# Petition for Writ of Certiorari — Wal-Mart Stores, Inc. v. Danco, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2000
- **Citation:** 528 U.S. 1105

## Text

FILED

') DO 484 sep- si

_—-. CARE Ob THE CLERK

IN THE
Supreme Court of the Gnited States

WAL-MART STORES, INC.,
Petitioner,
V.

DANCO, INC. AND BENJAMIN GUILIANI,
Respondents.

On Petition for a Writ of Certiorari
to the United States Court of Appeals
for the First Circuit

PETITION FOR A WRIT OF CERTIORARI

ROBERT K. RHOADS
RANAE BARTLETT

WAL-MART STORES, INC.

702 S.W. 8th Street

Bentonville, Arkansas 72716

(501) 273-4505

JEFFREY S. SUTTON
Counsel of Record
JONES, DAY, REAVIS
& POGUE
1900 Huntington Center
41 South High Street
Columbus, Ohio 43215
(624) 469-3855

MELANIE P. SARWAL
JONES, DAY, REAVIS

& POGUE
2727 North Harwood Street
Dallas, Texas 75201
(214) 220-3939

Counsel for Petitioner

OS UALS.

i
QUESTION PRESENTED

Does 42 U.S.C. § 1981 permit independent contractors, as
opposed to employees, to bring hostile work environment
claims?

ii
PARTIES TO THE PROCEEDINGS

The parties to the proceedings are identified in the caption
of the case. In accordance with S. Ct. R. 29.6, petitioner Wal-
Mart Stores, Inc. states that CIFRA, S.A. de C.V. is a non-
wholly owned subsidiary. Petitioner has no parent companies.

TABLE OF CONTENTS

Page
SPU REET POUNDUEEE oes bk eee bee ie i
PARTIES TO THE PROCEEDINGS ............... ii
pe Vv
OPINIONS AND JUDGMENTS BELOW ........... l
JURISDICTIONAL STATEMENT ................. 2
so ns a bap 5 a6 0t.c'v wnwee es 2
eg ab cio Nbc vee e ace Se 3
REASONS FOR GRANTING THE WRIT ........... 7

I. The Court Of Appeals Misconstrued § 1981 And
Disregarded Several Established Principles Of
Statutory Construction In Doing So.............. 8

1. The Terms Of § 1981 Do Not Reach
Hostile Work Environment Claims By
Independent Contractors ................... 8

2. As A Matter Of History And Context, The
1991 Amendments Do Not Cover Hostile-
Work Environment Claims By Independent
TR ES a 9

3. The Extensive Legislative History To The
1991 Amendments Is Utterly Silent About
Extending Hostile-Work Claims To
Independent Contractors .................. 14

4. This Extension Of § 1981 Is Awkward In
Theory And Will Make Little If Any Sense
a ee 17

IV

Il. The Decision Exacerbates A Lower Court Conflict
Over The Standing Of Corporations To Bring
§ 1981 Claims On Behalf Of Their Employees .....

III. The Lower Court’s Interpretation Of § 1981 And
Its Subsidiary Standing Decision Deserve Review
Now Rather Than Later ......................

CONCLUSION

Vv

TABLE OF AUTHORITIES
Page

Cases
62 Cases of Jam v. United States, 340 U.S. 593

WI svicscnisctksssansipssctnighenosssanachanethepemmstindubensieclateides 9
American Hospital Ass'n v. NLRB, 499 U.S. 606

[|__| |) EE SR SN GaP ay aD OPSP ROME FOREN Kavoen He OsnnonE 15
Apex Hosiery Co. v. Leader, 310 U.S. 469 (1940) ......... ll
Blue Chip Stamps v. Manor Drug Stores,

RIES: Ta iri ea dildanniiniaiinn 22
Burlington Industries, Inc. v. Ellerth, 118 S. Ct. 2257

CONN hn iia 12, 17
Chapman vy. United States, 500 U.S. 453 (1991) ............ 17
Chisom v. Romer, 501 U.S. 380 (1991) ..........c cece 15
City of Boerne v. Flores, 521 U.S. 507 (1997) ..........06. 16
Clifton Terrace Associates, Ltd. v. United Technologies

Corp., 929 F.2d 714 (D.C. Cir. 1991) 0... eee 21
Clinton v. City of New York, 118 S. Ct. 2091

| SAPO byt enn DaW EF Ss AON SOM OPMOTE SED 17
Community for Creative Non-Violence v. Reid,

OOD UD. TOI ei i hd 13

Concrete Pipe and Products of Cal., Inc. v. Construction
Laborers Pension Trust for So. Cal., 508 U.S. 602

CROUB DY: Boa Cc Ree sehen 16
Des Vergnes v. Seekonk Water District, 601 F.2d 9

Cha Ce ai ha aaa cesenedbecctcees 20
Faragher v. City of Boca Raton, 118 S. Ct. 2275

HI csccevnsniccanstensinadaieospainaphbenianinantnaeehensai eens 17

Florida Prepaid Postsecondary Education Expense

Board v. College Savings Bank, 119 S. Ct. 2199

CRO si ARE EEE sities enasnssins 16
Georgia v. Rachel, 384 U.S. 780 (1966) Ree ee ae aes 15

vi
TABLE OF AUTHORITIES (cont'd)

Gersman v. Group Health Ass'n, 725 F. Supp.
573 (D.D.C. 1989), aff'd on other grounds,

SOE FBG Te ey WI casa cancdscteiictsicntencens 21
Harris v. Forklift System, Inc., 510 U.S. 17

GRE ceenecreteltiatldidecvenencsdibeddascesscsersmsbenh 12, 13, 18
Hotel St. George Associates v. Morgenstern, 819

F. Supp. 310 (S.D.N.Y. 1993) ........ccccccccsccssscccessseces 21
Hudson Valley Freedom Theater, Inc. v. Heimbach,

GTi B26 FOB GROG BOD vadisctitccisccetihehci 20
Ingersoll-Rand Co. v. McClendon, 498 U.S. 133

CDI siisntinicctadaiecthtitilaenisthenclethedaieeaadesaete 11
Jones v. Alfred H. Mayer Co., 392 U.S. 409 (1968) ...... 16
Kolstad v. American Dental Ass'n, 119 S. Ct.

rib Et ee en ee Te 17
Marshall v. Kleppe, 637 F.2d 1217 (9th Cir. 1980) ......... 20
McDonald v. Santa Fe Trail Transp. Co., 427 U.S.

BID CEDTD ..scociccicccisscTiadincebiassttlhcnlien teeta 11
McNary v. Haitian Refugee Center, Inc., 498 U.S. 479

COBO .. ...«ssevissnesnsisasitonisiniecinsiesiaiestasaan taco 17
Meritor Savings Bank v. Vinson, 477 U.S. 57

CRIED: ccececiarssevesssensscesuntsiessnasodananene te ty Oe
Miles v. Apex Marine Corp., 498 U.S. 19 (1990) ........... 10
Mobil Oil v. Higginbotham, 436 U.S. 618 (1978) ............ 9
Morissette v. United States, 342 U.S. 246 (1952) .......... 11
NLRB v. Catholic Bishop of Chicago, 440 U.S. 490

CRD TD) .. .ccrccncecsnsctuchshisanieeensndiaatneia anes nn, 16
NLRB v. Hearst Publications, Inc., 322 U.S. 111

CRG ancccsccsececienemsechnaaeteneniaieii a 13
NLRB v. United Insurance Co., 390 U.S. 254

| RE Se eR 13
Nationwide Mutual Insurance Co. v. Darden,

$03 U.S. SIG (ISRRP cd... a el 14, 19

Vii
TABLE OF AUTHORITIES (cont'd)

O'Hare Truck Service, Inc. v. City of Northlake,

PU es PEON «

In addressing the “considerable” “problems” of “liability run
amok if a company is made responsible not only to protect its
own employees against racial harassment in the workplace but
also to protect all of the contractors with whom the company
may deal” (App. 9a), the court said that only corporations, not
their employees, could bring such claims. “Nothing in section
1981,” the court noted, “provides a personal claim” by
employees of such contractors. (App. 9a-10a). But because
“[{a] corporation ordinarily carries out its activities through its
employees,” the court felt that “work-site racial discrimination
against Danco’s employees could amount to racial discrimina-
tion against Danco.” (App. 10a).

8. Wal-Mart petitioned for rehearing and hearing en banc. It
pointed out that the panel’s analysis demonstrated that neither
Guiliani nor Danco had Article III standing to assert the hostile
work environment claim—first because Guiliani, as the panel
correctly understood, was not the contracting party and there-
fore had no rights under § 1981, and second because Danco, as
the panel failed to recognize, could not bring a hostile work

4
2
:
34
3
4
|
=

7

environment claim in its capacity as a corporation. Nonethe-
less, on June 11, 1999, the First Circuit denied the petition.
(App. 45a).

REASONS FOR GRANTING THE WRIT

In the 133 years since § 1981 came into existence and in the
13 years since the Court first recognized hostile work
environment claims, see Meritor Savings Bank v. Vinson, 477
U.S. 57 (1986), no other court has issued a holding merging
these separable and separately-conceived concepts—hostile
work environment and independent contractor status. The
reason is straightforward: The qualities of control and
dependence that make a hostile work environment actionable
in the context of an employer-employee relationship do not
exist in the setting of an agreement between two independent
businesses. Whether in the context of Title VII, the Americans
with Disabilities Act, the Age Discrimination in Employment
Act, or even § 1981, hostile work environment claims have
long been grounded in the unique dynamics of an employee-
employer relationship and that relationship alone. While
§ 1981 claims may be brought for racially-motivated termina-
tions of contracts, Danco in this instance was no more entitled
to bring a hostile work environment claim against Wal-Mart
than Wal-Mart was entitled to do so against Danco.

The court of appeals’ sudden expansion of § 1981 liability
warrants review now rather than later. The analysis is wrong
and disregards several established principles of statutory
interpretation announced by this Court. The decision
exacerbates a burgeoning conflict in the lower courts regarding
the standing of corporations to bring discrimination claims on
behalf of their individual employees. And, left unreviewed, the
decision may present, as the court of appeals itself
acknowledged (App. 9a), the “considerable” “problem” of
“liability run amok if a company is made responsible not only

8

to protect its own employees against racial harassment in the
workplace but also to protect all of the contractors with whom
the company may deal.” Nor is the answer to this quandary to
ask “Congress to fix” these “problems.” (/d.). Contrary to the
court of appeals’ suggestion, it is first to ask this Court to “fix”
the lower-court’s flawed analysis, which is just what this
petition does.

I. THE COURT OF APPEALS MISCONSTRUED § 1981
AND DISREGARDED SEVERAL ESTABLISHED
PRINCIPLES OF STATUTORY CONSTRUCTION IN
DOING SO.

1. The Terms Of § 1981 Do Not Reach Hostile Work
Environment Claims By Independent Contractors.

The operative words of § 1981 from 1866 to the present
have been, and continue to be, utterly silent about the
application of the statute to hostile work environment claims
between independently contracting businesses. The right to be
free of racial discrimination in the context of “mak[ing] and
enforc[ing] contracts,” 42 U.S.C. § 1981(a), simply has never
covered such claims. Nor did the 1991 amendments to the
statute change this component of the legislative landscape. By
establishing that the statute protected “the enjoyment of all
benefits, privileges, terms, and conditions of the contractual
relationship,” 42 U.S.C. § 1981(b), the amendments in no way
make one “term[] of the contractual relationship” the right to
be free of a subordinate hostile work environment in a non-
subordinate, non-employee, independent-contractor setting.
On this basis alone, the sudden and expansive extension of the
statute to this new setting, displacing all manner of State
common law actions in the process, should have been rejected.
The Court has long been “‘reluctant to federalize’” matters
historically covered by State law unless Congress clearly directs

ace

9

it to do so. Santa Fe Indus., Inc. v. Green, 430 U.S. 462, 479
(1977). See also Mobil Oil v. Higginbotham, 436 U.S. 618,
625 (1978) (noting that “[t]here is a basic difference between
filling a gap left by Congress’ silence and rewriting rules” and
that “to prescribe a different measure of damages .. . or a
different class of beneficiaries” would be inappropriate),
; Wheeldin v. Wheeler, 373 U.S. 647, 652 (1963); 62 Cases of
; Jam v. United States, 340 U.S. 593, 600 (1951) (refusing to
extend statute “beyond the point where Congress indicated it
would stop”).

Yet, in the face of this textual silence, the court of appeals
reasoned differently. Seizing on the fact that “nothing” in the
statute “forbids such a claim,” it jumped to the conclusion that
this previously-unknown theory of liability is a permissible one
and did so without considering any other canons of
construction. (8a). This reasoning, of course, simply embraces
an invariable attribute of silence—which always “forbids”
“nothing”—and in the end offers no more explanation for
expanding the reach of the statute than limiting it. At a
minimum, the language of the 1991 amendments to § 1981 is
ambiguous on the point, making it necessary to consider a host
of other informative, and ultimately dispositive, legislative clues
about the correct interpretation of the statute. The court of
appeals’ failure to do so by itself warrants review or a summary
reversal.

2. As A Matter Of History And Context, The 1991
Amendments Do Not Cover Hostile-Work
; Environment Claims By Independent Contractors.

ee eee eee —

The 1991 amendments to § 1981 were not enacted in a
vacuum. They arose as a specific response to Patterson v.
McLean Credit Union, 491 U.S. 164 (1989), borrowed
language from Title VII that had a well-understood application
to hostile work environment claims brought just by employees,

10

and were enacted against the backdrop of a well-understood
distinction between independent contractors and employees.
As a matter of history, context and terminology, then, the
amendments simply do not extend § 1981 to hostile-work
claims brought by independent contractors.

