# Petition for Writ of Certiorari — Escobedo v. Conoco, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_1157%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 2000 - **Citation:** 531 U.S. 874 ## Text No, 299 55° vu 7200 eee CER In THE Supreme Court of the Hnited States OcTOBER TERM, 1999 MANUEL EscoBepo, Martua I. EscoBepo, Gary Ivory, ANTHONY PICKETT, and MICHAEL Ross, Petitioners, V. Conoco, INC., Respondent. On Petition for Writ of Certiorari to the United States Court of Appeals for the Fifth Circuit PETITION FOR WRIT OF CERTIORARI Hat K. GILLESPIE Counsel of Record GILLESPIE, RozEN & Warsky, P.C. 3402 Oak Grove Avenue, Suite 200 Dallas, Texas 75204 (214) 720-2009 Phone (214) 720-2291 Fax GILBERT ARRAZOLO AGUILAR LAW OFFICES, P.C. 700 Lomas Blvd., NE, Suite 201 Albuquerque, New Mexico 87102 (505) 242-6677 Phone (505) 242-6655 Fax Attorneys for Petitioners St. Louis Law Printing, Inc. 14239 Manchester Rd. Manchester,MO 63011 314-231-4477 \2G0 P¥ QUESTIONS PRESENTED 1. Whether disclaimer language, as a matter of national public policy, can insulate a franchisor who operates a nationwide system of stores that are places of public accommodation from liability under 42 U.S.C. §§ 1981 and 2000a for racial discrimination against customers at its franchise stores, when the franchise agreement and federal law give the franchisor the right to control the franchise store and when the franchisor has commu- nicated this right and ability to the public. 2. Whether the Fifth Circuit erred in affirming sum- mary judgment against Petitioners by holding that disclaimer language in a franchise agreement shields franchisors as a matter of law from claims under 42 U.S.C. §§ 1981 and 2000a of race discrimination by franchisees when the Fifth Circuit failed to consider the evidence as a whole, assumed evidence not in the record, failed to draw all reasonable inferences from the evi- dence in Petitioners’ favor, and misconstrued Petition- ers’ burden at the summary judgment stage. pe, oe LIST OF PARTIES AND RULE 29.6 LIST The parties before the Court of Appeals included Denise Arguello, Alberto Govea, and the parties listed in the caption. Mrs. Arguello and Mr. Govea are not seeking certiorari and are therefore not listed as Peti- tioners. To Petitioners’ knowledge, Conoco, Inc. has no parent companies or non-wholly owned subsidiaries. — ili— TABLE OF CONTENTS Page QUESTIONS PRESENTED............ eee i LIST OF PARTIES AND RULE 29.6 LIST....... il TABLE OF AUTHORITIES ......... eee Vv SOR URE MNES CEA WE sicessessvsorssstcrcsscascescenbacnannssons 1 a is Siti sl cdissichvbpnnsad asso daceenbieann 1 pe putas - 2 bi, A'S 3 SRR ean 1 STATEMENT OF THE CASE .............00. eee 6 A. Nature of the Case and Proceedings NNN dit iieasddaubcetacldidihGiiexasediickeais cxatenins 6 B. Factual Backg@rouna ...............ccccc0scs0000 7 1. Racial Discrimination Against UNNI icsdcccncacacencshacceecovesnacgreess 7 2. Conoco’s Petroleum Marketer Agreements (PMAs) ....................4. 8 Be OND FRGROS BEGIN 6.00: scsncicssscsssecsseces 11 REASONS FOR GRANTING THE WRIT ......... 12 A. Conflict With This Court’s De- I fisted eee nlasasdciketenaae naka aati “se 13 1. Summary Judgment Stan- Ba fcdidshdicnigatins fcogeun traci eaciackcetee 13 2. Fifth Circuit’s Misapplication of Summary Judgment Standard ..... 15 B. Important Federal Question Not Yet sia pia CRI BAS Tt CNG ai cisicsciitessicccerecsss C. Conflict Among Courts. .................0...00 1. Whether Genuine Issue of Mate- I uaa 2. Question of Fact or Law................ CONCLUSION CORSE EHH EEE HEHEHE HEHEHE EEEEEETETEEEEEEEEED 21 25 25 27 30 TABLE OF AUTHORITIES Page(s) Cases Adickes v. S.H. Kress & Co., 398 U.S. 144 CNT iictcinvecsidcadsinncessacdbaciceibi tase 14 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 PINES is ccicandnancadacecaisacameentedabiinskcaeiaaeenied 12, 13, 14 Arguello v. Conoco, Inc., 207 F.3d 803 (5th CP, ee akin) ida cs ceceaiecns ieee 19, 20, 28, 29 Board of Trade of City of Chicago v.. Hammond Elevator Co., 198 U.S. 424 (1905) ............... 19 Bradbury v. Phillips Petroleum Co., 815 F.2d Se CAE AE: BED iia chcctisti iets 28 Burlington Indus., Inc. v. Ellerth, USS. sy RE EAs EE CRIED Ai cecerindisatcdctionchics 21 Cabrera v. Jakabovitz, 24 F.3d 372 (2nd Cir. SGP ivicosessispndiniccnddsubianca ds coieen 28 Chemtool, Inc. v. Lubrication Technologies, Inc., 148 F.3d 742 (7th Cir. 1998)............... 27 Chevron Oil Co. v. Sutton, 515 P.2d 1283 (N.M. WRT iideniitiland ca i acddeet ean 25-27 Drexel v. Union Prescription Centers, Inc., §82 F.2d 781 (3rd Cir. 1978) ..:.....5.....0000 25-27, 29 Equilease Corp. v. M/V Sampson, 756 F.2d Bre CU GE, BOE vecitittticidcnns 28 Gen. Bldg. Contractors Ass’n., Inc. v. Penn- sylvania, 458 U.S. 375 (1982) ............... 21 ee eee Jones v. Alfred H. Mayer Co., 392 U.S. 409 CRE chcctetscaccsecsicdctesomiekaaadve alec maine 22 Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) ............... 12 Meritor Sav. Bank, FSB v. Vinson, 477 U.S. 57 CRE icncnsetscctnticcictetenseiriesnule ens 21 Metco Prods., Inc., Div. of Case Mfg. Co. uv. NLRB, 884 F.2d 156 (4th Cir. 1989)........... 28 Neffv. American Dairy Queen Corp., 58 F.3d 1063 (5th Cir. 1995), cert. denied, GIG 03.0. BOGE Ce ccuckchiccteteeens 18, 29 Northern v.-McGraw-Edison Co., 542 F.2d BERS COU Gat. Be OP vctnisccasncrenasbieatiepiacaniaie 28 Reeves v. Sanderson Plumbing Products, Inc., 2000 WL 743663 (June 12, MOE i xitesissemetoninaanenn session 12, 14-15, 20 Sun Bank, N.A. v. E.F. Hutton & Co., Inc., 926 F.2d 1030 (11th Cir. 1991) 0.0.0... 28 United States v. Glass Menagerie, Inc., 702 F. Supp. LOD (DD. Tig. TG wisscecvcsncvscssevnsencens 23 Ward v. Mgmt. Analysis Co. Employee Disability Benefit Plan, 135 F.3d 1276 (9th Cir. 1998), affd in part, rev’d in part on other grounds, 526 U.S. 358 (1999) ............ 27 Wood v. Holiday Inns, Inc., 508 F.2d 167 (Pewunme BGR CAG, BG? cnencecestastiboccsmesetaccseus 28 : ; 5 x E ia i c & ; : — vVil— Statutes 1S UBC. § FOOL, C6 OG, «.06cccecsverssccecsasses 1, 8, 10, 15, 16 Be ee aa iteiccisnhsceaiernahfoutnicinceigdatininiiabdaiiovi 4,17 ree ED ikttntitncetiesbissesanitnsvaincssions 1 Be eae We I ahd dackcsncaieeiital dts iocepdindensenihe 7 Fe Ss Ob BN isaticivintintsaictlasivcdinassustiniabedinniens 7 eae ED dovhinshaindedonavinsdchesvianes i, 1, 2, 6, 7, 17, 23 Oe ee A I bivchnienrsicnassccctnaninnans i, 1,2, 6, 7, 17,23 Rules Ps es a rs Sdaidebtcebeipuciatdnibarisinrvansinadanns 12, 15, 21 ie A Bes PO sistas iaskaaninesiiantiaberpncnince 13 I ccs ctn tances sitedincintannepsenepiciaosanee 13 PETITION FOR WRIT OF CERTIORARI Petitioners respectfully submit this petition for writ of certiorari to review the opinion and order of the United States Court of Appeals for the Fifth Circuit, rendered in these proceedings on April 10, 2000. OPINIONS BELOW The opinion of the United States Court of Appeals for the Fifth Circuit is published at 207 F.3d 803. The opinion of the United States District Court is unpub- lished but available through Westlaw at 1998 WL 713277. Copies of both opinions are contained in the Appendix attached hereto. JURISDICTION This Court’s jurisdiction is invoked under 28 U.S.C. § 1254(1) to review a decision of the United States Court of Appeals for the Fifth Circuit by writ of certiorari after rendering judgment. The decision for which review is sought was entered on April 10, 2000. Pursuant to this Court’s Rule 13.1, this petition for writ of certiorari is timely because it is being filed within ninety days after entry of the judgment. STATUTES INVOLVED The case involves claims of racial discrimination under 42 U.S.C. §§ 1981 and 2000a. Petitioners are former customers at Conoco-branded stores, which are owned and operated according to Petroleum Marketer Agreements (“PMAs”) between Conoco and its market- ers. The relationship between Conoco and its branded marketers is governed by the Petroleum Marketing Practices Act (“PMPA”), 15 U.S.C. § 2801, et seq. Rel- evant portions of 42 U.S.C. §§ 1981 and 2000a and relevant portions of the PMPA are set forth below: ja Ses 42 U.S.C. § 1981. Equal rights under the law (a) (b) (c) Statement of equal rights All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other. “Make and enforce contracts” defined For purposes of this section, the term “make and enforce contracts” includes the making, perfor- mance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms and conditions of the contractual relationship. Protection against impairment The rights protected by this section are protected against impairment by nongovernmental discrimi- nation and impairment under color of State law. 42 U.S.C. § 2000a (a) Equal access All persons shall be entitled to the full and equal enjoyment of the goods, services, facilities, privi- leges, advantages, and accommodations of any place of public accommodation, as defined in this section, without discrimination or segregation on the ground of race, color, religion, or national origin. et a (b) Establishments affecting interstate commerce or supported in their activities by State ac- tion as places of public accommodation; lodg- ings, facilities principally engaged in selling food for consumption on the premises; gaso- line stations; places of exhibition or enter- tainment; other covered establishments. bith abit etn rsa nari sere Each of the following establishments which serves the public is a place of public accommodation within the meaning of this subchapter if its operations affect commerce, or if discrimination or segregation by it is supported by State action: (1) any inn, hotel, motel, or other establish- ment which provides lodging to transient guests, other than an establishment located within a building which contains not more than five rooms for rent or hire and which is actually occupied by the proprietor of such establishment as his residence; (2) any restaurant, cafeteria, lunchroom, lunch ) counter, soda fountain, or other facility princi- pally engaged in selling food for consumption on the premises, including, but not limited to, any such facility located on the premises of any retail establishment; or any gasoline station; (3) any motion picture house, theater, concert hall, sports arena, stadium or other place of exhibition or entertainment; and (4) any establishment (A)(i) which is physically located within the premises of any establish- ment otherwise covered by this subsection, or (ii) within the premises of which is physically located any such covered establishment, and A ¥ é z x i] z 3 $ A ‘ § 4 n Z 4 : “4 : 4 : % 2 5 2 A 2 a = (B) which holds itself out as serving patrons of such covered establishment. (c) Operations affecting commerce; criteria; “commerce” defined The operations of an establishment affect commerce within the meaning of this subchapter if (1) it is one of the establishments described in paragraph (1) of sub- section (b) of this section; (2) in the case of an establish- ment described in paragraph (2) of subsection (b) of this section, it serves or offers to serve interstate travelers or a substantial portion of the food which it serves, or gasoline or other products which it sells, has moved in commerce; (3) in the case of an establishment described in paragraph (3) of subsection (b) of this section, it customarily presents films, performances, athletic teams, exhibitions, or other sources of entertainment which move in commerce; and (4) in the case of an establishment described in paragraph (4) of subsection (b) of this section, it is physically located within the premises of, or there is physically located within its premises, an establishment the operations of which affect commerce within the meaning of this sub- section. For purposes of this section, “commerce” means travel, trade, traffic, commerce, transportation, or communication among the several States, or between the District of Columbia and any State, or between any foreign country or any territory or possession and any State or the District of Columbia, or between points in the same State but through any other State or the District of Columbia or a foreign country. 