Amicus Curiae Brief — Domino's Pizza, Inc. v. McDonald

No. 04-593 JUL i & 2005

CSPREEO? re oxen |

IN THE

Supreme Court of the Anited States

DOMINO’S PIZZA, LLC,

DOMINO’S PIZZA, INC., and DEBBIE PEAR,

Petitioners,

Vv.

JOHN MCDONALD,

Respondent.

On Writ of Certiorari to the

United States Court of Appeais

for the Ninth Circuit

UNCONTESTED MOTION TO FILE BRIEF AS

AMICI CURIAE AND BRIEF OF THE EQUAL

EMPLOYMENT ADVISORY COUNCIL AND THE

CHAMBER OF COMMERCE OF THE UNITED

STATES OF AMERICA AS AMICI CURIAE

IN SUPPORT OF PETITIONERS

STEPHEN A. BOKAT ANN ELIZABETH REESMAN *

ROBIN S. CONRAD MCGUINESS NORRIS &

ROBERT J. COSTAGLIOLA WILLIAMS LLP

NATIONAL CHAMBER 1015 Fifteenth Street, N.W.

LITIGATION CENTER, INC. Suite 1200

1615 H S reet, N.W. Washington, D.C. 20005

Washington, D.C. 20062 (202) 789-8600

(202) 465-5337 Attorneys for Amicus Cu. ‘ae

Attorneys for Amicus Curiae Equal Employment Advisory

The Chamber of Commerce Council

of the | 'nited States of America

July 2005 * Counsel of Record

WiLSON-EPES PRINTING Co., INC. — (202) 789-0096 — WASHINGTON, D.C. 20001

IN THE

Supreme Court of the Anited States

No. 04-593

DOMINO’S P1ZZA, LLC,

DOMINO’S PIZZA, INC., and DEBBIE PEAR,

Petitioners,

Vv.

JOHN MCDONALD,

Respondent.

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF OF THE EQUAL EMPLOYMENT ADVISORY

COUNCIL AND THE CHAMBER OF COMMERCE

OF THE UNITED STATES OF AMERICA

AS AMICI CURIAE IN SUPPORT OF PETITIONERS

The Equal Employment Advisory Council and The Cham-

ber of Commerce of the United States of America respect-

fully submit this brief amici curiae contingent on the grant-

ing of the accompanying Motion for Leave.' The brief urges

reversal of the Ninth Circuit’s decision below and thus

' Counsel for amici curiae authored this brief in its entirety. No person

or entity, other than the amici curiae, their members, or their counsel,

made a monetary contribution to the preparation of the brief.

has been filed with the Clerk of the Court. Counsel for

Respondent has filed a letter with the Clerk indicating that he

does not object to participation by amici.

In support of their motion, EEAC and the Chamber by the

following show that this brief brings relevant matters to the

attention of the Court that have not already been brought to

its attention by the parties.

1. The Equal Employment Advisory Council (“EEAC’)

is a nationwide association of employers organized in 1976 to

promote sound, practical programs and policies to combat

employment discrimination. Its membership now comprises

more than 330 of this nation’s largest private sector

companies, collectively employing over 20 million workers

throughout the United States.

2. The Chamber of Commerce of the United States of

America (“the Chamber’) is the world’s largest business

federation. It represents an underlying membership of more

than three million businesses, state and local chambers of

commerce, and professional organizations of every size, in

every industry sector, and from every region of the country.

The Chamber advocates the interests of the national business

community in courts across the nation by filing amicus curiae

briefs in cases involving issues of national concern to

American business.

3. EEAC’s and the Chamber’s members are fully

committed to the principles of nondiscrimination and equal

employment opportunity. Nevertheless, as employers, they

make tempting targets for lawsuits under the antidiscrim-

ination laws, including 42 U.S.C. § 1981. Consequently,

EEAC’s and the Chamber’s members have a direct interest in

the extent to which the universe of potential discrimination

suits is limited by the requirement that a plaintiff must have

standing to bring an action under Section 1981.

4. EEAC’s and the Chamber’s members are concerned

that the Ninth Circuit’s decision in this case vastly expands

the scope of standing under Section 1981 by holding that it

extends to anyone who claims to have been injured by

discrimination in a contractual relationship, even if it is not a

contractual relationship to which that individual has ever

been, or sought to be, a party. The decision raises the

prospect of a flood of Section 1981 suits by plaintiffs alleging

discrimination in contractual relationships to which they have

been only tangentially related.

5. The brief explains that although Section 1981 was

enacted to protect contractual rights, the Ninth Circuit has

expanded it to encompass derivative claims by individuals

against companies with which they have no contractual

relationships. Thus, the decision below creates a significant

new litigation threat to companies, exposing them to potential

discrimination suits brought, not by their own employees or

job applicants, but by virtually anyone associated with any

firm with which they have had any contractual dealings.