In particular, three principles “of existing law,” with which
courts “assume that Congress [was] aware . . . when it
pass[ed]” the 1991 amendments, limit the reach of § 1981.
Miles v. Apex Marine Corp., 498 U.S. 19, 32 (1990) (citation
omitted). First, the 1991 amendments, all agree, were
prompted by Patterson v. McLean Credit Union, 491 U.S.
164. In rejecting the argument that § 1981 reached hostile-
work environment claims brought by employees, Patterson
concluded that the terms “make and enforce” contracts covered
only the formation of an employment contract, not racial
harassment that occurred during the course of employment, a
subject already covered by Title VII’s prohibition against
discrimination with respect to “terms, conditions, or privileges”
of employment, 42 U.S.C. § 2000e-2(a)(1). Patterson, 491
U.S. at 178-80. Two years later, the national legislature
responded to Patterson by simply borrowing the operative
language from Title VII that proscribed a hostile work
environment in employment, and made these provisions
applicable to § 1981 claims. The 1991 amendment thus defined
“make and enforce contracts” to include “the enjoyment of all
benefits, privileges, terms, and conditions” of the contractual
relationship. 42 U.S.C. § 1981(b).

Where, as here, “Congress borrows terms” from another
body of law, the Court has repeatedly said that the legislature

presumably knows and adopts the cluster of ideas that were
attached to each borrowed word in the body of learning
from which it was taken and the meaning its use will convey
to the judicial mind unless otherwise instructed. In such

set a nactinn -
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1]

case, absence of contrary direction may be taken as
satisfaction with widely accepted definitions, not as a
departure from them.

Morissette v. United States, 342 U.S. 246, 263 (1952). See
also Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 144-45
(1990) (when Congress borrows language from one statute and
incorporates it into a second statute, the language of the two
acts should be interpreted similarly); Oscar Mayer & Co. v.
Evans, 441 U.S. 750, 756 (1979). The Court has said the same
thing when it comes to the specific context of construing
§ 1981. See McDonald v. Santa Fe Trail Transp. Co., 427
U.S. 273, 287 (1976) (noting that “whatever ambiguity there
may be in the language of § 1981 is clarified by an examination
of the legislative history of § 1981’s language”) (citation
omitted). Congress identified a problem regarding the failure
of § 1981 to reach hostile-work environment claims brought by
employees, and incorporated language from Title VII that
specifically addressed this employee-centered problem. The
1991 amendments thus “cannot be divorced from the
circumstances existing at the time it was passed, and from the
evil which Congress sought to correct and prevent.” United
States v. Champlin Refining Co., 341 U.S. 290, 297 (1951).
See also Apex Hosiery Co. v. Leader, 310 U.S. 469, 489
(1940) (“courts should interpret [statute]’s meaning in light of
_. . the particular evils at which the legislation was aimed”).

Second, not only does the cause-and-effect relationship
between Patterson and the 1991 amendments inform the reach
of § 1981, so too does the very nature of a hostile work
environment claim as it was understood at the time of the 1991
amendments and indeed as it has been understood ever since.
Not until Meritor Savings Bank v. Vinson, 477 U.S. 57, 65-67
(1986), did the Court first recognize that gender (or racial)
harassment that had “the purpose or effect of unreasonably

12
interfering with an individual’s work performance or creating
an intimidating, hostile, or offensive working environment”
violated Title VII because it amounted to individual
discrimination in “terms, conditions, or privileges of employ-
ment.” See Patterson, 491 U.S. at 179-80. Anchored to Title
VII and its coverage of civil rights claims by “employees,” the
theory of hostile work environment was necessarily linked to
the subordinate employee-employer relationship. “For sexual
harassment to be actionable,” the Court indicated, “it must be
sufficiently severe or pervasive to alter the conditions of [the
victim's] employment and create an abusive working environ-
ment.” Meritor, 477 U.S. at 67 (quotation omitted) (emphasis
added) Indeed, one defense to a hostile-work complaint is the
existence of “a procedure specifically designed to resolve” such
claims, id. at 71, a defense that does not translate to non-
employees of a company. See Burlington Indus., Inc. v.
Ellerth, 118 S. Ct. 2257, 2270 (1998) (affirmative defense
considers among other things whether “the plaintiff employee
unreasonably failed to take advantage of any preventive or
corrective Opportunities provided by the employer’).

Since Meritor, the Court’s hostile-work cases continue to be
linked to the employee-employer relationship and continue to
emphasize the individual nature of these claims. “A discrimi-
natorily abusive work environment, even one that does not
seriously affect employees’ psychological well-being, can and
often will detract from employees’ job performance, discourage
employees from remaining on the job, or keep them from
advancing in their careers.” Harris v. Forklift Sys., Inc., 510
U.S. 17, 22 (1993). As Harris reiterates, the theory is one of
“workplace equality,” id, and is about whether the conduct
“unreasonably interferes with an employee’s work
performance,” id. at 23, and ultimately asks whether “members
of one sex [or race] are exposed to disadvantageous terms or
conditions of employment to which members of the other sex

~ ee ee

ee ee ee ee -

13

[or race] are not exposed,” id. at 25 (Ginsburg, J., concurring).
To our knowledge, whether one looks to case law prior to the
1991 amendments or even to case law after it, no court (other
than the one below) has ever extended the theory of a hostile
work environment to an independent contractor

Third, besides following immediately on the heels of
Patterson and besides embracing a theory of liability that has
historically been limited to employees, the 1991 amendments
emerged in the context of a legal distinction that has a well-
established pedigree. The “distinction between employees and
independent contractors,” the Court has said, “has deep roots
in our legal tradition and often serves as a line of demarcation
for differential treatment of individuals.” O'Hare Truck Serv.,
Inc. v. City of Northlake, 518 U.S. 712, 721-22 (1996)
(citations omitted). See also Community for Creative Non-
Violence v. Reid, 490 U.S. 730, 739-40 (1989) (noting Court’s
historical understanding of term “employee” as describing the
conventional master-servant relationship); NLRB v. United Ins.
Co., 390 U.S. 254, 256 (1968) (“Congress passed an amend-
ment . . . [t]he obvious purpose of [which] was to have the .
courts apply general agency principles in distinguishing
between employees and independent contractors”).

Nor has the distinction been lost on Congress itself. After
the NLRB embraced a definition of the term “employee” that
covered independent contractors, see NLRB v. Hearst
Publications, Inc., 322 U.S. 111 (1944), Congress quickly
responded with new legislation. “In the law,” the House
Committee said in clarifying the two relationships, “there
always has been a difference, and a big difference, between
‘employees’ and ‘independent contractors’. ‘Employees’ work
for wages or salaries under direct supervision. ‘Independent
contractors’ undertake to do a job for a price, decide how the
work will be done, usually hire others to do the work, and
depend for their income not upon wages, but upon the

14

difference between what they pay for goods, materials, and
labor and what they receive for the end result, that is, upon
profits. .. . Congress intended then, and it intends now, that the
[NLRB] give to words not far-fetched meanings but ordinary
meanings.” H.R. Rep. No. 80-245, at 18 (1947). Under these
circumstances and in light of these time-honored under-
Standings, it seems exceedingly doubtful that Congress would
suddenly abandon this tradition by merging the employee-
spawned doctrine of a hostile-work environment claim with the
distinct legal concept of independent-contractor status. See
Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 322-25
(1992) (when Congress gives no specific guidance as to the
meaning of a term, courts presume that Congress intended to
incorporate traditional principles of agency law). The lower-
court’s contrary determination should be reviewed and
reversed.

3. The Extensive Legislative History To The 1991
Amendments Is Utterly Silent About Extending
Hostile-Work Claims To Independent Contractors.

Not surprisingly, in light of this background, the legislative
history to the 1991 amendments says nothing about extending
hostile work environment claims to independent contraciors.
One congressional report after another refers just to changing
the outcome of Patterson and to “restor[ing]” the prior
understanding that hostile work environment claims were
available to employees under § 1981. H.R. Rep. No. 102-40(1)
(1991), reprinted in 1991 U.S.C.C.A.N. 549, 630. Not once
does Congress signal a desire to extend hostile-work claims
beyond the employer-employee relationship. See, e.g., id. (“In
the context of employment discrimination, for example, this
would include, but not be limited to, claims of harassment... .
[The amendments] would restore protection under federal law
against harassment and other forms of intentional
discrimination in the terms and conditions of employment for

15

more than 11 million employees in firms that are not covered by
Title VII.”) (emphasis added); id. at 676 (“Reversal of
Patterson simply expands the scope of Section 1981 to Clearly
include all aspects of the employment relationship, a
particularly important goal because only Section 198] prohibits
racial discrimination by employers with less than 15
employees.”’) (last emphasis added); H.R. Rep. No. 102-40(II)
(1991), reprinted in 1991 U.S.C.C.A.N. 694, 730 (noting that
effects of Patterson extended from employment context to suits
for “alleged racial discrimination in insurance, auto repair, and
advertising contracts” but making no mention of independent
contractors); id. at 761 (“The bill . . . reverses Patterson by
amending section 1981 to cover all aspects of the employment
relationship”) (emphasis added); id. (amendments give “redress
to victims of on-the-job racial harassment”) (emphasis added).
Notably, the Court has looked to the legislative history of
§ 1981 in limiting its reach before. See Georgia v. Rachel, 384
U.S. 780, 791 (1966) (“The legislative history of the 1866 Act
clearly indicates that Congress intended to protect a limited
category of rights”).

It strains credulity to assume that the national legislature
would make such a consequential change in the law—extending
hostile-work claims to independent contractors—while saying
nary a word that it was doing so, to say nothing of engaging in
any deliberative debate over the subject. See Chisom v. Romer,
501 U.S. 380, 396 & n.23 (1991) (“we are convinced that if
Congress had such an intent, Congress would have made it
explicit in the statute, or at least some of the Members would
have identified or mentioned it at some point in the... .
legislative history”); American Hosp. Ass'n v. NLRB, 499 U.S.
606, 613-14 (1991) (“[i]f this amendment had been intended
[as] petitioner suggests, we would expect to find some
expression of that intent in the legislative history.”). Congress
deserves more credit than to have made such a significant

16

change in the law without even a discernible hint that it
considered the matter.

Nor in light of the constitutional source of this law—the
Thirteenth Amendment, see Jones v. Alfred H. Mayer Co., 392
U.S. 409, 413 (1968)—does it seem possible to sustain this
broad interpretation. The whole point of enforcement
legislation under the Thirteenth Amendment, as under the
Fourteenth Amendment, is to remedy prior constitutional
violations and to prevent future ones. See Florida Prepaid
Postsecondary Educ. Expense Bd. v. College Sav. Bank, 119
S. Ct. 2199, 2206 (1999): City of Boerne v. Flores, 521 U.S.
507, 519-22 (1997) (discussing the “remedial” nature of
Congress’s enforcement power under § 5 of the Fourteenth
Amendment). Yet there is no evidence today or in the past,
and certainly none in the congressional record, that the
paradoxical problem of independent contractors and
subordinate hostile-work environments is the kind of national
issue that would warrant enforcement legislation. As the Court
has required before, this “constitutional problem[]” should be
“avoid[ed]” in view of the “otherwise acceptable construction”
of the statute available. Concrete Pipe and Prods. of Cal., Inc.
v. Construction Laborers Pension Trust for So. Cal., 508 U.S.
602, 628-29 (1993) (citation and quotation omitted); see also
NLRB v. Catholic Bishop of Chicago, 440 U.S. 490, 507
(1979) (in the face of silence, “declin[ing] to construe the Act
in a manner that could in turn call upon the Court to resolve
difficult and sensitive [constitutional] questions”). Just last
Term, the Court granted a petition that would have addressed
the scope of Congress’s enforcement authority under the
Thirteenth Amendment. See United Brotherhood of
Carpenters and Joiners of Am. v. Anderson, i19 S. Ct. 1495
(1999) (granting petition for writ of certiorari and refor-
mulating question to address scope of constitutional authority
for § 1981), cert. dismissed, 119 S. Ct. 2418 (1999)

17

(dismissing writ pursuant to parties’ agreement under S. Ct. R.
46.1).

4. This Extension Of § 1981 Is Awkward In Theory
And Will Make Little If Any Sense In Application.

Lastly, this concept of liability makes little sense in theory
and will make even less sense in practice, and for this reason as
well it is “unlikely” that Congress meant to adopt it. McNary
v. Haitian Refugee Ctr., Inc., 498 U.S. 479, 496 (1991). See
also Clinton v. City of New York, 118 S. Ct. 2091, 2098 (1998)
(rejecting reading of statute “which would produce an absurd”
result) (quotation and citation omitted); Chapman v. United
States, 500 U.S. 453, 476 (1991) (same).

One of the principal defenses to a hostile work environment
claim is the existence of “preventive or corrective opportuni-
ties provided by the employer” and the failure of the employee
to “take advantage” of those company procedures. Ellerth,
118 S. Ct. at 2270. Yet how would this doctrine apply to
independent contractors? Would companies be expected to
extend their internal grievance procedures to employees of
other, independent businesses, including even competitors?
Would employees of one company be penalized for not
invoking the other company’s procedures? In the event this
defense is not available to defend claims by independent
contractors, how could it still be said that hostile-work claims
do not involve strict corporate liability? See Kolstad v.
American Dental Ass’n, 119 S. Ct. 2118 (1999); Ellerth, 118
S. Ct. 2257; Faragher v. City of Boca Raton, 118 S. Ct. 2275
(1998). And how at any rate would an independent business
Show that the “workplace” of another independent
business—where it may provide services for just 2-3 hours a
week-—is “permeated with discriminatory intimidation, ridicule,
and insult, that is sufficiently severe or pervasive to alter the
conditions of the victim’s employment and create an abusive

18

working environment”? Harris, 510 U.S. at 21 (quotations
and citations omitted). There are many questions here. And
the answers to all of them render implausible this new-found
theory of § 1981 liability.

But all of this is prelude to what seems to be the most
conspicuous oddity of expanding § 1981 to hostile-work claims
by independent contractors: It remains to be seen who if
anyone could properly benefit from this expansive
interpretation. Neither corporations nor individuals, it appears,
will benefit in any meaningful way from these claims.

Take the situation of corporations. Section 1981 by its
terms applies only to “contracts,” 42 U.S.C. § 1981(a), and the
contracting entities in these cases are invariably
corporations—as in fact was true with Danco here. Yet hostile
work environments injure individuals, not companies. See
Harris, 510 U.S. at 21 (the statute covers “an environment that
a reasonable person would find hostile or abusive”).
Independent contractors such as Danco simply are not the
types of entities that may suffer a hostile work environment,
eliminating any standing they could possibly have to bring such
eminently-personal claims. See Village of Arlington Heights
v. Metropolitan Housing Dev. Corp., 429 U.S. 252, 263
(1977) (“a corporation .. . has no racial identity and cannot be
the direct target of the alleged racial discrimination”). See also
Harris, 510 U.S. at 21-22 (“if the victim does not subjectively
perceive the environment to be abusive, the conduct has not
actually altered the conditions of the victim’s employment, and
there is no [hostile work ¢ »vironment]”) (emphasis added).