15 U.S.C. § 2802 (a) General prohibition against termination or nonrenewal rr ith nn th pre mo em Pe ee led ep re RN Ed VEE GE AR per BH snk ee een Except as provided in subsection (b) of this section and section 2803 of this title, no franchisor engaged in the sale, consignment, or distribution of motor fuel in commerce may (1) terminate any franchise (entered into or renewed on or after June 19, 1978) prior to the conclusion of the term, or the expiration date, stated in the franchise; or (2) fail to renew any franchise relationship (without regard to the date on which the rel- evant franchise was entered into or renewed). (b) Precondition and grounds for termination or nonrenewal (1) Any franchisor may terminate any fran- chise (entered into or renewed on or after June 19, 1978) or may fail to renew a franchise relationship, if — (2) (A) the notification requirements of sec- tion 2804 of this title are met; and (B) such termination is based upon a ground described in paragraph (2) or such nonrenewal is based upon a ground described in paragraph (2) or (3). For purposes of this subsection, the follow- ing are grounds for termination of a franchise or nonrenewal of a franchise relationship: (A) A failure by the franchisee to comply with any provision in the franchise, which provision is both reasonable and of material significance to the franchise relationship. .. . (C) The occurrence of an event which is rel- evant to the franchise relationship and as a result of which termination of the franchise or nonrenewal of the franchise relationship is reasonable. ... (c) Definition As used in subsection (b)(2)(C) of this section, the term “an event which is relevant to the franchise relationship and as a result of which termination of the franchise or nonrenewal of the franchise rela- tionship is reasonable” includes events such as — (11) knowing failure of the franchisee to com- ply with Federal, State, or local laws or regula- tions relevant to the operation of the market- ing premises;.... STATEMENT OF THE CASE A. Nature of the Case and Proceedings Below This case involves allegations of racial discrimination under 42 U.S.C. §§ 1981 and 2000a. Petitioners are all former customers of Conoco-branded stores! and were subjected to racial discrimination while attempting to receive service at those stores. Petitioners filed their initial Complaint on March 24, 1997 asserting, among other things, causes of action under 42 U.S.C. §§ 1981 and 2000a. Petitioners filed ' The phrase “Conoco-branded stores” and/or “branded stores” refers to stores that are owned and operated by marketers pursu- ant to Petroleum Marketer Agreements (“PMAs”) between the marketers and Conoco, Inc. a pon various amendments to that Complaint. Petitioners filed a Fourth Amended Complaint on March 30, 1998, asserting claims under §§ 1981 and 2000a. On July 27, 1998, Conoco filed a Motion for Summary Judgment seeking dismissal of Petitioners’ claims. The district court granted Conoco’s motion and entered summary judgment against Petitioners in its Judgment and Memo- randum Opinion and Order on October 8, 1998. Petitioners appealed the district court’s Order to the : United States Court of Appeals for the Fifth Circuit, and following oral argument, a three-judge panel of the Fifth ; Circuit affirmed in part and reversed in part the judg- | ment of the district court.? The district court had jurisdiction over Petitioners’ claims under 28 U.S.C. §§ 1331 and 1343. B. Factual Background L Racial Discrimination Against Petition- ers i } a. The Escobedos 3 3 Petitioner Manuel Escobedo and his wife, Petitioner ; Martha I. Escobedo, are Hispanic. In November, 1996, : the Escobedos and other members of their family stopped at a Conoco-branded store in San Marcos, Texas. While they were there, the store clerk called Mrs. Escobedo a “mother-f***ing bitch,” told her to “get out of the store — we don’t want you here,” told Mr. Escobedo to “get the ? The Fifth Circuit reversed the district court’s judgment as to Denise Arguello’s and Alberto Govea’s claims against a Conoco- owned store and affirmed the judgment on Petitioners’ claims involving Conoco-branded stores. = [ae _ es hell out of his station,” and told him that “you Mexicans need to go back to Mexico.” At a Conoco-branded store in Grand Prairie, Texas, a store clerk told Mr. Escobedo that he had to pre-pay for gas because “you people steal gas.” At two Conoco-branded stores in Laredo, Texas, Mr. Escobedo has consistently been asked to pre-pay for gas when white customers have not been asked to pre-pay. b. Ivory, Pickett, and Ross Petitioners Ivory, Pickett, and Ross are African-Ameri- can. In September, 1995, at a Conoco-branded store in Fort Worth, Texas, a store clerk treated them as though they were suspected of theft, told them “we don’t have to serve you people” and “you people always act like this,” and refused them service until they called the police and the police ordered the clerk to allow them to make a purchase. 2. Conoco’s Petroleum Marketer Agreements (“PMAs”) with Branded Stores Conoco has a system of both Conoco-owned stores and Conoco-branded stores which are op- erated pursuant to Petroleum Marketer Agree- ments (“PMAs”). The Petroleum Marketing Prac- tices Act (“PMPA”), 15 U.S.C. § 2801, et seq., governs these PMAs and the relationship between Conoco and its marketers. The majority of stores within the Conoco system are branded stores. In Texas alone, there are 697 Conoco-branded stores, compared to only 25 Conoco-owned stores. Conoco had a PMA with marketers who owned and operated the stores where the incidents involving the iia Escobedos, Ivory, Pickett, and Ross occurred. Although ‘some provisions in the PMAs for each marketer differ, the PMAs between Conoco and the marketers of the branded stores involved in this case are remarkably similar.’ Relevant portions of these PMAs provide the following: e Each PMA requires the marketer to “conduct its independent business operations consistent with the standards” set forth in the PMAs in order to “promote the continuing good reputa- tion of Conoco and all other Conoco marketers.” e Each PMA requires the marketer to treat all customers “fairly, honestly, and courteously.” e Each PMA requires the marketer to “conduct its operation to provide efficient, courteous, and intelligent service to retail dealers and ; other customers” and to “permit such inspec- : tion of [its] business operations by-Conoco .. . as may reasonably be required to determine whether [the branded store] is in compliance” with the PMA. PRLS EAR ODL ENERO e Each PMA requires the marketer to satisfy several Conoco standards, including display- ing a Conoco capsule sign visible to the public and displaying and selling Conoco motor oils. 3 * Because the Fifth Circuit affirmed summary judgment against Petitioners because of the language in the PMAs, the Petitioners are including two PMAs in the Appendix. These PMAs are essen- tial to understand this petition. Portions of the 1993 and 1996 PMAs between Conoco and Classic Group, Inc. are included in the Appendix. i e Each PMA states that the branded store and grounds must be “clean, in good repair, and well maintained.” e Each PMA states that the branded store must be operated with personnel who are well- groomed and wear clean, appropriate apparel. If the Conoco marketer violates the PMA, and if particular provisions of the Petroleum Market- ing Practices Act (“PMPA”), 15 U.S.C. § 2801, et seq., are satisfied, Conoco can revoke its PMA with that marketer, which is commonly referred to as “debranding.” Debranding can occur for a variety of reasons, including volume-related failures, product adulteration, and failure to satisfy Conoco image requirements. In addition to debranding, Conoco may refuse to renew a PMA witha marketer for various reasons, including numerous valid customer complaints. In order to insure that a marketer satisfies its obliga- tions under the PMA, Conoco conducts an image evalu- ation program two times per year at Conoco-branded stores. The image evaluation program evaluates the branded stores’ compliance with several image require- ments, including brand requirements such as customer service, signage and colors, exterior and interior ap- pearance, and cleanliness. These image evaluations are conducted anonymously and without notice. A Conoco branded store can be debranded if it fails the image evaluation. The image evaluation program is a con- certed effort by Conoco to diminish the visible differ- ences between Conoco-owned and Conoco-branded stores. The image evaluations encompass every detail of the operation, from the use of Conoco uniforms to the use of the octane rating stickers placed on fuel pumps. sid ee ke: The end result is that consumers are unable to distin- guish between Conoco-owned and Conoco-branded stores. This increases Conoco’s profits by drawing cus- tomers to Conoco-branded stores, which in Texas out- number Conoco-owned stores 28 to 1. The PMAs specifically identify the requirement of a marketer to treat customers “fairly, honestly, and cour- teously” as an image requirement and as one of the standards to be complied with by each marketer. 3. The Nokes Memo On April 4, 1997, Jim Nokes (“N okes”), Conoco’s Vice President of Refining and Marketing for North America, sent an internal memorandum to Bill Gover (“Gover”), Conoco’s Manager for Branded Marketing, North America. This memo discussed “ethnic insults” and discrimination against customers at Conoco-owned and Conoco-branded stores.‘ In the memo, Nokes directed Gover to “take appropriate action against any employee or business associate . . . found to have mistreated a customer for any reason up to and including termina- tion of an employee and/or debranding of a store.” (Emphasis added). Nokes also stated that he “want[ed] it understood that Conoco does not tolerate [racial dis- crimination against customers] by employees at any of its branded stores.” (Emphasis added). Nokes told Gover that “/ajll customers who choose to do business with Conoco have a right to be treated courteously and fairly” and that he has “absolutely no tolerance for behavior outside those expectations.” (Emphasis added). Nokes * This memo is contained in the Appendix because Petitioners believe that this internal memo is necessary to understanding this Petition, especially since the Fifth Circuit completely ignored this evidence in affirming summary judgment against Petitioners. nak ee indicated that the course of action he suggested was “supported by all of Conoco’s senior management, in- cluding the CEO.” (Emphasis added). Conoco distrib- uted this memo to the media, thereby conveying the message to the public that Conoco would address and take responsibility for racial discrimination at both its Conoco-owned and Conoco-branded stores. REASONS FOR GRANTING THE WRIT This Petition should be granted for several compel- ling reasons. First, certiorari should be granted because the Fifth Circuit’s decision is in conflict with this Court’s decisions. Specifically, in reaching its decision, the Fifth Circuit misapplied the summary judgment standard that is set forth in Fen. R. Crv. P. 56 and explained in Matsushita Elec. Industrial Co. v. Zenith Radio Corp.., 475 U.S. 574, 585-86 (1986), Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-51(1986), and, most recently, in Reeves v. Sanderson Plumbing Products. Inc., 2000 WL 743663 (June 12, 2000).6 The Fifth Circuit failed to consider the evidence as a whole, ignored critical parts of the summary judgment evidence, assumed evidence not in the record, failed to draw all reasonable infer- ences from the evidence in Petitioners’ favor, and mis- construed Petitioners’ burden at the summary judg- ment stage. Second, certiorari should be granted be- cause this case involves an extremely important federal question that has not yet been decided by this Court; that is, whether, in the public accommodations context, a franchisor can avoid liability as a matter of law for racial discrimination against customers by its franchi- sees. Finally, certiorari should be granted because there is a split among the courts as to two issues: (1) whether 5 Reeves is to be reported at 120 S.Ct. 2097 once published. a Ee a genuine issue of material fact was created on the agency issue in these circumstances, and (2) whether the existence of an agency relationship is a question of fact or of law. A. Conflict With Prior This Court’s Decisions Certiorari should be granted because in reaching its decision on the agency issue between Conoco and its branded stores, the Fifth Circuit misapplied the sum- mary judgment standard set forth in Fen. R. Crv. P. 56 and explained in this Court’s cases construing the rule. 1 Summary Judgment Standard According to Feb. R. Civ. P. 56(c), summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, ifany, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” To survive Conoco’s motion for summary judgment, Petitioners had to establish a genuine issue of material fact as to the existence of an agency relationship between Conoco, Inc. and the branded stores involved in this case. See Feb. R. Civ. P. 56(e); Matsushita, 475 U.S. at 585-86. Summary judgment is not appropriate “if the dispute about a material fact is ‘genuine,’ that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Liberty Lobby. Inc., 477 U.S. at 248. The judge’s inquiry at the summary judgment stage is “the threshold inquiry of determining whether there is the need for a trial — whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Jd. at 250. The inquiry is essentially “whether the evidence foe, yee presents a sufficient disagreement to require submis- sion to ajury or whether it is so one-sided that one party must prevail as a matter of law.” Jd. at 251-52. In ruling on a motion for summary judgment, the court must consider all of the evidence. Matsushita, 475 U.S. at 587 (record must be reviewed “as a whole”). The court must also consider the non-movant’s evidence as true and must draw all reasonable inferences from the evidence in favor of the non-movant. See Liberty Lobby, Inc., 477 U.S. at 255, citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970). At the summary judgment stage, the judge is “not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Liberty Lobby, Inc., 477 U.S. at 249. In doing so, “the judge must ask himself not whether he thinks the evidence unmistakably favors one side or the other but whether a fair-minded jury could return a verdict for the plaintiff on the evidence presented.” Jd. at 252. “Credibility determinations, the weighing of evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, whether he is ruling on a motion for summary judgment or a directed verdict.” Jd. at 255. These standards were recently reaffirmed by this Court in Reeves v. Sanderson Plumbing Products, Inc., 2000 WL 743663 (June 12, 2000) (discussing standard in reviewing motion for judgment as a matter of law under Rule 50 and noting that the standard “mirrors” the summary judgment standard under Rule 56). In Reeves, this Court unanimously reversed the Fifth Cir- cuit, finding that the Fifth Circuit “misapplied the standard of review dictated by Rule 50.” 