Respondents Brief — Domino's Pizza, Inc. v. McDonald

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O) So> 99 00%

No. 93

OFFICE OF *

IN THE Oe . isi Ba 4 LT

Supreme Court of the United States

Domino’s Pizza, LLC; Domino’s Pizza, Inc.;

and Debbie Pear,

Petitioners,

John McDonald.

On Writ of Certiorari to the United States Court of Appeals

for the Ninth Circuit

BRIEF FOR THE RESPONDENT

Eric Schnapper Allen Lichtenstein

SCHOOL OF LAW (Counsel of Record)

UNIVERSITY OF WASHINGTON 3315 Russell Road, No. 222

P.O. Box 353020 Las Vegas, NV 80120

Seattle, WA 98185 (702) 433-2666

Pamela S. Karlan David T. Goldberg

STANFORD LAW SCHOOL 99 Hudson Street, 8 Floor

SUPREME COURT New York, NY 10013

LITIGATION CLINIC

559 Nathan Abbott Way

Stanford, CA 94305

September 22, 2005

Aa Remon cmeee T,

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

——

Matthew Q. Callister

CALLISTER & REYNOLDS

823 South Sixth Street

Las Vegas, NV 89101

Thomas C. Goldstein

Amy Howe

Kevin K. Russell

GOLDSTEIN & HOWE, P.C.

4607 Asbury Pl., NW

Washington, DC 20016

QUESTIONS PRESENTED

1. Can an individual who is the actual target of a

discriminator’s racially motivated breach of a contract bring

suit under 42 U.S.C. 1981 for the damages he suffers even if

he is not a formal party to the contract?

2. Can an individual who is the direct victim of a

discriminator’s racially motivated impairment of contractual

relationships he has with others bring suit under 42 U.S.C.

1981 even if the discriminator is not also a party to those

contracts?

TABLE OF CONTENTS

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SUMMARY OF ARGUMENT. ..............:cccscssccssersosessesssseecnes 4

POTTED sntibs sieciiakiititiestianininiidesariositapeniasteininatiawiiultant 9

|. Section 1981 Protects the Actual Targets of

Contract-Related Discrimination Regardless of

Whether They Contract Through Formal

I sinssiincctciihinencksntenipigininaievelanietainmniicnaiee vy)

A. The Most Natural Reading of the Plain Language

of Section 1981 Protects the Contracting Behavior

of Actual Targets of Discrimination Regardless of

Whether They Are Formal Signatories. ................... 10)

B. Respondent's Ability To Engage in Business and

Sell His Labor Free From Racial Discrimination

Lies at the Core of Section 1981’s Protections......... 15

C. Section 1981 Protects the Actual Targets of

Contract-Related Discrimination, Incituding When

They Do Business Through Intermediate Persons

FT: spiticicecinintsisesiaiihindintiancttosiapicicevennsesetociivie 19

1. This Court's Precedents Recognize That

Sections 1981 and 1982 Protect Actual

Targets of Discrimination Whose Affairs

Involve Intermediaries. .................ccssessserecesees 20

Section 1981 Protects the Interests of

Individuals Doing Business or Providing

Their Services Through a Corporate

TELE A LD SOLERO |

3. Excluding Claims By Persons Who Are the

Actual Targets of Unlawful Discrimination

iil

Would Create a Serious Gap in_ the

Enforcement of Section 1981. ............cc cece 26

4. Section. 1981 Does Not Impose on

Entrepreneurs a Hobson’s Choice of Either

Giving Up the Right to Incorporate or

Forsaking Full Relief for Violations of the

Right to Be Free from Discrimination. ............ 31

D. Suits by Corporations Are Proper Under Section

1981 Because They Are Necessary for Full

Enforcement of the Section 1981 Prohibition

Against Racial Discrimination Against

SOP U MII. .0n<saisctinsovssisepssnietsiepcentensdsscaumnaniaedaniia 33

Il. Respondent Also Stated a Claim Under Section

1981 Because Petitioners’ Racially Motivated Acts

Intentionally Deprived Him of the Benefits of His

Comteehn WHR Gee Ge ecivciccrsssstssnscosecnsncsbiibeimiiobensiagsebiun 35

A. McDonald Had a Contractual Relationship with

FOIE. icsascisertenisridtiahstrbcisaainidiaxiamabigmaiaaiaaaaa 37

B. Section 1981's Protection of Individuals’

Contractual Rights Against Outside Impairment

Extends Beyond Protecting Them Against

Induced Breaches By the Other Contracting Party... 40

1. The History of Section 1981 Reflects

Congress's Intention to Reach Impairment

of Protected Rights By Outside Parties. .......... 40

The 1991 Amendments to Section 1981

Reinforce Its Coverage of Discriminators

Who Impair an Individual’s Opportunity to

Reap the Full Benefits of His Contracts with

CPU FOIIOES siccscraditpisencecsscsittigiimeantatiigidpanuamnes 45

3. Respondent’s Claim Fits Within a Well-

Recognized Category of Cases in Which

Individuals Have Been Permitted to Sue for

Racially Motivated Interference with Their

Contractual Relationships. ..................0:0cee 46

CN eisncaiciiatctinnminiiniaameae 50

TABLE OF AUTHORITIES

Cases

Allen v. Wright, 468 U.S. 737 (1984) ...0.......ccccccccteeeeeeeeetenenees 27

Allgever v. Louisiana, 165 U.S. S78 (1897) ooo cccccceeeees 15

Bains LLC v. Arco Prods. Co., 405 F.3d 764 (CA9

FESS Se AP STE ae a 24, 26

Barrows v. Jackson, 346 U.S. 249 (1953)...00.0............33, 34, 46

Bediako v. Stein Mart, Inc., 354 F.3d 835 (CA8& 2004)......... 48

Belfast vy. Upsilon Chapter of Pi Kappa Alpha

Fraternity at Auburn, 267 F. Supp. 2d 1139 (M.D.

TS Re Oe CO 47

Bellows v. Amoco Oil Co., 118 F.3d 268 (CAS 1997) ......... 4x

Braswell v. United States, 487 U.S. 99 (T9BB) oe 13

Cardinal Towing & Auto Repair, Inc. vy. City of Bedford,

Od F. Samp. STS C.D. Tem. IGGB).........ccccscercrersccercssoossceess 24

Cargill, Inc. v. Hedge, 375 N.W. 2d 477 (Minn. 1985).......... 32

Citv of Memphis v. Greene, 451 U.S. 100 (1981)... 12

Cohen v. Mirage Resorts, Inc., 62 P.3d 720 (Nev. 2003)..... 38

Coleman v. Dow Chemical Co., 747 F. Supp. 146

Sa tallies acaba ied camettengdsédbsegtdacseneeeses 47

Coley v. M&M Mars, inc., 461 F. Supp. 1073 (M.D.

Sd UTED Saha bethindichdchdinindindnbaisasanisboetnecetnaniatinterctressereteannened 48

Collin v. Rector and Bd. of Visitors of Univ. of Va., 873

ig ES CREEY TEIN POI Dctcasacssncietccnssecsecrarcsstanecnnces 47

Danco, Inc. vy. Wal-Mart Stores, Inc., 178 F.3d 8 (CAI

a olenstandtionie 24, 26

Daniels vy. Pipefitters’ Ass'n Local Union No, 597, 945

EA 47

DeMatteis v. Eastman Kodak Co., 511 F.2d 306 (CA2

a aaa sa cnssenssnteducqpediatenest 49

Des Vergnes v. Seekonk Water Dist., 601 F.2d 9 (CAI

baraca Vv. Clements, 506 F.2d 956 (CAS 1978) 20. 47

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

ee weciaetihinntiinnieninsteciistcilanisisitiiniiieinaail 14, 16, 41

Gersman vy. Group Health Ass'n, Inc., 931 F.2d 1565

I SOO cnccncicncssicntgupennetaentntantignabibasmetiniitendiiniand 24

Gomez vy. Alexian Bros. Hosp., 698 F.2d 1019 (CA9

Pee ia nncshciasintinnidttemctpnnnedintacspnininliietsshipibtneistvamitentadial 4,24

Goodman vy. Lukens Steel Co., 482 U.S. 656 (1987)..... passim

Great Am. Tool & Mfg. Co. v. Adolph Coors Co., Inc.,

780 F. Supp. 1354 (D. Colo. 1992)... ccccccceceeeeeeeees 24

Green v. State Bar of Tex., 27 F.3d 1083 (CAS 1994).......... 48

Guides, Lid. v. Yarmouth Group Prop. Mgmt., Inc., 295—

ff 2 ep RS Ee 24, 26

Haddle v. Garrison, 525 U.S. 121 (V99B) o.oo. ccc eeecceeeees 38

Hampton vy. Dillard Dept. Stores, Inc., 247 F.3d. 1091

A Oe cicreniacinecieancettaiiisatiniiitsintinanicapaininniniiiienlltininisisiail 4x

Harris v. Allstate Ins. Co., 300 F.3d 1183 (CA10 2002).24, 47

Hishon v. King & Spaulding, 467 U.S. 69 (1984)... 37

Hodges v. United States, 203 U.S.1 (1906) 2.00... ccccecceeees 1S, 27

Hudson Valley Freedom Theater, Inc. v. Heimbach, 671

Fane Pele Ge GO sccensigntreinnietnncdivhtaticientieteqneninittiagninsiiins 33

In Re JWM Investments, Inc., Case No. 00-19303 LBR,

U.S. Bankruptcy Court, District of Nevada.............0.......... 3

JA. Case Co. v. NLRB, 321 US. 332 (W944) ooo 22

Jackson \. Birmingham Board of Education, 125 $. Ct

8 ES SPER eran ne Oe ee Oe 1t-12

Jett v. Dallas Indep. Sch. Dist., 491 U.S. 701 (1989) ........ 20, 36

Johnson v. Railway Express Agency, Inc., 421 U.S. 454

Sree cckchssctinputtanthucdinteagihiaseibinashaibensibiahsiaaiidibaitinisidis 10, 11, 19

Jones v. Alfred H. Maver Co., 3992 U.S. 409 (1968)........ passim

McCrary v. Runyon, 515 F. 2d 1082 (CA4 1975) ....0......0...... 20

Mian v. Donaldson, Lufkin & Jenrette Sec. Corp., 7

ee HU OG FRee WO ee Peccscecnapsniasrecsendshibesepesnsindinaiomtastensinti 4s

Morrison v. Am. Bd. of Psvchiatry and Neurology, Inc.,

908 F. Supp. 582 (N.D. I. 1996)................ccecccceeeeeeneeenees 47

Park View Heights Corp. v. City of Black Jack, 467 F.2d

NG UE 0 el scncesencnsveinieneiniulcdiaitindiaitieadTebmmanititatilaiates 33

Parks Sch. of Bus., Inc. v. Svmington, 51 F.3d 1480 (CA9

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

GO asecicneccsteicinntatinemntercipbiathiaapaianteacinatinttianniibmiinaes 45

Perez v. Abbott Laboratories, No. 94 C 4127, 1995 WL

NR eee 24

Pollard v. EL. du Pont de Nemours & Co., 532 US.

Le EE aie: | LER Rae e crenon ae ators 38

Roepke v. W. Nat'l Mut. Ins. Co., 302 N.W. 2d 350

GRERIED, FSBE ) nccocccsenssesesecsnsessnsnsvensesnemsinsoonenateseoteesaneesescoees 32

Rosales v. AT&T Info. Sys., Inc., 702 F. Supp. 1489 (D.

GR a Sa LS 24, 31, 33

Runvon v. McCrary, 427 U.S. 160 (1976)... cee passim

Saint Francis Coll. v. Al-Khazraji, 481 U.S. 604 (1987)........ 14

Searcy v. Houston Lighting & Power Co., 907 F.2d 562

SEL GOED cicsariinnsinccasomnsteiimnianipuitiavintnaianiabapatitinndiaedbinatiis 24

Shaare Tefila Congregation v. Cobb, 481 U.S. 615

SR Pe ae er eee re 6, 10, 21

Soc. Sec. Bd. v. Nierotko, 327 U.S. 358 (1946)... cee 38

Southend Neighborhood Improvement Ass'n v. St. Clair

County, 743 F.2d 1207 (CAT VORA) eee cece eeeteeeee 49

Spicer Accounting, Inc. vy. United States, 918 F.2d 90

RD FE cecrescnanstecesinsutstnntuiniinpensstninsiiesenpaimienteaienis 37

Spriggs v. Diamond Auto Glass, 165 F.3d 1011S (CA4

Sap Picceiintenptcinsensntsiipinticdeiacnatiaipmniaugsiilaetanitineniinaatbiatecinbeidtpitinmipetians 47

Stackhouse v. DeSitter, 566 F. Supp. 856 (N.D. Ill

Fee Pcrctncrsnpesmutnsntinecignnsintipeinegtabebinitiagidinipiaaiaiectipaibimniiis 49

Sullivan vy. Little Hunting Park, Inc. 396 U.S. 229

FeO ceicintncndenctitcsegtiupsindpheniccitiatiiimaniipdansendeapataliiiods passim

Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002) ............. 37

Thinket Ink Info. Res., Inc. v. Sun Microsystems, Inc., 368

BO we A ES ee oe ee ee 24

vil

Tillman v. Wheaton-Haven Recreation Ass'n, 410 U.S.

cg ae ener ence ea ee ee passim

U.S. Gypsum Co. v. Mackey Wall Plaster Co., 199 P. 249

IK Ctl cxdinshcpecinestnaibensittinenedeaindinedganietinminailadsiunaabinte 32

United States v. Price, 383 U.S. 787 (1966)................ce0ccc0000 12

Veterinary Surgical Consultants, P.-C. v. Comm'r, 117

Bie Ce ichetnitinntncteyrictandinceasiinetmniiicipnliehaaitaniibaiiniianiinittiit 37

Vietnamese Fishermen's Ass'n v. Knights of Ku Klux

Klan, 518 F. Supp. 993 (S.D. Tex. 1981)... ccc cceeeeeeee 46

Village of Arlington Heights v. Metro. Housing Dev.