Nor may individuals customarily bring such claims. In most
instances, as here, the individual simply will not be a
contracting party, which as the lower court itself recognized,
deprives the person of any claim at all. But even in the rare
instance where that is not the case—because the individuai,

19

say, is a sole proprietorship and enters into a contract with the
offending company—the independent status of the individual
will generally preclude the kind of subordinate contro! that
makes such claims cognizable. Indeed, the only time that will
not be true is precisely when individual claimants need a § 198]
claim least. Independent contractors in name, it is well
established, may be treated as employees in fact when the
necessary qualities of control exist. See Darden, 503 U.S. at
323-24 (discussing common law factors to consider in treating
individual as an employee, including among other factors “the
hiring party’s right to control” the other). But in that instance,
Title VII would of course protect them. In the end, what a
hostile work claim requires (subordinate status and control) is
precisely what independent contractors lack, making the claims
mutually exclusive in theory and in coverage. Accordingly,
even perhaps the best reason for sustaining the decision
below—the commendable desire to further “society’s
consensus that discrimination based on the color of one’s skin
is a profound wrong of tragic dimension,” Patterson, 491 U.S.
at 188—does not support the court of appeals’ analysis. The
decision warrants further review, if not summary reversal.

Il. THE DECISION EXACERBATES A LOWER
COURT CONFLICT OVER THE STANDING OF
CORPORATIONS TO BRING § 1981 CLAIMS ON
BEHALF OF THEIR EMPLOYEES.

In Village of Arlington Heights v. Metropolitan Housing
Development Corp., the Supreme Court stated in dicta that “a
corporation .. . has no racial identity and cannot be the direct
target of the alleged racial discrimination.” 429 U.S. at 263.
Ever since, the lower courts have disagreed whether a cor-
poration can suffer “some threatened or actual” injury, Warth
v. Seldin, 422 U.S. 490, 499 (1975), as is necessary to meet the
“irreducible minimum” of Article III, Valley Forge Christian
College v. Americans United for Separation of Church and

20

State, 454 U.S. 464, 472 (1982), when its employees face
conduct prohibited by § 1981.

On one side of the ledger is the decision below. In the First
Circuit’s view (10a), a “corporation ordinarily carries out its
activities through its employees, and work-site racial
discrimination against Danco’s employees could amount to
racial discrimination against Danco causing damage to the
company.” That view is supported by other lower-court
decisions. In Hudson Valley Freedom Theater, Inc. v.
Heimbach, 671 F.2d 702 (2d Cir. 1982), for example, the
Second Circuit held that a corporation possesses a racial
identity and has standing to bring an action for racial
discrimination under §§ 1981 and 1983 where a functional
nexus exists between the purpose or activity of the corporation
and the identity of the members of that corporation. /d. at
705-06. Other decisions too recognize that a corporation can
embody a racial identity, suffer a § 1981 injury, and thus have
standing to pursue a § 1981 claim. See, e.g., Des Vergnes v.
Seekonk Water Dist., 601 F.2d 9, 13-14 (1st Cir. 1979);
Rosales v. AT&T Info. Sys., Inc., 702 F. Supp. 1489, 1494 (D.
Colo. 1988); 7 & S Serv. Assocs. v. Crenson, 505 F. Supp.
938, 943 (D.R.I.), vacated on other grounds, 666 F.2d 722
(1st Cir. 1981); Yesteryears, Inc. v. Waldorf Restaurant, Inc.,
730 F. Supp. 1341, 1351-53 (D. Md. 1989); see also Triad
Assocs. Inc. v. Chicago Housing Auth., 892 F.2d 583, 591 (7th
Cir. 1989) (discounting Supreme Court’s statement regarding
a corporation and racial identity and remanding case for
reconsideration of standing in light of post-Arlington Heights
decisions); Marshall v. Kleppe, 637 F.2d 1217, 1219-20 (9th
Cir. 1980) (minority-owned corporation had standing to bring
Fifth Amendment claim); Organization of Minority Vendors,
Inc. v. Hlinois Central Gulf R.R., 579 F. Supp. 574, 588-89
(N.D. Ill. 1983) (corporation identified as minority business

4
a s

21

enterprise under federal regulations had standing for § 1982
action).

On the other side of the ledger are several decisions in line
with Arlington Heights. They all hold that a corporation is
independent of its employees and members’ racial identities and
thus has no standing to bring § 1981 claims. See Clifton
Terrace Assocs., Ltd. y. United T. echnologies Corp., 929 F.2d
714, 721 (D.C. Cir. 1991) (owner of federally subsidized
low-income housing complex lacked standing to press § 1981
race discrimination claims on behalf of its minority residents as
there was insufficient identity of interest between company and
tenants and as the “direct victims,” tenants were “best situated
to assert the individual rights in question”); Hotel St. George
Assocs. v. Morgenstern, 819 F. Supp. 310, 318-19 (S.D.N_Y.
1993) (hotel association did not have standing to assert
discrimination claims under § 1981 as association had not been
discriminated against on basis of race); Gersman v. Group
Health Ass'n, 725 F. Supp. 573, 578 (D.D.C. 1989) (finding
no § 1981 standing because “corporations are legal entities
separate and distinct from the . . . racial identit[y] of the
individuals that comprise the corporation”), aff'd on other
grounds, 931 F.2d 1565 (D.C. Cir. 1991). This conflict, which
has divided the lower courts ever since Arlington Heights,
warrants resolution.

fil. THE LOWER COURT’S INTERPRETATION OF
§ 1981 AND ITS SUBSIDIARY STANDING
DECISION DESERVE REVIEW NOW RATHER
THAN LATER.

The court of appeals’ sudden expansion of § 1981 warrants
immediate review. Indeed, it is precisely the absence of a
single holding of this Court or of any other supporting this new
doctrine that makes review both appropriate and necessary.
Most business is conducted by contracts between independent

22

enterprises. And some 8.3 million workers, representing 6.7%
of the total work force, identify themselves as independent
contractors. Lewis L. Maltby & David C. Yamada, Beyond
“Economic Realities”: The Case for Amending Federal
Employment Discrimination Laws to Include independent
Contractors, 38 B. C. L. Rev. 239, 243 (1997) (citing U.S.
Dep’t of Labor, Bureau of Labor Statistics, Contingent and
Alternative Employment Arrangements, Report 900, at 1
(1995)). It thus is no exaggeration to portend the risk of the
development of “a judicial oak” in this area “which has grown
from little more than a legislative acorn.” Blue Chip Stamps v.
Manor Drug Stores, 421 U.S. 723, 737 (1975).

Consider the situation of Wal-Mart itself. The company
currently operates over 2900 stores and employs over 815,000
employees. Each year the company also hires thousands of
independent contractors to clean its parking lots, floors, and
windows, paint the outside of its stores, remodel the interior
and exterior of its stores, and perform a range of maintenance
duties on plumbing, air conditioning, heating, alarms, and cash
registers. Every time a vending machine is filled, trash is
hauled away, or an armored car picks up deposits, an
independent contractor is involved. The company also hires
legal counsel, accountants, court reporters, and couriers. Many
of the tasks performed by these independent contractors occur
after hours when Wal-Mart personnel are not even present, as
was true here, and much of the interaction between Wal-Mart
employees and its independent contractors occurs by phone or
mail. It is difficult to imagine how a responsible company can
be expected to apply this new doctrine in these diverse circum-
stances, keeping in mind that in this case itself liability was
established for alleged discrimination that occurred after hours
and by an off-duty employee in two of the three alleged
incidents.

23

No less important is the related question whether corpora-
tions have standing to bring discrimination claims on behalf of
their employees. As the ever-expanding conflict in the lower
courts illustrates, this issue arises with considerable frequency
and cries out for prompt resolution by the Court.

Each of the above explanations for granting the writ
assumes (perhaps unfairly) that the First Circuit erred. But
even for those inclined to believe that the court of appeals
accurately interpreted § 1981 and a company’s standing to
bring such claims, that is no reason for waiting longer to review
the issue. Quite the opposite is true. Initial agreement with the
First Circuit presents perhaps the strongest case for reviewing
the issue promptly. No other circuit has issued a holding
extending § 1981 to hostile-work claims filed by independent
contractors. And many lower courts have denied corporations
standing to vindicate discrimination claims of their employees.
Right or wrong, in other words, employers, employees, and
independent contractors alike deserve immediate review of the
lower-court’s decision.

CONCLUSION

The Court should grant the petition.

ROBERT K. RHOADS

RANAE BARTLETT
WAL-MART STORES, INC.
702 S.W. 8th Street
Bentonville, Arkansas 72716
(501) 273-4505

September 1999

Respectfully submitted,

JEFFREY S. SUTTON
Counsel of Record
JONES, DAY, REAVIS
& POGUE
1900 Huntington Center
41 South High Street
Columbus, OH 43215
(614) 469-3855

MELANIE P. SARWAL
JONES, DAY, REAVIS

& POGUE
2727 North Harwood Street
Dallas, Texas 75201
(214) 220-3939

Counsel for Petitioner

APPENDIX

la

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

DANCO, INC. and Benjamin Guiliani, Plaintiffs,
Appellees/Cross-A ppellants,
v.
WAL-MART STORES, INC., Defendant,
Appellant/Cross-Annellee.

Nos. 98-2101, 98-2269.

Decided May 12, 1999,
As amended June 11, 1999.

Before TORRUELLA, Chief Judge, BOUDIN and STAHL,
Circuit Judges.

BOUDIN, Circuit Judge.

In the district court, Danco, Inc., and its owner Benjamin
Guiliani, brought suit against Wal-Mart, which is a major
discount retailer. On a claim for racial discrimination under 42
U.S.C. § 1981, the jury awarded the plaintiffs $650,000, based
on a hostile work environment theory; the judge reduced the
award to $300,000. Wal-Mart appeals from this judgment; the
plaintiffs cross-appeal from the district court’s dismissal prior
to the jury’s verdict of plaintiffs’ claim for punitive damages.

Benjamin Guiliani — a Mexican-American — started his
company, Danco, in 1988 to engage in the business of
maintaining parking lots (cleaning, striping, etc.). He
incorporated the company in 1994. He continued to be the sole
shareholder, but employed his son, Daniel, and a small number
of other employees from time to time. His principal contracts
during the time in question were with various Wal-Mart stores

On September 15, 1994, Guiliani signed a contract, on
behalf of Danco, agreeing to perform parking lot maintenance
for the Wal-Mart store in Augusta, Maine. The agreement

2a

called for Danco to clear litter from the lot three times each
week, and to clear sand from the lot (using a vacuum-type
sweeper) once a week. The sweeping provision was included
in the contract because the Augusta Wal-Mart had a special site
approval permit, from the Maine Department of Environmental
Protection, requiring the lot to be swept of sand each week to
prevent the sand from being washed into a nearby brook.

According to Guiliani’s trial testimony, he felt unwelcome at
Wal-Mart soon after he signed the contract to maintain its lot.
Early in October 1994, there were two men in a truck in the
parking lot when he arrived to start working. They asked him
what he was doing in the lot, and if “Big Bob” knew he was
there. When the men told Big Bob (later identified as Bob
Amadei, the maintenance supervisor) that Guiliani was in the
lot, Big Bob told Guiliani to leave, saying that he did not know
of anyone who had been hired to work on the lot. At trial,
Amadei denied that he had ever had words with Guiliani.

Also early in October 1994, the words “White Supremacy”
were spray-painted on the Wal-Mart parking lot, near to the
spot where Guiliani and his son usually unloaded their
equipment. Guiliani testified that he saw Amadei walking
toward the store shortly before Guiliani drove over to the spot
where the words were painted. His son Daniel testified that he
had seen Amadei at the spot with a can of spray paint, leaning
over as if he were spraying the paint. Amadei denied that he
had anything to do with the graffiti.

Guiliani offered to cover over the spray paint in the parking
lot, but Curtis Scheffe, the manager of the Augusta store and
the person to whom Guiliani reported, said that he would take
care of it and would investigate to find out who had done it.
Although Scheffe testified at trial that he thought he had had an
employee cover the graffiti with paint shortly after the incident,
all other testimony indicated that the words remained on the lot
for over a month. Guiliani claimed that he told Scheffe that he
believed Amadei was the culprit, but Scheffe took no action

3a

against Amadei. Scheffe said he did investigate and concluded
that no one was willing to say that they knew anything about
the incident, although two of Wal-Mart’s night shift workers
testified that he had not spoken personally to them about it.

A second incident occurred on October 14, 1994. Guiliani
testified that Hamlin, another night shift employee, said to him,
“I don’t like your kind.” When Guiliani asked what he meant,
Hamlin said “Puerto Ricans.” Guiliani said that he was
Mexican-American. Then, Guiliani said, Hamlin pushed him
and threatened to rip his head off. Guiliani returned to his
vehicle, where his younger son (Benjamin, Jr., age 8) was
waiting, and called the police a short time later. Hamlin
testified that he had made only a harmless jest not involving
race, that Guiliani started the quarrel, and that there was no
pushing.

The final incident took place in November 1994. Guilianj
testified that Hamlin yelled a racial slur at him from a passing
vehicle. His son Benjamin, Jr., also testified that he heard the
slur. Guiliani said that he was shaken by the incident, and again
called the police. Hamlin again denied the incident. Scheffe
testified that he again investigated, but did not discipline
Hamlin because he could prove neither Guiliani’s nor Hamlin’s

story.

In January 1995, Scheffe left the Augusta Wal-Mart, and
James Helterbrake replaced Scheffe as the manager. Guiliani
testified that when he told Helterbrake in February about the
earlier incidents, Helterbrake became angry about the police’s
having been called. Later in the month, Helterbrake gave
Danco notice that the company’s services were to be
terminated, assertedly because Helterbrake was unhappy with
Danco’s work. After further discussions, a new contract was
signed on February 21, 1995, calling for Danco to sweep twice
a week. However, Helterbrake remained unhappy with the
Sweeping and terminated that contract at the end of March.