2000 WL 743663, *12. The Court noted that the Fifth Circuit iis was misapplied the standard by “disregard [ing] critical evi- dence favorable to petitioner,” by “fail{ing] to draw all reasonable inferences in favor of petitioner,” and by “impermissibly substitut[ing] its judgment concerning the weight of the evidence for the jury’s.” Jd. 2. Fifth Circuit’s Misapplication of Summary Judgment Standard Certiorari should be granted in this case because the Fifth Circuit has again misapplied the standards an- nounced by this Court, this time in the context of a motion for summary judgment under Rule 56. As in Reeves, the Fifth Circuit in this case disregarded critical evidence favorable to Petitioners, failed to draw all reasonable inferences in Petitioners’ favor, and imper- missibly substituted its judgment for the jury’s judg- ment on the weight of the evidence. Certiorari should be granted to address this flagrant disregard for the stan- dards previously announced by this Court and recently reaffirmed in Reeves. The evidence Petitioners presented on the issue of agency between Conoco, Inc. and its branded stores included (1) Conoco’s right to control the branded stores as set forth in the Petroleum Marketer Agreements (“PMAs”), (2) Conoco’s right to control the branded stores as set forth in the Petroleum Marketing Practices Act, 15 U.S.C. § 2801, et seq. (“PMPA”), and (3) Conoco’s right and ability to control the branded stores as set forth in the Nokes memo. The Fifth Circuit completely ignored the Nokes memo and the evidence showing Conoco’s rights under the Petroleum Marketing Prac- tices Act, 15 U.S.C. § 2801, et seg. (“PMPA”), both of which demonstrate Conoco’s right to control the branded stores and which therefore raise a genuine issue of material fact on the agency issue. a The Nokes memo provides powerful evidence of Conoco’s ability to control the branded stores and is therefore probative as to the agency issue. As previously discussed, in his memo, Jim Nokes® discussed the allegations of ethnic insults and racial discrimination at Conoco-owned and Conoco-branded stores, and in the memo, he directed Bill Gover’ to “take appropriate action against any employee or business associate .. . found to have mistreated a customer for any reason, up to and including termination of an employee and/or debranding of a store.” (Empha- sis added). Nokes stated that he “want[ed] it understood that Conoco does not tolerate [racial discrimination against customers] by employees at any of its branded stores.” (Emphasis added). Nokes further stated that “fajll customers who choose to do business with Conoco have a right to be treated courteously and fairly” and that he has “absolutely no tolerance for behavior outside those expectations.” (Emphasis added). Finally, Nokes stated that the course of action outlined in the memo was “supported by all of Conoco’s senior management, including the CEO.” (Emphasis added). In addition to the Nokes memo, the Fifth Circuit also completely ignored evidence of Conoco’s right to control the branded stores as set forth in the Petroleum Market- ing Practices Act, (““PMPA”), 15 U.S.C. § 2801, et seq. The PMPA gives Conoco the right to control the various 6 Again, Nokes was Conoco’s Vice President of Refining and Marketing for North America at the time. 7Gover was Conoco’s Manager for Branded Marketing, North America at the time. en ea aspects of the branded stores, which could lead a reason- able jury to conclude that an agency relationship exists between Conoco, Inc. and its branded stores. Under 15 U.S.C. § 2802(b)(2), Conoco may terminate and/or fail to renew a PMA for any failure by a branded store to comply with any provision of the PMA, if the provision is reasonable and of material significance to the fran- chise relationship. In this case, the branded stores violated the PMAs by failing to provide fair, honest, and courteous service to customers. This is of material significance to the franchise relationship, as failure to do so can dramatically affect the branded store’s busi- ness and Conoco’s overall reputation; thus, Conoco could exert control over the branded stores by terminat- ing or failing to renew the PMAs in question. Further, under § 2802(b)(2)(C), Conoco can terminate or fail to renew a PMA based upon “the occurrence of an event which is relevant to the franchise relationship and as a result of which termination . . . or nonrenewal .. . is reasonable,” including, but not limited to, a knowing failure of the branded store to comply with federal laws relevant to the operation of the branded store. See 15 U.S.C. § 2802(c)(11). Federal law under both 42 U.S.C. §§ 1981 and 2000a prohibits racial discrimination against customers. Such laws are relevant to the operation of the branded store, and Conoco could therefore exert control over the branded stores by terminating or failing to renew the PMAs in question. In this case, the critical issue affecting the agency question between Conoco, Inc. and its branded stores is whether Conoco had the right to control the branded stores. The Nokes memorandum is probative evidence on this point. It demonstrates the ability and intent to exercise such control from Conoco’s highest levels of management. Conoco’s rights under the PMPA also demonstrates Conoco’s right to control the branded stores. Both the Nokes memo and Conoco’s rights under the PMPA could lead a reasonable fact-finder to con- clude that Conoco had the right to control the branded stores. The Fifth Circuit completely ignored this evi- dence in considering the agency issue between Conoco and its branded stores and thus misapplied the sum- mary judgment standard in affirming summary judg- ment. See Reeves, 2000 WL 743663, *12. Closely akin to the Fifth Circuit’s misapplication of the standard of review by ignoring evidence in the form of the Nokes memo and Conoco’s rights under the PMPA, the Fifth Circuit supplied “evidence” that did not exist. Specifically, the Fifth Circuit opined: The facts of the present case are similar to the facts which form the basis of the claim in Neff v. Ameri- can Dairy Queen Corp., 58 F.3d 1063 (5th Cir. 1995). Arguello, 207 F.3d at 808. The Fifth Circuit then stated: “The only summary judgment evidence presented by Neff was the franchise agreement.” Id. In other words, the facts in Arguello were not similar to those in Neff, since Neff contained no equivalent of the Nokes memo, since the franchise agreements in Neff and this case have different control language, and since the plaintiff in Neff apparently did not raise any federal statute giving American Dairy Queen Corporation any right to control the franchise store in question. ae ie In addition to ignoring critical evidence and assuming evidence not in the record, the Fifth Circuit also failed to draw from the evidence all reasonable inferences in Petitioners’ favor and impermissibly weighed the evi- dence with respect to the PMAs.' First, the Fifth Circuit examined only portions of the PMAs and failed to draw all reasonable inferences from the PMAs in Petitioners’ favor. For example, the Fifth Circuit recognized that the PMAs allow Conoco to conduct regular inspections of branded stores; however, instead of drawing an infer- ence in Petitioners’ favor that such inspections evidence Conoco’s right to control the branded stores, the Fifth Circuit discussed the ‘normal focus’ of the inspections and surmised that “[c]ustomer service is not considered a main focus of the random inspections.” See Arguello, 207 F.3d at 807 n.6. Further, although the Fifth Circuit recognized that the PMAs contain ‘guidelines’ by Conoco, Inc. that the branded stores must follow, see Arguello, 207 F.3d at 808, the Court failed to recognize that a reasonable trier of fact could conclude from those ‘guide- lines’ that Conoco, Inc. had the right to control the branded stores and that a principal-agent rela- tionship existed between them. Second, using Neff, supra as precedent, where there was no evidence of agency besides the franchise agree- ment, the Fifth Circuit treated as dispositive the provi- sion in the PMAs that state that no agency relationship exists, even though this Court has previously held that the fact that an express disclaimer of agency exists between two parties “is not decisive of their relations so * Obviously, since the Fifth Circuit completely ignored the Nokes memo and the PMPA provisions, the Fifth Circuit failed to draw the reasonable inferences from such evidence in Petitioners’ favor. ini es far as third parties dealing with them upon the basis of their being agents are concerned.” Board of Trade of City of Chicago v. Hammond Elevator Co., 198 U.S. 424, 437 (1905). The Fifth Circuit’s decision that the dis- claimer language in the PMA outweighs all its other language is the same kind of misapplication of the standard of review denounced in Reeves where the Fifth Circuit had relied upon evidence that the age discrimi- nation claimants had been cited for poor recordkeeping and the defendant employer had employed many man- agers over the age of 50. This Court noted that this evidence, although relevant, “is certainly not disposi- tive.” Reeves, 2000 WL 743663 at *12. The Fifth Circuit also misconstrued Petitioners’ bur- den atthe summary judgment stage. Petitioners merely had to raise a genuine issue of material fact as to the agency issue. Instead, the Fifth Circuit implicitly held that Petitioners had to conclusively establish the exist- ence of an agency relationship between Conoco, Inc. and its branded stores. The Fifth Circuit stated: [tlhe language of the PMA, while offering guide- lines to the Conoco-branded stores, does not estab- lish that Conoco, Inc. has any participation in the daily operations of the branded stores nor that Conoco, Inc. participates in making personnel deci- sions. Therefore, we find that there is no agency relation- ship between Conoco, Inc. and the branded stores in question... Arguello, 207 F.3d at 808 (emphasis added). As is evident from this statement, the Fifth Circuit misconstrued Petitioners’ burden at the sum- mary judgment stage. By “finding” no agency relationship because the PMAs purportedly do not “es- tablish” Conoco’s participation in certain matters, the Fifth Circuit apparently affirmed summary judgment against Petitioners because they did not conclusively prove their case on the agency issue. Contrary to that misconception, Petitioners merely had to present suffi- cient evidence which would allow a reasonable fact- finder to find that an agency relationship existed. Cer- tiorari should be granted because the Fifth Circuit misapplied the summary judgment standard set forth in Fep. R. Civ. P. 56 and explained in Matsushita, Liberty Lobby, Inc., and Reeves. B. Important Federal Question Not Yet Settled by this Court Certiorari should also be granted because this case involves an important federal question that has not yet been settled by this Court. In prior cases, this Court has indicated that vicarious liability in the civil rights and discrimination context should be determined according to general agency rules. See, e.g., Burlington Indus., Inc. v. Ellerth, ___ U.S.__, 118 S.Ct. 2257, 2265 (1998) (Title VII); Meritor Sav. Bank, FSB v. Vinson, 477 U.S. 57, 72 (1986) (same); Gen. Bldg. Contractors Ass’n, Inc. v. Pennsylvania, 458 U.S. 375, 392 (1982) (§ 1981). However, this Court has not yet issued any opinions as to how these general agency rules should be applied either in the public accommodations context and/or in the context of a franchisor/franchisee relationship. If certiorari is granted here, the Court will determine the appropriate standards governing vicarious liability of a franchisor for discrimination by its franchisees in places of public accommodations. This Court should — A grant certiorari and address this issue because of the critical importance this question has upon the future of civil rights in public accommodations in America. This is a nation of franchise stores. Due to the overwhelming number of franchise operations throughout America,’ the practical effect of a refusal to grant certiorari will be that for many, if not most, consumer transactions in places of public accommodation, customers will have essentially no protection against racial discrimination, for companies can insulate themselves from liability for such discrimination simply by serving the public through a system of franchise stores. If certiorari is denied, discrimination-free public accommodations envisioned by Congress will be more difficult, but franchisor com- panies will have the best of both worlds: like Conoco, they can enforce standards (to their economic benefit) so the public will not know the difference between a Conoco- owned and a Conoco-branded store; they can put out announcements to the public about how Conoco will not tolerate discrimination at any of its businesses, includ- ing franchise operations; yet they will rest beyond the reach of the law when discrimination is practiced at their franchise store. Civil rights laws were originally introduced in order to “give effect to [the declaration that all persons in the United States should be free] and [to] secure to all persons within the United States practical freedom.” Jones v. Alfred H. Mayer Co., 392 U.S. 409, 431-32 (1968) (quoting Cong. Globe, 39th Cong. 1st Sess., 1115- * Even considering only Conoco’s stores in Texas, the disparity in number between the Conoco-owned stores and the Conoco- branded stores is staggering. In Texas alone, there are approxi- mately 697 Conoco-branded stores and only 25 Conoco-owned stores, a ratio of approximately 28 to 1. i. 1124 and 1151-1155, statement by Senator Trumbull). Senator Trumbull, who introduced the Civil Rights Act of 1866 (upon with § 1981 is based), explained that “(t]here is very little importance in the general declara- tion of abstract truth and principle [that all persons be free] unless the persons who are to be affected . . . have some means of availing themselves of their benefits.” Jd. Congress intended public accommodations laws to be sweeping in scope, as Title II applies to “any place of public accommodation,” which includes, in part, any gasoline station whose operations affect commerce. 