Sg A es See cetcnneenicctssinnsatnininineniniagtiamnaniiioe 14

Wharf (Holdings) Lid. v. United Int'l Holdings, Inc.,

ee ettinsitinibbiechiciniepstipietneiciiiniidiidliiadintinaihi 38

Statutes

II entcereinigadicsiaveiipsanadininpivetiitndibantiathe . diptitintandines 14

> ET ronantsictiieitedndinianltdunedinanimnnuinlevenidibindl passim

ie Se crnticncntstitntdtninietesntienditionnmatiins 13, 36, 45

Se CORD cntuicicecenitistindhbiieidialppiaiimaiedailicesendiitiedgeltias 45

ie SEE biitcieicctilsaineisttdhininidiicrtpegiicteineiesinematasininiindis passim

Other Authorities

Walter L. Fleming, Documentary History of

ae wicitesinrisinintitactntnieeniniicimeabinannteasdidies 4]

Wilham Meade Fletcher, Fletcher Cyclopedia of the Law

of the Law of Private Corporations (perm. ed., rev. vol.

PUTT cinstigsiltnpapgrerinnpasanauninibintiiennsntataianmnindeinaelnmbscniiegs 13, 38, 39

19 Am. Jur. 2d Corporations (2005 ) .............ccccccccceeeeneeneeees 39

Cong. Globe, 39th Cong.. I st Sess. (1866)........... 16, 42, 43, 44

H.R. Rep. 101-644 (1990). eee ececeeeeeeeesenneees 10, 27, 45

Fas SR, CERO ceritrentcinntocsntasnsnsonenctdtiaremenntsiittndt 10, 27

Harold M. Hyman & William M. Wiecek, Equal Justice

NT INT GUID tic docecinspinnisicirnidaniiappinitonpabadnnineiinntntalstiine 15

Nevada Small Bus. Dev. Ctr.. Forms of Business

ee rccittectevintncsniptsnincinnipticatiiiiviaiphinatiins 23

vill

Report of C. Schurz, S. Exec. Doc. No. 2, 39th Cong..

I 16, 41, 42

Restatement (Second) of Torts § 766 (1979)... 43

Rev. Rul. 74-44, 1974-1 C.B. 287 (1974). 000000. ccccccccccceeeeeeees 37

U.S. Equal Employment Opportunity Comm'n,

Enforcement Guidance: Application of EEO Laws to

Contingent Workers Placed by Temporary

Employment Agencies and Other Staffing Firms,

EEOC Notice No. 915.002, Dec. 3, 1997.00.00... 25

Treatises

HR Series: Policies and Practices (Thomson/West

Tax Planning for Corporations and Shareholders

(Matthew Bender & Co. 2005) 2............:cccccccceceeeeserseeeeeeeees 23

BRIEF FOR THE RESPONDENT

STATEMENT OF THE CASE

Respondent John McDonald is an African American

entrepreneur who lives in Nevada. McDonald was the sole

officer, director, and stockholder of JWM Investments, Inc., a

Nevada corporation he formed in 1996 for the purpose of

developing and leasing real property.

1. Because the district court dismissed respondent's

complaint for failure to state a claim, see Pet. App. 7, the

following allegations from the complaint, id 11-14, must be

taken as true. In January 1997, petitioner Domino's Pizza,

Inc. (“Domino's”) entered into four agreements with

McDonald's corporation, each for the construction of a

restaurant in or around Las Vegas that Domino's would

subsequently lease and operate. To McDonald's information

and belief, he was the only African-American developer used

by Domino’s to construct restaurants in the southwestern

United States.

Petitioners breached several key provisions of the

* contracts. First, Domino's failed to execute estoppel

certificates necessary for JWM to obtain the bank financing it

needed to continue performing the contracts. Second,

Domino's demanded that respondent either amend or abandon

three of the contracts. Third, Domino's failed to pay rent on

completed restaurants it had already occupied.

As McDonald sought to perform and enforce the terms of

the contracts, he was met with hostility and racial animus.

When McDonald tlephoned petitioner Pear, the real estate

negotiator for Domino's, to reiterate the need for Domino's to

satisfy its obligation to provide the estoppel certificates, Pear

told McDonald she would see to it that he personally would

experience serious financial repercussions and lose his

business and financial position if he didn’t voluntarily

terminate his dealings with Domino's after completing the

first of the four restaurants. McDonald then reminded Pear

that he had entered into four contracts with Domino's and

informed her that he intended to see them through to

completion. Pear responded “| don’t like dealing with you

people anyway.” She also announced that she would

personally see to it that Domino’s did no further business with

McDonald and threatened to use company attorneys to bury

him if he initiated a court action to enforce JWM’s contracts

with Domino's. The conversation concluded with Pear

informing McDonald that he “didn’t have a chance in hell” of

winning. Subsequently, Domino’s routed McDonald's calls

to Vice President and General Counsel Joe Graziani. Told of

petitioner Pear’s discriminatory treatment, Graziani refused to

conduct any investigation. Graziani agreed to honor

Domino's obligations only if McDonald acquiesced in

amendments to the contracts favorable to Domino's. Because

McDonald insisted on full performance of the existing

contracts, Domino’s continued to deny the estoppel

certificates to which JWM was entitled.

Despite petitioners’ refusal to satisfy their contractual

promises, McDonald performed his obligations under the

contracts. Fulfilling the terms proved to be costly, however,

as Domino’s made good on Pear’s threats to financially ruin

him. As a result of being denied the estoppel certificates,

McDonald had to forgo numerous construction offers, lost

financing for projects not yet started, and was unable to

realize potential sales of real property. Because his business

depended entirely on his ability to secure land and then

develop, sell, or lease it, petitioners’ refusal to sign the

certificates locked up JWM’s resources, thus jeopardizing

McDonald's company.

McDonald's financial situation was further damaged

when Domino's failed to pay rent on the completed

restaurants it already occupied and when its agent, Pear, made

derogatory statements about McDonald to Steward Olson, the

chicf lending officer for Nevada First Bank, who had

formerly agreed to finance construction of two of the

restaurants.. According to Olson, Pear’s statement led him to

believe that McDonald was dishonest and untrustworthy.

Opposition to Motion to Dismiss at 4. With few resources

and fewer prospects, JWM was forced by petitioners’

misconduct to file for Chapter 11 bankruptcy (/n Re JWM

Investments, Inc., Case No. 00-19303 LBR, U.S. Bankruptcy

Court, District of Nevada).

As a result of petitioners’ misconduct, McDonald's net

worth decreased by several million dollars. For example, he

lost $500,000 because he had personally pledged certificates

of deposit to obtain loans on which JWM later defaulted.

Because of the bankruptcy of his wholly owned corporation

and personal defamation, his credit is now ruined and he has

been unable to finance other business ventures. Affidavit of

John McDonald in Support of Opposition to Motion to

Dismiss 4 5. McDonald has also suffered pain, humiliation,

and emotional distress. /d.

2. In 2002, McDonald filed suit under 42 U.S.C. 1981

against petitioners Domino's Pizza, LLC: Domino's Pizza,

Inc.: and Debbie Pear. The complaint alleged that petitioners’

actions constituted intentional racial discrimination against

him “that occurred during the term of a contract.” Pet. App.

16 (Compl. § 44). Respondent sought injunctive and

monetary relief, including “front pay, back pay and other lost

benefits,” compensatory damages for pain and suffering and

emotional distress, punitive damages, costs and attorney's

fees. /d. 17 (Compl. Yj 2-5).

Petitioners moved to dismiss the complaint on the

grounds that McDonald had no right to recover under section

1981 because his company, JWM Investments, Inc., was the

! . - . . . .

The following allegations were made im respondent's

Opposition to Defendants’ Motion to Dismiss (Document || on the

district, court docket sheet reprinted in the Joint Appendix)

[hereinafter “Opposition to Motion to Dismiss” ].

formal signatory of the contract with Domino's. The district

court agreed, and in an unpublished order, granted the motion

to dismiss. /d. 3-7.

3. On appeal, the Ninth Circuit unanimously reversed.

Pet. App. 1-2. The court of appeals recognized that

McDonald could not bring suit for injuries suffered by JWM,

but under its longstanding precedent, see Gomez v. Alexian

Bros. Hosp., 698 F.2d 1019 (CA9 1983), it held that

McDonald was entitled to sue under section 1981 for injuries

he had suffered as the actual target of petitioners’

discrimination that were “distinct from |those] suffered by

JWM Investments, Inc.” Pet. App. 2. Subsequently, the court

of appeals denied Domino's petition for rehearing and

petition for rehearing en banc. /d. 8.

SUMMARY OF ARGUMENT

1. Section 1981 was enacted to protect individuals’

“personal right to engage in economically significant activity

free from racially discriminatory interference.” Goodman v.

Lukens Steel Co., 482 U.S. 656, 662 (1987). In this case,

petitioners directly targeted respondent, a black entrepreneur,

refusing to fulfill their contractual obligations with his wholly

owned corporation because of racial animus against him.

Thus, contrary to petitioners’ insinuations, the injuries giving

rise to this case are not “collateral.” Petr. Br. 13, and the

rights respondent asserts are not “derivative,” id. at 20.

McDonald is not suing as a “bystander” to racial

discrimination, id. at 37, nor because he “happens” to have

been the owner and operator of JWM. dd. at 8.

The core of petitioners’ argument is that they need not

answer under section 1981 for their intentional racial

discrimination against respondent because he chose, like

countless other entrepreneurs, to conduct his business in

corporate form. Even though McDonald negotiated, signed,

performed, and sought to enforce the contract, petitioners

insist that it somehow was not his “own.” id. at 14, and

therefore even as the actual target of their racial animus, he

cannot bring suit. ;

Petitioners’ cramped construction of section 1981 finds

no support in its text, structure, history, or purposes and it Is

contradicted by decades of precedent.

First, by its plain terms, section 1981°s protections are

not confined to the formal signatories to a contract. Section

1981 protects the right of individuals to “make and enforce

conteacts,” without limiting that right to “parties” making and

enforcing “their own” contracts. The text also expressly

protects the “performance” of a contract, which will

frequently be carried out by individuals who are not

themselves formal signatories to a contract but whose

participation is integral to the contractual relationship.

Second, as this Court has recognized and Congress has

emphatically reaffirmed, the focus of section 1981 lies not in

assuring that private parties comply with the common law of

contracts, but rather in securing equal economic opportunity,

by imposing a nonnegotiable duty to refrain from intentional

racial discrimination. The remedies available under section

1981 (unlike those in contract law), are defined not by the

expectations of the parties, but by the full harm the intentional

tortious discrimination has caused — and they include

personal, as well as economic, damages. Consistent with the

law’s treatment of torts (but not breaches of contract)

committed by a corporate officer, courts have imposed

individual liability for violating section 1981.

Third, this Court's precedents firmly establish that

persons who are the direct targets of racial discrimination can

bring suit without regard to contractual formalities. This

Court's first case allowing a section 1981 suit to proceed

against a private defencuat, Tillman v. Wheaton-Haven

Recreation Ass'n, 410 U.S. 431 (1973), reinstated the claims

of an African-American family subjected to a private club's

racially discriminatory guest policy, even though the relevant

contract was not “their own.” but rather bound the club and

their white would-be hosts. Runyon v. McCrary, 427 US.

160 (1976), likewise upheld an award of separate damages to

a plaintiff — a two-year-old private school applicant — who

was the target of the intentionally discriminatory admission

policy, although his parents (who were awarded separate

damages) were the would-be contracting party. And

Goodman v. Lukens Steel, 482 U.S. 656 (1987), sustained a

claim brought by black steelworkers against a union fc. its

intentionally discriminatory refusal to enforce provisions of a

contract to which those steelworkers were not parties.

Section 1981 and 42 U.S.C. 1982 started out as adjacent

clauses of a single sentence in the Civil Rights Act of 1866.