4a

At trial, Charles Kellogg of the Maine Department of
Environmental Protection testified that he had been displeased
about the amount of sand left on the lot. He said that he spoke
to Scheffe and Helterbrake a number of times about the sand
on the lot, as both confirmed. In February 1995, Kellogg sent
a letter to Wal-Mart stating that the sand removal had not been
adequate. Kellogg also testified that he had spoken to Guiliani
about the state of the lot, but Guiliani denied this. At the time
Guiliani was terminated, Kellogg said that he was considering
steps against Wal-Mart to enforce the permit condition.

In March 1997, approximately two years after the
termination of Danco’s contract, Guiliani and Danco sued Wal-
Mart. The complaint alleged a violation of civil rights under 42
U.S.C. § 1981, denial of public accommodations in violation of
5 Maine 1 R.S.A. § 4551 ef seq., breach of written contract,
breach of oral contract, unjust enrichment, negligence,
intentional infliction of emotional distress, negligent infliction
of emotional distress, and requests for compensatory and
punitive damages. Wal-Mart moved for summary judgment on
all counts. The district judge then dismissed three of the state
claims and set the others for trial.’

The case was tried to a jury in late April 1997. At the close
of the plaintiffs’ case, Wal-Mart moved for a directed verdict
on all remaining claims, but the district court granted the
motion only as to the request for punitive damages. As part of
its motion, Wal-Mart argued unsuccessfully that the civil rights
claim under section 1981 should be treated as comprising only
a wrongful termination and not a hostile work environment
theory. The court also refused to reconsider its pre-trial

' The claims dismissed on summary judgment were public accommo-
dations, negligence, and intentional infliction of emotional distress. The
dismissal has not been appealed. The claims set for trial were the section
1981 claim, the contract claims, and the claim for negligent infliction of
emotional distress.

Sa

decision not to allow Wal-Mart to impeach Guiliani’s
credibility based on an incident that occurred some 15 years
before.

Before instructing the jury, the judge told counsel that he
would tell the jury to treat the two plaintiffs as one person —
Benjamin Guiliani — for the purpose of their deliberations.
Neither side objected to this instruction which the judge then
gave. The judge’s instructions as to section 1981 included
separate instructions on the discriminatory termination theory
and the hostile work environment theory. For the hostile work
environment theory, the judge gave instructions that would be
standard for a Title VII hostile work environment claim, but
omitted any references to “employee” (because of Danco’s
independent contractor status). Throughout, the court rejected
Wal-Mart’s argument that independent contractors had no right
to make such claims based on a hostile work environment
theory.

By special verdict, the jury found for the plaintiffs on the
hostile work environment theory under section 1981, the claim
for negligent infliction of emotional distress, and one of several
contract theories.2 The jury found for Wal-Mart on the
discriminatory termination theory under section 1981 and on
the remaining contract theories. The jury awarded the plaintiffs
$650,000 on the hostile work environment claim and — despite
the liability finding — zero damages on the claim for negligent
infliction of emotional distress. The judge granted a remittitur
to which the plaintiffs assented, reducing the jury’s award of
$650,000 to $300,000. Cf Farber v. Massillon Bd. of Educ.,
917 F.2d 1391, 1396 (6th Cir. 1990), cert. denied, 498 U.S.
1082, 111 S. Ct. 952, 112 L. Ed.2d 1041 (1991).

? The contract theory accepted by the jury involved a contract to clean a
parking lot at a different Wal-Mart-owned store and resulted in an award
of $4,400. No appeal has been taken as to this award.

6a

Wal-Mart now appeals on two different grounds from the
district court’s refusal to award Wal-Mart judgment as a matter
of law: first, that an independent contractor cannot bring suit
based on a hostile work environment under section 1981, and
second, that the evidence presented at trial was insufficient to
show a hostile work environment. Wal-Mart also says that the
district court erred in refusing to admit proffered evidence to
impeach Guiliani’s credibility. Plaintiffs cross-appeal
challenging the district court’s decision to withdraw their
punitive damages request from the jury.

We review de novo the district court’s denial of judgment as
a matter of law, viewing the evidence in the light most
favorable to the nonmovant. See Correa v. Hospital San
Francisco, 69 F.3d 1184, 1191 (1st Cir. 1995), cert. denied,
517 U.S. 1136, 116 S. Ct. 1423, 134 L. Ed.2d 547 (1996).
The most important issues raised by Wal-Mart’s motion involve
the construction of'42 U.S.C. § 1981, which inter alia gives all
persons equal rights to “make and enforce contracts” free from
racial discrimination. The initial question is whether this
provision gives an independent contractor a racial
discrimination claim based on the hostile work environment
theory that would be available to an employee under an
ordinary employment contract.

The Supreme Court first recognized the hostile work
environment theory under Title VII, 42 U.S.C. § 2000e-2,
which prohibits discrimination in employment on racial or
gender grounds (among others). In Meritor Savings Bank,
FSB v. Vinson, 477 U.S. 57, 65-67, 106 S. Ct. 2399, 91 L.
Ed.2d 49 (1986), the Court found that sexual misconduct that
had “the purpose or effect of unreasonably interfering with an
individual’s work performance or creating an intimidating,
hostile, or offensive working environment” violated Title VII
because, in the words of the statute, it amounted to sex-based
discrimination in “terms, conditions, or privileges of
employment.” Under Title VII, the same theory also applies to

ae POD PCN NE 8. A hy EES eS Nint erey RIA TA Newbies hy

Ta

racial harassment of employees that has the same effects.
Lattimore v. Polaroid Corp., 99 F.3d 456, 463 (1st Cir. 1996).

Title VII is unavailable to plaintiffs here because they were
never Wal-Mart employees. For this reason, the complaint
relied upon section 1981, which is part of the original Civil
Rights Act of 1866. Unlike 42 U.S.C. § 1983, which broadly
protects federal rights from impairment under color of state
law, section 1981 protects only certain specified rights,
including the right to make and enforce contracts, and it
protects them only against racial discrimination. But since
1968, section 1981 has been applied to private acts of
discrimination as well as official acts.*

In addition, the Supreme Court held in 1975 that the statute
covers employment contracts, thereby protecting against racial
discrimination in the employment relationship. Johnson v.
Railway Express Agency, Inc., 421 U.S. 454, 459-60, 95 S. Ct.
1716, 44 L. Ed.2d 295 (1975).

However, until 1991, section 1981 was read literally as
applying only to the making and enforcement of contracts, and
“enforcement” was read narrowly to include only enforcement
by legal process. Patterson v. McLean Credit Union, 491 U.S.
164, 177-78, 109 S. Ct. 2363, 105 L. Ed.2d 132 (1989).
Patterson held that no hostile work environment claim could be
brought under section 1981 because the environment might
discriminate in the carrying out of a contract — infringing its

* The Supreme Court ruled in Jones v. Alfred H. Mayer Co., 392 U.S. 409,
413, 88 S. Ct. 2186, 20 L. Ed.2d 1189 (1968), that 42 U.S.C. § 1982, a
directly analogous statute, prohibited acts of private discrimination, and
the courts have applied this ruling to section 1981. See, e.g., Waters v.
Wisconsin Steel Works of Int’l Harvester Co., 427 F.2d 476, 481 (7th
Cir.}, cert. denied, 400 U.S. 911, 91 S. Ct. 137, 27 L. Ed.2d 151 (1970);
Scott v. Young, 421 F.2d 143, 145 (4th Cir.), cert. denied, 398 U.S. 929,
90 S. Ct. 1820, 26 L. Ed.2d 91 (1970). The constitutional basis is the
Thirteenth Amendment. See Jones, 392 U.S. at 413, 88 S. Ct. 2186.

8a

terms, conditions and privileges — but did not impede the
“making” or “enforcement” of contracts. 491 U.S. at 178, 109
S. Ct. 2363.

In 1991, Congress amended section 1981 specifically to
overtule the Patterson decision. See H.R.Rep. No. 102-40(D),
at 141 (1991), reprinted in 1991 U.S.C.C.A.N. 549, 670. New
language defines the phrase “make and enforce contracts” to
include “the making, performance, modification, and
termination of contracts, and the enjoyment of all benefits,
privileges, terms, and conditions of the contractual
relationship.” 42 U.S.C. § 1981(b). This language tracks
language of Title VII prohibiting discrimination with respect to
“compensation, terms, conditions, or privileges of
employment.” 42 U.S.C. § 2000e-2(a)(1). Thus, hostile work
environment claims may now be pursued by employees under
both Title VII and section 1981. See Jackson v. Motel 6
Multipurpose, Inc., 130 F.3d 999, 1008 n. 17 (11th Cir. 1997)
(collecting cases).

If an employee may sue under section 1981 on a hostile
work environment theory, can an independent contractor also
do so? On the face of the statute, nothing forbids such a claim.
Section 1981 does not limit itself, or even refer, to employment
contracts but embraces all contracts and therefore includes
contracts by which a corporate independent contractor like
Danco provides service to another corporation like Wal-Mart.
See T & S Serv. Assocs., Inc. v. Crenson, 666 F.2d 722, 725
(ist Cir. 1981). One could say that avoiding a hostile work
environment is an implicit contractual benefit or term that exists
for employees but not independent contractors, yet nothing in
the statute’s language supports such a limitation.

Wal-Mart makes two arguments against allowing a hostile
work environment claim by an independent contractor. The
first is that the 1991 amendment was intended to secure such
claims for employees, as the legislative history makes clear.
See H.R.Rep. No. 102-40(I), at 141, reprinted in 1991

9a

U.S.C.C.A.N. 549, 670. But references to employees appear
because most cases involve employees rather than independent
contractors. There is nothing in the legislative history to
Suggest that Congress had any objection to providing similar
benefits to independent contractors, and the language it used
in its amendment applies as readily to the one as to the other.
In fact, H.R.Rep. No. 102-40(I), at 92, reprinted in 1991
4 U.S.C.C.A.N. 549, 630, states that “[t]he Committee intends
this provision to bar all race discrimination in contractual
relations.”

Alternatively, Wal-Mart paints a vivid picture of liability run
amok if a company is made responsible not only to protect its
own employees against racial harassment in the workplace but
also to protect all of the contractors with whom the company
may deal. These problems may be considerable, but it is fair to
point out that the hostile work environment theory is likely to
be useful only to those independent contractors who work on
site, and (as we shall see) the claims of such contractors are
more limited than Wal-Mart supposes. Beyond that, the
problems if any are for Congress to fix.

ree ee vee ee

Nevertheless, in the present case Danco has a potential claim
under section 1981, but Guiliani does not. The same statutory
. language that gives a claim to Danco, as an independent
: contractor with Wal-Mart, precludes such a claim by Guiliani
unless he also had a contract with Wal-Mart. It appears, not
: surprisingly, that the contract in question was between Wal-
Mart and Danco.* Nothing in section 1981 provides a personal
claim, so far as its language is concerned, to one who is merely
affiliated — as an owner or employee — with a contracting

* Although the complaint said that the Wal-Mart contract was with
“plaintiffs,” Wal-Mart’s statement of undisputed facts corrected this
assertion, citing to the contract itself, and plaintiffs’ counter-statement did
not disagree. An examination of the contract itself makes clear that the
two parties to the contract were Wal-Mart and Danco.

10a

party that is discriminated against by the company that made
the contract.

A corporation ordinarily carries out its activities through its
employees, and work-site racial discrimination against Danco’s
employees could amount to racial discrimination against Danco
causing damage to the company. But the employee cannot
collect damages on his own behalf. Cf Gersman v. Group
Health Ass'n, Inc., 931 F.2d 1565, 1573 (D.C. Cir. 1991),
vacated on other grounds, 502 U.S. 1068, 112 S. Ct. 960, 117
L. Ed.2d 127, but original opinion adopted on remand, 975
F.2d 886 (D.C. Cir. 1992), cert. denied, 511 U.S. 1068, 114
S.Ct. 1642, 128 L. Ed.2d 363 (1994); Perez v. Abbott Lab.,
1995 WL 86716, at *6 (N_D. Ill. Feb. 27, 1995). And the
suffering of Guiliani, however real, is not automatically damage
to Danco.

Thus, if the issue had been raised, Wal-Mart would likely
have been entitled to an instruction that Guiliani had no claim
of any kind under section 1981 because he had no contract.
Further, Guiliani offered evidence that he had suffered
emotional harm but there does not appear to be evidence that
Danco, as distinct from Guiliani, was measurably damaged by
the racial incidents. So Wal-Mart might also have been entitled
to a directed verdict on Danco’s hostile work environment
theory for lack of evidence of damages to Danco. However, so
far as we can tell, neither point was argued to the district court.

It is true that Wal-Mart argued in the district court that
neither Danco nor Guiliani had a claim under section 1981.
But the reasons given were quite different. It is well settled
that to preserve a claim for review on appeal, the party
claiming error must have supplied the right ground for the
request. The basis for this requirement is obvious: the judge
must largely rely upon the parties to research and raise issues,
and giving the judge the wrong reason for a request is usually
equivalent to giving the judge no reason at all. Havinga v.
Crowley Towing & Transp. Co., 24 F.3d 1480, 1483 n.5 (ist

ee eS er se

lla

Cir. 1994); Wells Real Estate, Inc. v. Greater Lowell Bd. of
Realtors, 850 F.2d 803, 810 (1st Cir.), cert. denied, 488 U.S.
955, 109 S. Ct. 392, 102 L. Ed.2d 381 (1988).

This brings us to the plain error doctrine. Hammond v. T.J.
Litle & Co., Inc., 82 F.3d 1166, 1172 (Ist Cir. 1996). The
requirements for plain error, set forth by the Supreme Court in
United States v. Olano, 507 U.S. 725, 732-35, 113 S. Ct.
1770, 123 L. Ed.2d 508 (1993), are that there be error, that it
be plain, that it affect substantial rights and that the error
threaten “miscarriage of justice.” Olano was a criminal case
but in this circuit, the same requirements are commonly
imposed in civil cases, and even more stringently. As we said
recently in Beatty v. Michael Bus. Machs. Corp., 172 F.3d 117,
121 (Ist Cir. 1999) (citations and internal quotation marks
omitted):

The plain error exception should be applied sparingly and
only in exceptional cases or under peculiar circumstances to
prevent a clear miscarriage of justice. The exception should
be confined to the exceptional case where the error has
seriously affected the fairness, integrity, or public reputation
of judicial proceedings.