42 U.S.C. § 2000a(b)(2). Even if the business was a small “mom-and-pop” operation, it would fall within Con- gress’ proscription against racial discrimination against customers under Title II. The breadth of Congress’ protections under Title II is even more evident when compared to the protections under Title VII, which was also enacted as part of the Civil Rights Act of 1964. Under Title VII, Congress specifically excepted the small “mom-and-pop” type operations. See 42 U.S.C. §2000e(b) (as originally enacted, employer had to have at least 25 employees before being subject to Title VII). Contrary to the intended breadth of public accommoda- tions laws, a refusal to grant certiorari will essentially turn Title II on its head, for large companies will be able to avoid liability simply by operating through a fran- chise system, while small “mom-and-pop” type opera- tions will still be subject to liability. Both §§ 1981 and 2000a should be interpreted to give practical effect to the right to be free from racial dis- crimination in places of public accommodations. Given the reality of business operations in America today, if the Fifth Circuit’s decision is allowed to stand, there will be no real protections in the public accommodations context, and indeed, “the fundamental precept on which — our country is based — ‘that all men are created equal” — [will be] a sham.” See United States v. Glass Menag- erie, Inc., 702 F. Supp. 139, 142 (E.D. Ky. 1988). If certiorari is refused, the guarantee of equal treat- ment in public accommodations will be simply an illu- sion and an empty promise for many consumers, as Conoco and its branded stores (not to mention all other oil companies and their franchisees, or for that matter, all other large corporations who operate a nationwide franchise system) will simply avoid liability by doing what they do already — serving the public through low- level employees at branded stores, and then arguing that the acts of the employees at those stores do not bind the company. Perhaps because of the apparently sweep- ing scope of public accommodations laws, or perhaps just for publicity, the Nokes memo shows that Conoco chose to tell the world, through the media, that all of Conoco’s senior management, including the CEO, in- tended to take appropriate action against any employee or business associate found to have mistreated a cus- tomer and that Conoco does not tolerate racial discrimi- nation against customers by employees at any of its branded stores. Unless certiorari is granted, the Fifth Circuit puts Conoco and other employers on notice that it can save the speeches and disregard racial discrimi- nation at franchise stores, or, more cynically, it can put out such statements to the press, to further fool the public, but that the statements mean nothing. This Court should grant certiorari so that the Court can more fully examine the Fifth Circuit’s decision and its devas- _— ee tating impact on the future of civil rights laws in public accommodations in America.’ - C. Conflict Among Courts Finally, certiorari should also be granted because there is a split in the courts as to two issues: (1) whether a genuine issue of material fact was shown as to the agency issue in these circumstances, and (2) whether the agency issue is a question of fact or of law. lL Whether Genuine Issue of Material Fact Shown There is a split between the Fifth Circuit, the Third Circuit, and the New Mexico Supreme Court as to whether a genuine issue of material fact on the agency issue was created based upon the evidence presented in this case. In this case, the Fifth Circuit concluded that there was no genuine issue of material fact as to the existence of an agency relationship between Conoco, Inc. and its branded stores. The Fifth Circuit’s decision is in conflict with the Third Circuit’s decision in Drexel v. Union Prescription Centers, Inc., 582 F.2d 781 (3rd Cir. 1978) and with the New Mexico Supreme Court’s decision in Chevron Oil Co. v. Sutton, 515 P.2d 1283 (N.M. 1973). The Fifth Circuit’s decision implicates other issues, although they are not at issue in this particular case. For example, the Fifth Circuit’s decision may affect franchisors’ vicarious liability in the Title VII context or in the public accommodations context of the Americans with Disabilities Act. This Court should grant certio- rari because of the important federal question involved in this particular case as well as these other important federal questions implicated by the Fifth Circuit’s decision. — ee In Drexel, a widow brought a wrongful death action against the Union Prescription Centers, Inc. arising from the death of her husband after he received and consumed an incorrect prescription medication from one of UPC’s franchisees. The district court granted summary judgment against the widow, and the widow appealed. The Third Circuit reversed, stating that “it cannot be determined as a matter of law on the present record that UPC did not have the right to control the manner of [the franchisee’s] performance or that UPC was not the ‘master’ of [the franchisee].” Drexel, 582 F.2d at 788. The Third Circuit explained: When a franchisee is required . . . to perpetuate ‘quality standards, - . . to maintain the premises and equipment in an ‘attractive condition,’ to en- sure a ‘high degree of cleanliness’ and a ‘neat, orderly arrangement’ of merchandise, to conform all equipment and facilities to [franchisor’s] ‘na- tional standards, to adhere strictly to [franchisor’s] ‘uniformly high standards of service, appearance, quality of equipment and proved methods of opera- tion,’ and to conduct his business in a manner that will reflect favorably at all times upon [franchisor],’ and when the franchisor has the ‘unqualified right’ to review the store’s operations and to inspect the store ‘to assure maintenance of [franchisor’s] high standards ... , the goodwill of the public, and compliance with the provisions of [the agreement] ... as Well as the right to terminate the relationship for breach of any provision of the [agreement], we believe that reasonable minds could differ as to whether or not [franchisor] had the right to control [franchisee’s] physical conduct and the manner in a Se which he operated the store, including the prescrip- tion-filling activity. Drexel, 582 F.2d at 789 (emphasis added). In Chevron Oil Co. v. Sutton, 515 P.2d 1283 (N.M. 1973), a widower brought a wrongful death action against Chevron and its lessee for his wife’s death that resulted from a negligent vehicle repair at the lessee’s station. The trial court had granted summary judgment against the widower, and the appeals court reversed. In consid- ering whether summary judgment was appropriate on the agency issue, the New Mexico Supreme Court held that summary judgment was not appropriate, stating that a “substantial dispute as to a material fact” existed, thereby foreclosing summary judgment. Jd. at 1286. The court based its decision, in part, on the fact that the lessee was required to keep the facilities in a “clean and orderly condition,” and to “present a ‘good appearance” and on the fact that lessee “sold Chevron products and dispensed gasoline and oil provided by Chevron,” “re- ceived the benefit of Chevron advertising,” and its employees wore “work uniforms containing the Chev- ron emblem.” /d. The facts in this case are strikingly similar to the facts presented in both Drexel and Sutton, yet the Fifth Circuit reached the opposite conclusion. Certiorari should be granted to address the split between the courts on this issue. 2. Question of Fact or Law Certiorari should also be granted because there is a split among the circuits as to whether the agency issue is a question of fact or of law. ae, a The overwhelming majority of the courts of appeals have indicated that the question of agency is a fact issue to be submitted to the jury. See, e.g., Chemtool, Inc. v. Lubrication Technologies, Inc., 148 F.3d 742, 745 (7th Cir. 1998) (“the existence and scope of an agency rela- tionship are questions of fact, to be decided by the trier of fact”); Ward v. Mgmt. Analysis Co. Employee Disabil- ity Benefit Plan, 135 F.3d 1276, 1283 (9th Cir. 1998); affd in part, rev'd in part on other grounds, 526 U.S. 358 (1999) (“existence of an agency relationship generally presents a question of fact”); Cabrera v. Jakabovitz, 24 F.3d 372, 386 (2nd Cir. 1994) (question of agency should be submitted to jury unless facts are insufficient to support a finding or there is no dispute as to historical facts); Sun Bank, N.A. v. E.F Hutton & Co., Inc., 926 F.2d 1030, 1036 (11th Cir. 1991) (“existence of an agency relationship is an issue of fact”); Metco Prods., Inc., Div. of Case Mfg. Co. v. NLRB, 884 F.2d 156, 159 (4th Cir. 1989) (“generally, existence and scope of an agency relationship are factual matters”); Bradbury v. Phillips Petroleum Co., 815 F.2d 1356, 1361 (10th Cir. 1987) (“relationship of principal and agent is ordinarily a question of fact”); Northern v. McGraw-Edison Co., 542 F.2d 1336, 1343 (8th Cir. 1976) (to determine if agency exists, surrounding facts and circumstances should be considered, and “the ultimate resolution is appropri- ately left to the jury in most instances”). Indeed, even the Fifth Circuit has indicated in deci- sions prior to this case that the question of agency is a fact issue that should be submitted to the jury. See, e.g., Equilease Corp. v. M/V Sampson, 756 F.2d 357, 363 (5th Cir. 1985) (“the existence of any agency relation- ship is a question of fact”); Wood v. Holiday Inns, Inc., tc ain 508 F.2d 167, 173 (Former 5th Cir. 1978) (the existence and scope of a principal-agent relationship is generally for the jury to determine). In contrast to those cases, however, the Fifth Circuit in this case decided the agency issue as a matter of law, refusing to submit the question of agency to the jury." See Arguello, 207 F.3d at 808. In doing so, the Fifth Circuit relied upon its prior decision in Neff v. American Dairy Queen Corporation, 58 F.3d 1063, 1065 (5th Cir. 1995) cert. denied, 516 U.S. 1045 (1996), in which the court stated that the agency issue was a question of law.'*In ruling in Neff that the agency question was an 4 Interestingly, however, the Fifth Circuit made specific “find- ings” on the agency issue. See Arguello v. Conoco, Inc., 207 F.3d at 808 (“[wje find that there is no agency relationship between Conoco, Inc. and the branded stores”) (emphasis added). Not only did the court fail to consider all of the evidence, see section A., supra, but the court also improperly rendered ‘findings’ even while considering the issue as a matter of law rather than as a factual issue. '2 Not only did the Fifth Circuit in this case incorrectly conclude that the agency issue was an issue of law rather than fact, but the Fifth Circuit relied on the Neff case which is substantially distin- guishable from the facts of this case. In contrast to this case, the issue in Neff was whether the franchisor “operated” the franchise store in order to be subject to liability under the public accommo- dations provisions in Title III ofthe ADA. This is not an ADA public accommodations case, and the same standards do not apply. Not only are the cases distinguishable in the types of claim presented, but the cases are also distinguishable in light of the evidence presented as well. In Neff, plaintiffs only evidence of an agency relationship was the franchise agreement itself. 58 F.3d at 1065. Here, however, Petitioners’ submitted not only the PMAs but also external evidence of Conoco’s right to control its branded stores as reflected in the Nokes memo and in the PMPA, which, as previ- ously discussed, was completely ignored by the Fifth Circuit. —_ a issue of law, the Fifth Circuit expressly declined to follow the Third Circuit’s decision in Drexel v. Union Prescription Centers, Inc., 582 F.2d 781 (3rd Cir. 1978). As indicated above, the overwhelming majority of courts treat the agency question as a question of fact rather than law, including but not limited to prior decisions by the Fifth Circuit. In this case, however, the Fifth Circuit followed another prior Fifth Circuit deci- sion that stated that the agency issue is a question of law rather than fact, thereby creating a split between the circuits on this issue. Certiorari should be granted to address the current split among the circuits so that courts will have adequate guidance in resolving these issues in the future." CONCLUSION For all the reasons stated herein, this Petition for Writ of Certiorari should be granted. '3 Even if this Court rules that the agency question is an issue of law rather than fact, this Court should still grant certiorari because the Fifth Circuit misapplied the summary judgment _ standard and affirmed summary judgment against Petitioners, when Petitioners presented sufficient evidence to show a genuine issue of material fact on the agency question. See Section A.2., supra. pee, ane Respectfully submitted, Hal K. Gillespie Counsel of Record GILLESPIE, ROZEN & WATSKY, P.C 3402 Oak Grove Avenue, Suite 200 Dallas, Texas 75204 (214) 720-2009 phone (214) 720-2291 fax -and- Gilbert Arrazolo Aguilar Law Offices, P.C. 700 Lomas Blvd. NE, Suite 201 Albuquerque, NM 87102 (505) 242-6677 phone (505) 242-6655 fax ATTORNEYS FOR PETITIONERS APPENDIX ‘Sy £8 EP aT By a Soh % She A} APPENDIX A IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT No. 98-11280 DENISE ARGUELLO, ALBERTO GOVEA, GARY IVORY, ANTHONY PICKETT, MICHAEL ROSS, for themselves and all others similarly situated; MANUEL ESCOBEDO, MARTHA I. ESCOBEDO, Plaintiffs-Appellants, eS ee eS Se ee ee eo Pe versus CONOCO, INC., Defendant-Appellee. Appeal from the United States District Court for the Northern District of Texas April 10, 2000 Before POLITZ, DAVIS, and STEWART, Circuit Judges. CARL E. STEWART, Circuit Judge: SE tk a Se ey ee eM en NS at CRE ee eee SAP ea OREN EE ee fe ery © si a a ead The appellants, a group of Hispanic and African- American consumers, filed suit against appellees, Conoco, Inc. (“Conoco” or “Conoco, Inc.”) alleging that they were subjected to racial discrimination while pur- chasing gasoline and other services. Appellants chal- lenge the district court’s 