This Court’s section 1982 decisions reinforce the conclusion

that section 1981 covers cases like respondent’s. For

example, in Sullivan v. Little Hunting Park, Inc. 396 U.S. 229

(1969), this Court expressly rejected a privity argument

indistinguishable from the one advanced by petitioners here,

awarding damages both to the African-American family

targeted by the defendant's discrimination and to the white

individual who was the formal signatory to the contract with

the discriminator. And in Shaare Tefila Congregation v.

Cobb, 481 U.S. 615 (1987), this Court permitted recovery by

both the corporate owner of a synagogue desecrated for racial

reasons and by the individual congregants who suffered their

own personal injuries as a result of the vandalism.

Fourth, petitioners’ proposed restriction of section 1981

poses an unacceptable danger to the core interests protected

by that statute. Petitioners’ construction would limit a

discriminator’s liability for the same harm caused by the same

actions with the same intent because of the fortuity that the

contract was signed by a corporation rather than by a sole

proprietor. For a variety of pragmatic reasons, corporations

may decline to sue even when their workers are the actual

targets of intentional discrimination by parties with whom the

corporation has contracted. Remarkably, Domino’s argues

that individual victims of discrimination should not be

permitted to sue because that would interfere with the

discretion of a corporation to placate wrongdoers by ignoring

their illegal actions. To the contrary, the danger that

corporations will do this is precisely why individuals should

be able to sue.

Nor should this Court be swayed by the ill-considered

suggestion that the statute's protections should be denied to

those who “decide to do business” through the corporate

form. Although state and federal law attach certain benefits

and burdens to incorporation, forfeiture of the personal

protections of section 198! has never been one of them.

Were that the law. minority businesspeople unwilling to

forfeit those protections would be forced to compete on a

permanently unequal basis — literally the antithesis of the

level playing field that Congress intended section 1981 to

foster. Nor is there the least merit in the idea that holding

Domino’s liable for intentional discrimination would enable

McDonald to “have it both ways”: in reality, it is Domino's

that is selective in its respect for the corporate form, lifting

the veil of the legally “nonracial” JWM to discriminate

against its owner-operator, but then secking to invoke that

very corporate formality to cut off liability for harm this

intentional discrimination caused.

Giving effect to Congress’ plain intention to protect

individuals in McDonald's position carries no plausible

danger of the open-ended liability that petitioners and their

amici brandish. These slippery slope arguments have a

common defect: willful blindness to the principle that

distinguishes McDonald's case from the hypotheticals they

pose. [he plaintiff in this case was the actual, intended target

of petitioners’ discriminatory conduct. Recognizing his right

to sue under section 1981 leaves no opening for suits based

on injury as a result of racial discrimination directed against

someone else.

2. It is settled law that the 1866 Civil Rights Act's

prohibitions are not limited to defendants who were

contracting parties. Given the Reconstruction Congress’s

predominant concern with the Black Codes and other efforts,

public and private, to forbid black people from entering into

voluntary transactions with willing partners, petitioners

cannot seriously dispute that the rights guaranteed by section

1981 are protected “against the actions of third parties,”

Sullivan, 396 U.S. at 237, as well as against those of formal

signatories. Because the complaint’s allegations establish that

petitioners’ racially discriminatory acts intentionally denied

McDonald the rights and benefits of “the contractual

relationship” he had with JWM, he has stated a claim under

section 1981 against petitioners.

Rather than contend that third-party actions may never be

the basis for section 1981 liability, petitioners contend, first,

that respondent's complaint fails to allege that he had any

contractual relationship with JWM and, second, that liability

for section 1981 claims against discriminators who impair a

plaintiff's contractual rights should be defined by and limited

to the common-law tort of third party interference with

contractual relations. Thus, after conceding that section 198]

provides a cause of action for an individual whose employer

was persuaded by a defendant “to fire the employee, or to

staff the employee on a different project, because of his race,”

Petr. Br. 33, they paradoxically suggest that section 1981

somehow does not reach discriminatory actions aimed at the

contractual relationship for similarly racial reasons but

directed at the minority employee.

Contrary to petitioners’ assertions, the complaint includes

numerous allegations that may — and at this stage of the

proceedings, must — be read to assert a_ contractual

relationship between JWM and McDonald. The complaint

plainly describes an employment relationship between JWM

and McDonald. Moreover, as the “owner” of the corporation,

McDonald was necessarily party to a second contract with

JWM. in his capacity as shareholder. To be sure, this latter

contractual relationship does not entitle him to jue for injuries

to the corporation. But the injuries alleged in this complaint

are not corporate. Rather they involve personal injuries to

McDonald caused by discriminatory acts directed at him as a

black small-business owner.

Nor is there any basis for concluding that Congress

intended to limit section 1981 liability for impairment of a

plaintiff's contractual relations to racially motivated instances

of common-law tortious interference. The text of the statute

contains not a hint of that limitation. To the contrary, an

individual's ability to “perform” an employment contract 1s

impaired when he is intimidated into abandoning it, and

history shows the Reconstruction Congress to have been

especially concerned about that sort of behavior.

ARGUMENT

I. Section 1981 Protects the Actual Targets of Contract-

Related Discrimination Regardless of Whether They

Contract Through Formal Intermediaries.

Section 1981 provides that “{aJll persons within the

jurisdiction of the United States shall have the same right in

every State and Territory to make and enforce contracts.” 42

U.S.C. 1981. In construing section 1981 and the parallel

provision of 42 U.S.C. 1982,” which originated in the same

* Section 1982 provides that “ja]ll citizens of the United States

shall have the same right, in every State and Territory, as is enjoyed

by white citizens thereof to inherit, purchase, lease, sell, hold, and

convey real and personal property.”

Given that “[t}he operative language of both § 1981 and §

1982 is traceable” to the same sentence of the 1866 Civil Rights

Act, this Court has consistently construed the statutes to reach the

same types of defendants (the only difference being that section

1982 covers transactions involving real and personal property while

section 1981 covers contracts more generally). Runvon vy.

sentence of the Civil Rights Act of 1866, this Court has

extended its protections to cover intentional racial

discrimination to two classes of individuals. First, sections

1981 and 1982 protect targets of discrimination when they are

actual or would-be contract signatories or property owners.

See, ¢.g., Johnson v. Railway Express Agency, Inc., 421 U.S.

454 (1975): Tillman v. Wheaton-Haven Recreational Ass'n, 410

U.S. 431 (1973); Jones v. Alfred H. Maver Co., 392 U.S. 409

(1968). Second, sections 1981 and 1982 protect the actual

targets of discrimination when they are conducting their

activities through an actual or would-be signatory or owner.

See Shaare Tefila Congregation v. Cobb, 481 U.S. 615 (1987);

Runvon v. McCrary, 427 U.S. 160 (1976). As a black

entrepreneur conducting his business through a wholly-owned

corporation, respondent falls squarely within this well-

recognized second category.

A. The Most Natural Reading of the Plain Language

of Section 1981 Protects the Contracting Behavior

of Actual Targets of Discrimination Regardless of

Whether They Are Formal Signatories.

This case turns on the unsurprising premise that section

1981. enacted to “bar a// race discrimination in contractual

relations,” H.R. Rep. 102-40, pt. 1, at 92 (1991) (emphasis

added), * was intended to protect the actual targets of that

discrimination. The unlawfulness of the discrimination alleged

in this case is not in dispute.’ There is no question, for

MeCrary, 427 U.S. 160, 171 (1976) (quoting Tillman v. Wheaton-

Haven Recreational Ass'n, 410 U.S. 431, 439 (1973)).

* See also H.R. Rep. 101-644, pt. 2, at 43 (1990) (“The

Committee intends this provision to bar a// racial discrimination m

contracts.) (emphasis added).

* While there was originally some uncertainty as to petitioners*

precise position, compare Defendants” 12(b46) Motion to Dismiss

for Failure to State A Claim Upon Which Relief Can Be Granted at 6-

7 (claaming only JWM could sue) with Reply to Plaintiffs Opposition

example, that petitioners would be liable to McDonald if he had

operated his business as a sole proprietorship. See 7i//man v.

Wheaton-Haven Recreation Ass'n, 410 U.S. 431 (1973);

Johnson v. Railway Express Agency, Inc . 421 U.S. 454 (1975).

The question in this case is whether McDonald lost the

protection of section 1981 when he organized his business as a

corporation instead. Nothing in the text of section 1981

supports petitioners’ contention that actual targets of

discrimination are somehow stripped of protection when th. ;

do business through a corporation. To the contrary, wher 4

minority entrepreneur like McDonald does business through a

corporation, the terms of section 1981 protect both the actions

taken by that entrepreneur and the benefits that he or she

receives from the transaction.

Petitioners insist that the reference in section 1981 to the

right to “make and enforce contracts” grants to potential

plaintiffs only “the right to be free from racial discrimination in

their own actual or prospective contractual relationships.” Petr.

Br. 14 (emphasis added); see also id. at 25 (McDonald

sustained no injury “to any actual or potential contractual

relationship of his own™) (e sis added). But the words

“their own” (or “his own”) simply are not to be found in the

language of section 1981.° The failure of Congress to include

to Defendants’ 12(b46) Motion to Dismiss For Failure lo State A

Claim Upon Which Relief Can Be Granted at 6. (claiming no one

could sue), eventually petitioners agreed that JWM would have a

section 1981 claim, Supplemental Reply to Opposi[tijon to Motion to

Dismiss at 3. In the court of appeals, petitioners argued only that an

action by McDonald was improper because it was based on a

violation of the nghts of a third party, JWM. Defendants-Appellees”

Answering Brief at 6. 9-13. AfeDonald vy. Domino's Pizza, LLC,

(CAY 2004) (No. 02- 16900).

* Jackson W. Birmingham Board of Education, 125 S$. Ct. 1497

(2005), rejected a similar attempt to read into Title IX of the

I:ducation Amendments of 1972 a limitation not to be found in the

text of that statute:

such a limitation cannot be dismissed as “a mere slip of the

legislative pen.” Jones, 392 U.S. at 427. Here, as with section

1982 in Jones, section 1981 should be “accord{ed] a sweep as

broad as its language.” /d. at 437 (quoting United States v.

Price, 383 U.S. 787, 801 (1966)).°

Section 1981 provides that all persons have a right to be

free from discrimination “to make and enforce contracts,” not

merely to make and enforce their own contracts. For example,

one person can make a contract as an agent for someone else.

Where the party to a contract is a corporation, a natural person

of necessity must actually negotiate, approve, and execute the

contract. Congress did not provide more narrowly only that all

persons have a right to be “parties” to a contract, an omission

all the more telling because the very term “parties” is used

elsewhere in section 1981 itself (protecting the right of all

persons to “be parties” to a lawsuit). If Domino'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. By contrast, JWM’s accountant would not have a

claim under section 1981, even though that accountant

[Tithe IX] is broadly worded: it does not require that the

victim of the retaliation must also be the victim of the

discnmimnation that ts the subject of the original complaint.

if the statute provided instead that “no person shall be

subjected to discrimination on the basis of such individual's

sex,” then we would agree with the Board. However, Title

IX contains no such limitation.

125 S. Ct. at 1507 (internal citation omitted) (emphasis in original).

* This Court has emphasized the “broad and sweeping nature of

the protection meant to be afforded by § | of the Civil Rights Act of

1866,” trom which 42 U.S.C. 1981 and 1982 derive. Sullivan v. Little

Hunting Park, Inc., 396 U.S. 229, 237 (1969). Section 1981, like

section 1982, is to be “broadly construed” Cin of Memphis v.

Greene, 451 US. 100, 120 (1981).

undoubtedly lost some business when, as a result of petitioners’

discriminatory actions, JWM went bankrupt. But that is

because, unlike Mr. McDonald, the accountant was not the

target of Domino’s racial discrimination.

The text of section 1981 has always protected the right to

“enforce” a contract through legal action. It was precisely

because McDonald was an African American who threatened to

take legal action — that is, to “enforce” the contract he had made

with Domino's as president of JWM - that he was threatened

and verbally abused by petitioners’ employees. Pet. App. 13

(Compl. 4 19) (alleging that petitioner Pear “threatened to use

the company’s attorney to bury Plaintiff in the event a court

action was initiated”).

As amended in 1991, the text of section 1981 also

expressly protects the “performance™ of a contract. 42 U.S.C.

1981(b). Performance of a corporation's contracts will

frequently be carried out by the individuals who are its owners

or employees, as occurred in this case. Cf. Braswell v. United

States, 487 U.S. 99, 110 (1988) (noting that “[a]rtificial entities

such as corporations” may act only through natural persons): |

William Meade Fletcher, Fletcher Cyclopedia of the Law of the

Law of Private Corporations § 30 (perm. ed.. rev. vol. 1999).

Finally, the text of section 1981 protects “the enjoyment of

all benefits, privileges, terms. and conditions of the contractual

relationship.” 42 U.S.C. 1981(b) (emphasis added). Again, the

plain language of the statute is not limited to enjoyment of the

benefits of the plaintiff's own contractual relationships.

In sum, the very activities that an entrepreneur personally

undertakes when doing business through his corporation —

negotiating and executing contracts, performing contracts,

taking steps to enforce contracts — as well as the benefits the

entrepreneur receives as wages or from the status of owning a

corporation are precisely the activities and benefits protected by

the literal language of section 1981.