6. Because of their members’ interest in the scope of

Section 1981 as applied to employment, EEAC and/or the

Chamber have filed amicus curiae briefs in a number of cases

in this Court, including Goodman v. Lukens Steel Co., 482

U.S. 656 (1987), Patterson v. McLean Credit Union, 491 U.S.

164 (1989), Landgraf v. USI Film Prods., 511 U.S. 244

(1994), Rivers v. Roadway Express, Inc., 511 U.S. 298

(1994), and Jones v. R.R. Donnelley & Sons Co., 541 US.

369 (2004). Thus, EEAC’s and the Chamber's interest in,

and experience with, the issue presented for the Court’s con-

sideration in this case are both substantial and long-standing.

7. Because of their significant experience, EEAC and the

Chamber are uniquely situated to brief the Court on the

relevant concerns of the business community and the sig-

nificance of this case to employers generally, as opposed to

its significance to the immediate parties.

WHEREFORE, for the reasons stated, the Equal Em-

ployment Advisory Council and the Chamber of Commerce

of the United States of America respectfully request that the

Court grant them leave to file the accompanying brief as

amici curiae.

Respectfully submitted,

STEPHEN A. BOKAT ANN ELIZABETH REESMAN *

ROBIN S. CONRAD MCGUINESS NorRIS &

ROBERT J. COSTAGLIOLA WILLIAMS LLP

NATIONAL CHAMBER 1015 Fifteenth Street, N.W.

LITIGATION CENTER, INC. Suite 1200

1615 H Street, N.W. Washington, D.C. 20005

Washington, D.C. 20062 (202) 789-8600

(202) 463-5337 Attorneys for Amicus Curiae

Attorneys for Amicus Curiae Equal Employment Advisory

The Chamber of Commerce Council

of the United States of America

July 2005 * Counsel of Record

TABLE OF CONTENTS

A PLAINTIFF WHO NEITHER IS, NOR

SEEKS TO BE, A PARTY TO A CON-

TRACTUAL RELATIONSHIP HAS NO

STANDING TO SUE UNDER 42 U.S.C.

§ 1981 FOR ALLEGED DISCRIMINATION

IN THAT RELATIONSHIP................:ccccceeceeees

A. Because Section 1981 Protects a Specific

Right—the Right To Make and Enforce

Contracts—the Class of Persons Who Can

Bring Claims Under Section 1981 Is

Limited to Those Who Seek To Enter Into

or Remain In the Contractual Relationship

|

B. Alleged Injuries to Persons Who Neither

Have Nor Seek a Contractual Relationship

Lie Outside the Zone of Interests Section

PRUDENTIAL PRINCIPLES WEIGH HEAV-

ILY AGAINST EXTENDING SECTION 1981

STANDING TO PERSONS WHO ARE

ONLY TANGENTIALLY RELATED TO

THE CONTRACTUAL RELATIONSHIPS

ON WHICH THEY BASE THEIR CLAIMS...

(i)

ii

TABLE OF CONTENTS—Continued

Page

A. The Party Whose Section 1981 Rights Are

at Stake Is Best-Suited To Assert Any

Section 1981 Claim ..........ccccccceeeeeeeeeeeeeeeenees 11

B. Prudent Concern for the Amount of

Litigation in the Federal Courts Warrants

Limiting Standing Under Section 1981 to

Those Whose Own Rights Are at Stake ...... 14

CONCLUSION .ncccccccccecccccsscocsssccccssccccsscsscssesscsnssossnsssoes 16

TABLE OF AUTHORITIES

FEDERAL CASES Page

Bellows v. Amoco Oil Co., 118 F.3d 268 (Sth Cir.

IOP csensessensmenmeneemmansennnemaaiane 8

Danco, Inc. v. Wal-Mart Stores, Inc., 178 F.3d 8

fe ee 8

Elk Grove Unified School District v. Newdow,

542 U.S. 1, 124 S. Ct. 2301 (2004) oe 5, 11

General Building Contractors Association v.

Pennsylvania, 458 U.S. 375 (1982)... 13

Gersman v. Group Health Association, Inc., 931

F.2d 1565 (D.C. Cir. 1991), vacated on other

grounds, 502 U.S. 1068 (1992), orig. opinion

aff d, 975 F.2d 886 (D.C. Cir. 1992) 00... 8

Gladstone Realtors v. Village of Bellwood, 441

te DS COVED cnnsmssssnenenenemmnnnmeniennscsnnenines 11

Gomez v. Alexian Brothers Hospital, 698 F.2d

BS Ge Ge, GED cnnecsessssetennesmasnenen 9

Goodman v. Lukens Steel Co., 482 U.S. 656

(RG Prarcencsemmunsmnenimee 3

Guides, Ltd. v. Yarmouth Group Property Man-

agement, Inc., 295 F.3d 1065 (10th Cir. 2002) ... 9

Jones v. R.R. Donnelley & Sons Co., 541 US.

