

jurisdictional issues—are not binding in future cases that

directly raise the questions.” United States v. Verdugo-

Urquidez, 494 U. S. 259, 272 (1990) (citations omitted).

McDonald resorts finally to policy arguments. Unless

his reading of the statute prevails, he warns, many dis-

criminatory acts will go unpunished. Corporations, for

instance, may choose not to bring suit for the racially

motivated contract breach. It is not likely to be a common

occurrence that the victim of a contract breach will forgo a

potent available remedy. Injured parties “usually will be

the best proponents of their own rights,” Singleton v.

Wulff, 428 U. S. 106, 114 (1976). And if and when “the

holders of those rights . . . do not wish to assert them,” id.,

at 113–114, third parties are not normally entitled to step

into their shoes. Moreover, §1981 is only one of a multi-

tude of civil rights statutes. Many of McDonald’s hypo-

thetical examples of unpunished discrimination would in

fact be reachable under Title VII—or even under general

criminal law. See, e.g., Brief for Respondent 27 (concern-

ing a scenario in which “Domino’s officials had beaten up

McDonald in an attempt to intimidate him”). The most

important response, however, is that nothing in the text of

§1981 suggests that it was meant to provide an omnibus

remedy for all racial injustice. If so, it would not have

Cite as: 546 U. S. ____ (2006) 9

Opinion of the Court

been limited to situations involving contracts. Trying to

make it a cure-all not only goes beyond any expression of

congressional intent but would produce satellite §1981

litigation of immense scope. McDonald’s theory would

permit class actions by all the minority employees of the

nonbreaching party to a broken contract (or, for that mat-

ter, minority employees of any company failing to receive a

contract award), alleging that the reason for the breach (or

for the refusal to contract) was racial animus against

them.

Consistent with our prior case law, and as required by

the plain text of the statute, we hold that a plaintiff can-

not state a claim under §1981 unless he has (or would

have) rights under the existing (or proposed) contract that

he wishes “to make and enforce.” Section 1981 plaintiffs

must identify injuries flowing from a racially motivated

breach of their own contractual relationship, not of someone

else’s. Because the District Court correctly recognized and

applied these principles, the Ninth Circuit erred in revers-

ing its judgment.4

* * *

The judgment of the Ninth Circuit is accordingly

——————

4 McDonald also argues in his merits brief (for the first time) that we

should affirm the Ninth Circuit’s judgment because Domino’s interfered

with McDonald’s own contracts with JWM. Counsel for McDonald

asserted at oral argument that this contention is not a new argument

(see this Court’s Rule 15.2), but is a “sort of formulatio[n] of the same

argument” that he had properly raised. Tr. of Oral Arg. 28. As such, it

fails for the same reasons that the argument fails in its original incar-

nation. McDonald acknowledges that JWM did not breach any contrac-

tual obligation to him, see Brief for Respondent 44, and so any injury

he may have received still derived from impairment of the contractual

relationship between JWM and Domino’s, under which McDonald has

no rights.

10 DOMINO’S PIZZA, INC. v. MCDONALD

Opinion of the Court

Reversed.

JUSTICE ALITO took no part in the consideration or

decision of this case.