Petitioners’ suggestion that the sole, or even the primary.

purpose of section 1981 in a case such as this was to protect the

interest of the corporation is inconsistent with the plain

language of section 1981. The manifest intent of section 1981

was to protect against intentional racial discrimination. Gen.

Bldg. Contractors Ass'n v. Pennsylvania, 458 U.S. 375, 383-

391 (1982). But a corporation does not have a race. “As a

corporation, [JWM] has no racial identity and cannot be the

direct target of the petitioners’ alleged discrimination.” Village

of Arlington Heights v. Metro. Housing Dev. Corp., 492 U.S.

252, 263 (1977). There are of course cases in which a

defendant imputes to a corporation the race of the actual target

of its discrimination. Under those circumstances, the

corporation also has a cognizable claim under section 1981 in

not being a victim of race-based discrimination. See infra Part

1.D. But clearly the corporation’s interest does not supplant the

core interest of the individual human being who is the actual

target of the defendant’s racial animus. Section 1981 was

“intended to protect from discrimination identifiable classes of

persons who are subject to intentional discrimination solely

because of their ancestry or ethnic characteristics” Saint

Francis Coll. vy. Al-Khacraji, 481 U.S. 604, 613 (1987)

(emphasis added).

That the interests of a corporation could not be the sole or

primary interests protected by section 1981 1s reinforced by the

original language of section | of the 1866 Civil Rights Act.

[A]ll persons born in the United States and not subject

to any foreign power * * * are hereby declared to be

citizens of the United States; and such citizens, of

every race and color, * * * shall have the same right *

* * to make and enforce contracts * * * as is enjoyed

by white citizens * * * .

14 Stat. 27 (1866). In the form in which they were first enacted,

the rights now contained in section 1981 were accorded on/y to

individuals who were United States citizens by virtue of having

been born in this country, a group that obviously could not

include corporations. As of 1866, it was emphatically the

interests of private individuals that section 1981 was intended to

protect. That section 1981s protections subsequently expanded

to cover entities other than natural persons hardly undermines

their coverage of human beings.

B. Respondent's Ability To Engage in Business and

Sell His Labor Free From Racial Discrimination

Lies at the Core of Section 1981's Protections.

The provisions of section 1981 regarding discrimination in

contracting were enacted to “guarante{e] the personal right to

engage in economically significant activity free from racially

discriminatory interference.” Goodman v. Lukens Steel Co.,

482 U.S. 656, 662 (1987). As the first Justice Harlan explained:

[T]he freedom established by the 13th Amendment * *

* “is deemed to embrace the right of the citizen to be

free in the enjoyment of all his faculties: to be free to

use them in all lawful ways; to live and work when he

will: to earn his livelihood by any lawful calling: to

pursue any livelihood or avocation, and for that

purpose to enter into all contracts which may be

proper, necessary, and essential to his carrying out to a

successful conclusion the purposes above mentioned.”

Hodges v. United States, 203 U.S. 1, 35-36 (1906) (Harlan, J..

dissenting) (quoting Al/gever v. Louisiana, 165 U.S. 578, 589

(1897) (emphasis omitted). Justice Harlan’s view ultimately

prevailed when this Court overruled Hodges in Jones v. Alfred

H. Maver Co., 392 U.S. 409, 443 n.78 (1968).

The 1866 Civil Rights Act was adopted in large part to

nullify the Black Codes. which severely limited economic

rights of the newly freed slaves. See Harold M. Hyman &

William M. Wiecek, Equal Justice Under Law 319-20 (1982).

The Act's supporters believed that freedom would be valueless

if the newly freed slaves could not engage in economic

transactions. Section 1981 prohibited discrimination related to

contracts, not to federalize the common law of contracts, but as

a method of providing to the newly freed slaves “the means of

holding and enjoying the proceeds of their toil.” Cong. Globe.

39th Cong.. Ist Sess. 1159 (1866) (statement of Rep.

Windom).

Congress adopted the 1866 Civil Rights Act as a

comprehensive charter designed to protect the hard-won liberty

of the freedmen and to ensure that they could rely on their skills

and initiative to advance their economic interests. The

protections enumerated in section | of the Act encompassed

every right that the framers knew or could foresee that the

former slaves might require in order to participate fully in

economic life. Congress stopped short of an unrestricted

prohibition against a// forms of discrimination only because of a

concern that it might be construed to extend to political rights.

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

388 n.15 (1982). The rights enacted in section | should be

given full effect and construed to reach new devices and

schemes intended to deny individuals on the basis of race the

ability to hold and enjoy the proceeds of their toil.

” One of the key pieces of evidence on which Congress relied

in enacting section 1981 was a comprehensive report by Major

General Carl Schurz on conditions in the South. See Report of C.

Schurz, S. Exec. Doc. No. 2, 39th Cong., Ist Sess. (1865)

{hereinafter “Schurz Report”; see also Jones, 392 U.S. at 428

(describing the Schurz Report).

The Schurz Report recounted that the newly freed slave “is

positively prohibited from working or carrying on a business for

himself.” Schurz Report, supra, at 24. Senator Eliot warned that

without the protections of the 1866 Civil Rights Act. a freedman

would be “without the right to acquire or use any instrumentalities of

carrying on the industry of which he may be capable.” Cong. Globe,

39" Cong.. 1" Sess. 514 (1866). Senator Trumbull pointed to a newly

enacted Mississippi law whose purpose was “to prevent any freedmen

from doing any independent business.” /d. at 1759. Representative

Lawrence explained that the enactment of section | was required to

enable the freed slaves “to secure the privilege and rewards of labor.”

Id. at 1832-33.

The zone of interests protected by a statute such as section

1981 directed at racial discrimination is manifestly different

from the zone of interests protected by traditional contract law.

The basic purpose of the common law of contracts, and of

statutes such as the Uniform Commercial Code providing for

the enforcement of contracts, is to protect the interests of

contracting parties, and of certain intended _ third-party

beneficiaries. Thus, if a state-law contract action were brought

against Domino's, the zone of interests protected by Nevada

contract law presumably would be limited to JWM, as a

contracting party, and to any intended third-party beneficiaries.

But the purpose of section 1981 is to protect against racial

discrimination.” The overarching purpose of Reconstruction.

after all, was not to deal with a sudden rash of contract

violations, but to secure the freedom of the former slaves, and

to assure that they could participate in the economic life of the

nation unencumbered by racial discrimination. :

Thus, the interests asserted by McDonald — to conduct

business and to be compensated for his labor unimpeded by

racial discrimination — lie at the very heart of the concerns that

section 1981 was fashioned to address. For his entrepreneurial

efforts in acquiring land and constructing and leasing

restaurants, Domino’s was to pay a substantial sum in rent to

JWM, most or all of which, after expenses, would go to

McDonald in recompense for his time, effort. and skills.

The complaint alleges that certain Domino’s officials took

a series of discriminatory actions because of their racial animus

toward McDonald. Domino's had no racially motivated ill will

toward JWM as such; Domino’s would not have taken the

actions complained of if McDonald had been white. The

* This distinction plays out in the calculation of damages. The

damages in contracts cases are intended to give the injured party

the economic benefits of his bargain, measured through reliance,

restitution, or expectation. By contrast, section 1981 claims sound

m tort, see, eg. Goodman, 482 U.S. at 661-62, and can include

non-economic damages as well.

discriminatory acts were directed at McDonald in a highly

personal manner: a Domino’s official threatened McDonald

with personal financial ruin, Pet. App. 12 (Compl. 4 19), and,

referring to McDonald's race, admonished him “I don’t like

dealing with you people anyway.” /d. 13. The complaint

asserts that as a result of the discrimination of which he was the

actual target,’ McDonald suffered injuries distinct from any

damages that occurred to JWM,'" the corporation through

which he was doing business. JWM too was injured, but those

harms were incidental to the discrimination aimed at

” Petitioners correctly observe that the “circumstances of this

case allow McDonald to claim that he was the direct target of the

alleged discrimination.” Petr. Br. 37 (emphasis added).

The complaint identifies several such monetary claims:

1. The complaint alleges that McDonald personally suffered

“damages for pain and suffering, emotional distress and humiliation,”

Pet. App. 16 (Compl. 4 46), and sought compensatory damages for

those injuries, id. at 17.

2. The complaint sought back pay and front pay, which

McDonald assertedly would have received if Domino's had not

violated section 1981. /d 17 (Compt. © 2). This is not money which

JWM itself could have recovered. JWM could only have recovered

an amount equal to the profit it would have obtained from the

contracts (and perhaps certain consequential damages). The amount

of wages that JWM would have paid to McDonald could not have

been recovered by JWM; to the contrary, those wages would have

been subtracted from the contracted-for amounts in determining what

profits JWM would have made.

3. The complaint alleges that McDonald was forced by the

defendant's actions “to sit on the land Av already possessed and not

develop, sell or lease them [sic].” Ad 14 (Compl. © 26) (emphasis

added). Redress for that injury was within the scope of the damages

“for pecuniary losses” sought in the complaint. /d. 17 (Compl. © 3).

4. The complaint asserts that “Plainuff had numerous

construction offers which he was unable to secure” because of

petitioners’ discriminatory conduct. // 13 (Compl. © 24).

McDonald; Domino’s only took action harmful to JWM

because it was owned and operated by an African-American.

C. Section 1981 Protects the Actual Targets of

Contract-Related Discrimination, Including

When They Do Business Through Intermediate

Persons or Entities.

Had the intentional discrimination in this case been taken

against McDonald as a sole proprietor, he undoubtedly could

have invoked section 1981. That case would be directly

controlled by this Court’s decisions in 7illman vy. Wheaton-

Haven Recreation Ass'n, 410 U.S. 431 (1973), and Johnson v.

Railway Express Agency, Inc., 421 U.S. 454 (1975). But here,

as in most substantial business agreements, the underlying

contract was between two corporations:'' JWM, of which

McDonald was the owner-operator, and Domino's. JWM was,

in petitioners’ apt phrase, merely a “corporate intermediary™

between McDonald and Domino's. Petr. Br. 27. “McDonald

himself chose to do business through JWM.” Id. at 26

{emphasis omitted and added). Whatever the contractual

formalities, Domino’s understood that it was “do[ing] business”

with McDonald. The deal fell apart precisely because certain

Domino’s officials objected to dealing with an African-

American.

The fact that JWM rather than McDonald was formally the

party to the contract neither places the _ intentional

discrimination by Domino's outside the prohibitions of section

1981 nor puts McDonald's “right to engage in economically

significant activity” outside the zone of interests that section

1981 protects. Goodman, 482 U.S. at 662. Section 1981

‘' More recently. entrepreneurs and now professionals,

including lawyers, doctors, and accountants, do business as limited

hability companies or professional corporations. The discussion in

this brief of the use and purposes of corporations ts. in general.

equally applicable to LLCs and PCs.

provides redress both for McDonald, the actual target of the

discrimination, and for JWM, an intermediate victim of the

discriminatory acts.’

1. ‘This Court’s Precedents Recognize That Sections

1981 and 1982 Protect Actual Targets of

Discrimination Whose Affairs Involve

Intermediaries.

Contrary to petitioners’ contentions, this Court has

consistently applied sections 1981 and 1982 in cases where

the actual targets of discrimination were not themselves either

formal signatories or would-be signatories to a contract or

formal owners of the property at issue. In Runyon v.

McCrary, 427 U.S. 160 (1976), this Court held that Bobbe’s

School had violated section 1981 when it refused to admit

Michael McCrary because he was African-American. Michael

McCrary himself, however, had never sought to contract with

the school, and could not legally have done so; at the time of the

alleged discrimination, Michael was only two years old. See

McCrary v. Runvon, 515 F. 2d 1082, 1085 (CA4 1975). The

individuals who actually sought to contract with Bobbe’s

School were his parents. The school’s discriminatory policies

were directed at prospective students, not their parents; the

school clearly would have refused to admit Michael McCrary

even if he had been the adopted child of white parents. The

Court's decision in Runvon v. McCrary does not even refer to

the race of Mr. and Mrs. McCrary. Michael McCrary was the

- This Court has already recognized the existence of an implied

cause of action to enforce section 1981 against private parties. Je? v.

Dallas Indep. Sch. Dist., 491 U.S. 701, 731-32 (1989). There ts also

an express cause of action under 42 U.S.C. 1983 for section 1981

claims against governmental defendants.

Whether there is a private cause of action to enforce section

1981 is analytically distinct from the issue of which plaintiffs have

claims which fall within the zone of interests protected by section

1981.

actual target of the discrimination; his parents were only the

intermediate victims.'’ This Court nonetheless had no doubt

that section 1981 allowed Michael McCrary to sue, and

properly so.