12(b)(6) dismissal of their disparate impact claim under 42 U.S.C. § 2000a, and the district court’s grant of summary judgment to Conoco on the appellants remaining 42 U.S.C. §§ 1981 and 2000a claims. For the following reasons we affirm in part, and reverse in part. — FACTUAL AND PROCEDURAL BACKGROUND There are three different incidents which form the background for this appeal. In March 1995, Denise Arguello (“Arguello”), and her father Alberto Govea (“Govea”), along with various other members of their family stopped at a Conoco-owned store’ in Fort Worth, Texas. After pumping their gasoline Arguello and Govea entered the store to pay for the gasoline and purchase other items. When Arguello approached the counter she presented the store cashier, Cindy Smith (“Smith”), with her items and a credit card. Smith asked to see Arguello’s identification. When Arguello gave Smith her Oklahoma driver’s license Smith stated that an out- of-state driver’s license was not acceptable identifica- tion. Arguello disagreed with Smith and Smith began to insult Arguello using profanity and racial epithets.” Smith also knocked a six-pack of beer off the counter toward Arguello. After Arguello retreated from the inside of the store, Smith used the store’s intercom system to continue yelling racial epithets. Smith also made obscene gestures through the window. Moments after the incident occurred Arguello and Govea used a pay phone outside the station to call a Conoco customer service phone number and complain about Smith’s conduct. Govea also attempted to reenter the store to discover Smith’s name. When Govea at- tempted to reenter the store, Smith and another store ‘We will use the term “Conoco-owned” to denote stores that are owned and operated by Conoco, Inc. “Conoco-branded” stores are stores which are independently owned marketers of Conoco prod- ucts and are subject to the Petroleum Marketer Agreements. *These racial epithets included “f***ing Iranian bitch”, and “go back to where you came from you poor, f***ing Mexicans.” TY a Tee Le ae ee ee ne rs ieee employee locked the doors. Linda Corbin (“Corbin”), a district manager, received Arguello and Govea’s com- plaints. Corbin reviewed video tape from the store, which had no audio, and concluded that Smith had acted inappropriately. When she was confronted by Corbin, Smith admitted to using the profanity, racial epithets, and obscene gestures. Corbin counseled Smith about her behavior but did not suspend, or terminate Smith. Several months after the incident Corbin transferred Smith to another store for Smith’s protection after receiving phone calls that a group was planning to picket the store at which the incident took place. In September 1995, Gary Ivory (“Ivory”), Anthony Pickett (“Pickett”), and Michael Ross (“Ross”) visited a Conoco-branded store in Fort Worth, Texas. While in- side the store they allege that they were followed by a store employee and after complaining about this treat- ment a store employee told them “we don’t have to serve you people” and “you people are always acting like this.” The employee refused to serve them and asked them to leave. Eventually the police were summoned and the policeman ordered the store employee to serve the group. In November 1996, Manuel Escobedo (“Escobedo”) and Martha Escobedo (“Mrs. Escobedo”) stopped at a Conoco-branded store in San Marcos, Texas. Escobedo claims that while visiting this store the store employee refused to provide toilet paper for the restroom, shouted profanities at his wife, and said “you Mexicans need to go back to Mexico.” Escobedo called Conoco to complain about this incident, and was told by a Conoco customer service supervisor, Pamela Harper, that there was noth- - ing Conoco could do because that station was not owned by Conoco. In a separate incident at a Conoco-branded pee Ey eee store in Grand Prairie, Texas Escobedo was allegedly told by the store clerk that “you people steal gas.” Finally, Escobedo claims that at two Conoco-branded stores in Laredo, Texas he was required to pre-pay for his gasoline while Caucasian customers were allowed to pump their gas first and then pay. In March 1997, Arguello, Govea, the Escobedos, Ivory, Pickett, and Ross (“plaintiffs” or “appellants”) filed suit against Conoco, Inc. on behalf of themselves and all other similarly situated parties.’ The plaintiffs alleged that Conoco was in violation of 42 U.S.C. §§ 1981‘ and 2000a (“Title II”)® and state law for refusing to serve Hispanic and African-American customers, and sub- jecting this class of customers to substandard service and racially derogatory remarks. The plaintiffs also claimed that Conoco had illegal policies and practices which disparately impacted Hispanics and African- Americans. In July 1997, the district court issued an order dis- missing all claims based on the plaintiffs’ allegations of disparate impact and the plaintiffs’ state law claims. In 3In the Plaintiffs’ Fourth Amended Complaint they dropped all claims made on behalf of the class. *42 U.S.C. § 1981 provides that “[a]ll persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to full and equal benefit of all laws...as is enjoyed by white citizens.” *Title II states that “[a]ll persons shall be entitled to the full and equal enjoyment of the goods, services, facilities, privileges, ad- vantages, and accommodations of any place of public accommodation...without discrimination or segregation on the ground of race, color, religion, or national origin.” 42 U.S.C. § 2000a. coe Si ies October 1998, the district court granted summary judg- ment to Conoco on all of the plaintiffs’ remaining claims. DISCUSSION Appellants raise several issues on appeal. First, ap- pellants contend that the district court erred in finding no agency relationship between Conoco, Inc. and the Conoco-branded stores. Appellants also argue that the district court erred in finding no agency relationship between Conoco, Inc. and Cindy Smith because Smith acted outside the scope of her employment. Appellants argue in the alternative that even if Smith was outside the scope of her employment Conoco had a non-del- egable duty to prevent racial discrimination, and fur- ther that Conoco should be held liable because it ratified Smith’s conduct. Finally, appellants contend that the district court improperly dismissed their disparate im- pact claims under Title II. We will consider each of these issues in turn. A. Standard of Review This court reviews a grant of summary judgment de novo. Neff v. American Dairy Queen Corporation, 58 F.3d 1063, 1065 (5 Cir. 1995). Summary judgment should be granted if there is no genuine issue as to any material fact and the moving party is entitled to judg- ment as a matter of law. Fed. R. Civ. P. 56(c). We review the facts drawing all inferences most favorable to the party opposing the motion. Neff, 58 F.3d at 1065 (quot- ing Reid v. State Farm Mut. Auto Ins. Co., 784 F.2d 577, 578 (5 Cir. 1986)). oe yee B. Agency Relationship between Conoco, Inc. and Conoco-branded Stores The incidents involving Ivory, Ross, Pickett and the Escobedos occurred at Conoco-branded stores. These Conoco-branded stores are independently owned, and have entered into Petroleum Marketing Agreements (“PMA”) that allow them to market and sell Conoco brand gasoline and supplies in their stores. The district court held that no agency relationship existed between Conoco, Inc. and the Conoco branded stores. The district court found that Conoco, Inc. did not control the details of the daily operations of the Conoco branded stores, including personnel decisions. The Supreme Court has suggested that in order to impose liability on a defendant under § 1981 for the discriminatory actions of a third party, the plaintiff must demonstrate that there is an agency relationship between the defendant and the third party. General Building Contractors Association v. Pennsylvania United Engineers and Constructors, 458 U.S. 375,393, 102 S.Ct. 3141, 3151-52, 73 L.Ed.2d 835 (1982). Agency is a fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act. Jd. at 391 (citing Restatement (Second) of Agency § 1 (1958) (“Restatement”)). At the core of agency is a “fiduciary relation” arising from the “consent by one person to another that the other shall act on his behalf and subject to his control...equally central to the master-servant relation is the master’s control over or right to control the physical activities of the servant.” Jd. at 393 (citing Restatement §1). There- fore, to establish an agency relationship between Conoco, Inc. and the branded stores the plaintiffs must show fink! Si poe that Conoco, Inc. has given consent for the branded stores to act on its behalf and that the branded stores are subject to the control of Conoco, Inc. Appellants argue that the PMAsestablish that Conoco, Inc. has an agency relationship with the branded stores. They argue that the PMAs give Conoco, Inc. control of the branded stores because the PMAs require the branded stores to maintain their businesses according to the standards set forth in the PMAs. Plaintiffs fur- ther contend that Conoco, Inc. controls the customer service dimension of the Conoco-branded stores. As evidence the plaintiffs point to a statement in the PMA that instructs the branded stores that) “all customers shall be treated fairly, honestly, and courteously.” Fur- thermore, the plaintiffs assert that Conoco, Inc. has the power to debrand the Conoco-branded stations for not complying with the contractual terms of the PMA. Thus, because of this debranding power the plaintiffs reason that Conoco controls the operations of their brand mar- keters in all areas which are discussed in the PMA, including customer service. The plaintiffs also produced summary judgment evidence that Conoco, Inc. conducts random, bi-yearly inspections of the branded stores to determine if business is being conducted in\accordance with the standards of the PMA.® Despite the plaintiffs’ interpretation of the PMAs and the evidence of inspections, the plain language of the PMA defines the relationship between Conoco, Inc. and its branded stores. The PMA states: 6 These inspections normally focus on product displays and labeling. Customer service is not considered a main focus of the random inspections. ay ye Marketer [Conoco branded store] is an independent business and is not, nor are its employees, employ- ees of Conoco. Conoco and Marketer are completely separate entities. They are not partners, general partners...nor agents of each other in any sense whatsoever and neither has the power to obligate or bind the other. The facts of the present case are similar to the facts which formed the basis of the claim in Neff v. American Dairy Queen Corporation, 58 F.3d 1063 (5"" Cir. 1995). In Neff, the plaintiff appealed summary judgment of her claims against American Dairy Queen Corporation (“ADQ”) for violation of the Americans with Disability Act (“ADA”). Neff claimed that ADQ violated the ADA by failing to make its San Antonio stores wheel chair accessible. Jd. at 1064. We held that ADQ was a franchisor and the franchise agreement specifically stated that ADQ did not own or operate the San Antonio stores. Id. at 1068. The only summary judgment evidence pre- sented by Neff was the franchise agreement. Neff ar- gued that contrary to franchise agreement's statement disclaiming operation of the franchisee establishments, other clauses in the franchise agreement demonstrated that ADQ did in fact “operate” the San Antonio stores. Id. at 1065. Neff did not allege that the franchise agreement was ambiguous, instead she disputed whether the control over franchisee facilities which was provided for in the agreement made ADQ an “operator.” Id. at 1065. The franchise agreement stated that the fran- chise building should be constructed and equipped in accordance with the ADQ’s specifications, and that the building should be maintained in accordance with the ADQ’s requirements. Id. at 1066. We held that this language in the franchise agreement “[did] not estab- sii LM ie lish sufficient control on ADQ’s part such that ADQ can be said to “operate” the San Antonio stores.” Jd. at 1067. Reena In the present case, our review of the record and pleadings do not reveal any allegation by, the nJaintiffs. that the language in the PMA is ambiguous as to its meaning. The clauses of the PMA which state that the franchisee’s business operations should be conducted in a consistent manner with the standards of Conoco, Inc., and that customers should be treated fairly and courte- ously are similar to the language of the franchise agree- ment in Neff which required that building specifications be approved by the franchisor. See also, Perry v. Burger King Corporation, 924 F.Supp. 548 (S.D.N.Y. 1996) (granting summary judgment to defendant based on franchise agreement which defined franchisee as an independent contractor, and plaintiff presented no evi- dence that franchisor had policies regarding franchisee employees). The language of the PMA, while offering guidelines to the Conoco-branded stores, does not estab- lish that Conoco, Inc. has any participation in the daily operations of the branded stores nor that Conoco, Inc. participates in making personnel decisions. Therefore, we find that there is no agency relation- ship between Conoco, Inc. and the branded stores in question, and that Conoco, Inc. asa matter of law cannot be held liable for the unfortunate incidents which hap- ~ pened to Ivory, Pickett, Ross, and the Escobedos at the Conoco- branded stores. C. Scope of Employment Arguello and Govea complain of discriminatory treat- ment at a Conoco-owned store. Appellants argue that the district court erred in finding that Conoco could not — A-10 — be held liable under Title IT, 42 U.S.C. § 2002e-2’, or 42 U.S.C. § 19813, for the acts of its store clerk, Smith. The district court found that as a matter of law there was no agency relationship between Smith and