BP Ge cremate 3

Kyles v. J.K. Guardian Security Services, Inc.,

222 F.3d 289 (7th Cir. 2000) ...........cccceeeeeees 7, 8, 10, 14

Landgraf v. USI Film Products, 511 U.S. 244

Ce csenternsnennmmemmm 3

McDonnell-Douglas Corp. v. Green, 411 U.S.

0 13

Patterson v. McLean Credit Union, 491 U.S. 164

GUI eeneensscserensncreansieanenerienneisemmemntennennmatil 3, 13

Rivers v. Roadway Express, Inc., 511 U.S. 298

Gee cnsemssesesssemenssssetngasmesneieemmammniennitns 3

iv

TABLE OF AUTHORITIES—Continued

Page

Singleton v. Wulff, 428 U.S. 106 (1976)..... 10, 12, 13, 14

St. Mary's Honor Center v. Hicks, 509 U.S. 502

( aaa ee 13

Texas Department of Community Affairs v.

Burdine, 450 U.S. 248 (1981).......cccccccessereereeees 13

Warth v. Seldin, 422 U.S. 490 (1975)....cccceseee 10, 11, 12

CONSTITUTIONS

Oe 1]

FEDERAL STATUTES

GB US, 0 FBG ccccceccssesescecesescccssesscscsnsessssssesssssese passim

42 UBL. § IDB NCA) ..cccccccccsccccccccccsccvccvsccesscsesscccesens 7

42 UBC. § IDB ICD) .cccccccccccccecccccccccccccccvesesccsssesenee 7,15

Title VII of the Civil Rights Act of 1964, 42

U.S.C. $§ ZOD!) Cf SEq. ..0rreeccccccrccresceseseereceesees 7

IN THE

Supreme Court of the Anited States

No. 04-593

DOMINO’S PIZZA, LLC,

DOMINO’S PIZZA, INC., and DEBBIE PEAR,

Petitioners,

Vv.

JOHN MCDONALD,

Respondent.

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF OF THE EQUAL EMPLOYMENT ADVISORY

COUNCIL AND THE CHAMBER OF COMMERCE

OF THE UNITED STATES OF AMERICA

AS AMICI CURIAE IN SUPPORT OF PETITIONERS

The Equal Employment Advisory Council and The Cham-

ber of Commerce of the United States of America respect-

fully submit this brief amici curiae contingent on the grant-

ing of the accompanying Motion for Leave.' The brief urges

reversal of the Ninth Circuit’s decision below and thus

' Counsel for amici curiae authored this brief in its entirety. No person

or entity, other than the amici curiae, their members, or their counsel,

made a monetary contribution to the preparation of the brief.

2

supports the position of the petitioners, Domino's Pizza,

LLC, et al.

INTEREST OF THE AMICI CURIAE

The Equal Employment Advisory Council (“EEAC”) is a

nationwide association of employers organized in 1976 to

promote sound, practical programs and policies to combat

employment discrimination. Its membership now comprises

more than 330 of this nation’s largest private sector com-

panies, collectively employing over 20 million workers

throughout the United States.

The Chamber of Commerce of the United States of Amer-

ica (“the Chamber’) is the world’s largest business federa-

tion. It represents an underlying membership of more than

three million businesses, state and local chambers of com-

merce, and professional organizations of every size, in every

industry sector, and from every region of the country. The

Chamber advocates the interests of the national business

community in courts across the nation by filing amicus curiae

briefs in cases involving issues of national concern to

American business.

EEAC’s and the Chamber’s members are fully committed

to the principles of nondiscrimination and equal employment

opportunity. Nevertheless, as employers, they make tempting

targets for lawsuits under the antidiscrimination laws, in-

cluding 42 U.S.C. § 1981. Consequently, EEAC’s and the

Chamber’s members have a direct interest in the extent to

which the universe of potential discrimination suits is limited

by the requirement that a plaintiff must have standing to bring

an action under Section 1981.

EEAC’s and the Chamber’s members are concerned that

the Ninth Circuit’s decision in this case vastly expands the

scope of standing under Section 1981 by holding that it

extends to anyone who claims to have been injured by

3

discrimination in a contractual relationship, even if it is not a

contractual relationship to which that individual has ever

been, or sought to be, a party. The decision raises the

prospect of a flood of Section 1981 suits by plaintiffs alleging

discrimination in contractual relationships to which they have

been only tangentially related.