A similar three-party situation was present in Shaare

Tefila Congregation v. Cobb, 481 U.S. 615 (1987). The

defendant had sprayed swastikas and anti-Semitic slogans on

the ouiside of a synagogue owned by the Congregation

Shaare Tefila, under Maryland law a non-stock membership

religious corporation.'* Both the Congregation and several of

its members sued, alleging that the vandalism violated the

right protected by section 1982 to hold properiy free of racial

discrimination.'* But the defaced synagogue was owned, not

by the congregation members whose ancestry was the target

of the prohibited discrimination, but by the distinct legal

entity, Congregation Shaare Tefila itself. Yet here too, this

Court did not question the members’ ability to sue.

In either of these cases it might have been possible for

those involved to so structure their affairs that the actual targets

of the discrimination would have been the contracting party in

Runyon and the property owner in Shaare Tefila. Mr. and Mrs.

McCrary could have placed the needed tuition funds in a

Uniform Gift to Minors account, and then, as Michael

McCrary’s legal guardians, entered into a contract on his behalf

with the school. It might have been possible to organize the

" At trial, the court awarded Michael damages of $1000, and his

parents damages of $2000. See 427 U.S. at 166 n.4.

'* App. to Pet. for Writ of Cert. at App. D, Shaare Tefila

Congregation v. Cobb, 481 U.S. 615 (1987) (No. 85-2156).

* Section 1982 applied to discrimination against Jews because

at the time the statute was adopted “race” meant ancestry or ethnic

group. Shaare Tefila Congregation v. Cobh, 481 U.S. at 617-18.

Cobb may have acted in part out of animus toward the religious

purpose of the Congregation, but ¢iat animus would not have been

actionable under section 1982.

Congregation in Shaare Tefila differently, with title to the

synagogue building instead being held jointly by all the

individual members of the congregation. But the framers of the

1866 Act manifestly did not intend that such an awkward

arrangement would be required in order to invoke the

protections of sections 1981 and 1982. It is equally unlikely

that Congress in adopting section 1981 intended to require the

actual targets of discrimination, as a condition of receiving

redress for their personal injuries, to give up the right to do

business as a corporation.

Petitioners’ contention that section 1981 protects from

discrimination only the interests of plaintiffs in contractual

privity with the defendant is inconsistent with this Court's

decision in Goodman. The plaintiffs there, black employees

who were members of the United Steelworkers, proved that

their union had deliberately refused to pursue grievances that

asserted that Lukens Steel had violated its collective bargaining

agreement by engaging in racial discrimination. But the

collective bargaining agreement that the union had unlawfully

declined to enforce was a contract between the United

Steelworkers and Lukens Steel Company; the aggrieved black

employees were not parties to that agreement. Cf. J./. Case Co.

v. NLRB, 321 U.S. 332, 335-36 (1944) (noting that collective

bargaining agreements are not contracts of employment, and

that an employee has status under the agreement “somewhat as

a third party beneficiary”). If only parties to a particular

contract were within the zone of interests protected by section

1981, the plaintiffs in Goodman would have had no viable

claim. And yet, this Court affirmed the finding of liability

against the union. See 482 U.S. at 664-69. Goodman was

established law when Congress, four years later, adopted the

1991 Civil Rights Act.

2. Section 1981 Protects the Interests of Individuals

Doing Business or Providing Their Services

Through a Corporate Intermediary.

Racial discrimination because of the race of the owner or

employees of a corporation easily falls within the scope of

section 1981. In moder business transactions, corporations

often play an essential intermediate role, as did the parents in

Runvon and the Congregation in Shaare Tefila. Where racial

discrimination related to contracts occurs because of the race of

a corporation’s owner-operator, the owner-operator (like the

black applicants in Runyon and the Jewish congregation

members in Shaare Tefila) is the actual target of that unlawful

discrimination, while the corporation itself is an intermediate

victim.

In the modern world, a number of practical, economic,

legal, and tax considerations may compel individuals to conduct

their affairs through corporations or other intermediate parties.

First, incorporation ordinarily protects a corporation's Owners

from personal liability for the debts of the firm. Second, an

entrepreneur can form several corporations to carry on separate

businesses, permitting him or her to establish different equity

sad financial structures and to work with different co-owners.

Third, there can be important federal income tax advantages to

doing business as a corporation; for certain taxpayers, doing

business as a sole proprietorship could cost thousands of dollars

in increased taxes. See Tax Planning for Corporations and

Shareholders § 1.01 (Matthew Bender & Co. 2005). Fourth, in

some instances the lenders or others with whom an entrepreneur

does business may insist on incorporation. See id. § 1.02

(1 fla}ti).

' Thus, for example, the Small Business Development Center

in Nevada where McDonald lives urges entrepreneurs to

incorporate. Nevada Small Bus. Dev. Ctr. Forms of Business

Ownership 6 (2004), available at http:’/www.nsbdc.org/resources:

documents/images/FormsofOwnership.pdf (last visited Sept. 20,

2005).

This intractable reality of modern business life is reflected

in section 1981 litigation. A significant number of the reported

section 1981 decisions (other than those based on employment

claims) involve minority-owned corporations. The importance

and prevalence of incorporation is reflected in the wide range of

business activities of these section 1981 claimants: parking lot

7 ‘

maintenance, '’ towing, '~ office supplies, '” _technology

2 2) 22

services, ”, Fepair services,“ medical services.“ software

services, ~’ information services,** tool manufacturing, **

retailing of African art and artifacts, +s the sale and

transportation of natural gas’ and gasoline," and real estate

development. -

Danco, Inc. vy. Wal-Mart Stores, Inc., 178 F.3d 8 (CAI

1999), cert. denied, 528 U.S. 1105 (2000).

* Cardinal Towing & Auto Repair, Inc. v. City of Bedford, 991

F. Supp. 573 (N.D. Tex. 1998).

Perez vy. Abbott Laboratories, No. 94 C 4127, 1995 WL

86716 (N.D.1. Feb. 27, 1995).

" Thinket Ink Info. Res., Inc. v. Sun Microsystems, Inc., 368

F.3d 1053 (CA9 2004).

*' Harris v. Allstate Ins. Co., 300 F.3d 1183 (CA10 2002).

*° Gomez v. Alexian Bros. Hosp., 698 F.2d 1019 (CA9 1983).

*" Gersman v. Group Health Ass'n, Inc., 931 F.2d 1565 (CADC

1991), vacated, 502 U.S. 1068 (1992).

4 Rosales v. AT&T Info. Sys.. Inc., 702 F. Supp. 1489 (D. Colo.

1988).

** Great Am. Tool & Mfg. Co. vy. Adolph Coors Co., Inc., 780

r. Supp. 1354 (D. Colo. 1992).

* Guides, Lid. v. Yarmouth Group Prop. Memt., Inc.. 295

b 3d $665 (CAO 2002).

” Searcy v. Houston Lighting & Power Co., 907 F.2d 562

(CAS 1990). cert. denied, 498 U.S. 970 (1990).

** Bains LLC v. Arco Prods. Co., 405 F.3d 764 (CA9 2005).

* Des Vergnes vy. Seekonk Water Dist., 601 F.2d 9 (CAI

1979).

Application of section 1981 to a refusal to deal with a

corporation (or other entity) because of the race of its

employees is of equal importance. Today, millions of

individuals who provide labor and services to a business or

individual are technically the employees of some other entity.

In the construction industry, many of the individuals working

at a particular job site are actually employees of specialized

subcontractors, rather than of the landowner or general

contractor. An entire industry has grown up of firms, such as

Kelly Services, Manpower, and Accountemps, that provide

temporary employment services. The workers serve on the

premises of the business in question and under its

supervision; those workers, however, are actually employees

of the temporary agency, through which the business whose

work they perform pays them.” In addition, a large number

of individuals with technical skills do their work at one

business (¢.g., a law firm) while on the payroll of another firm

(¢.g., a copier service company). If in these cases the entity

receiving and ultimately paying for the services could

lawfully discriminate against those workers, or refuse to do

business with an employer because of the race of its

employees, milliors of American workers would fall outside

the protections of section 1981.

See U.S. Equal Employment Opportunity Comm'n,

Enforcement Guidance: Application of EEO Laws to Contingent

Workers Placed by Temporary Employment Agencies and Other

Staffing Firms, EEOC Notice No. 915.002, Dec. 3, 1997, available

at http://www.eeoc.gov/policy/docs/conting. html (last visited Sept.

20, 2005) (explaining that “a temporary employment agency

employs the individuals that it places in temporary jobs at its

clients’ work sites” and then “bills the client for the services

performed,” and that “both staffing firms and their clients share

EEO responsibilities toward [temporary] workers”); see also IIR

Series: Policies and Practices § 29:1 (Thomson West 2005) (“What

distinguishes [contingent worker] arrangements from the traditional

employer-employee relationship is that the business ts contracting

with another entity * * * rather than hiring an employee.”).

3. Excluding Claims By Persons Who Are the

Actual Targets of Unlawful Discrimination

Would Create a Serious Gap in the Enforcement

of Section 1981.

If section 1981 (or section 1982) did not apply to such

three-way relationships, or if the actual targets of discrimination

could not obtain redress in such situations, the effectiveness of

sections 1981 and 1982 would be seriously impaired, and

would-be discriminators would at times be able to evade the

statutory prohibition against discrimination.

If section 1981 did not permit recovery of the damages

sustained by the actual target of discrimination whenever a

corporation or other intermediary was involved, significant

injuries caused by violations of section 1981 would go

unredressed. See, e.g.. Guides, Lid. v. Yarmouth Group Prop.

Memt., Inc., 295 F.3d 1065, 1071 (CA10 2002) (jury found that

the proven violation of section 1981 had caused $150,000 in

damages to the corporation and $200,000 in damages to its

owner-operator). In many instances, the wrongdoer would

escape liability altogether.

There are a number of types of discriminatory practices

that (at least ordinarily) will injure only the actual target of the

discrimination, but not the intermediate person or entity. For

example, racial harassment of the owner or an employee of a

corporation will not injure the corporation itself unless it

somehow causes lost profits. See Bains LLC v. ARCO Prods.

Co., 405 F.3d 764, 767-68, 770-71 (CA9 2005) (only

corporation itself permitted to sue despite protracted personal

harassment of its Sikh owner-operators); Danco, Inc. v. Wal-

Mart Stores, Inc., 178 F.3d 8, 10-11, 15-16 (CAI 1999) (noting,

in case involving racial harassment of Mexican-American

owner-operator, “it seems unlikely that [the corporation] itself

could have established monetary damages of any size from the

racial incidents”).

In the mstant case, McDonald asserts that Domino's

officials engaged in a number of actions that injured McDonald

personally, but could not have harmed JWM, including threats,

verbal abuse, and interference with McDonald’s personal

business activities. On petitioners’ view, none of these injuries,

however intentional or foreseeable, would be actionable under

section 1981. Under the theory advanced by petitioners,

moreover, Domino’s would have faced no liability under

section 1981 to anyone if Domino’s officials had beaten up

McDonald in an attempt to intimidate him into canceling

JWM’s contract, but he had the fortitude to persevere as a small

businessman. JWM would have had no claim because it would

still have received all the benefits promised by the contract, and

under petitioners’ theory, McDonald would have had no claim

because he wasn’t the formal signatory, even though he

controlled the signatory completely. Cf. Hodges v. United

States, 203 U.S. 1, 3 (1906) (white armed mob forcibly drove

African-American workers from the lumber mill where they

worked thereby inducing them to relinquish their contractual

entitlements). me

Under Domino’s interpretation of section 1981, moreover,

certain types of injuries would be excluded per se from redress

under section 1981 whenever an intermediate corporation ts

involved. The complaint in the instant case sought damages for

the pain and suffering, mental anguish, and humiliation suffered

by McDonald. “[{T]his sort of noneconomic injury is one of the

most serious consequences of discriminatory * * * action.”

Allen v. Wright, 468 U.S. 737, 755 (1984).*' But it is an injury

See H.R. Rep. 102-40, pt.1, at 92 (1991) ("In a wide range of

cases. only an award of monetary damages makes a victim whole for

physical, emotional or economic injury resulting from interntional

[sic] race discrimination.) (emphasis added); H.R. Rep. 101-644, pt.

1, at 87-88 (1990) (citing the case of a plaintiff who, prior to the 199]

amendments to section 1981, “received nothing for the humiliation,

loss of dignity, and psychological and physical harm a federal jury

found she had suffered as a result of her employer's intentional

discnmuination and harassment’).

for which only individuals can seek redress; corporations

(however beneficent or vindictive their policies) do not

themselves have feelings.’ The complaint also sought

backpay, relief which could be obtained only to the extent to

which JWM had not paid McDonald for the work in question.

Wages that were never paid to JWM employees because of

Domino’s discriminatory conduct represent to JWM, not an

injury, but a business expense that was avoided. In an action of

its own under section 1981, JWM itself could not collect money

owed to it by Domino's that would have been used to pay the

salaries of McDonald or other JWM employees for work they

would have performed had the breach not occurred. _ Its

damages would include only those wages it actually paid or was

still obligated to pay. JWM could sue only for lost profits or

other injuries to the corporation, not for economic injuries to its

employees. To the extent that the contract payments from

Domino's would have been used to pay an employee who never

became entitled to wages at all, JWM suffered no injury for

which it was entitled to compensation.