Conoco because Smith’s acts of discrimination towards Arguello and Govea were outside the scope of Smith’s employment. In Flanagan, this Court considered whether agency principles applied to an employment discrimination suit alleging racial discrimination and seeking relief under both 42 U.S.C. § 1981 and Title VII. Flanagan v. A.E. Henry Comm. Health Svcs. Ctr., 876 F.2d 1231, 1233 (5th Cir. 1989). We held that the doctrine of respondeat superior applied under § 1981° to render the employer liable for the discriminatory acts of the plaintiffs supervisors. Jd. at 1236 (relying on the Su- preme Court’s implication, in General Building Con- tractors Ass’n v. Pennsylvania, 458 U.S. 375, 392, 102 S.Ct. 3141, 3151-52, 73 L.Ed.2d 835 (1982), that agency 742 U.S.C. § 2000a provides, in relevant part “[a]ll persons shall be entitled to full and equal enjoyment of the goods, services, facilities, privileges, and accommodations of any place of public accommodation, as defined in this section, without discrimination or segregation on the ground of race, color, religion, or national origin.” §42 U.S.C. § 1981 provides, in relevant part, “[aJil persons within the jurisdiction of the United States shall have the same right ... to make and enforce contracts ... as is enjoyed by white citizens.” °As the district court noted in its opinion, a plaintiff must prove purposeful discrimination under § 1981. See Patterson v. McClean Credit Union, 491 U.S. 164, 186, 109 S.Ct 2363, 2377, 105 L.Ed.2d 132 (1989) (citing General Bldg. Contractors, 458 U.S. at 391, 102 S.Ct. at 3150). A successful § 1981 plaintiff may be entitled to compensatory and punitive damages. Under Title II the only relief is injunctive. Therefore, we see no reason that vicarious liability standards under § 1981 should not also be applicable to Title II. “ ee eg ee Oe ee ey eee ee eee — A-11— principles apply under § 1981). In Flanagan, we did not foreclose the possibility that an employer must respond in damages for the acts of a non-supervisor. Jd. Conoco does not dispute that we must apply agency principles in determining liability under § 1981. However, Conoco cites a recent Supreme Court decision holding that courts may not hold an employer vicariously liable for the discriminatory actions of non-supervisory employ- ees. Faragher v. City of Boca Raton, 524 U.S. 775, 118 S.Ct. 2275, 141 L.Ed.2d 662 (1998). In Faragher, the plaintiff brought a sexual harass- ment action under Title VII claiming sexual discrimina- tion in the “terms, conditions, and privileges” of her employment. Faragher, 524 U.S. at 781, 118 S.Ct. at 2280. The Court held that an employer is subject to vicarious liability for the discriminatory actions of su- pervisory employees where the employer undertakes tangible employment action, discharge, demotion, or undesirable reassignment. Jd. at 807, 118S.Ct. at 2293. The Court further held that when no tangible employ- ment action is taken such as in a hostile environment sexual harassment action, “a defending employer may raise an affirmative defense” to liability or damages ....” Id. at 807-08, 118 S.Ct at 2293. The Supreme Court explained that: [w]hen a person with supervisory authority dis- criminates in the terms and conditions of subordi- nates’ employment, his actions necessarily draw 10“The defense comprises two necessary elements: (a) that the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and (b) that the plaintiff em- ployee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise.” — A-12 — upon his superior position over the people who report to him, or those under them, whereas an employee generally cannot check a supervisor's abusive conduct the same way that she might deal with abuse from a co-worker. When a fellow em- ployee harasses, the victim can walk away or tell the offender where to go, but it may be difficult to offer such responses to a supervisor, whose ‘power to supervise-[which may be]-to hire and fire, and to set work schedules and pay rates-does not disap- pear ... when he chooses to harass through insults and offensive gestures rather than directly with threats of firing or promises of promotion. Id. at 803, 118 S.Ct. at 2291. Conoco argues that we should follow Faragher and hold that Conoco is not vicariously liable for the actions of Smith, a non-supervisory employee. Alternatively, Conoco argues that even if it has some responsibility for Smith’s acts it is entitled to assert an affirmative de- fense as outlined by the Court in Faragher, by showing at trial that it was not negligent. It points to the lack of evidence indicating prior harassment by Smith that would have notified Conoco of her behavior so that Conoco could have had an opportunity to fashion a remedy. We disagree with Conoco’s arguments. The Supreme Court in Faragher recognized that in an action based on discrimination in the workplace whether the discriminating party is a supervisor is all-impor- tant. The supervisor controls the career of the employee under his supervision. The offended employee cannot rebuke the supervisor, laugh at the supervisor, or walk away from the supervisor as she could from a fellow employee. In a public accommodation case such as this, — A-13 — the supervisory status of the discriminating employee is much less relevant than it isin an employment discrimi- nation case. Smith subjected Arguello and Govea to discrimination that was just as harmful as if the dis- criminatory acts had been committed by one of Conoco’s supervisory employees. We are therefore not persuaded that the Supreme Court would apply the same re- stricted vicarious liability rule in this public accommo- dation context as it did in Faragher, involving discrimi- nation in the workplace. Also, in a public accommodation case under § 1981, a rule that only actions by supervisors are imputed to the employer would result, in most cases, in a no liability rule. Unlike the employment context it is rare that ina public accommodation setting a consumer will be mis- treated by a manager or supervisor. Most consumer encounters are between consumers and clerks who are non-supervisory employees. In City of Chicago v. Matchmaker Real Estate Sales Center, Inc., 982 F.2d 1086, 1089 (7th Cir. 1992), cert. denied, 508 U.S. 972, 113 S.Ct 2961, 125 L.Ed.2d 662 (1993), plaintiff sued a real estate company under the Fair Housing Act and § 1982, a companion statute to § 1981. One of the questions presented in the case was whether the real estate company was responsible for the discriminatory acts of its employees, who engaged in illegal racial steering. Jd. at 1096-97. The court, apply- ing the Restatement (Second) of Agency, held that the real estate company was responsible for the acts of these non-supervisory employees. Jd. at 1098. For allofthese _ reasons, we are persuaded that the restrictive rules of respondeat superior, applied in Faragher, do not apply to this case. — A-14 — Under general agency principles a master is subject to liability for the torts of his servants while acting in the scope of their employment. See Restatement § 219. Some of the factors used when considering whether an employee’s acts are within the scope of employment are: 1) the time, place and purpose of the act; 2) its similarity to acts which the servant is authorized to perform; 3) whether the act is commonly performed by servants; 4) the extent of departure from normal methods; and 5) whether the master would reasonably expect such act would be performed. Domar Ocean Transportation Ltd. v. Independent Refining Company, 783 F.2d 1185, 1190 (5th Cir. 1986) (citing Prosser and Keeton, The Law of Torts 502 (5th ed. 1984); Restatement § 228. First, we must consider the time, place and purpose of Smith’s actions. Smith’s behavior toward Arguello and Govea occurred while she was on duty inside of the Conoco station where she was employed. The plaintiffs also put forth summary judgment evidence that Smith asked Arguello to present identification for credit card purchases. The purpose of Smith’s interaction with Arguello was to complete the sale of gas and other store items. The initial confrontation and subsequent use of racial epithets occurred while Smith was completing Arguello’s purchase of her items and processing the credit card transaction. Second, we must consider whether Smith’s actions were similar to those she was authorized by Conoco to perform. The sale of gasoline, other store items, and the completion of credit card purchases are the customary functions of a gasoline store clerk. The plaintiffs pre- sented summary judgment evidence that Smith also used the intercom, which is also a customary action of gasoline store clerks. — A-15 — Third, we will examine the extent of Smith’s depar- ture from normal methods. It is self-evident that Smith did not utilize the normal methods for conducting a sale. There was no summary judgment evidence presented that Conoco expected or anticipated that Smith would perform her functions in this manner. The appellees would have this court adopt the position that because Smith’s use of racial epithets is comparable to the commission of an intentional tort, Conoco should not be held liable for Smith’s behavior. However, the fact that an employee engages in intentional tortious conduct does not require a finding that the employee was outside the scope of his employment. Domar, 783 F.2d at 1190 (citing Restatement § 231). In Domar, we found that a captain of a tanker vessel who stole crude oil and sold the oil was within the scope of his employment when he committed the theft and sale. Jd. This court found that the captain’s illegal actions took place while he was serving as master of the vessel and that the illegal transaction was similar to other transactions he had authority to perform. Id. We correctly concluded that although the captain’s employer did not expect the captain to steal the cargo, that factor was outweighed by the other considerations. Jd. In the present case, al- though Conoco could not have expected Smith to shout racial epithets at Arguello and Govea, Smith’s actions took place while she was performing her normal duties as aclerk. Conoco, Inc. had authorized Smith to interact with customers as they made purchases. Therefore, although Smith did depart from the normal methods of conducting a purchase this does not lead to the conclu- sion that as a matter of law she was outside the scope of her employment. Finally, we must consider whether Conoco could have reasonably expected Smith to act in a racially discrimi- — A-16 — natory manner. There is no evidence in the record on this prong of the test. However, we note that even if Conoco is able to show that they could not have expected this conduct by Smith, the jury is entitled to find that the other factors outweigh this consideration. Domar, 783 F.2d at 1190. In assessing whether Smith was within the scope of her employment the district court found that the only summary judgment evidence presented by the plaintiffs was that Smith was working in her job as cashier when the offensive behavior occurred. The district court con- cluded that the summary judgment evidence was insuf- ficient to “overcome the common-sense conclusion” that Smith’s offensive actions were not within the scope of her employment. However, we reject the presumption that because Smith behaved in an unacceptable manner that she was obviously outside the scope of her employ- ment. See Domar, 783 F.2d at 1190. The plaintiffs did present summary judgment evidence that Smith was on duty as aclerk, and that she was performing authorized duties such as conducting sales. This summary judg- ment evidence is not insignificant. Smith’s position as clerk, and her authorization from Conoco to conduct sales allowed her to interact with Arguello and Govea, and put Smith in the position to commit the racially discriminatory acts. The plaintiffs also presented sum- mary judgment evidence that Smith used her authority to conduct credit card transactions and use the gas station intercom system to commit the acts in question. It is also important to note that Conoco does not challenge whether this incident occurred. Smith admit- ted to a Conoco district manager that she did subject Arguello and Govea to the use of racial epithets, profan- ity, and obscene gestures. The only dispute is whether SCR Haney, is aE ie ‘ —A-17 — there is a legal remedy for Arguello and Govea by holding Conoco liable for Smith’s actions. The plaintiffs contend that the inference that should be drawn from Smith’s actions is that Smith was authorized by Conoco to perform the actions of aclerk and that this meant that her actions while on duty as clerk were within the scope of her employment. Conoco, utilizing the same facts asks us to draw the inference that because Smith was acting on personal racial bigotry and animosity that she was outside the scope of her employment. This court has repeatedly held that when the basic facts of a case are undisputed and the parties disagree about the material factual inferences that may be drawn from these facts summary judgment may be improper. See Winters v. Highlands Insurance Company, 569 F.2d - 297, 299 (5" Cir. 1978). Summary judgment is appropri- ate when a party fails to “make a showing sufficient to establish the existence of an element essential, to the party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corporation v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The plaintiffs in the present case do bear the burden of proof to establish the existence of an agency relation- ship between Smith and Conoco. See Karl Rove & Co. v. Thornburg, 39 F.3d 1273, 1296 (5" Cir. 1994). To estab- lish an agency relationship between Smith and Conoco the plaintiffs must establish that Smith was within the scope of her employment when she committed the ra- cially discriminatory acts against Arguello and Govea. See Restatement § 319. The factors for establishing scope of employment were