Although Section 1981 was enacted to protect contractual

rights, the Ninth Circuit has expanded it to encompass

derivative claims by individuals against companies with

which they have no contractual relationships. For example,

under the decision below, Company A can be sued by an

employee, shareholder or creditor of Company B, where

Company B is, was, or at some time sought to be, a custo-

mer, supplier or vendor of Company A. Indeed, such indi-

viduals—who themselves have no contractual relationship

with Company A—can sue Company A alleging that it

discriminated against Company B, even if Company B itself

does not believe that it has been discriminated against, or has

settled any claims it may have had against Company A. Of

course, if Company A has not discriminated against Company

B, it ultimately may win the case, but only after expending

significant resources to defend itself. Thus, the decision

below creates a significant new litigation threat to companies,

exposing them to potential discrimination suits brought, not

by their own employees or job applicants, but by virtually

anyone associated with any firm with which they have had

any contractual dealings.

Because of their members’ interest in the scope of Section

1981 as applied to employment, EEAC and/or the Chamber

have filed amicus curiae briefs in a number of cases in this

Court, including Goodman vy. Lukens Steel Co., 482 U.S. 656

(1987), Patterson v. McLean Credit Union, 491 U.S. 164

(1989), Landgraf v. USI Film Prods., 511 U.S. 244 (1994),

Rivers v. Roadway Express, Inc., 511 U.S. 298 (1994), and

Jones v. R.R. Donnelley & Sons Co., 541 U.S. 369 (2004).

4

Thus, EEAC’s and the Chamber’s interest in, and experience

with, the issue presented for the Court’s consideration in this

case are both substantial and long-standing.

STATEMENT OF THE CASE

This case arose on a complaint filed by John McDonald

against Domino’s Pizza claiming that McDonald suffered

financial loss, emotional distress, and other personal damages

as a result of Domino’s alleged failure to perform certain

obligations under contracts Domino’s had with a corporation

called JWM Investments, Inc. (“JWM”). The contracts,

which called for construction of several restaurants for

Domino’s in Las Vegas, Nevada, were solely between

Domino’s and JWM. McDonald was not a party to the

contracts, although he was JWM’s president and sole

shareholder. Nevertheless, McDonald filed this action solely

in his own behalf.

McDonald brought this suit under 42 U.S.C. § 1981. His

complaint claims that Domino’s alleged “refusal . . . to abide

my contractual obligations with JWM [was] due to racial

animus towards McDonald,” who is African-American. Pet.

App. 14.°

The district court dismissed the complaint on the ground

that McDonald lacked standing to sue under 42 U.S.C. § 1981

for an alleged violation of the civil rights of JWM. The court

reasoned that “[b]y its terms, section 1981 protects the

contractual relationship itself and therefore limits the class of

persons who may sue under section 1981 to persons in the

contractual relationship.” Pet. App. 5. Since McDonald was

not party to the contractual relationship between Domino’s

and JWM, the district court concluded that he could not “step

> “Pet. App.” references are to the appendix filed with the petition for

writ of certiorari.

5

into the shoes of the corporation and assert [a Section 1981]

claim personally.” Pet. App. 7.

The Ninth Circuit reversed. The court of appeals held that,

even though the Domino’s contracts were with JWM and not

with McDonald himself, McDonald nonetheless could sue

Domino’s under Section 1981 for discrimination in the

contractual relationship “insofar as he seeks recovery of

individual injuries separate and distinct from contract

damages suffered by JWM Investments, Inc.” Pet. App. 2.

The Ninth Circuit essentially acknowledged that its decision

conflicts with decisions of other circuits holding that standing

under Section 1981 requires a contractual relationship. /d.

This Court granted Domino’s petition for a writ of certiorari.

SUMMARY OF ARGUMENT

As most lower courts, other than the Ninth Circuit, have

correctly recognized, a person cannot have standing to sue

under 42 U.S.C. § 1981 for alleged discrimination in a

contractual relationship to which he is fot a party and does

not seek to be a party. Section 1981 protects a specific

right—the right to make and enforce contracts free from

racial discrimination. A plaintiff who has not made, or at

least attempted to make, a contract cannot properly claim that

any right of Ais under Section 1981 is violated when the

defendant rejects, terminates or otherwise interferes with a

contract with some third party. If anyone’s Section 1981

rights are at stake in this situation, it is the third person’s, not

the plaintiff's. To accord a plaintiff standing in such circum-

stances violates, at a minimum, the “general prohibition on a

litigant’s raising another person’s legal rights . . . and the

requirement that a plaintiff's complaint fall within the zone of

interests protected by the law invoked.” Elk Grove Unified

Sch. Dist. v. Newdow, 542 U.S. 1, 124 S. Ct. 2301, 2309

(2004) (quoting Allen v. Wright, 468 U.S. 737, 751 (1984)).