Where owners or employees are the actual targets of

discrimination and as a result suffer distinct personal injuries,

permitting them to obtain redress for those injuries will not

impose excessive liability on the wrongdoer. Those individual

plaintiffs may only obtain damages for personal injuries that are

separate from the harms suffered by a related corporation; the

lower courts are competent to ensure that no double recovery

occurs. The total amount of damages will be no greater than

would have been awarded if the discrimination had been

inflicted on a sole proprietorship; the only difference will be

* Similarly, in Shaare Tefila, the emotional harm caused to

congregation members when the defendants painted “DEATH TO

THE JUDE.” “TAKE A SHOWER JEWS “DEAD JEW. and a

swastika on the walls of the synagogue was undoubtedly far more

serious than the financial cost to the Congregation of physically

removing that graffiti. See Brief for Petitioner at 3-5, Shaare Tefila

Congregation v. Cobb, 481 US. 615 (1987) (No. 85-2156).

that that amount will be divided appropriately among the

several victims.

The suggestion by several states that this interpretation of

section 1981 would impose unreasonable burdens on state and

local officials, see Brief of the States of Alabama et al. as Amici

Curiae in Support of Petitioners at 1-2, is simply baffling. The

Fourteenth Amendment already applies to any racial

discrimination by state and local officials or governments

against an individual, regardless of whether the victim is an

actual or would-be contracting party. Any party that would

have a colorable cause of action against a public entity under

section 1981 would necessarily also have a Fourteenth

Amendment claim under section 1983, which has no

contractual requirement and applies to those acting under color

of law. Interpreting section 1981 in the manner suggested by

petitioners would not add to the types of claims actionable

against government officials or governments. In any event, the

longstanding availability of equal protection claims against

government officials has led to none of the dire consequences

predicted by petitioners or their amici.

The gaps in the redress available under section 198] that

petitioners’ interpretation would create would permit a

discriminator to reduce or even to avoid legal liability under

section 1981 by engaging in discriminatory practices targeted at

the owner-operator or employees of a firm, rather than at the

firm itself. In the instant case, although Domino’s could have

faced liability if i had injured JWM’s relationship with its

bank, under petitioners’ theory it faces no liability for

interfering with McDonald's relationship with his personal

bank. If Domino’s were disposed to use violence to pressure

JWM to give up its contract rights, it could avoid section 1981

liability for such tactics by burning (or threatening to burn)

McDonald's home, rather than JWM'’s corporate offices.

Domino's urges that the employees and owners of a

corporation should not be permitted to sue for their own injuries

because the corporation that was also harmed may prefer, in

order to avuid antagonizing the wrongdoer, not to complain

about unlawful racial discrimination. Petr. Br. 38. Although

that issue would not arise with regard to the minority owner-

operator of a small firm, the situation Domino's describes could

well occur in the case of discrimination against a minority

employee of a white-owned firm. A temporary employment

agency, for example, might decide to ignore the race-based

rejection of a black temporary worker, rather than risk

alienating an important customer. A bar to actions by the actual

targets of that discrimination would mean the minority

employees victimized by such discrimination could not even

sue for injunctive relief.

The very real possibility that Domino's describes,

however, is precisely the reason why the actual victim should

be permitted to sue, as this Court has already recognized. The

tactics regarded by Domino's with such solicitude — a white-

owned firm choosing to ignore discrimination against its

employees in order to curry favor with the wrongdoer — is

essentially the same as the union conduct held unlawful in

Goodman, 482 U.S. at 669 (stating that “[a] union which

intentionally avoids asserting discrimination claims * * * so as

not to antagonize the employer and thus improve its chances of

success on other issues * * * is liable under * * * § 1981")

(internal quotation marks omitted).*’ Surely Congress did not

intend that the protection of minority nights under section 1981

would depend in such circumstances on the good will or

courage of the white-owned corporation.

“Of course, a corporation (unlike a union) would not violate

section 1981 by failing to complain about discrimination against its

employees. An employer would violate section 1981 only if, in

order to placate a customer, it refused to hire racial minorities, or

would not assign them to work for that customer.

4. Section 1981 Does Not Impose on Entrepreneurs

a Hobson’s Choice of Either Giving Up the Right

to Incorporate or Forsaking Full Relief for

Violations of the Right to Be Free from

Discrimination.

Petitioners argue that an entrepreneur who chooses to do

business through a corporation thereby forfeits the right to

redress for personal injuries that would have been compensable

under section 1981 if he or she had been doing business as a

sole proprietorship. Petr. Br. 8, 26-27, 39. The interpretation of

section 1981 advocated by petitioners would work just such a

forfeiture, denying relief under section 1981 to minority

entrepreneurs who for a variety of legal and practical reasons

must incorporate. Congress, however, cannot have intended to

impose such a Hobson’s choice on the victims of racial

discrimination. “This court is unaware of any authority

suggesting that 4 person who lawfully invokes the incorporation

laws thereby forfeits his rights under § 1981." Rosales v. AT&T

Info. Svs., Inc., 702 F. Supp. 1489, 1497 (D. Colo. 1988).

Neither the development of modern corporation law nor

the emergence and complexity of federal income tax law could

have been foreseen by the Congress that adopted the 1866 Civil

Rights Act. But assuredly neither that Congress, nor the

Congress which adopted the 1991 Civil Rights Act amending

section 1981, intended to compel entrepreneurs to abandon the

protections of, or the possibility of full redress under, section

1981 if they chose, often of absolute necessity, to conduct their

business through a corporation. The imposition of such a

forfeiture would codify in federal law the very type of

discriminatory barriers to economic self-advancement that

section 198] was enacted to prevent.

Forcing minority entrepreneurs to forsake incorporation in

order to retain the full protection of section 1981 would place

them at a serious, perhaps fatal, competitive disadvantage

relative to white entrepreneurs, and would therefore be in itself

an improper discriminatory practice. Faced with unlimited

potential personal liability, a minority businessperson might

attempt to reduce the resulting financial exposure by taking out

additional liability insurance. But the cost of that insurance

would have to be either passed on to his or her customers,

raising prices and reducing competitiveness, or absorbed by the

entrepreneur, resulting in lower profits than those earned by

white competitors for selling the same good or services at the

same price.

Domino’s objects that stockholders and employees cannot

ordinarily sue for a violation of a corporation’s rights. But state

corporate law * is of little relevance in determining what

interests Congress intended to protect when it enacted section

1981. The primary purpose of section 1981 is to protect the

individuals who may be the targets of intentional racial

discrimination in the making and enforcement of contracts; any

cause of action a corporation may have depends upon a

showing of intentional discrimination against such an

individual. In a case such as this, moreover, the very reason

that Domino's actions were unlawful was that its officials

disregarded the race-neutral corporate veil of JWM, and made

their discriminatory decisions based on the race of the

individual who owned and operated that corporation. It would

be utterly incongruous to now permit Domino's to reduce its

* Contrary to petitioners’ contentions, under state law

shareholders are at times permitted to disregard the existence of the

intermediate corporate entity where failing to do so would impair full

enforcement of important state statutes. See, ¢.g., Cargill, Inc. v.

Hedge, 375 N.W. 2d 477, 478-79 (Minn. 1985) (holding that husband

and wife owner-occupants of a farm could reverse pierce their family

farm corporation to receive a homestead exemption from a creditor):

Roepke v. W. Nat'l Mut. Ins. Co., 302 N.W. 2d 350, 353 (Minn. 1981)

(holding reverse pierce necessary to allow the “stacking” of decedent

president and sole shareholder's corporate insurance policies); US.

Gypsum Co. v. Mackey Wall Plaster Co., 199 P. 249 (Mont. 1921)

(holding sole stockholders of corporation the “equitable owners” of a

debt owed to their corporation).

liability for that veil-piercing violation by invoking the very

corporate formalities that Domino's itself unlawfully

disregarded.

Such an interpretation of section 1981, moreover, would

introduce a serious inequity into the administration of the

statute. Section 1981 imposes liability on individual officials or

supervisors who engage in unlawful discrimination. McDonald

would be personally liable under section 1981 if in his capacity

as JWM’s president he were to discriminate on the basis of race

against a JWM employee or a contractor such as Domino’s

itself. The underlying reason for allowing such suits is that the

individual defendant was discriminating through the corporate

entity. But if individual perpetrators can be held liable under

such circumstances for violating the prohibitions of section

1981, it would be perverse to hold, as petitioners insist, that

individual victims cannot seek vindication for the rights

protected by section 1981.

D. Suits by Corporations Are Proper Under Section

1981 Because They Are Necessary for Full

Enforcement of the Section 1981 Prohibition

Against Racial Discrimination Against

Individuals.

The lower courts have uniformly, and correctly, held that

corporations can sue when they are injured by discrimination

based on the race of the individuals with whom they do

business. ** But such suits are permissible, not because

contracting corporations are the sole (or even primary) intended

beneficiaries of section 1981, but because such actions are

necessary to vindicate the statutory prohibition against

intentional racial discrimination against individuals.

Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1487-88

(CAY 1995); Hudson Valley Freedom Theater, Inc. v. Heimbach, 67\

F.2d 702, 704-06 (CA2 1982), Park View Heights Corp. v. City of

Black Jack, 467 ¥.2d 1208, 1212-14 (CA8 1972), Rosales, 702 F.

Supp. at 1494-95.

In Barrows v. Jackson, 346 U.S. 249 (1953), Jackson was

sued for damages because she had sold her house to non-

Caucasians, and permitted them to occupy it, in violation of a

restrictive covenant. The Court viewed racially restrictive

covenants as violating the constitutional rights of the non-

Caucasian buyers. See id. at 254 (explaining that such

covenants will mean that a prospective seller “will either refuse

to sell to non-Caucasians or else will require non-Caucasians to

pay a higher price to meet the damages which the seller may

incur’). It then held that the white seller, in defending the

action, could rely on the illegality of racially restrictive

covenants. See id. at 254-57 (holding that Jackson “[may] rely

on the invasion of the rights of others in her defense to this

action”). The antidiscrimination principle would be seriously

impaired if the state could “punish [the seller] for not

continuing to discriminate against non-Caucasians in the use of

her property.” /d. at 258.

Similarly, in Sullivan v. Little Hunting Park, Inc., 396 U.S.

229 (1969), a white plaintiff, Sullivan, was permitted to invoke

the section 1982 rights of a black family, the Freemans, to

whom he had leased a home. Sullivan had attempted to obtain

permission for his tenants to use Littke Hunting Park, a

community park and playground owned by a corporation of

which Sullivan was a shareholder. Under the bylaws of the

corporation, tenants of homes owned by shareholders such as

Sullivan were presumptively entitled to use of the park. The

board of the corporation refused for discriminatory reasons to

permit the Freemans to use the park. In retaliation for his

actions on behalf of the Freemans, Sullivan was expelled from

the corporation. This Court held that Sullivan could sue the

corporation for damages, and could ground his action on the

underlying violation of the Freemans’ section 1982 rights.

Compliance with section 1982 would be seriously impaired, the

Court explained, if Sullivan could obtain no redress for his

exp'lsion since permitting that kind of realiation “would give

impetus to the perpetuation of racial restrictions on property.”

Id. at 237.

Section 1981 does not permit a corporation to be punished

because it is the vehicle through which a black entrepreneur

does business, because it is the means through which black

workers provide services, or because it has black shareholders.

When such a corporation sustains injuries because of racial

discrimination forbidden by section 1981, effective enforcement

of section 1981 requires, as it did in Barrows and Sullivan, that

the corporation be able to obtain redress, even though the

corporation itself has no racial identity and the actual target of

the discrimination itself was instead one or more minority

individuals The purposes of section 1981 would be seriously

undermined if there were no redress for such injuries to the

corporation, and if that corporation were without legal recourse

to avoid economic pressure from customers who objected to its

minority shareholders or employees.

Petitioners object that a corporate owner-operator

personally injured by section 1981 should not be permitted to

sue because his or her claim is merely “derivative” of the

underlying claim of the corporation that is also injured by the

section 1981 violation. See Petr. Br. 20-21, 29-31, 35. In the

context of a section 1981 claim such as this, however, this

characterization of the legal rights and relationships is

precisely backwards. Here, the claims of the corporation

derive from the underlying section 1981 prohibition against

discrimination against the minority individual who ts _ the

actual target of the discrimination, not vice versa.

Il. Respondent Also Stated a Claim Under Section

1981 Because Petitioners’ Racially Motivated

Acts Intentionally Deprived Him of the Benefits

of His Contracts With JWM.

Respondent has already shown why a section 1981

plaintiff need not be a formal signatory to the contract whose

racially motivated breach triggers the lawsuit. See supra Part

1. Nor must a section 1981 defendant be a formal signatory to

the contract whose benefits the plaintiff has been denied. The

rights guaranteed by the 1866 Civil Rights Act are protected

“against the actions of third parties” as well as against the

actions of formal signatories, Su/livan, 396 U.S. at 237

(1969). Domino's racially discriminatory acts intentionally

denied McDonald “enjoyment of [the] benefits * * * of the

contractual relationship” he had with JWM. 42 U.S.C.