outlined in Domar. As we have discussed supra it is clear that the plaintiffs have presented summary judgment evidence regarding these — A-18 — factors. Therefore, the plaintiffs have met the standard set forth in Celotex, and summary judgment should not have been granted in favor of Conoco. D. Non-Delegable Duty Appellants argue in the alternative that even if Smith was outside the scope of her employment Conoco should still be held liable because it had a non-delegable duty not to discriminate against minority consumers. A mas- ter is not subject to liability for the torts of his employees acting outside the scope of their employment, unless: 1) the master intended the conduct or consequences, 2) the master was negligent or reckless, or 3) the conduct violated a non-delegable duty of the master, or 4) the employee purported to speak on behalf of the principal. Restatement § 219(2). The argument that an employer has a non-delegable duty under § 1981 not to discrimi- nate has been largely foreclosed by the Supreme Court in General Building Contractors, 458 U.S. at 395. In General Building Contractors, the Supreme Court stated that § 1981 is meant to prohibit employers from inten- tional discrimination and not intended to make them guarantors of rights against all third parties. See Gen- eral Building Contractors, 458 U.S. at 396. Therefore, it follows that the duty not to discriminate is not a non- delegable duty, instead a plaintiff must establish a close connection between the employer and the third party who engages in the intentional discrimination. Plaintiffs also argue in the alternative that Conoco ratified the actions of Smith by not suspending or firing her. In order for an employer to be found to have ratified the actions of an employee the employer must know of the act and adopt, confirm, or fail to repudiate the acts of its employee. See generally, Prunty v. Arkansas Freightways, Inc., 16 F.3d 649, 653-54 (5" Cir. 1994). In — A-19 — the present case, after Conoco was notified of Smith’s actions, a customer service supervisor, Linda Corbin, told Arguello and Govea that she agreed that Smith had acted inappropriately and she counseled Smith about her behavior. While Conoco did not fire or suspend Smith, it does not appear that Conoco ratified Smith’s actions. E. Disparate Impact Claims under Section 2000a Appellants argue that the district court erred in finding that as a matter of law the plaintiffs could not state a claim for redress under 42 U.S.C. § 2000a (“Title II”) based on a disparate impact theory. The district court found that the language of Title II evidences an intent to prohibit only intentional discrimination and that disparate impact claims are not cognizable under Title II. However, the district court offered no authority to support that proposition. Neither the Supreme Court nor this court has addressed the question of whether disparate impact claims are cognizable under Title II. Furthermore, the law in the other circuits is generally unclear as to whether disparate impact claims are recognized under Title II." In the present case, even assuming arguendo that disparate impact claims are cognizable under Title II, '' See Stephen E. Haydon, A Measure of Our Progress: Testing for Race Discrimination in Public Accommodations, 44 UCLA L. Rev. 1207, 1220 n.47 (1997). There are cases in which courts have acknowledged disparate impact theories in Title II cases. See e.g., Robinson v. Power Pizza, Inc., 993 F.Supp. 1462, 1464-65 (M.D. Florida 1997) (parties agreed and court applied disparate impact analysis in Title II claim); Olzman v. Lake Hills Swim Club, 495 F.2d 1333, 1340 (2d Cir. 1974) (using disparate impact analysis in case against social club in which plaintiffs challenged facially neutral club guest policy). — A-20 — the plaintiffs did not establish a prima facie case of discrimination of the type required in disparate impact claims.” The plaintiffs failed to allege that there was a specific Conoco policy which had a negative disparate effect on minority customers. The plaintiff's complaint contains general allegations that Conoco’s policies and or practices though neutral on their face have a dispar- ate impact on black and Hispanic persons. In their original complaint and subsequent amended complaints plaintiffs failed to identify any specific Conoco policy that hada discriminatory effect. Furthermore, the plain- tiffs also failed to provide a specific allegation that any Conoco practice or policy was having an effect on an identified class of Conoco’s consumers. The plaintiffs’ complaints set forth facts regarding approximately six specific incidents of racially discriminatory treatment, but do not establish any widespread or general effect on minority consumers. During discovery it was shown that in a two year period Conoco received between ten and twenty compiaints which alleged racial discrimina- tion. Therefore, because the plaintiffs’ allegations could not support a disparate impact claim, we decline to decide whether disparate impact claims are generally cognizable under Title II. We conclude that the district court properly granted the motion to dismiss under 12(b)(6) for failure to state a claim upon which relief can be granted. '2In disparate impact claims the plaintiff must first establish that there is neutral policy or practice that has had a discrimina- tory impact on a particular group. See e.g., Griggs v. Duke Power Company, 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed. 2d 158 (1972); Simms v. First Gibraltor Bank, 83 F.3d 1546, 1555 (5 Cir. 1996). — A-21 — CONCLUSION We hold that the district court did not err in finding that no agency relationship existed between Conoco, Inc. and its branded stores, and properly entered sum- mary judgment against the Escobedos, Ivory, Pickett, and Ross. We also affirm the district court’s dismissal of the plaintiffs’ disparate impact claims for failure to state a claim upon which relief could be granted. We reverse the district court’s determination that Cindy Smith acted outside the scope of her employment as a matter of law and remand for further proceedings con- sistent with this opinion. AFFIRMED in part, and REVERSED in part. a =. yee APPENDIX B IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS Civil Action No. 3:97-CV-0638-H DENISE ARGUELLO, et al., Plaintiffs V. CONOCO, INC., Defendant. MEMORANDUM OPINION AND ORDER [Filed: October 7, 1998] Before this Court is Defendant Conoco, Inc.’s Motion for Summary Judgment, with a supporting brief and appendix, filed July 27, 1998; Plaintiffs’ Response to Defendant’s Motion for Summary Judgment, with a supporting brief and appendix, filed August 31, 1998; and Defendant’s Reply Brief, filed September 21, 1998. Plaintiffs sue for injunctive relief and monetary dam- ages basec on the allegedly discriminatory treatment they received at Conoco gas stations. Defendant Conoco, Inc. (“Conoco”) now moves for summary judgment argu- ing that it is not legally responsible for the discrimina- tory acts of its employee or the employees of indepen- dently owned and operated Conoco franchises (herein- after, “Conoco-branded stores”). Plaintiffs oppose this motion. Having considered the motions and briefs of both parties, and for the reasons set forth below, the Court concludes that there is no genuine issue of material fact and that Defendant Conoco is entitled to judgment as a a % > = 23 oz = ate 3 ie Eh “he * e A, = 3 Bs — A-23 — matter of law. Defendant Conoco’s Motion for Summary Judgment will be granted. I. BACKGROUND Plaintiffs Denise Arguello, Manuel Escobedo, Martha Escobedo, Alberto Govea, Gary Ivory, Anthony Pickett, and Michael Ross brought this suit claiming Conoco gas stations were discriminating against Hispanics and African-Americans in their provision of services. The incidents underlying this suit allegedly transpired against three distinct groupings of the plaintiffs at no less than five different Conoco gas stations. Further- more, the specific Conoco gas stations involved can be divided into two distinct classes, the one store directly owned and operated by Defendant Conoco, Inc., and the four other stores independently owned and operated by franchisees of the Defendant — the Conoco-branded stores. A. Incident Involving Plaintiffs Arguello and Govea Plaintiffs Denise Arguello and Alberto Govea claim that in March of 1995, Plaintiff Arguello, her husband, three of her children, Plaintiff Govea (who is Plaintiff Arguello’s father), and Plaintiff Govea’s wife (who is also Plaintiff Arguello’s mother) stopped at a Conoco gas station on Randol Mill in Fort Worth, Texas to purchase gasoline and some beer and soda. This station is owned and operated by Defendant, Conoco. When Denise Arguello, along with her father, Alberto Govea, at- tempted to pay for her purchases with an American Express card, the cashier at the store, Ms. Cindy Smith, asked Ms. Arguello to provide some sort of identification in order to complete the purchase. When Ms. Arguello — A-24 — presented her Oklahoma! driver’s license, Ms. Smith refused to accept it, claiming it was an invalid form of identification and that it was her duty to refuse out-of- state driver’s licenses. Ms. Smith eventually accepted Ms. Arguello’s credit card, but while Ms. Arguello was signing the receipt for her credit card purchase, Ms. Smith began to yell racial obscenities at her. This haranguing continued even after Ms. Arguello and Mr. Govea left the store. Ms. Smith utilized the store’s intercom to continue her racial slurs, while supplement- ing them with obscene gestures. Ms. Arguello and Mr. Govea reported this incident to the store manager and the district manager of Conoco. The district manager had viewed a videotape of the incident and agreed with Ms. Arguello that she had been mistreated. Ms. Smith was transferred to another store. B. Incident Involving Plaintiffs Gary Ivory. Anthony Pickett and Michael Ross In September 1995, at a Conoco-branded store located on Country Club Lane in Fort Worth, Texas, Gary Ivory, Anthony Pickett and Michael Ross, all of whom are black, were suspected of theft and told by a store clerk that “we don’t serve you people” and that “you always act like this.” C. Incidents Involving Plaintiffs Manuel and Martha Escobedo In November 1996, while at a Conoco-branded store in San Marcos, Texas, a store clerk called Martha Escobedo an obscene name, and told her and Manuel 'Ms. Arguello is a resident of Broken Arrow, Oklahoma. — A-25 — Escobedo (her husband) that “you Mexicans need to go back to Mexico.” Furthermore, the Escobedos assert they have consistently been asked to prepay for gas at Conoco-branded stores in Laredo, Texas, while white customers have not. D. Procedural History of The Plaintiffs’ Suit On March 24, 1997, Plaintiffs filed their Original Complaint — Class Action, alleging Defendant Conoco, Inc., discriminated in providing services to African- American and Hispanic customers. On March 27, 1997, Plaintiffs filed their First Amended Complaint, aver- ring causes of action under 42 U.S.C. § 1981 (the Civil Rights Act of 1866), 42 U.S.C. § 1985(3) (civil con- spiracy), 42 U.S.C. § 2000a (Title II - Public Accommo- dations), Texas Business and Commerce Code § 17.50 (Texas Deceptive Trade Practices Act (“DTPA”)), and common law negligent supervision. On April 28, 1997, Conoco moved for the dismissal of all claims based on allegations of disparate impact, the DTPA, and negli- gent supervision. This Court granted Defendant’s mo- tion in a July 21, 1997, Memorandum Opinion and Order. On September 24, 1997, Conoco filed a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss for failure to state a claim or, in the alternative a Rule 12(c) motion for judgment on the pleadings with regards to the Plaintiffs’ remaining claims. This Court, in a No- vember 21, 1997, Memorandum Opinion and Order, granted that motion as to Plaintiffs’ claims under 42 U.S.C. § 1985(3), but denied it as to their claims under 42 U.S.C. § 1981 and 42 U.S.C. § 2000a. On March 28, 1998, Plaintiffs filed their Fourth Amended Complaint, which deleted from their Complaint the class action and pattern and practice allegations. Conoco filed this mo- tion for summary judgment on July 27, 1998. ow Me xe II. RELEVANT STANDARD The Federal Rules of Civil Procedure provide that summary judgment shall be rendered when the evi- dence establishes that there is “no genuine issue as to any material fact” and that the movant is “entitled to judgment as a matter of law.” Fed. R. Civ. P. 56 (c); see Ruiz v. Whirlpool, Inc., 12 F.3d 510, 513 (5th Cir. 1994); Armstrong v. City of Dallas, 829 F. Supp. 875, 876(N.D. Tex. 1992), affd 997 F.2d 62 (5th Cir. 1993). Under proper circumstances, awarding summary judgment is favored in the federal courts: “Summary judgment rein- forces the purpose of the Rules, to achieve the just, speedy, and inexpensive determination of actions, and, when appropriate, affords a merciful end to litigation that would otherwise be lengthy and expensive.” Fontenot v. Upjohn Co., 780 F.2d 1190, 1197 (5th Cir. 1986) (footnote omitted). A summary judgment movant must inform the court of the basis for the motion and identify the material specified in Rule 56(c) that it believes demonctrates the absence ofa genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, 506 U.S. 825 (1992). Ifthe movant falls to meet its initial burden, the motion must be denied, regardless of the nonmovant’s response. Little v. Liquid Air Corp., 37 F.3d 1069, 1975 (5th Cir. 1994) (en banc). If the movant carries its burden, the burden shifts to the nonmovant to show that summary judgment should not be granted. Celotex, 477 U.S. at 324. A party oppos- ing summary judgment must go beyond the pleadings and “set forth specific facts” showing that there is a “genuine issue for trial.” Fed. R. Civ. P. 56(e); see —— — A-27 — Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Ruiz, 12 F.3d at 513; Armstrong, 829 F. Supp. at 876. A party opposing summary judgment may not rest on mere conclusory allegations or denials in the pleadings. Fed. R. Civ. P. 56(e); see also Hightower v. Texas Hosp. Ass‘n., 65 F.3d 443, 447 (5th Cir. 1995). Furthermore, a party “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita, 475 U.S. at 586. There must be “significant probative evidence” on which a jury could reasonably find for the nonmovant. Anderson, 477 U.S. at 249. In determining whether a genuine issue exists for trial, the Court must view the evidence introduced and all factual inferences from the evidence in the light most favorable_-to the nonmovant. Eastman Kodak v. Image Technical Servs., Inc., 504 U.S. 451, 456-58 (1992); Gremillion v. Gulf Coast Catering Co., 904 F.2d 290, 292 (5th Cir. 1990); see also Bodenheimer v. PPG Indus., Inc., 5 F.3d 955, 956 (5th Cir. 1993). If the record, taken as a whole, cannot “lead a rational trier of fact to find for the nonmoving party,” no genuine issue remains for trial. Matsushita, 475 U.S. at 587; see Friou v. Phillips Petroleum Co., 948 F.2d 972, 974 (5th Cir. 1991). Ill. ANALYSIS As the case now stands, plaintiffs seek relief under two different statutes based on events which occurred at Conoco gas stations under two distinct ownership struc- tures. Plaintiffs seek relief under both 42 U.S.C. § 1981 (the Civil Rights Act of 1866) and 42 U.S.C. § 2000a (Title If — Public Accommodations). The incident un- derlying the claims of plaintiffs Denise Arguello and — A-28 — Alberto Govea occurred at a gas station owned and operated by Conoco. The claims of the other plaintiffs arise from events which transpired at Conoco-branded stores. The analysis as to the potential liability of Conoco is different for each of the two ownership struc- tures. A. 42U.S.C.