6

The importance of reaffirming these prudential limitations

on standing in the Section 1981 context is underscored by a

consideration of the horrendous implications of disregarding

them, as the Ninth Circuit did in this case. Contracts are the

principal means by which companies do business. Every day,

companies throughout the nation propose, accept, reject,

modify, amend, enforce, extend, rescind, cancel and terminate

literally millions of business contracts. Most of these trans-

actions have potential consequences not only for the imme-

diate contracting parties, but also for others, including

shareholders, employees, subcontractors, suppliers, custo-

mers, landlords, tenants, creditors, insurers and countless

others who do business directly or indirectly with the con-

tracting companies.

When a company loses a business contract, its shareholders

may suffer a loss in stock value; its employees may lose work

and earnings; firms that do business with it may lose money

and opportunities. Although none of these affected indi-

viduals was a party to the principal contract, any or all of

them could claim to have suffered, to use the Ninth Circuit’s

phrase, “individual injuries separate and distinct from con-

tract damages suffered by [the company that lost the

contract]. Pet. App. 2. Thus, under the decision below, any

and all of these individuals could have standing to bring

Section 1981 suits against the other company involved,

alleging that it acted with discriminatory animus.

Thus, to sustain the Ninth Circuit’s holding would, in

effect, convert Section 1981 from a guarantee of equal

treatment for persons who engage in contractual relationships

into an open invitation to file lawsuits by anyone and

everyone tangentially related to any soured business trans-

action that they believe has caused them some loss or harm.

This Court should not allow Section 1981 litigation to be

expanded so far beyond the zone of interests the statute was

designed to protect.

-

ARGUMENT

I. A PLAINTIFF WHO NEITHER IS, NOR SEEKS

TO BE, A PARTY TO A CONTRACTUAL

RELATIONSHIP HAS NO STANDING TO SUE

UNDER 42 U.S.C. § 1981 FOR ALLEGED DIS-

CRIMINATION IN THAT RELATIONSHIP

A. Because Section 1981 Protects a Specific

Right—the Right To Make and Enforce Con-

tracts—the Class of Persons Who Can Bring

Claims Under Section 1981 Is Limited to Those

Who Seek To Enter Into or Remain In the

Contractual Relationship at Issue

Unlike Title VII of the Civil Rights Act of 1964, as

amended, 42 U.S.C. §§ 2000e et seqg., which broadly pro-

scribes discrimination because of race, color, religion, sex, or

national origin in all aspects of employment, the statute at

issue in this case, 42 U.S.C. § 1981, focuses solely on one

specific type of relationship—i.e., the contractual relation-

ship. Section 1981 guarantees individuals the right to “make

and enforce contracts” free from discrimination because of

race. 42 U.S.C. § 1981(a). This guarantee covers “the mak-

ing, performance, modification, and termination of contracts,

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

ditions of the contractual relationship.” 42 U.S.C. § 1981(b).

By its own terms, however, Section 1981’s protection does

not extend beyond the limits of the contractual relation-

ship itself.

The Seventh Circuit put it concisely: “Section 1981...

protects the right to enter into and preserve a contractual

relationship, period.” Kyles v. J.K. Guardian Sec. Servs.,

Inc., 222 F.3d 289, 303 (7th Cir. 2000). “The class of persons

who may bring suit [under Section 1981] is therefore limited

to persons who actually wish to enter into (or remain in)

that relationship.” /d. at 303. Thus, the Seventh Circuit

8

concluded that plaintiffs who applied for jobs as “testers” in

an effort to detect hiring discrimination, without any inten-

tion of actually accepting empl» ment with the defendant-

employers, lacked standing to sue under Section 1981,

because “in terms of the essential right that section 1981

protects—the right to make and enforce a contract—({the

plaintiffs] suffered no injury.” /d. at 302.

Most other federal appeals courts that have examined this

issue have reached the same conclusion as the Seventh

Circuit. For example, the First Circuit observed that “[nJoth-

ing in section 1981 provides a personal claim . . . to one who

is merely affiliated—as an owner or employee—with a

contracting party that is discriminated against by the company

that made the contract.” Danco, Inc. v. Wal-Mart Stores,

Inc., 178 F.3d 8, 14 (1st Cir. 1999).