1981(b). Section 1981 therefore permits McDonald to bring

suit against petitioners to compensate him for the contractual

benefits he lost. *

Petitioners’ argument to the contrary rests essentially on

two subsidiary claims. First, they assert that the complaint

“does not allege that [McDonald] was a party to any other

contractual relationship that Domino's might have interfered

with.” Petr. Br. 31. To the contrary, the complaint clearly

alleges facts showing two contractual relationships between

McDonald and JWM Investments, Inc. — one as an employee,

the other as a shareholder. Second, Domino’s asserts that

even if section 1981 recognizes claims against defendants

who are not parties to the contract at issue, such claims are

limited to cases where the defendant’s purpose is to induce

one of the parties to the contract “to violate * * * contractual

commitments it had made.” /d. at 32. That cramped

construction disregards the plain language of section 1981,

which protects individuals against injuries beyond common-

law third-party interference. Even if JWM remained entirely

willing to perform on its contract with McDonald, Domino's

racially discriminatory acts impaired McDonald's right to

“perform[]” his contract as well as his “enjoyment of all

benefits, privileges, terms, and conditions of the contractual

relationship.” 42 U.S.C. 1981(b).

“It is entirely possible, for example. that an individual's

supervisor might be held liable under section 1981 for

discriminating against him, while his actual employer, with whom

he has a contractual relationship, will not be lable because no

policy-maker ratified the decision. See, e.g., Jett, 491 U.S. at 707-

O8.

A. McDonald Had a Contractual Relationship with

JWM.

The district court dismissed McDonald’s complaint under

Fed. R. Civ. P. 12(b)(6) for failure to state a claim. But as

this Court has repeatedly held, “[gJiven the Federal Rules’

simplified standard for pleading, ‘[a] court may dismiss a

complaint only if it is clear that no relief could be granted

under any set of facts that could be proved consistent with the

allegations.’” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514

(2002) (quoting Hishon v. King & Spaulding, 467 U.S. 69,73

(1984)). Under that standard, the allegations in respondent's

complaint plainly are sufficient to conclude that that there

were two contractual relationships between McDonald and

JWM: one in his capacity as a corporate employee and the

other in his capacity as a corporate shareholder.

1. As “President” and “operator” of JWM, Pet. App. 11

(Compl. 4 10-11), McDonald had a contractual relationship

with JWM as an employee. The complaint alleges that

McDonald performed a wide range of activities with respect

to JWM’s dealings with Domino’s. For example, McDonald

negotiated and entered into leases on behalf of JWM. /d. at

11 (Compl. §} 10, 12). McDonald “put his full effort into

getting the building constructed” that JWM agreed to erect at

the Bonanza location. /d. at 12 (Compl. ¥ 15).

As a result of the services respondent actively performed

for JWM, federal law required that he be considered an

employee and be paid wages. Spicer Accounting, Inc. v.

United States, 918 F.2d 90, 93 (CA9 1990) (requiring that

compensation paid by a small corporation to a shareholder

who actively performs services be characterized as wages

subject to social security and unemployment taxes):

Veterinary Surgical Consultants, P.C. v. Comm’'r, 117 T.-C.

141 (2001) (same); Rev. Rul. 74-44, 1974-1 C.B. 287 (1974)

(same). The complaint alleges that entitlement to wages:

among the remedies the complaint secks are “front pay [and]

back pay.” Front pay and back pay operate to replace wages

an individual otherwise would have earned. See Pollard v.

El. du Pont de Nemours & Co., 532 U.S. 843, 846 (2001);

Soc. Sec. Bd. v. Nierotko, 327 U.S. 358, 359, 364 (1946).

Thus, the complaint necessarily alleges an obligation for

some entity to pay McDonald a salary — namely, JWM.

Petitioners’ citation of Bellows v. Amoco Oil Co., 118

F.3d 268 (CAS 1997), cert. denied, 522 U.S. 1068 (1998), and

the Fletcher Cyclopedia, see Petr. Br. 32, do not undermine

this conclusion. First, in Bellows, the case had advanced far

beyond the pleading stage: “Ar trial, Bellow produced no

document and presented no testimony evidencing the terms,

provisions, or conditions of any contractual relationship * * *

.” 118 F.3d at 275 (emphasis added). It was under those very

different circumstances that the Fifth Circuit found that the

plaintiff had no employment contract. In this case, which was

decided solely on the pleadings, McDonald has not yet had

the obligation or opportunity to provide evidence to establish

his contractual arrangements. Cf. Haddle v. Garrison, 525

U.S. 121, 127 (1998) (at-will employment arrangements are

nonetheless contracts); Wharf (Holdings) Ltd. v. United Int'l

Holdings, Inc., 532 U.S. 588, 595 (2001) (statutory reference

to “any contract” includes oral contracts).

Moreover, the very section of the Fletcher Cyclopedia

that petitioners cite undercuts their argument. It notes that

“the term ‘employee’ in both Model Business Corporation

Acts, includes officers,” 2 William Meade Fletcher, Fletcher

Cyclopedia of the Law of Private Corporations § 266, at 12

(perm. ed., rev. vol. 1998), and Nevada’s corporation law is

based on the Model Act, see Cohen v. Mirage Resorts, Inc.,

62 P.3d 720, 726 n.10 (Nev. 2003). In particular, when the

officer or owner of a corporation regularly performs work for

a corporation, he will generally be treated as an employee.

See also 2 Fletcher, supra, §§ 266.10, 266.20. That is

precisely what the allegations in this case involve.

2. As the “owner” of JWM, Pet. App. 11 (Compl. 4 11),

McDonald was necessarily party to a second contract with

JWM, this time in his capacity as shareholder of a Nevada

corporation. Contrary to petitioners’ suggestion, see Petr. Br.

at 32, the relationship between a corporation and its

shareholders is contractual. See 7A William Meade Fletcher,

Fletcher Cyclopedia of the Law of Private Corporations §

3634, at 216 (perm. ed., rev. vol. 1997) (corporate charters

involve “a contract * * * between the corporation and its

stockholders”).

To be sure, if McDonald’s injuries as a shareholder

consisted of nothing more than a decrease in the value of his

shares, he would not have suffered a personal injury. That

injury would belong to the corporation as an entity, and it

would be up to the corporate officers to decide whether to sue

the defendants — here, petitioners — who had caused that loss

of value. But, as respondent has already explained, supra at

18-19 & n.9, the complaint alleges that McDonald did suffer a

distinct personal injury, an injury that Domino’s intended to

cause. It charges that petitioner Pear, acting on behalf of

Domino’s and motivated by racial animus, threatened

McDonald that Ae “would experience serious financial

[repercussions] and the loss of Ais business and financial

position,” Pet. App. 12 (Compl. 4 19) (emphasis added). The

“pain and suffering, emotional distress, mental anguish, and

humiliation” McDonald suffered as a result of Domino's

discriminatory acts does not merge with the corporation’s

pecuniary losses. Rather, read in the context of the complaint

as a whole, the allegations charge that Domino’s humiliated

and injured petitioner by impairing his status as the black

owner of a corporation with which Domino's new personnel,

for discriminatory reasons, id. at 13-14 (Compl. 4 24, 30), did

not wish to do business. Cf. 19 Am. Jur. 2d Corporations §

1937 (2005).

B. Section 1981°s Protection of Individuals’

Contractual Rights Against Outside Impairment

Extends Beyond Protecting Them Against Induced

Breaches By the Other Contracting Party.

Despite petitioners’ portrayal of Sullivan v. Little

Hunting Park, Inc., 396 US. 229 (1969), as only

“suggest[ing]” or “arguably permitting” claims against

discriminators who are not themselves in contractual privity

with the plaintiff, Petr. Br. 31, the Court’s opinion quite

clearly authorized civil rights lawsuits against such

defendants. Freeman, the black tenant, had a lease with

Sullivan, and not with Litthke Hunting Park. And yet, the

Court recognized that Freeman could bring suit:

The right to “lease” is protected by § 1982 against

the actions of third parties, as well as against the

actions of the immediate lessor. Respondents’

actions in refusing to approve the assignment of the

membership share in this case was [sic] clearly an

interference with Freeman's right to “lease.”

Id. at 237 (emphasis added). Sullivan thus squarely

recognized that a discriminator can be held liable for

depriving an individual of benefits that would otherwise flow

from a transaction to which the discriminator was not a party.

Just as Little Hunting Park could be held liable to Freeman,

even though the lease whose benefits Freeman was denied ran

between him and Sullivan, so too Domino's can be held liable

to McDonald, even though the contracts whose benefits he

was denied ran between him and JWM.

1. The History of Section 1981 Reflects Congress's

Intention to Reach Impairment of Protected

Rights By Outside Parties.

The conclusion that section 1981 reaches third-party

discriminators is firmly rooted in its history. The Congress

that originally enacted section 1981 was concerned primarily

not with first-party refusals to contract, but rather with acts by

outside parties that prevented newly freed slaves from

entering into economic transactions with willing partners.

This Court’s more recent decisions and Congress’s 199]

amendments to section 1981 only strengthen the conclusion

that when section 1981 “guarantee|[s}] the personal right to

engage in economically significant activity free from racially

discriminatory interference,” Goodman, 482 U.S. at 662, it

guarantees that right against impairment “from any source

whatever.” Jones, 392 U.S. at 424 (emphasis added).

Early in their brief, petitioners note that “(t]he principal

object” of the 1866 Civil Rights Act “was to eradicate the

Black Codes, laws enacted by Southern legislatures imposing

a range of civil disabilities on freedmen.” Gen. Bldg.

Contractors Ass'n v. Pennsylvania, 458 U.S. 375, 386 (1982);

see Petr. Br. 15. But they fail to recognize that this history

bears directly on McDonald’s claims. The Black Codes, after

all, did not involve the government's refusal to contract with

black individuals. Rather, they forbade black people from

entering into voluntary transactions with willing partners.

One of the key pieces of evidence on which Congress

relied in enacting section 1981 was the Schurz Report. See

supra p.16. That report was filled with examples of attempts

by both governments and private individuals to prevent

freedmen from pursuing or benefiting from contractual

opportunities. For example, Opelousas, Louisiana, enacted an

ordinance denying a black person the right to “sell, barter or

exchange, any articles of merchandise or traffic within the

limits of Opelousas without permission in writing from his

employer, or the mayor, or president of the board.” Schurz

Report, supra, at 23. See also id. at 94 (reporting a

substantially identical St. Landry ordinance); | Walter L.

Fleming, Documentary History of Reconstruction 305-06

(1906) (referring to South Carolina statute mandating that

“[{njo person of color shall pursue or practice the art, trade or

business of an artisan, mechanic or shopkeeper, or any other

trade, employment or business * * * on his own account and

for his own benefit, or in partnership with a white person, * *

* until he shall have obtained a license therefor from the

Judge of the District Court”). The whole point of such laws

was to prevent black individuals from trading with willing

partners.

More particularly, both Schurz and members of Congress

specifically identified actions that undermined blacks” ability

to establish and benefit from their own businesses — that is, to

be entrepreneurs — as a central problem. The freedman,

Schurz reported, “is positively prohibited from working or

carrying on a business for himself, he is compelled to be in

the ‘regular service’ of a white man, and if he has no

employer he is compelled to find one.” Schurz Report, supra,

at 24

The opposition to the negro’s controlling his own

labor, carrying on business independently on his own

account — in one word, working for his own benefit —

showed itself in a variety of ways. * * * [For

example,] the white citizens refuse to sign any bonds

for the freedmen.

Id. at 24-25. Similarly, in responding to President Johnson's

assertion that the Act was unnecessary, Senator Trumbull

pointed to a newly enacted Mississippi law whose purpose

was “to prevent any freedmen from doing any independent

business, and to compel them to labor as employés.” Cong.

Globe, supra, at 1759. See also, e.g., id. at 514 (statement of

Rep. Eliot on the companion Freedman’s Bureau bill that

freedmen were being denied the ability to “select their own

employers and to choose their own kind of service”).””

” Although the Freedman’s Bureau bill was not enacted, it

was sponsored by Senator Trumbull, the author and primary

sponsor of the 1866 Act. Accordingly, this Court has relied on its

legislative history to interpret the 1866 Act. See, e.g., Jones, 392

U.S. at 423 n.30.

Congress's concern with acts that prevented blacks from

entering into and benefiting from contractual transactions

quite clearly extended to misconduct by private parties, as this

Court held in Jones, 392 U.S. at 436, Runyon, 427 U.S. at

170-71, and Tillman, 410 U.S. at 440. See, e.g., Cong. Globe,

supra, at 475, 500 (statements by Sen. Trumbull that

customary deprivations of blacks’ rights to make and enforce

contracts would be subject to liability under the Act); id. at

1156 (statement by Rep. Thernton that “Congress has the

power to punish any man who deprives a slave [sic] of the

right of contract, or to the right to control and recover his

wages’); id. at 1160 (reference by Rep. Windom to a report

that black farmers had been wrongfully “notified that they

must give up their leases” — leases that presumably they and

the lessor had entered into voluntarily — “by citizens”). The

frequent references to private violence in the legislative

history often involved violence directed at intimidating blacks

into abandoning contracts.