In this case, letting any claim by Guiliani under section 1981
go to the jury was an error; it was arguably at least “plain”
error; and it affected substantial rights in the sense that no
damages to Danco were proved from the harassment. But
there are several reasons which, taken in combination, persuade
us that there is no miscarriage of justice or any other reason
sufficient to exercise our discretion to notice the error or errors
in the case before us. Olano, 507 US. at 736, 113 S. Ct. 1770;
Beatty, 172 F.3d 117, 121.

The first reason is that Wal-Mart, as well as the plaintiffs,
affirmatively consented to the district court’s instructions to
treat Guiliani and Danco interchangeably. The reasons may
have been tactical or may have resulted from a genuine

12a

misunderstanding of the law that governs whether and when a
small incorporated business can be treated interchangeably with
its owner and operator.° If the former, this would be a waiver
not subject to plain error; but even if the latter is true, it is at
least a consideration, in exercising our discretion, that the legal
issue was specifically discussed and counsel affirmatively
consented to treating the plaintiffs as one.

Second, it counts heavily against finding plain error that the
party on the other side would be unfairly prejudiced. Here, it
seems unlikely that Danco itself could have established
monetary damages of any size from the racial incidents; but it
is not impossible that some showing could have been attempted
if the plaintiffs had known that Guiliani’s right to recover for
the emotional effects on him was legally disputed on the basis
we are now considering. Whether and how much damage
Danco might have been proved is speculative, but that is
exactly why we cannot say for sure that there was no prejudice
from the failure to raise the objection in timely fashion.

Third, the jury would likely have awarded substantial
damages, and quite possibly the same $650,000, on the
negligent infliction claim if Guiliani’s section 1981 claim had
been stricken. As the case was tried, the same racial
harassment underlay both claims. Whatever the jury was told
in the instructions, the jury’s decision to award zero damages
for negligent infliction, after a finding that Wal-Mart was liable
on that claim, was probably due to the jury’s belief that the
award on the section 1981 claim already covered the same

* There is little indication from the facts in this record that Guiliani would
be subject to suit under a “piercing the veil” theory if Danco committed a
tort, Theberge v. Darbro, Inc., 684 A.2d 1298, 1300- 01 (Me. 1996);
Henn & Alexander, Laws of Corporations § 147, at 352-53 (3d ed.1983);
but there is even less basis in law for assuming that, if the corporation
were a sham, Guiliani could take advantage of a sham he had created to
assert Danco’s rights as a plaintiff, see LaBelle v. Crepeau, 593 A.2d 653,
655 (Me. 1991).

eedittnds Cities sttniee ev uibes

l3a

injury. In sum, we do not find that this error “calls into
question the fairness, integrity, or public reputation of judicial
proceedings.” Beatty, 172 F.3d 117, 121.

It remains to consider, on Wal-Mart’s appeal, its claim that
it was entitled to judgment as a matter of law under section
1981 because the evidence was not sufficient for a reasonable
jury to find that a hostile work environment existed. The
barrier to reversal on this ground is high, given the jury’s
superior ability to gauge the witnesses and draw inferences in
favor of one side or the other on this highly factual issue. See
Costos v. Coconut Island Corp., 137 F.3d 46, 48 (1st Cir.
1998). Viewing the evidence in the light most favorable to the
plaintiffs, this may have been a thin case but not so thin as to
preciude a reasonable jury from finding a hostile work
environment.

To make out a hostile work environment claim, the plaintiff
must show not only a contractual relationship but also two
further elements: (1) that the plaintiff was exposed to
comments, jokes, or acts of a racial nature by the defendant’s
employees; and (2) that the conduct had the purpose or effect
of interfering with the plaintiff's work performance or created
an intimidating, hostile or offensive working environment.
Harris v. Forklift Systems, Inc., 510 U.S. 17, 20-22, 114 S. Ct.
367, 126 L. Ed.2d 295 (1993). In addition, the defendant will
ordinarily only be liable for harassment by low-level employees
if management-level employees knew or should have known
about it. See Burrell v. Star Nursery, Inc., 170 F.3d 951, 1999
WL 160796 at *3 (9th Cir. Mar.25, 1999).

In this case, the plaintiffs alleged three race-related incidents.
While a plaintiff must show “more than a few isolated incidents
of racial enmity,” Snell v. Suffolk County, 782 F.2d 1094, 1103
(2d Cir. 1986), there is no “absolute numerical standard” by
which to determine whether harassment has created a hostile
environment, Vance v. Southern Bell Telephone & Telegraph

14a

Co., 863 F.2d 1503, 1511 (11th Cir. 1989). In the Supreme
Court’s words:

[W }hether an environment is “hostile” or “abusive” can be
determined only by looking at all the circumstances. These
may include the frequency of the discriminatory conduct; its
severity; whether it is physically threatening or humiliating,
or a mere offensive utterance; and whether it unreasonably
interferes with an employee’s work performance.

Harris, 510 U.S. at 23, 114 S. Ct. 367.

In this case, all of the incidents involved utterances but one
also involved a low level of physical violence (or so the jury
could have found) and one, it could be argued, effectively
lasted for months because Guiliani had to face the graffiti on
the parking lot every time he worked on the lot. Guiliani also
alleged that he altered his schedule so that he would work on
the Wal-Mart lot in daylight because of the harassment, an
action that suggests some amount of interference with his work
because of the harassment. Although much of the evidence
was contested, the jury is assumed to have believed the
plaintiffs’ version. See Correa, 69 F.3d at 1191.

Even on this premise, these allegations do seem rather tame
compared to many reported cases involving racially hostile
working environments. Cf West v. Philadelphia Elec. Co., 45
F.3d 744, 749-52 (3d Cir. 1995); Snell, 782 F.2d at 1098-
1100 (2d Cir. 1986). However, they are not so trivial that we
would countermand a jury’s decision that they constituted a
violation of section 1981. Of course, no evidence exists that
Danco itself suffered specific monetary damage; but (as
already noted), that may be because Wal-Mart’s legal attack on
the section 1981 claim was insufficiently precise to alert
plaintiffs to any need to make such a separate showing.

Wal-Mart’s final ground for appeal is that the district judge

should have allowed Guiliani to be impeached based on a 15-
year old incident. While Guiliani’s credibility was certainly

Pb At Mtr ls aba sed:

15a

important, the probative value of the incident was minimal, and
a danger of prejudice existed. Exclusion of the evidence was
not an abuse of the district court’s substantial discretion to
allow or exclude such impeaching evidence. See Freeman v.
Package Mach. Co., 865 F.2d 1331, 1340 (1st Cir. 1988).

Turning to the plaintiffs’ cross-appeal, their claim is that the
district court erred in deciding that the evidence did not permit
an award of punitive damages and in withdrawing that issue
from the jury. The standard for punitive damages in civil rights
cases, whether under Title VII or sections 1981-83, is drawn
from Smith v. Wade, 461 U.S. 30, 56, 103 S. Ct. 1625, 75 L.
Ed.2d 632 (1983), where the Court said that the plaintiff must
show that the defendant acted with “evil motive or intent” or
with “reckless or callous indifference” to the plaintiff s federally
protected rights.°

However, section 1983 cases like Smith v. Wade itself, often
involve only the wrongdoing individual, whereas cases like this
one and cases under Title VII often involve a company from
whom the plaintiff seeks compensation and punitive damages
for the acts of low-level employees. Company liability for
compensatory damages is fairly easy to establish although not
automatic, e.g., Faragher v. Boca Raton, 524 U.S. 775, 118 S.
Ct. 2275, 2292-93, 141 L. Ed.2d 662 (1998); but the rule for
punitive damages has been complicated because the precedents
often do not distinguish between the wrongdoing employee and
the employer against whom the punitive damage claim is
directed.

Such distinctions may not be pertinent where the
discriminatory conduct is a matter of company policy or is

* Smith was a section 1983 case, but the same standard has been applied
by this court and others under section 1981, e.g., Rowlett v. Anheuser-
Busch, 832 F.2d 194, 205 (1st Cir. 1987), and Congress in 1991 wrote
similar language into Title VII to govern punitive damages. 42 U.S.C. §
198 1a(b)(1).

l6a

engaged in by management officials whose own intent may
automatically be imputed to the company. Cf Dichner v.
Liberty Travel, 141 F.3d 24, 28-29 (1st Cir. 1998); Rowlett,
832 F.2d at 201-03. However, where, as here, we are
concerned only with isolated acts of harassment by ordinary
employees — Amadei had limited supervisory authority but not
over Guiliani — it follows that punitive damages should be
afforded only where the management itself “by evil motive or
intent” engaged in racial discrimination or behaved in a manner
that showed “reckless or callous indifference” to such
discrimination. Smith, 461 U.S. at 56, 103 S. Ct. 16235.

This view has been taken in well-reasoned decisions in the
Fourth and Tenth Circuits.’ More important, it accords with
the Supreme Court’s reminder in Smith that punitive damages
are to deter seriously wrongful conduct by the defendant and
not just to provide another layer of compensation. See
Hernandez-Tirado v. Artau, 874 F.2d 866, 869 (1st Cir. 1989)
(Breyer, J.). It is consistent with this view to require that
before a company is held liable for punitive damages for acts of
harassment by low-level employees, there be some culpability
beyond mere negligence at the management level.

In this instance, the district judge nghtly concluded that no
such malicious or evil intent or reckless indifference could be
attributed to Wal-Mart, whatever one might say about Amadei
and Hamlin. Even if Scheffe could be described as
management for this purpose—which we will assume arguendo
but do not decide-there is no indication that he was motivated
by racist attitudes or that he paid no attention to the complaints

” See Harris v. L & L Wings, Inc., 132 F.3d 978, 982-84 (4th Cir. 1997);
Fitzgerald v. Mountain States Tel. & Tel. Co., 68 F.3d 1257, 1262-64
(10th Cir. 1995). The Fifth Circuit originally adopted a more plaintiff-
friendly standard in Deffenbaugh-Williams v. Wal-Mart Stores, Inc., 156
F.3d 581 (Sth Cir. 1998). However, the opinion has been vacated and the
case set for rehearing. 169 F.3d 215 (5th Cir. 1999).

17a

of harassment by Guiliani. On the contrary, the record shows
that he investigated two of the three incidents but found no
definitive evidence as to what had happened; and on the
remaining incident Scheffe testified that he had undertaken an
investigation and explained why it bore no fruit, and there was
no conclusive proof to the contrary.

Certainly a jury might have found that Scheffe was careless.
He apparently did not question all of the 14 night shift workers
about the spray paint episode, and he failed to see that the
spray paint was promptly removed, even though he testified
that he thought he had given instructions that it be done and
that this had occurred. But Guiliani himself testified that
Scheffe was not racist, and Scheffe’s missteps hardly reveal the
evil intent or reckless disregard of civil rights necessary to
support punitive damages.

Affirmed.

18a

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE

DANCO, INC. and
Benjamin Guiliani,
Plaintiffs

Vv.

)
)
)
) Civ. No. 97-0054-B
)
)
WAL-MART STORES, INC., )
Defendant )

ORDER AND MEMORANDUM OF DECISION

BRODY, District Judge

Plaintiffs, Danco, Inc. (“Danco”) and Benjamin Guiliani
bring this action against Defendant, Wal-Mart Stores, Inc.
(“Wal-Mart”), alleging violations of Plaintiffs’ civil rights under
42 U S.C. § 1981 (Count I), denial of Plaintiffs’ full and equal
enjoyment of the public facilities of Defendant (Count II),
breach of written and oral contracts (Counts III and IV), unjust
enrichment (Count V), negligence (Count V1), intentional and
negligent infliction of emotional distress (Counts VII and VIII),
and willful and wanton conduct in support of a punitive
damages claim (Count [X). Before the Court is Defendant’s
Motion for Summary Judgment on all counts of Plaintiffs’
Complaint. For the reasons set forth below, Defendant’s
Motion is GRANTED in part and DENIED in part.

BACKGROUND

For the purposes of summary judgment, the Court views the
facts in the light most favorable to the nonmoving party. See
McCarthy v. Northwest Airlines, Inc., 56 F.3d 313, 315 (ist
Cir. 1995). Plaintiff Benjamin Guiliani, a Mexican-American of
Mexican-Hispanic descent, is the owner and sole shareholder

19a

of Plaintiff Danco, a commercial industrial maintenance
company incorporated in 1994.

On or about September 15, 1994, Danco entered into a
written contract with the Augusta Wal-Mart store whereby
Danco was to provide parking lot cleaning and maintenance
services. In a letter dated January 30, 1995, Defendant
terminated this contract effective March 2, 1995. Subsequently,
however, after discussing the matter, the parties signed a new
contract for parking lot maintenance services dated February
21, 1995. Around the same time that Danco entered into its
initial contract with the Augusta Wal-Mart, in the fall of 1994,
Danco also entered into oral agreements with other Wal-Mart
stores in Scarborough, Windham, Auburn, Farmington,
Rockland, Waterville, and the Sam’s Club in Augusta! to
provide parking lot cleaning and maintenance services. On
March 15, 1995, Danco entered into a written contract for
parking lot services with the Augusta Sam’s Club.

In October 1994, Mr. Guiliani and his son Daniel observed
the words “White Supremacy” spray-painted on the parking lot
pavement of the Augusta Wal-Mart. Daniel claims to have
observed the Augusta Wal-Mart maintenance manager, Robert
Amadei, spray-painting the words on the pavement earlier in
the day. Mr. Guiliani immediately reported the incident to the
Augusta Wal-Mart store manager, Curtis Scheffe, and informed
Mr. Scheffe that he found the words to be highly offensive.
Mr. Guiliani offered to remove the words from the parking lot
immediately, but Mr. Scheffe assured Plaintiff that he would
take care of it. Mr. Scheffe conducted an investigation into
who may have spray-painted the words, but the words allegedly
remained on the pavement for over two months.

' Defendant Wal-Mart is registered and licensed to do business in the State
of Maine under the names Wal-Mart and Sam’s Club.