The Fifth Circuit likewise concluded that a plaintiff who

had no separate contractual relationship with a defendant had

no standing to sue under Section 1981 for emotional distress

allegedly arising from discrimination against a corporation

based on the plaintiff's race, because “the discrimination

could only be asserted to invade the legal rights of the

corporation and not the rights of the plaintiff.” Bellows v.

Amoco Oil Co., 118 F.3d 268, 277 (Sth Cir. 1997). Like

McDonald in the case at bar, the plaintiff in Bellows was the

president and majority shareholder of the corporation he

claimed the defendant had discriminated against. The Fifth

Circuit recognized, however, that his claim was “merely

derivative” of the corporation’s, and hence he had “no indi-

vidual section 1981 claim.” /d. at 276. Accord Gersman v.

Group Health Ass'n, Inc., 931 F.2d 1565, 1567 (D.C. Cir.

1991), vacated on other grounds, 502 U.S. 1068 (1992), orig.

opinion aff d, 975 F.2d 886 (D.C. Cir. 1992) (President and

principal shareholder of computer software firm (CSI), lacked

Standing to sue health maintenance organization (GHA) for

discrimination under Section 1981, “because CSI, rather than

9

[plaintiff], suffered the alleged injury, as it was CSI that had

been party to the contractual relationship with GHA”);

Guides, Ltd. v. Yarmouth Group Prop. Mgemt., Inc., 295 F.3d

1065 (10th Cir. 2002) (President and sole shareholder of retail

mall tenant had no standing to sue under Section 1981 for

emotional damages she allegedly suffered because of racial

discrimination against tenant by landlord and _ property

management firm, since plaintiff suffered no violation of any

distinct contractual rights of her own).

B. Alleged Injuries to Persons Who Neither Have

Nor Seek a Contractual Relationship Lie Out-

side the Zone of Interests Section 1981 Protects

In its short, perfunctory opinion below, the Ninth Circuit

acknowledged that its “sister circuits” might not agree with

its holding that a person can have standing to sue under

Section 1981 for discrimination in a contractual relationship

to which he is not a party. Indeed, it cited the Tenth Circuit's

Guides decision as an example of one that “reachies] a

contrary result.” Pet. App. 2. Unlike the Tenth and other

circuits, however, the Ninth Circuit focused solely on whether

the injury the plaintiff was claiming to have suffered was

separate and distinct from the contract damages allegedly

suffered by the contracting party. It failed to complete the

necessary analysis by also considering whether the right the

plaintiff was asserting was one that comes within the zone of

interest Section 1981 protects. The Ninth Circuit's earlier

decision in Gomez v. Alexian Bros. Hospital, 698 F.2d 1019

(9th Cir. 1983), on which it relied in this case, suffers from

this same error.

This oversight is fatal to the Ninth Circuit's decisions,

because, as this Court has long recognized, it is essential in

standing cases to consider not only whether the plaintiff is

asserting a distinct injury, but also “whether the constitutional

or statutory provision on which the claim rests properly can

10

be understood as granting persons in the plaintiff's position a

right to judicial relief.” Warth v. Seldin, 422 U.S. 490, 500-

01 (1975) (footnote omitted).

The Ninth Circuit failed to recognize that standing involves

two distinct questions: First, whether the plaintiffs allege

“injury in fact,” that is, a sufficiently concrete interest in the

outcome of their suit to make it a case or controversy subject

to a federal court’s jurisdiction under Article Ill of the

Constitution, and second, whether as a prudential matter the

plaintiffs are proper proponents of the particular legal rights

on which they base their suit. Singleton v. Wulff, 428

U.S. 106 (1976). The Ninth Circuit considered only that

McDonald alleged distinct personal injuries, without con-

sidering the specific scope of the statute under which he

was suing.

The Seventh Circuit's opinion in Kyles v. J.K. Guardian

Security Services, Inc.. 222 F.3d 289 (7th Cir. 2000),

illustrates a proper analysis of the Section 1981 standing issue

and, by comparison, reveals the incompleteness of the Ninth

Circuit's approach. The Seventh Circuit acknowledged that

the plaintiff “testers” in Kyles were alleging individual

injuries that were separate and distinct to them—i.e., humil-

iation and other emotional distress as a result of having

allegedly encountered discrimination. 222 F.3d at 302. But

unlike the Ninth Circuit, the Seventh Circuit recognized that a

valid Section 1981 standing analysis cannot end there.

Rather, the Seventh Circuit recognized the need to go further

and consider whether the plaintiffs’ alleged injuries were of a

kind that is cognizable under Section 1981. It properly

determined that they were not, because “in terms of the

essential right that section 1981 protects—the right to make

and enforce a contract—{the plaintiffs] suffered no injury.”

Id. Hence, the Seventh Circuit correctly concluded that

the Kyles plaintiffs had no standing to assert claims under

Section 1981.