Section 1981 is not simply a federalized version of the

common-law tort of tortious interference. That tort, as

petitioners correctly note, applies to actions that induce a third

person not to perform a contract with the plaintiff.

Restatement (Second) of Torts § 766 (1979); see Petr. Br. 33.

In other words, if A and B have a contract, and C induces B to

violate the contract, then A has“a claim against C. But in

enacting section 1981, Congress was also (indeed, primarily)

concerned with situations where, for racially discriminatory

reasons, C causes A not to be able to perform A’s contract

with B. Thus, even in situations where B remains willing and

able to meet its obligations to A, section 1981 provides a

remedy if A has been deterred or punished for seeking to

exercise his right to enter into contracts.

Put concretely, even petitioners concede that section

1981 should provide a remedy for an individual if a company

contracting with his employer persuaded the employer “to fire

the employee, or to staff the employee on a different project,

because of his race.” Petr. Br. 32. But it is equally clear that

section 1981 must provide a remedy if a discriminator,

instead of persuading a black worker's employer to fire him,

forces the worker off the job by threatening to kill him if he

does not quit or ask for a reassignment. In this second

scenario, there would of course be no breach by the employer

of the contract. Nonetheless, the employee has clearly been

deprived of his ability to perform his employment contract

and has also been deprived, at the very least, of some of the

benefits that would otherwise have flowed from the contract.

The complaint in this case alleges a version of this

second scenario. For racially discriminatory reasons,

Domino’s prevented McDonald from carrying out his duties

as JWM’s president and operator. The fact that JWM did not

breach its contractual relationship with McDonald is simply

immaterial.

Furthermore, section 1981 was intended to do more than

protect black individuals’ right to be subordinate employees

in someone else’s enterprise. It was intended as well to

protect them in their ability to work for themselves, to be

entrepreneurs. In the contemporary economy, that ability to

do “independent business,” Cong. Globe, supra, at 1758

(statement of Senator Trumbull), necessitates.that they, like

all other Americans, be able to form corporations, with the

ensuing contractual status as a shareholder. See supra Part

1.C.2. Here, too, discriminators’ efforts to prevent blacks

from acquiring and benefiting from shareholder status fall

within the purview of section 1981. If, for example, the State

of Nevada were to enact a statute denying black individuals

the right to form corporations and work for themselves, that

statute would surely violate 42 U.S.C. 1981 and 1982 as well

as the Fourteenth Amendment. Because section 1981 reaches

private conduct as well as governmental impairment, a private

discriminator who acts with the intent to prevent a black

individual from owning and obtaining benefits from his own

business is also liable under section 1981.

2. The 1991 Amendments to Section 1981 Reinforce

Its Coverage of Discriminators Who Impair an

Individual’s Opportunity to Reap the Full

Benefits of His Contracts with Other Parties.

In 1991, Congress enacted two amendments to section

1981 that reinforce its coverage of actions by private parties

undertaken with the purpose of depriving minority indi. iduals

of contractual opportunities.

New subsection 1981(c) provides that the right to make

and enforce contracts is “protected against impairment by

nongovernmental discrimination and impairment under color

of State law.” This provision explicitly “codified” this

Court's decision in Runvon v. McCrary. H.R. Rep. No. 101-

644, at 42 (1990).

New subsection 1981(b) provides an expansive definition

of the term “make and enforce contracts” that includes “the

making, performance, modification, and termination of

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

and conditions of the contractual relationship.” That

provision responded to this Court’s decision in Patterson v.

McLean Credit Union, 491 U.S. 164 (1989), interpreting the

rights protected by section 1981 more narrowly not to include

post-formation conduct.

Section 1981(b) confirms that section 1981 claims are

not limited to racially motivated episodes of the narrow

common-law tort of intentional interference with contract.

Section 1981(b) makes clear that an individual's right to

perform a contract — and not just his right to

nondiscriminatory performance by the other party — falls

within the protection of the statute. The complaint in this

case unquestionably alleges that petitioners intentionally

denied McDonald the ability to perform his job for JWM

because he was black. Petitioner Pear refused to deal with

McDonald, see Pet. App. 12-13 (Compl. 4 19-20), thereby

impairing his ability to perform the parts of his job as

President and operator of JWM that required him to interact

with a major customer. In addition, as a result of Domino's

refusal to provide estoppel certificates, not only was

McDonald unable to perform JWM’s construction contracts

with Domino’s, but “he was unable to move forward with

other projects” he might have performed on behalf of JWM.

Id. at 14 (Compl. § 25).

Moreover, section 1981(b) also expressly protects the

right to “enjoyment of all benefits, privileges, terms, and

conditions of the contractual relationship.” The ability to

“enjoy|]” the benefits of a contract will clearly be impaired if

a contracting party is “punish[ed]” for having engaged in

contractual behavior. Cf. Barrows v. Jackson, 346 U.S. at

258. The complaint alleges that petitioners deliberately drove

JWM into bankruptcy because they had decided not to deal

with minority-owned businesses and because of race-based

animus against McDonald personally. The intent to ruin

McDonald personally, see id. at 12 (Compl. 4 19), thus

deprived him of the benefit of being a business owner.

3. Respondent's Claim Fits Within a Well-

Recognized Category of Cases in Which

Individuals Have Been Permitted to Sue for

Racially Motivated Interference with Their

Contractual Relationships.

Modern cases continue to deal with attempts by

discriminators to suppress the ability of racial minorities to

contract with third parties. A paradigmatic example is

Vietnamese Fishermen's Ass'n \. Knights of Ku Klux Klan, 518 F.

Supp. 993 (S.D. Tex. 1981). in which defendant Ku Klux Klan

members sought to intimidate Vietnamese-born fishermen into

abandoning their shipping business through such tactics as burning

the fishermen’s boats and pointing weapons at the fishermen and

their families.

Courts have consistently recognized, both before and

after the 1991 amendments, that section 1981 reaches outsider

impairment of an individual's ability to make, perform, and

enjoy the benefits of contractual relationships. See, e.g..

Harris v. Allstate Ins. Co., 300 F.3d. 1183, 1197 (CALO

2002) (“Relief is available under § 1981 where a party

discriminatorily uses its authority to preclude an individual

from securing a contract with a third party.”); Spriggs v.

Diamond Auto Glass, 165 F.3d 1015 (CA4 1999) (defendants

included a company president and the plaintiff's supervisor,

as well as the employer with whom he had had a contractual

relationship); Daniels v. Pipefitters’ Ass'n Local Union No.

597, 945 F.2d 906 (CA7 1991) (defendant was a union whose

discriminatory job referral system denied the plaintiff the

ability to enter into employment contracts); Des Vergnes v.

Seekonk Water Dist., 601 F. 2d 9 (CAI 1979) (defendant was

a water district whose racially motivated refusal to include the

plaintiff developer’s real estate within the district interfered

with the plaintiff's ability to enter into contracts with black

' home buyers).*

* See also, e.g., Faraca v. Clements, 506 F.2d 956 (CAS

1975) (suit against the director of a Georgia center for the

developmentally disabled that refused to hire plaintiff as a cottage

administrator because plaintiff was in an interracial relationship,

even though plaintiff's contract would have been with the state of

Georgia, not with defendant); Belfast vy. Upsilon Chapter of Pi

Kappa Alpha Fraternity at Auburn, 267 F. Supp. 2d 1139, 1144

(M.D. Ala. 2003) (suit by pizza delivery man attacked for racial

reasons because the attack interfered with his employment;

explaining the viability of third-party interference claims and

relying expressly on amended section 1981(b) to support its

conclusions); Morrison v. Am. Bd. of Psychiatry and Neurology,

Inc., 908 F. Supp. 582 (N.D. Hl. 1996) (suit against credentialing

organization whose actions allegedly interfered with the plaintiff's

ability to enter into contracts with medical facilities); Collin v.

Rector and Bd. of Visitors of Univ. of Va., 873 F. Supp. 1008, 1015-

l6 (W.D. Va. 1995) (defendants included deans and faculty

members whose racially motivated actions resulted in plaintiffs

denial of tenure at the university); Coleman v. Dow Chemical Co.,

747 F. Supp. 146, 155 (D.Conn. 1990) (allowing section 1981

claim against the plaintiffs supervisor as well as the employer with

The cases demonstrate two things. First, they show that

the outside impairment of minority individuals’ contractual

opportunities that motivated passage of section 1981 in the

first place remains a serious problem today. Second, they

show that the recognition of claims against third-party

discriminators has not produced the flood of meritless

lawsuits petitioners prophesize. Thus, this Court need not

impose an unprecedented contractual privity requirement on

section 1981 claims.

The claims that are cognizable under section 1981 share

three critical elements. They involve (1) purposeful racial

discrimination by the defendant (2) directed intentionally at a

person who is the plaintiff or a party with whom the plaintiff

is in privity that (3) is intended to impair the formation,

performance, enforcement, or enjoyment by the plaintiff of

benefits of a specific contractual opportunity.’

Although none of these elements requires a contractual

relationship between the plaintiff and the discriminator, they

nonetheless cabin the category of cases that can be brought.

For example, a plaintiff whose car was destroyed in a racially

motivated firebombing would fail to state a section 1981

claim if he alleged only that the defendant “interfered with his

housing rights” and “intimidated him”; while the defendant's

act could conceivably be related to some potential contractual

opportunity, if a plaintiff fails to point to any specific contract

whom he had a contractual relationship: relying on Su//ivan and the

common origins of sections 1981 and 1982 in recognizing such

claims); Coley v. M&M Mars, Inc., 461 F. Supp. 1073, 1076 (M.D.

Ga. 1978) (defendants included the plaintiffs co-workers who

interfered with his contractual relationship with his employer).

” See Bediako v. Stein Mart, Inc., 354 F.3d 835, 839 (CA8

2004); Hampton vy. Dillard Dept. Stores, Inc.. 247 F.3d. 1091,

1101-02 (CAIO 2001): Green v. State Bar of Tex., 27 F.3d 1083.

1086 (CAS 1994): Mian v. Donaldson, Lutkin & Jenrette Sec.

Corp., 7 F.3d 1085, 1087 (CA2 1993).

with which the defendant had interfered, he fails to state a

claim. See Stackhouse v. DeSitter, 566 F. Supp. 856, 858-59

(N.D. Ill 1983). Cf. DeMatteis v. Eastman Kodak Co., 511

F.2d 306, 311-12 (CA2 1975) (recognizing plaintiff's

satisfaction of this element where he alleged that defendant,

by punishing him, had impaired his ability to sell his house to

an African American; plaintiff had identified a specific

contractual right). See also Southend Neighborhood

Improvement Ass'n v. St. Clair County, 743 F.2d 1207, 1211

(CA7 1984) (explaining that a “causal nexus” must exist

between the defendant’s behavior and the contract right

impaired).

By contrast, in this case, the complaint alleges each of

the elements of a section 1981 claim against a third-party

discriminator. First, it alleges racial animus by petitioners.

See Pet. App. 13-14, 16 (Compl. 4] 24, 43-45). Second, the

complaint alleges that petitioners’ racially discriminatory

conduct was directed intentionally at McDonald and _ the

business he owned. See id. at 12-14, 16 (Compl. $j 19, 24,

47). Thus, respondent was not an incidental victim of

petitioners’ discriminatory conduct, but rather its primary

target. Third, given the context of petitioners’ discriminatory

actions, which were directed at respondent in his capacity as

owner-operator or JWM, the complaint clearly alleges that

Domino’s discrimination impaired his contracts with JWM.

See id. at 12-14, 16 (Compl. {J 19-21, 24-26, 30, 47).

The critical flaw in petitioners’ analysis is that they

assume that if “[sJection 1981 authorizes suit only by persons

whose own right to ‘make and enforce contracts’ has been

infringed,” Petr. Br. 25, this necessarily means that the

plaintiff's right must involve a contract with the defendant.

To the contrary, as long as the plaintiff is alleging that the

discriminator intentionally impaired his right to make a

contract, the fact that the discriminators’ own contractual

rights and responsibilities are not at issue is irrelevant.

CONCLUSION

For the foregoing reasons, the judgment should be

affirmed.

Eric Schnapper

School of Law

University of Washington

P.O. Box 353020

Seattle, WA 98185

Pamela S. Karlan

STANFORD LAW SCHOOL

SUPREME COURT

LITIGATION CLINIC

559 Nathan Abbott Way

Stanford, CA 94305

Matthew Q. Callister

CALLISTER & REYNOLDS

823 South Sixth Street

Las Vegas, NV 89101

September 22, 2005

Respectfully submitted,

Allen Lichtenstein

(Counsel of Record)

3315 Russell Road, No. 222

Las Vegas, NV 80120

(702) 433-2666

David T. Goldberg

99 Hudson Street

New York, NY 10013

Thomas C. Goldstein

Amy Howe

Kevin K. Russell

GOLDSTEIN & Howe, P.C.

4607 Asbury PI., NW

Washington, DC 20016

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