20a

On or about October 14, 1994, a few days after the
spray-painting incident, a Wal-Mart employee, Scott Hamlin,
racially harassed and physically assaulted Mr. Guiliani on the
premises of the Augusta Wal-Mart store. Plaintiff Guiliani
immediately called the police and reported the incident to Mr.
Scheffe. Mr. Scheffe, however, failed to take any disciplinary
action against Mr. Hamlin. On or about November 12, 1994,
Mr. Hamlin allegedly further subjected Mr. Guiliani to racial
harassment, by shouting out a racial slur as he was driving out
of the Augusta Wal-Mart and Mr. Guiliani and his son
Benjamin were driving in. Mr. Guiliani reported this second
incident to Mr. Scheffe. Again, Wal-Mart took no disciplinary
action.

In January 1995, James Helterbrake replaced Curtis Scheffe
as the Augusta Wal-Mart manager. Mr. Guiliani informed Mr.
Helterbrake of the “White Supremacy” incident and the
confrontations with Mr. Hamlin, and mentioned that he had
contacted the police in response to two of the incidents. Upon
learning of Mr. Guiliani’s contact with the police, Mr.
Helterbrake allegedly became angry and asked Mr. Guiliani
why he had called the police and why the words “White
Supremacy” bothered him. Following this conversation, Mr.
Helterbrake treated Mr. Guiliani in a hostile manner.

In late March 1995, while Mr. Guiliani and Daniel were
completing their cleaning of the Augusta Wal-Mart parking lot,
Mr. Guiliani observed a sanding contractor enter the parking
lot and begin to sand the ice. Mr. Guiliani also noticed Mr.
Helterbrake watching the sanding contractor from in front of
the store. The following day Mr. Helterbrake terminated
Danco’s contract, on the ground that Danco was
unsatisfactorily performing its cleaning duties. Mr. Helterbrake
told Mr Guiliani that Charles Kellogg from the Maine
Department of Environmental Protection (“DEP”) had
complained the previous night about the sand on the lot and
had threatened Wal-Mart with a $500,000 fine. Mr. Kellogg

2la

has testified that he never threatened the Augusta Wal-Mart
with a $500,000 fine. Mr. Helterbrake also told Mr. Guiliani
that he did not wish to see him around the Augusta Wal-Mart
store again. Soon after Mr. Helterbrake terminated Danco’s
contract with the Augusta Wal-Mart, other Wal-Mart stores
began terminating their contracts with Danco without proper
notice or cause.

SUMMARY JUDGMENT

Summary judgment is appropriate in the absence of a
genuine issue of any material fact and when the moving party
is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c).
An issue is genuine for summary judgment purposes, if “the
evidence is such that a reasonable jury could return a verdict
for the nonmoving party.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). A material fact is one that has “the
potential to affect the outcome of the suit under applicable
law.” Nereida-Gonzalez v. Tirado-Delgado, 990 F.2d 701, 703
(Ist Cir. 1993). Facts may be drawn from “the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits.” Fed. R. Civ. P. 56(c).

DISCUSSION
A. Count I — Section 1981

In Count I, Plaintiffs allege that Defendant violated
Plaintiffs’ civil rights pursuant to 42 U.S.C. § 1981.
Specifically, Plaintiffs allege that Defendant failed to prevent or
remedy a racially hostile work environment, and ultimately
terminated Danco’s written contract with the Augusta
Wal-Mart for racially discriminatory reasons. The Court is
persuaded that summary judgment on Count I of Plaintiffs’
Complaint is inappropriate at this stage of the proceedings.

Section 1981(a) provides that “{aJll persons within the
jurisdiction of the United States shall have the same right... to
make and enforce contracts... .” 42 USC. § 1981(a).

22a

Section 1981(b) defines the term “make and enforce contracts”
as including “the making, performance, modification, and
termination of contracts, and the enjoyment of all benefits,
privileges, terms and conditions of the contractual
relationship.” 42 U.S.C. § 1981(b). The First Circuit has held
that analysis of a section 1981 claim is “substantially identical” °
to analysis of a Title VII claim. See Villanueva v. Wellesley
College, 930 F.2d 124, 127 n.2 (1st Cir. 1991). In both types
of claims, “the ultimate issue is whether the defendant
intentionally discriminated against the plaintiff. . . .”
Ayala-Gerena v. Bristol Meyers-Squibb Co., 95 F.3d 86, 95
(1st Cir. 1996).

The Court first addresses Plaintiffs’ contention that
Defendant subjected Plaintiff Guiliani to a hostile working
environment. To prevail on a hostile work environment claim,
Plaintiffs must establish: (1) unwelcome comments, jokes, acts,
and other verbal or physical conduct of a racial nature in the
workplace; (2) that such conduct has the purpose or effect of
substantially interfering with an individual’s work performance
or creating an intimidating, hostile, or offensive work
environment; and (3) that the employer, or its agents or
supervisory employees, knew or should have known of the
conduct. Duplessis v. Training & Dev. Corp., 835 F. Supp.
671, 677 (D. Me. 1993) (setting forth standard for hostile work
environment claim under Title VII). Once Plaintiffs have
established these factors, Defendant “may rebut a prima facie
case by showing it took immediate and appropriate corrective
action.” Jd; see also DeGrace v. Rumsfeld, 614 F.2d 796, 805
(1st Cir. 1980) (“employer who has taken reasonable steps
under the circumstances to correct and/or prevent racial
harassment by its nonsupervisory personnel has not violated
Title VII’).

In determining whether harassment is sufficiently severe as
to constitute a hostile working environment, courts “look to
the gravity as well as the frequency of the offensive conduct.”

a

23a

DeNovellis v. Shalala, 124 F.3d 298, 311 (ist Cir. 1997)
(analyzing Title VII hostile work environment claim). A
court’s decision must be based on the totality of the
circumstances. Duplessis, 835 F. Supp. at 677.

The Court is satisfied that Plaintiffs have raised genuine
issues of fact with respect to each of the elements of their claim
alleging a hostile work environment. The spray-painted words
“White Supremacy,” as well as both of Mr. Hamlin’s alleged
confrontations with Mr. Guiliani constitute unwelcome
comments and/or actions of a racial nature in the workplace.
Although Mr. Hamlin may have been off-duty when he
confronted Mr. Guiliani, the altercations took place on
Wal-Mart’s premises, indeed in the very place where
Mr. Guiliani performed his duties. Plaintiffs allege that the
harassment caused Mr. Guiliani great mental anguish and
directly interfered with his work performance, by causing him
to perform his duties during the day rather than at night
because he feared for the safety of himself and his family. While
the incidents of harassment may not have been large in number,
the Court is persuaded that their potential severity is sufficient
to preclude summary judgment.

Plaintiffs have also presented evidence sufficient to create a
question of material fact on the issue of Defendant’s knowledge
of the discriminatory conduct. Mr. Guiliani allegedly reported
each of the three discriminatory incidents to the Augusta
Wal-Mart manager, Mr. Scheffe. Although Mr. Scheffe
conducted an investigation into the “White Supremacy”
incident and told Mr. Guiliani he would handle removal of the
words from the parking lot, Plaintiffs allege that the words
remained on the pavement for over two months. Defendant
further failed to take any disciplinary action against Mr. Hamlin
although Mr. Scheffe was aware that the confrontations
occurred. A reasonable jury could find that Defendant failed to
take reasonable steps to prevent or correct a hostile work

Sonne ee

24a

environment, even though Defendant had knowledge of this
offensive atmosphere.

Next, the Court turns to Plaintiffs’ argument that Defendant
unlawfully terminated Danco’s contract with the Augusta
Wal-Mart for racially discriminatory reasons. Contrary to
Plaintiffs’ contentions, the Court finds that Plaintiffs have not
presented direct evidence of discrimination. The First Circuit
has held that “[d]irect evidence is evidence which, in and of
itself, shows a discriminatory animus.” Ayala-Gerena, 95 F.3d
at 96 (quoting Jackson v. Harvard Univ., 900 F.2d 464, 467
(ist Cir. 1990)). “[A]t a minimum, direct evidence does not
include stray remarks in the workplace, particularly those made
by nondecision-makers or statements made by decisionmakers
unrelated to the decisional process itself.” /d. Even assuming,
as Plaintiffs allege, that the spray-painting was done by Mr.
Amadei and that Mr. Amadei reported to the store manager
about Danco’s performance, Plaintiffs have not demonstrated
that the spray-painting incident was sufficiently related to Mr.
Helterbrake’s decision to terminate Danco’s contract so as to
constitute direct evidence of discrimination.

In the absence of direct evidence of race discrimination,
courts will apply the burden-shifting analysis established in
McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802-05
(1973). Plaintiffs bear the initial burden of establishing a prima
facie case of discrimination by proving that: (1) Plaintiffs were
members of a protected class, (2) Plaintiffs performed their jobs
satisfactorily; (3) Plaintiffs’ contract was terminated; and (4)
Plaintiffs’ position remained open and was eventually filled by
persons with Plaintiffs’ qualifications. Ayala-Gerena, 95 F.3d
at 95. This initial burden is not onerous. See Lipsett v.
University of Puerto Rico, 864 F.2d 881, 899 (1st Cir. 1988).
Once Plaintiffs have established a prima facie case of
discrimination “the burden of production shifts to the defendant
in order to show a legitimate nondiscriminatory reason” for its
action. Ayala-Gerena, 95 F.3d at 96. If Defendant proffers

25a

such a reason, the burden shifts back to Plaintiffs to establish
that Defendant’s reason is merely a pretext for intentional
discrimination. Jd. :

Defendant contends that Plaintiffs have failed to satisfy the
second prong of their prima facie case of discrimination, the
requirement that Danco perform its job satisfactorily.
Defendant alleges that Mr. Kellogg, a representative from the
Maine DEP, criticized Plaintiffs and Wal-Mart for not
performing parking lot maintenance as required by DEP
regulations, and that Mr. Helterbrake was dissatisfied with
Danco’s performance. Plaintiffs respond that Wal-Mart District
Manager, J.R. Lee, commented several times on the excellent
work Danco was performing at the various Wal-Mart stores
and that Mr. Kellogg never recommended that Mr. Helterbrake
terminate Danco’s services. The Court is satisfied that Plaintiffs
have presented sufficient facts to support their prima facie
claim of discrimination.

Turning to the second stage of the McDonnell Douglas
analysis, the Court finds that Defendant has proffered a
legitimate nondiscriminatory justification for the termination of
Danco’s contract, Danco’s poor performance of its duties. The
Court is persuaded, however, under the third and final stage of
the McDonnell Douglas analysis, that Plaintiffs have put forth
sufficient facts from which a reasonable factfinder could
conclude that Defendant’s justification was merely a pretext for
discrimination. Even though the termination of Danco’s
contract with the Augusta Wal-Mart occurred when Mr
Helterbrake was in charge of the store, rather than Mr. Scheffe,
the manager at the time the incidents of harassment occurred,
Mr. Guiliani told Mr. Helterbrake of the alleged harassment.
Indeed, in response to Mr. Guiliani’s disclosure Mr.
Helterbrake allegedly became angry, and thereafter treated Mr.
Guiliani with hostility. Mr. Guiliani further contends that when
Mr. Helterbrake terminated Danco’s contract, he told Mr.
Guiliani that Mr. Kellogg had threatened Wal-Mart with a

26a

$500,000 fine. Mr. Kellogg has testified that no such fine was
ever threatened. The Court is satisfied that genuine issues of
material fact exist with respect to the reason behind the
Augusta Wal-Mart’s termination of Danco’s contract.
Accordingly, the Court denies Defendant’s Motion for
Summary Judgment on Count I.

B. Count II — Public Accomodations Discrimination

Plaintiffs allege in Count II that Defendant discriminated
against and denied Mr. Guiliani the full and equal enjoyment of
the public facilities of Defendant in violation of the “unlawful
public accomodations” provision of the Maine Human Rights
Act, 5M. R.S.A. § 4551 ef seg. Section 4592 of the Maine
Human Rights Act provides:

It is unlawful public accomodations discrimination, in
violation of this Act:

1. Denial of public accommodations. For any public
accommodation or any person who is the owner, lessor,
lessee, proprietor, operator, manager, superintendent, agent
or employee of any place of public accommodation to
directly or indirectly refuse, discriminate against or in any
manner withhold from or deny the full and equal enjoyment
to any person, on account of race or color, sex, physical or
mental disability, religion, ancestry or national origin, any of
the accomodations, advantages, facilities, goods, services or
privileges of public accommodation, or in any manner
discriminate against any person in the price, terms, or
conditions upon which access to accommodation,
advantages, facilities, goods, services and privileges may
depend.

5 M.R.S.A. § 4592.

Plaintiffs allege that when Mr. Helterbrake terminated
Danco’s contract with the Augusta Wal-Mart and Mr. Guiliani
questioned him about it, Mr. Helterbrake angrily told Mr.

EES ae ee =. =«¢

27a

Guiliani that he did not want to see him around the Augusta
Wal-Mart again. Mr. Guiliani contends that he interpreted Mr.
Helterbrake’s statement to mean that Mr. Helterbrake did not
wish Mr. Guiliani to go back to the property for any reason.
Plaintiffs have not, however, presented any evidence that Mr.
Guiliani was denied access to Defendant’s premises, or denied
access to shopping at the Augusta Wal-Mart. The Court is
persuaded that Mr. Helterbrake’s statement alone does not
present a sufficient issue of material fact as to whether Mr.
Guiliani was denied the full and equal enjoyment of
Defendant’s facilities to survive summary judgment. The Court,
therefore, grants Defendant’s Motion for Summary Judgment
on Count II.

od Count II] — Breach of Written Contract

In Count III, Plaintiffs contend that Defendant breached
written contracts with Plaintiffs by failing to pay Plaintiffs for
their services provided pursuant to these contracts. Specifically,
Plaintiffs allege that Defendant breached two written contracts,
the February 21, 1995, contract between Danco and the
Augusta Wal-Mart, and the March 15, 1995, contract between
Danco and the Augusta Sam’s Club.