Had the Ninth Circuit completed the necessary analysis in

this case, it would have reached the same conclusion. Since

McDonald had never made nor attempted to make any

contract in his individual capacity with Domino’s, he could

not claim an injury within the zone of interests sought to be

regulated by Section 1981. Therefore, he lacked standing to

sue under that statute.

Il. PRUDENTIAL PRINCIPLES WEIGH HEAVILY

AGAINST EXTENDING SECTION 1981 STAND-

ING TO PERSONS WHO ARE ONLY TAN-

GENTIALLY RELATED TO THE CONTRAC-

TUAL RELATIONSHIPS ON WHICH THEY

BASE THEIR CLAIMS

A. The Party Whose Section 1981 Rights Are at

Stake Is Best-Suited To Assert Any Section

1981 Claim

As noted above, a proper analysis of standing does not end

with a determination that a plaintiff has alleged an “injury in

fact” sufficient to raise a justiciable controversy under Arti-

cle Ill. For even when the Constitution’s requirements are

satisfied, courts use “prudential principles” to “limit access to

the federal courts to those litigants best suited to assert the

particular claim.” Gladstone Realtors v. Village of Bellwood,

441 U.S. 91, 99-100 (1979). Such principles are reflected in

the “general prohibition on a litigant’s raising another per-

son’s legal rights,” as well as in “the requirement that a

plaintiff's complaint fall within the zone of interests pro-

tected by the law invoked.” Elk Grove Unified Sch. Dist. v.

Newdow, 542 U.S. 1, _., 124 S. Ct. 2301, 2309 (2004)

(quoting Allen v. Wright, 468 U.S. 737, 751 (1984)).

Indeed, this Court has recognized repeatedly that, to have

standing, a plaintiff “generally must assert his own legal

rights and interests, and cannot rest his claim to relief on

the legal rights or interests of third parties.” Warth, 422 U.S.

12

at 499. The practical necessities behind this rule are detailed

in the Court's opinion in Singleton, 428 U.S. at 113-16.

Those considerations weigh heavily against extending stand-

ing under Section 1981 to plaintiffs who have no contractual

relationship with the defendant they are suing, but claim to

have been harmed by the defendant's treatment of some

company with which they are affiliated as, for example,

employees or shareholders.

This Court explained in Singleton why “(federal courts

must hesitate before resolving a controversy, even one within

their constitutional power to resolve, on the basis of rights of

third persons not parties to the litigation.” 428 U.S. at 113. It

noted, first, that “courts should not adjudicate . . . rights

unnecessarily, and it may be that in fact the holders of [the

rights in question] either do not wish to assert them, or will be

able to enjoy them regardless of whether the in-court litigant

is successful or not.” /d. at 113-14.

These concerns are clearly warranted in cases, like the one

at bar, where Company A is sued by an employee or

shareholder of Company B, who claims that Company B was

discriminated against by Company A, with which Company

B had a contractual relationship. Company B may not

believe that it has been discriminated against, or even if it

does, it may still wish to do business with Company A. For

any number of valid reasons, Company B may conclude that

its business interests will be best served by resolving any

differences it may have had with Company A through

nonjudicial means, or simply letting them pass and moving

on. In any event, the last thing Company B is likely to want

in this situation is a lawsuit by its employees or shareholders

’ Here, for example, according to the parties’ briefs to the court of

appeals. JWM settled its claims against Domino's before its employee and

shareholder, McDonald, brought this suit in his own name. Pilaintiff-

Appellant's Opening Brief at 4; Defendants-Appellees’ Answering Brief

at 4.

13

claiming that Company A has discriminated against it.

Company A may be far less likely to settle or continue doing

business with Company B if it remains open to potential suits

by employees, shareholders or others claiming to have been

harmed by its alleged violation of Company B’s rights. Thus,

to allow such third-party suits would effectively take control

of the right guaranteed to Company B by Section 1981—

the right to make and enforce contracts—out of Company

B’s hands.

Second, as the Court went on to observe in Singleton, the

“parties themselves usually will be the best proponents of

their own rights.” /d. at 114. Again, this is certainly true in

Section 1981 actions. It is well-established that Section 1981

claims require proof of discriminatory intent. See General

Bldg. Contractors Ass'n v. Pennsylvania, 458 U.S. 375

(1982). A plaintiff generally must be prepared to prove that a

defendant’s proffered explanation for terminating a contract

or rejecting a contract proposal is a pretext to cover racial

bias. See Patterson v. McLean Credit Union, 491 U.S. 164

(1989).* In the business context, this typically requires an

understanding of business conditions, objectives and stra-

tegies better known to the contracting parties themselves than

to any non-party.

“The courts depend on effective advocacy, and therefore

should prefer to construe legal rights only when the most

* The Court held that the scheme of proof for intentional discrimination

claims under Title VII also applies to Section 1981 claims. Patterson, 491

U.S. at 186. Thus, once a plaintiff has established a prima facie case of

discrimination and the defendant has proffered a legitimate, nondiscrim-

inatory reason for its action, the plaintiff must prove by a preponderance

of the evidence that the reasons articulated by the defendant were

pretextual and that the defendant's real motives were discriminatory. See

McDonnell-Douglas Corp. v. Green, 411 U.S. 792 (4973), Texas Dept. of

Cmty. Affairs v. Burdine, 450 U.S. 248 (1981); St. Mary's Honor Ctr. v.

Hicks, 509 U.S. 502 (1993).

14

effective advocates of those rights are before them.”

Singleton, 428 U.S. at 114. Company B, having participated

directly in contractual dealings with Company A, generally

will be in a better position than any non-party to those

transactions to know the facts and circumstances surrounding

any breakdown that may have occurred in the parties’

relations. Company B also will be more likely than any

outsider to have access to relevant documents and infor-

mation. Thus, Company B likely will be a more effective

advocate of its own rights under Section 1981 than any

employee, shareholder, or other person who was not a party

to the contractual dealings at issue.

Indeed, to allow plaintiffs to bring suits based on other

parties’ rights not only impairs the quality of advocacy in the

courts, but also may directly harm the interests of the persons

whose rights actually are at stake. For example, an inquiry

into the reasons why Company B’s contractual relations with

Company A turned sour may require exploration of matters

Company B would prefer for strategic or competitive reasons

to keep confidential. Clearly, whether to launch a Section

1981 action that inevitably will lead to such an inquiry should

be up to Company B alone, not to some third person pursuing

his or her own agenda.

B. Prudent Concern for the Amount of Litigation

in the Federal Courts Warrants Limiting

Standing Under Section 1981 to Those Whose

Own Rights Are at Stake

Finally, controlling the sheer quantity of litigation in the

federal courts is a legitimate, prudential consideration for

courts to take into account when deciding how far to extend

the boundaries of standing under a statute such as Section

1981, which contains no “language suggesting that Congress

meant to stretch standing to the limits of Article III.” Kyles,

222 F.3d at 303. Viewed in that light, the potential impli-

15

cations of the Ninth Circuit’s holding in this case are beyond

breathtaking; they are truly appalling.

Indeed, even under the view of the majority of Circuits that

Section 1981 standing is limited to the actual parties to a

contractual relationship, the number of potential litigants is

huge, given that every contract has at least two parties and

every instance of discrimination in the “making, performance,

modification, [or] termination” of a contract, or in the

“enjoyment of all benefits, privileges, terms, and conditions”

of a contractual relationship of any sort, constitutes an

actionable event. 42 U.S.C. § 1981(b).

Under the Ninth Circuit’s holding, however, each action-

able event gives rise to a virtually infinite number of potential

litigants. For under that holding, the potential litigants

include anyone and everyone who can claim to have suffered

some distinct injury because of an actionable event—e.g.,

every employee who can claim to have lost wages because his

employer lost a contract with another company; every share-

holder who claims to have lost dividends or share value;

every creditor who claims to have been prevented from

collecting a debt; and everyone who claims to have suffered

emotional distress due to a disruption in one company’s

contractual relations with another. The list could go on

indefinitely.

There is simply no evidence that when Congress enacted

Section 1981, it meant to open the federal courts to suits by

persons whose only claim is that they have suffered as a

result of a violation of some other person’s right to make and

enforce contracts. This Court should not open the doors now

to such tangential claims, but should adopt the view of the

majority of lower courts that the class of persons who can

bring claims under Section 1981 is limited to those who

actually seek to enter into or remain in the contractual

relationships at issue.

16

CONCLUSION

For the reasons stated above, this Court should reverse the

Ninth Circuit's decision in this case.

STEPHEN A. BOKAT

ROBIN S. CONRAD

ROBERT J. COSTAGLIOLA

NATIONAL CHAMBER

LITIGATION CENTER, INC.

1615 H Street, N.W.

Washington, D.C. 20062

(202) 463-5337

Attorneys for Amicus Curiae

The Chamber of Commerce

of the United States of America

July 2005

Respectfully submitted,

ANN ELIZABETH REESMAN *

MCGUINESS NORRIS &

WILLIAMS LLP

1015 Fifteenth Street, N.W.

Suite 1200

Washington, D.C. 20005

(202) 789-8600

Attorneys for Amicus Curiae

Equal Employment Advisory

Council

* Counsel of Record