With respect to the contract between Danco and the
Augusta Wal-Mart, Plaintiffs allege by way of background that
pursuant to ¥ 3 of the September 15, 1994, contract between
the Augusta Wal-Mart and Danco, Danco dumped all
“sweeping debris” into Wal-Mart’s compactor. In February
1995, however, Mr. Amadei informed Mr. Guiliani that he
could no longer dump debris into the compactor because of the
weight of the sand. Mr. Guiliani contacted the person who had
prepared the contract between Danco and Defendant, Helen
Poulin of S.R. Weiner Associates, for guidance. After checking
with Mr. Helterbrake, Ms. Poulin told Mr. Guiliani that he
would have to haul the sand off site. In response to Mr.
Guiliani’s query as to what he should charge for such removal,
Ms. Poulin told him that the going rate was $58.00 per ton.

28a

As a result of this series of events, Plaintiffs contend that
when Danco and the Augusta Wal-Mart entered into a new
contract for parking lot maintenance on February 21, 1995, the
provision allowing for the dumping of debris into Wal-Mart’s
compactor was absent. Plaintiffs allege that the parties mutually
assented to Danco’s hauling away of the debris and the
subsequent reimbursement of Danco by Defendant. At a
minimum, Plaintiffs argue, the ultimate disposition of the debris
is an ambiguity in the contract. Defendant responds that since
the contract does not expressly provide for the removal of sand
off-site, Defendant’s refusal to pay for such services does not
constitute breach of contract.

Under Maine law:

the paramount principle in the construction of contracts is to
give effect to the intention of the parties as gathered from
the language of the agreement viewed in the light of all the
circumstances under which it was made... . Such intention
must be gathered from the written instrument, construed in
respect to the subject matter, the motive and purpose of
making the agreement, and the object to be accomplished.

Hodgkins v. New England Telephone Co., 82 F.3d 1226, 1230
(ist Cir. 1996) (quoting Baybutt Constr. Corp. v. Commercial
Union Ins. Co., 455 A.2d 914, 919 (Me. 1983)). “Whether
contract language is ambiguous is a question of law.” Town of
Lisbon v. Thayer Corp., 675 A.2d 514, 516 (Me. 1996). A
contract is ambiguous “when it is reasonably susceptible to
different interpretations.” Fitzgerald v. Gamester, 658 A.2d
1065, 1069 (Me. 1995). When contract language is
ambiguous, its interpretation is a question of fact, McCarthy v.
U.S.I. Corp. 678 A.2d 48, 51-52 (Me. 1996), and “extrinsic
evidence may be admitted and considered to show the intention
of the parties.” Fitzgerald, 658 A.2d at 1069 (citation
omitted).

“I eee

29a

Paragraph 1 of the February 21, 1995, contract provides for
“[t]he parking lot and roadways. . . [to] be cleaned and
sweep/vacuumed two times per week” by Danco. B. Guiliani
Dep. Ex. 6. The Court is persuaded that this language is
ambiguous as to the ultimate disposition of the sweeping
debris. Danco needed to deposit the debris it collected from
cleaning the parking lot somewhere, and Mr. Guiliani’s
conversation with Mr. Amadei foreclosed the option of the
Wal-Mart compactor. Furthermore, Ms. Poulin allegedly
checked with Mr. Helterbrake before telling Mr. Guiliani that
the sand would have to be hauled off site. The Court is
satisfied that an issue of material fact exists regarding the intent
of the parties, and that, therefore, summary judgment on
Plaintiffs’ claim that Defendant breached the February 21,
1995, contract is inappropriate. See Town of Lisbon, 675 A.2d
at 516 (when an issue of fact exists regarding the intent of the
parties, summary judgment is inappropriate).

Plaintiffs also contend that Defendant breached its March
15, 1995, contract with Danco for maintenance of the Augusta
Sam’s Club parking lot. Pursuant to this contract, Plaintiffs
allege, Danco performed services for Defendant until May 31,
1995, when Sam’s Club manager, Eddie Smith, terminated the
contract. Danco has billed the Augusta Sam’s Club for its
services during the months of April and May, 1995; however,
Defendant has refused to pay for these services. The
determination of whether there has been a breach of contract is
a question of fact. VanVoorhees v. Dodge, 679 A.2d 1077,
1080 (Me. 1996). The Court, therefore, denies Defendant’s
Motion for Summary Judgment on Count III.

D. Count IV — Breach of Oral Contracts

Count IV of Plaintiffs’ Complaint alleges that Defendant
breached various oral contracts it had with Danco by
terminating these contracts without cause or sufficient notice.
The parties do not dispute that during the fall of 1994, Danco
and Defendant entered into oral agreements to provide parking

30a

lot maintenance and cleaning services for Wal-Mart stores in
Scarborough, Windham, Auburn, Farmington, Rockland,
Waterville, and the Sam’s Club in Augusta, Maine.’ Plaintiffs
contend that J.R. Lee, the district manager for Wal-Mart, told
Mr. Guiliani that these oral contracts were Danco’s to keep as
long as Danco performed its job in a satisfactory manner, and
further expressly promised Danco the contracts for a significant
duration of time. In spite of these representations, soon after
Mr. Helterbrake terminated the Augusta Wal-Mart’s written
contract with Danco, the remaining Wal-Mart stores, with the
exception of the Auburn Wal-Mart,’ terminated their oral
contracts with Danco, for no reason and without notice.
Defendant responds that the oral contracts between Danco and
these other Wal-Mart stores were “terminable at will.”

“While the interpretation of unambiguous language in a
written contract falls within the province of the court, .. .
questions of fact concerning the terms of an oral agreement are
left to the trier of fact.” Moulton Cavity & Mold, Inc. v.
Lyn-Flex Indus., Inc., 396 A.2d 1024, 1029 (Me. 1979)
(citations omitted). The parties dispute whether the oral
agreements were intended to be contracts of a specific
duration, and whether Defendant was allowed to terminate
them without cause or notice. The Court, therefore, is satisfied
that Defendant’s Motion for Summary Judgment on Count IV
should be denied.

? The Court assumes, however, that Plaintiffs’ claim for breach of oral
contract does not apply to Danco’s oral contract to provide parking lot
maintenance to the Augusta Sam’s Club, since on or about March 15,
1995, Danco and Wal-Mart entered into a written contract for parking lot
maintenance services for this store.

> Plaintiffs acknowledge that Don Jenkins, manager of the Auburn
Wal-Mart, did provide Danco with notice and a reason for termination of
their contract, namely the Auburn Wal-Mart’s decision to utilize in-house
personnel to maintain the lot during the winter months.

3la

E. Count V — Unjust Enrichment

Plaintiffs allege in Count V that Defendant has_ been
“unjustly enriched” by services provided by Plaintiffs,
specifically Danco’s hauling away of the sweeping debris from
the Augusta Wal-Mart parking lot. “‘{U]njust enrichment
describes recovery for the value of the benefit retained when
there is no contractual relationship, but when, on the grounds
of fairness and justice, the law compels performance of a legal
and moral duty to pay.”’ Hodgkins, 82 F.3d at 1232 (quoting
A.F-A.B., Inc. v. Town of Old Orchard Beach, 639 A.2d 103,
105 n.3 (Me. 1994)). Plaintiffs contend that to the extent the
February 21, 1995, written contract between Danco and the
Augusta Wal-Mart is found not to cover Danco’s removal of
sand from the site, Plaintffs are nevertheless entitled to relief
under a theory of unjust enrichment.

In order to establish a claim for unjust enrichment a party
must prove: (1) a benefit conferred upon Defendant by
Plaintiffs; (2) an appreciation or knowledge by Defendant of
the benefit; and (3) the acceptance or retention by Defendant
of the benefit under such circumstances as to make it
inequitable for Defendant to retain the benefit without payment
of its value. Aladdin Elec. Assoc. v. Town of Old Orchard
Beach, 645 A.2d 1142, 1144 (Me. 1994). The Court is
persuaded that genuine issues of material fact exist with respect
to each of these elements.

First, Danco’s removal of sand from the site conferred a
benefit upon Defendant. Second, Plaintiffs have put forth
evidence suggesting that Defendant knew about this benefit.
Mr. Guiliani alleges that Ms. Poulin checked with Mr.
Helterbrake before telling Mr. Guiliani to haul the debris off
site, and one of Defendant’s employees, Mr. Amadei, was
responsible for telling Mr. Guiliani that disposal of sand in the
compactor would no longer be allowed. Finally, Danco has not
yet received payment for this service. A reasonable factfinder
could conclude that it was inequitable for Defendant to receive

32a

Danco’s services without paying for them. The Court denies
Defendant’s Motion for Summary Judgment on Count V.

F. Count VI — Negligence

Count VI of Plaintiffs’ Complaint alleges a cause of action
for negligence. Specifically, Plaintiffs allege that Defendant had
a duty to protect Plaintiffs from racial discrimination while
Plaintiffs performed their contractual obligations, and breached
this duty by failing to prevent or correct a racially hostile
atmosphere. Defendant contends that no such duty exists.
Alternatively, Defendant argues that even if such a duty did
exist, there is no evidence on the record to support Defendant’s
breach of that duty.

In order to prevail on a claim for negligence, Plaintiffs must
prove: (1) a duty owed Plaintiffs by Defendant, (2)
Defendant’s breach of that duty; and (3) injury to Plaintiffs
from the breach. Parker v. Harriman, 516 A.2d 549, 550 (Me.
1986). The existence of a duty is a question of law for decision
by the Court. Fish v. Paul, 574 A.2d 1365, 1366 (Me. 1990).

Plaintiffs argue that Defendant’s duty to protect Plaintiffs
from racial discrimination arises from the recognized common
law duty, under Maine law, on the part of a business owner to
exercise reasonable care to prevent injury to business invitees.
See Pelletier v. Fort Kent Golf Club, 662 A.2d 220, 221-22
(Me. 1995). While the Court agrees that common law imposes
a duty of reasonable care upon a business owner, the traditional
application of common law negligence in this area has been to
protect business invitees from physical injury. See /saacson v.
Husson College, 297 A.2d 98, 105 (Me. 1972) (““A possessor
of land is subject to liability for physical harm caused to his
invitees .. . .”’) (quoting Restatement (Second) of Torts § 343
(1965)). Plaintiffs have failed to present any legal support for
extending this common law duty to cases such as this one,
where a plaintiff's alleged injuries are purely psychological in

ew ae ee, oe ee ee

33a

nature.* The Court is persuaded that Mr. Guiliani’s emotional
injuries are more properly addressed by his claim for negligent
infliction of emotional distress. As a result, the Court grants
Defendant’s Motion for Summary Judgment on Count VI.

G. Count VII — Intentional Infliction of Emotional
Distress

In Count VII, Plaintiffs allege that Defendant intentionally
and recklessly inflicted emotional distress on Mr. Guiliani. To
prevail on this claim, Plaintiffs must prove that: (1) Defendant
intentionally or recklessly inflicted severe emotional distress or
was certain that such distress would result from its conduct: (2)
the conduct was so “extreme and outrageous” as to exceed “all
possible bounds of decency” and must be regarded as
“atrocious, and utterly intolerable in a civilized community;”
(3) the actions of Defendant caused Mr. Guiliani’s emotional
distress; and (4) the emotional distress suffered by Mr. Guiliani
was so “severe” that “no reasonable [person] could be expected
to endure it.” Henriksen v. Cameron, 622 A.2d 1135, 1139
(Me. 1993) (quoting Vicnire v. Ford Motor Credit Co., 401
A.2d 148, 154 (Me. 1979)). The Maine Supreme Judicial
Court has held in the context of an intentional infliction of
emotional distress claim that:

[i]t is for the Court to determine, in the first instance
whether the Defendant’s conduct may reasonably be
regarded as so extreme and outrageous to permit recovery,
or whether it is necessarily so. Where reasonable [people]
may differ, it is for the jury, subject to the control of the
Court, to determine whether, in a particular case, the
conduct has been sufficiently extreme and outrageous to
result in liability.

* While Mr. Guiliani alleges that he suffers severe headaches, he
acknowledges that these headaches were caused by his severe emotional
distress and anguish.

34a

Colford v. Chubb Life Ins, Co. of America, 687 A.2d 609, 616
(Me. 1996), cert. denied, — U.S. —, 117 S. Ct. 2433 (1997).

Viewing the facts in a light most favorable to Plaintiffs, the
Court is satisfied that Defendant’s conduct may not reasonably
be regarded as so atrocious or extreme as to permit recovery
on this theory. Defendant, itself, did not commit any of the
three allegedly discriminatory acts. Rather, Plaintiffs allege that
Defendant failed to prevent or correct a hostile work
environment. While such allegations, if proven, may constitute
sufficient evidence of intentional discrimination, the Court finds
that they do not rise to the level of intentional infliction of
emotional distress. The Court, therefore, grants Defendant’s
Motion for Summary Judgment on Count VII.

H. Count VIII — Negligent Infliction of Emotional
Distress

Count VIII of Plaintiffs’ Complaint seeks relief for negligent
infliction of emotional distress. In order to succeed on this
claim, Plaintiffs must establish: (1) that Defendant failed to
exercise reasonable care in keeping the workplace free from
harassment; (2) that Defendant’s failure caused Mr. Guiliani
severe emotional distress; (3) that Defendant’s failure would
have caused a reasonable person severe emotional distress; and
(4) that the harm was foreseeable. Duplessis, 835 F. Supp. at
683 (citing Salley v. Childs, 541 A.2d 1297 (Me. 1988)).

Defendant contends that the mental anguish allegedly
suffered by Mr. Guiliani does not rise to the level of severity
necessary for a successful negligent infliction of emotional
distress claim. Mr. Guiliani alleges that the various incidents of
discrimination caused him to experience emotional distress
resulting in severe headaches and significant sleeplessness and
nightmares. The Court is satisfied that a reasonable factfinder
could determine that this mental distress was more than the
“usual and insignificant emotional traumas of daily life in
modern society,” Dewilde v Guy Gannett Publ’g Co., 797 F.

35a

Supp. 55, 62 (D. Me. 1992), constituting instead trauma that
no reasonable person could expect to endure. Defendant’s
Motion for Summary Judgment on Count VIII is, thus, denied.

I. Count IX — Punitive Damages

In Count IX, Plaintiffs move for punitive damages. Punitive
damages are available under section 1981 when “the
defendant’s conduct is shown to be motivated by evil motive or
intent, or when it involves reckless or callous indifference to
the federally protected rights of others.” Rowlett v.
Anheuser-Busch, Inc., 832 F.2d 194, 205 (1st Cir. 1987)
(analyzing punitive damages award in section 1981 case)
(quoting Smith v. Wade, 461 U.S. 3 0, 56 (1983)). Under
Maine law, Plaintiffs are entitled to punitive damages on their
common law tort claims if they can establish by clear and
convincing evidence that Defendant acted with malice. Tuttle
v. Raymond, 494 A.2d 1353, 1363 (Me. 1985).

The Court is satisfied that Plaintiffs have generated sufficient
facts, if viewed in a light most favorable to Plaintiffs, from
which a reasonable jury could conclude that Defendant acted
with malice, or with reckless indifference to Plaintiffs’ federally
protected rights. In general, however, punitive damages are not
available in Maine for breach of contract. See Drinkwater v.
Patten Realty Corp. 563 A.2d 772, 776 (Me. 1989). Since the
Court has granted Defendant’s Motion for Summary Judgment
on Counts II, VI and VII, the Court narrows Plaintiffs’ basis
for recovery on the punitive damages count to those damages
arising from Counts I, V, and VIII.

36a

CONCLUSION

Defendant’s Motion for Summary Judgment is GRANTED
as to Counts II, VI and VII, and DENIED as to all other
counts.

SO ORDERED.

/s/ Morton A. Brody

MORTON A. BRODY
United States District Judge

Dated this 26th day of March, 1998.

37a

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE

DANCO, INC. and )
Benjamin Guiliani, )
Plaintiffs, )

)
v. ) Civ. No. 97-54-B

)
WAL-MART STORES, INC., )
Defendant, )

ORDER AND MEMORANDUM OF DECISION

BRODY, District Judge

On April 29, 1998, the Court entered judgment on a jury
verdict awarding Plaintiffs, Danco, Inc. and Benjamin J.
Guiliani (collectively, “Plaintiff’), $654,440 in compensatory
damages. The jury found that Defendant, Wal-Mart Stores,
Inc., violated Plaintiff's civil rights by subjecting him to a
hostile work environment in violation of 42 U.S.C. § 1981, and
breached a written contract between Plaintiff and the Augusta
Sam’s Club. Pursuant to Fed. R. Civ. P. 50(b) and 59(a),
Defendant moves the Court for Judgment as a Matter of Law
or, in the alternative, for a New Trial. A hearing on
Defendant’s Motion was held on June 29, 1998. For the
reasons set forth below, the Court rejects each of Defendant’s
arguments in support of its motion, except for Defendant’s
claim that the jury’s award of damages on Plaintiff ’s civil rights
claim is excessive. Upon consideration of the evidence
presented at trial and the arguments presented by the parties in
connection with this issue, the Court is persuaded that
remittitur is warranted.

38a

I. STANDARD OF REVIEW

On a Fed. R. Civ. P. 50(b) motion for judgment as a matter
of law, the Court “‘examine[s] the evidence and the inferences
reasonably to be drawn therefrom in the light most favorable to
the nonmovant.”” Colasanio v. Life Insurance Co. of North
America, 100 F.3d 203, 208 (Ist Cir. 1996) (quoting
Wagenmann v. Adams, 829 F. 2d 196, 200 (Ist Cir. 1987)).
The Court will override a jury verdict only if the evidence “‘is
so one-sided that the movant is plainly entitled to judgment, for
reasonable minds could not differ as to the outcome.’” /d.
(quoting Gibson v. City of Cranston, 37 F.3d 731, 735 (ist
Cir. 1994)).

Pursuant to Fed. R. Civ. P. 59(a), the Court may order a
new trial and set aside a verdict “when the verdict is against the
clear weight of the evidence, or is based upon evidence which
is false, or will result in a clear miscarriage of justice.’”” Ahern
v. Scholz, 85 F.3d 774, 780 (1st Cir. 1996) (citations omitted).
““[ T]he district court has broad legal authority to determine
whether or not a jury’s verdict is against the “clear weight of
the evidence.””” Jd. (quoting de Perez v. Hospital del
Maestro, 910 F.2d 1004, 1006 (1st Cir. 1990)). The district
court, however, “‘cannot displace a jury’s verdict merely
because he disagrees with it or would have found otherwise in
a bench trial.’” /d. (quoting Milone v. Moceri Family, Inc.,
847 F.2d 35, 37 (1st Cir. 1988)).

Il. DISCUSSION

Defendant asserts four arguments in favor of its Motion for
Judgment as a Matter of Law or, in the alternative, for a New
Trial. The Court addresses each in turn.

39a

A. An Independent Contractor May Not Bring a Hostile
Work Environment Claim Pursuant to 42 U.S.C.
§ 1981.

Defendant reiterates its argument, raised during the course
of trial, that Plaintiff, as an independent contractor, is precluded
from claiming that Defendant violated 42 U.S.C. § 198]
(“§ 1981”) by creating a hostile work environment. Defendant
contends that the hostile work environment theory was crafted
under Title VII as a method of proving racial discrimination,
and is limited in its application to the employer/employee
relationship.

The parties have not cited, and the Court’s research does not
disclose, any authority directly addressing this issue. In Wright
v. State Farm Mutual Automobile Insurance Co., 911 F. Supp.
1364, 1376 (D. Kan. 1995), aff'd, 94 F.3d 657 (10th Cir.
1996), the court reached the merits of an independent
contractor’s § 1981 claim for a hostile work environment. The
court, however, granted summary judgment in favor of the
defendant on the claim, without discussing whether such a
claim was allowable. Jd.

42 USC. § 1981 provides that “[a]ll persons . . . shall have
the same right . . . to make and enforce contracts . . . as is
enjoyed by white citizens... .” 42 U.S.C. § 1981(a). The
phrase “make and enforce contracts” is defined to include the
“making, performance, modification, and termination of
contracts, and the enjoyment of all benefits, privileges, terms,
and conditions of the contractual relationship.” 42 U.S.C.
§ 1981(b) (emphasis added). Unlike Title VII which on its face
concems discrimination in employment relationships, the plain
language of § 1981 indicates that the statute applies to “all
persons,” and courts have consistently applied § 1981 to
independent contractors. See e.g., Miller v. Advanced Studies,
Inc., 635 F. Supp. 1196, 1199 n.4 (plaintiff s claim under
§ 1981 is not affected by his status as an independent
contractor); Wright, 911 F. Supp. at 1376; see also Springer v.

40a

Seamen, 821 F.2d 871 (Ist Cir. 1987) (involving § 1981 suit
brought by black independent contract postal carrier against
Postal Service and other individuals). The Court remains
persuaded that Plaintiff may bring a hostile work environment
claim pursuant to § 1981, and denies Defendant’s motion as it
relates to this argument.

B. Plaintiff did not Adequately Plead a Hostile Work
Environment Claim

Defendant next argues that because Plaintiff failed to allege
that he was the victim of a hostile work environment in his
Complaint, he was not entitled to proceed upon this theory. As
with Defendant’s first argument, the Court discussed and
resolved this issue during the course of trial. The Court
remains satisfied that Plaintiff has met his burden of notice
pleading with respect to his civil rights claim. See DeNovellis
v. Shalala, 124 F.3d 298, 310 n.6 (1st Cir. 1997) (plaintiff need
not allege a hostile work environment in his complaint because
notice pleading only requires that a plaintiff “give the defendant
fair notice of what the plaintiff's claim is and the grounds upon
which it rests,” not the “precise legal theories upon which the
plaintiff bases his right to recovery”) (citations omitted). In his
Complaint, Plaintiff described Defendant’s conduct and alleged
a violation of Plaintiff's civil rights pursuant to § 1981.
Plaintiff then articulated a hostile work environment theory
before the Court in response to Defendant’s Motion for
Summary Judgment. See id. (hostile work environment
satisfactorily presented to court where plaintiff failed to allege
nostile work environment theory in complaint, but raised theory
in reply brief to defendant’s motion for summary judgment).
The Court finds that Defendant had sufficient notice of
Plaintiff s hostile work environment argument and, accordingly,
denies Defendant’s motion insofar as it alleges that Plaintiff
failed to adequately plead this claim.

4la

S. Evidence was Legally Insufficient to Support -the
Hostile Work Environment Verdict

Defendant’s third argument is that the evidence introduced
at trial was insufficient to support the jury’s verdict in favor of
Plaintiff on his hostile work environment claim. Whether
Defendant’s conduct was sufficiently pervasive to create a
hostile or offensive work environment depends on the “gravity
as well as the frequency of the offensive conduct.” DeNovellis,
124 F.3d at 311 (analyzing Title VII hostile work environment
claim). The Court is satisfied that based upon the evidence
introduced at trial, including evidence that the racial graffiti
allegedly remained on the parking lot for a period of several
months, the jury’s verdict was not against the weight of the
evidence, nor would a reasonable factfinder be compelled to
reach a different conclusion. Therefore, the Court denies
Defendant’s Motion for Judgment as a Matter of Law or, in the
alternative, for a New Trial as it relates to Defendant’s
argument that the evidence was insufficient to support the
jury’s verdict.

D. Jury’s Award of $650,000 is Inconsistent and
Excessive

Defendant’s fourth argument is that the jury’s award of
$650,000 to Plaintiff for violation of his civil rights is
inconsistent with the remainder of the verdict and excessive.
Defendant contends that the wording of Question #6 on the
Special Verdict Form, requesting the jury’s determination of
damages on two of Plaintiffs breach of contract claims, resulted
in an inconsistent verdict. Specifically, Defendant draws the
Court’s attention to the following language in Question #6:

Subtract from this amount any portion of the damages you
may have awarded in question #2 [civil rights damages] that
is attributable to the violation of Plaintiff s civil rights as it
relates to breach of contract. Do not subtract any daniages

42a

you may have awarded in question #2 for pain, suffering,
mental anguish, and other non-pecuniary damages, if any.

Because the jury awarded $4,440 in response to this question,
Defendant contends that the $4,440 award is inconsistent with
the $650,000 award on Plaintiff's hostile work environment
claim which also included non-pecuniary damages. The Court
is not persuaded by Defendant’s interpretation of the jury’s
answers, and further rejects Defendant’s argument that the
$650,000 award could not have included any damages for
emotional distress because the jury awarded no damages on
Plaintiff's claim for negligent infliction of emotional distress.
The Jury Instructions stated that any damages awarded for
negligent infliction of emotional distress were to be “separate
from and awarded in addition to, any award of mental anguish,
pain or suffering.” Jury Instructions at 16.

Moreover, Defendant failed to object to the wording of
Question #6. By failing to object before the jury was
dismissed, Defendant waived any claim of inconsistency unless
“the alleged error seriously affected the fairness or integrity of
the trial.” Moore v. Murphy, 47 F.3d 8, 11 (1st Cir. 1995)
(plain error doctrine reserved for use “in only the most
egregious circumstances”); see also Wilson v. Maritime
Overseas Corp., No. 97-1804, 1998 WL 374902, at *4 (lst
Cir. July 10, 1998) (“[i]t is an ironclad rule in this circuit that
failure to renew objections after the charge constitutes waiver
of any claim of error.”) (citations omitted). The Court is
satisfied that any error in the wording of Question #6 does not
rise to the level of plain error, and denies Defenuant’s motion
insofar as it alleges that the jury’s award of damages on
Plaintiff's civil nights claim is iriconsistent with the remainder of
the verdict.

Defendant also argues that it should be entitled to a new trial
because the jury’s award of damages on Plaintiff's hostile work
environment claim is excessive. While Defendant’s initial
Motion for Judgment as a Matter of Law and/or a New Tnial

43a

did not contain a motion for remittitur, on July 2, 1998,
Defendant filed a Supplementary Memorandum of Law in
Support of its Motion for New Trial or for Remittitur. Plaintiff
responded to this Supplementary Memorandum on or about
July 27, 1998.

Under the federal standard, “a damage determination will
withstand scrutiny unless it is ‘grossly excessive, inordinate,
shocking to the conscience of the court, or so high that it
would be a denial of justice to permit it to stand.’” Blinzler v.
Marriott Int’l, Inc., 81 F.3d 1148, 1161 (ist Cir. 1996)
(quoting Correa v. Hospital San Francisco, 69 F.3d 1184,
1197 (1st Cir. 1995)). The Court may grant a remittitur or a
new trial when the award exceeds “any rational appraisal or
estimate of the damages that could be based upon the evidence
before it.” | Eastern Mount. Platform Tennis, Inc. vy.
Sherwin-Williams Co., 40 F.3d 492, 502 (ist Cir. 1994)
(quoting Kolb v. Goldring, Inc., 694 F.2d 869, 872 (1st Cir.
1982)). In calculating a remittitur, the First Circuit applies the
“least intrusive” standard. Conjugal Partnership v. Conjugal
Partnership, 22 F.3d 391, 398 (1st Cir. 1994). “Under this
standard, the remittitur amount should reduce the verdict ‘only
to the maximum that would be upheld by the trial court as not
excessive.” Jd. (quoting Earl v. Bouchard Transp. Co., 917
F.2d 1320, 1328 (2d Cir. 1990)).

While the Court is extremely reluctant to disturb the jury’s
damages award, in light of all the evidence introduced at trial,
the Court concludes that the compensatory damages awarded
by the jury for violation of Plaintiff's civil rights are so
excessive as to warrant a remittitur. Although the evidence at
trial supported the jury’s finding that Plaintiff was treated
improperly and unlawfully, the Court is persuaded that the jury
could not reasonably have awarded Plaintiff more than
$300,000 on his hostile work environment claim given the
evidence of compensatory damages presented bv Plaintiff and
the fact that Plaintiff's punitive damages claim was dismissed

44a

during the course of trial. If Plaintiff accepts this reduced
award, leaving him a total damages award of $304,440, the
Court will deny Defendant’s motion for a new trial.’

II. CONCLUSION

Defendant’s Motion for Judgment as a Matter of Law or, in
the alternative, for a New Trial is DENIED, except as to
Defendant’s claim that the jury’s award of damages on
Plaintiff's civil rights claim is excessive. Plaintiff shall have 30
days from the date of this Opinion in which to decid

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_0020%3A1. Public record. Not legal advice.