§ 1981 Section 1981 provides that all persons in the United States shall have the same contractual rights as white citizens. 42 U.S.C. § 1981(a). “Claims of racial discrimi- nation brought under § 1981 are governed by the same evidentiary framework applicable to claims of employ- ment discrimination brought under Title VII.” Deffenbaugh-Williams v. Wal-Mart Stores, Inc., __ F.3d __, No 97-10685, 1998 WL 645810, at *4 (5th Cir. Sept. 24, 1998) quoting LaPierre v. Benson Nissan, Inc., 86 F.3d 444, 448 n.2 (5th Cir. 1996). Thus, to prevail under § 1981, the plaintiff must establish a prima facie case of intentional discrimination. If the plaintiff successfully establishes a prima facie case, the burden then shifts to the defendant to articulate a legitimate non-discrimina- tory reason for the challenged action. If the defendant meets this burden, the plaintiff must then demonstrate that the defendant’s proffered explanation is not the actual reason for its decision, but is instead a pretext for discrimination. See Rhodes v. Guiberson Oil Tools, 75 F.3d 989, 992-93 (5th Cir. 1996) (en banc). B. Title II of the Civil Rights Act of 1964, 42 U.S.C. 2000a Title II of the Civil Rights Act of 1964 (“Title II”) entitles all persons to the full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations of any place of public accommoda- tion, without discrimination on the basis of race, color, ie il religion, or national origin. 42 U.S.C. § 2000a(a). The statute further prohibits any person from withholding, denying, or attempting to withhold or deny any person any right secured by Title II, 42 U.S.C. § 2000a-2. The statute also creates a private right of action for injunc- tive relief, but not for monetary damages. 42 U.S.C. § 2000a-3(a). The parties do not indicate, and the Court’s indepen- dent research has not revealed, Fifth Circuit cases discussing the burdens on the respective parties in relation to a claim under Title II. Those courts which have considered the issue have applied the well-estab- lished burden-shifting rules governing Title VII. See Hornick v. Noyes, 708 F.2d 321, 325 n.8 (7th Cir. 1983) (upholding the district court’s application of the burden- shifting framework of Title VII established in Texas Dep‘t of Community Affairs v: Burdine, 450 U.S. 248 (1981)); Robinson v. Power Pizza, Inc., 993 F. Supp. 1462, 1464 (M.D. Fla. 1998) (utilizing the Title VII burden-shifting test in Title II case.); Boyle v. Jerome Country Club, 883 F. Supp. 1422, 1429 (D. Idaho 1995) (applying Burdine burden-shifting rules to Title II). Since no Fifth Circuit case discusses the proper frame- work to use, and the Fifth Circuit has not hesitated to apply the Title VII burden-shifting framework outside of Title VII, see Rhodes, 75 F.3d at 992 n.3 (applying Title VII burden-shifting rules to age discrimination claims); Harrington, 118 F.3d at 367 (applying Title VII burden-shifting rules to claims arising under 42 U.S.C. § 1981), this Court will apply the burden-shifting rules established in Burdine and its progeny to this case. OE — A-30 — C. Plaintiffs Gary Ivory. Anthony Pickett. Michael Ross. Martha Escobedo, Manuel Escobedo The causes of action of plaintiffs Ivory, Pickett, Ross, and the Escobedos (Martha and Manuel) under 42 U.S.C. § 1981 and Title II stem from at least three separate incidents at four different Conoco-branded stores. The issue presented is to what extent can a third- party hold a franchisor liable for the torts of the employ- ees of a franchisee. This inquiry begins with the basic question of whether an agency relationship exists between Conoco, Inc., and Conoco-branded stores such that the acts of a Conoco- branded store can be considered the acts of the Defen- dant, and therefore, the Defendant can be held legally accountable. The essential element of an agency rela- tionship is the right of control. The alleged principal must “have the right to control both the means and the details of the process by which the alleged agent is to accomplish his task.” Matter of Carolin Paxon Advertis- ing; Inc., 938 F.2d 595, 598 (5th Cir. 1991). Moreover, this right of control must pertain to a task or matter material to the lawsuit. O’Bryant v. Century 21 South Central States, Inc., 899 S.W.2d 270, 271 (Tex. App. 1995, no writ). Plaintiffs Ivory, Pickett, Ross, and the Escobedos attempt to establish this element of control by pointing to the Petroleum Marketer Agreements (PMAs) be- tween Defendant Conoco, Inc., and the Conoco-branded stores. (See Defs App. in Supp. of Mot. for Summ. J. at APP 0001 - 0302.) Each of the PMAs between Conoco and the Conoco-branded stores at question provides that the Conoco-branded store shall conduct its inde- — A-31 — pendent business operations consistent with the stan- dards and requirements set forth in the agreement, one of which is to treat all customers “fairly, honestly, and courteously.” (Def’s App. in Supp. of Mot. for Summ. J. q 3(1)(9) at APP 0003; J 4(H)(1)(e) at APP 0032.) How- ever, as Conoco points out, the same PMAs define the relationship between Conoco and the Conoco-branded stores as follows: The [Conoco-branded store] is an independent busi- ness and is not, nor are its employees, an employee of Conoco. Conoco and the [Conoco-branded store] are completely separate entities. They are not part- ners, general partners, limited partners, joint ven- turers, nor agents of each other in any sense what- soever and neither has the power to obligate or bind the other. (Def’s App. in Supp. of Mot. for Summ. J. {10 at APP 0014; 714 at APP 0110.) To overcome this express clause of no agency relation- ship in the PMAs, the plaintiffs must produce proof to show that the true operating agreement was one which vested the right of control in the franchisor.” O’Bryant 899 S.W.2d at 272. The plaintiffs have not offered any such summary judgment evidence. All that the PMAs establish is that Conoco has contracted for protections of its trademark. The PMAs do not in and of themselves create an agency relationship. Moreover, Plaintiffs have not offered any summary judgment evidence demon- strating that Conoco controlled the details of the daily operations of the Conoco-branded stores. On the other hand, Conoco presents summary judgment evidence that issues such as the hiring and firing of employees are left to the absolute discretion of each Conoco-branded — A-32 — store. (See Decl. of Alan K. Kosley, Marketing Manager, Wholesale, Branded Marketing Gulf Coast at J11, Def’s App. in Supp. of Mot. for Summ. J. at APP 0305.) This evidence further confirms the conclusion that Conoco did not control the “means and details” of the operation of the Conoco-branded stores. Therefore, as a matter of law, Conoco-branded stores are not the agents of Conoco, Inc. See also Perry v. Burger King Corp., 924 F. Supp. 548, 554 n.4 (S.D.N.Y. 1996) (listing analogous cases finding franchisee is not the agent of the franchisor). Since the Conoco-branded stores are not agents of Defendant Conoco; it follows that the employees of a Conoco-branded store are also not the agents of Defen- dant Conoco. That being so, Defendant Conoco cannot be held liable for any of the discriminatory acts of the employees of the Conoco-branded stores. Plaintiffs Ivory, Pickett, Ross, and the Escobedos also attempt to establish Defendant Conoco’s liability by claiming that the Defendant cannot absolve itself from liability by delegating the duty not to discriminate to an agent. This argument fails for two reasons. First, the Conoco-branded stores are not agents of Conoco, so there has been no delegation of a non-delegable duty to an agent. Second, in making this argument plaintiffs rely on housing discrimination cases grounded in the underlying policies and language of the Fair Housing Act, 42 U.S.C. § 3601, et. seg, which do not apply to the situation in this case. Plaintiffs Ivory, Pickett, Ross, and the Escobedos have not offered any evidence or theory under which Defendant Conoco can be held liable; there being no genuine issue of material fact, Defendant Conoco’s Motion for Summary Judgment is granted and all claims — A-33 — of plaintiffs Ivory, Pickett, Ross, and the Escobedos against Defendant Conoco must be dismissed. D. The Claims of Plaintiffs Denise Arguello and Alberto Govea Plaintiffs Denise Arguello and Alberto Govea suit against Conoco for violations of both 42 U.S.C. § 1981 and Title II is based on an incident with the cashier at a Conoco gas station on Rando! Mill in Fort Worth, Texas. This particular station is owned and operated by Defendant Conoco, Inc. The question, therefore, be- comes to what extent may Conoco be held liable for the discriminatory acts of its employee towards a third party. The Supreme Court considered the issue of vicarious liability under 42 U.S.C. § 1981 in General Building Contractors Association v. Pennsylvania, 458 U.S. 375 (1982), but did not determine whether the mere exist- ence of an agency relationship without more is sufficient to impose liability under § 1981. In applying General Building Contractors, the Fifth Circuit has allowed for a principal to be held liable under § 1981 for the acts of an agent, with the qualification that the finding of intentional discrimination necessary to a § 1981 claim “demands a closer look at the relationship between principal and agent.” Flanagan v. A.E. Henry Commu- nity Health Servs. Ctr., 876 F.2d 1231, 1236 (5th Cir. 1989). In Flanagan, the Circuit Court found a suffi- ciently close agency relationship between the Medical and Executive Directors of a community health center and the health center itself to find the health center liable based on the acts of the Directors. Therefore, to determine Conoco’s liability for the discriminatory acts of its employee the Court will look to the existence of an — A-34 — agency relationship and the basic principles of agency law.” Under the common law of agency,’ an employer is not responsible for every tort or wrongful act committed by an employee. In general, an employer is liable only for those torts of an employee committed within the “scope ? Conoco, relying on a favorable reference to a Seventh Circuit case, Hunter v. Allis-Chalmers Corp., 797 F.2d 1417 (7th Cir. 1986), in Flanagan, 876 F.2d at 1236, pushes the argument that it is not the existence of an agency relationship with the employee which determines their liability but whether the employee was a managerial or non-managerial employee. The Court has been unable to locate Fifth Circuit precedent in support of Conoco’s argument. 3 In a recent decision examining the limits of an employer’s vicarious liability for the discriminatory acts of an employee under Title VII of the Civil Rights Act of 1964, Burlington Indus., Inc. v. Ellerth, 118 S.Ct. 2257 (1998), the Supreme Court turned to the principles of agency law. In so doing the Court relied on “the general common law of agency, rather than the law of a particular state” in an effort to establish “a uniform and predictable stan- dard” as a matter of federal law. Jd. at 2265. Before this decision, the Fifth Circuit had also utilized common law agency principles to determine an employer’s vicarious liability under Title VII. Long, 88 F.3d at 306. While this Court recognizes that in Burlington the Supreme Court was interpreting the specific meaning of a specific word in a specific statute (“employer” as used in Title VII), the general principles of uniformity and predictability of liability under a federal statute apply with equal force to § 1981. The Court also notes that, since Texas has adopted the Restatement (Second) of Agency’s general test for respondeat superior liability, the analysis would be substantially the same under the law of Texas. See Moore’s; Inc. v. Garcia, 604 S.W.2d 261 (Tex. App. 1980, no writ) (finding the Restatement (Second) of Agency is the control- ling statement of law); see also Rodriguez v. Sarabyn, 129 F.3d 760, 768 (5th Cir. 1997) (looking to Restatement (Second) of Agency in determining employer liability under Texas law). — A-35 — of employment.” An employee’s “scope of employment” has traditionally been defined as conduct “of the kind [the employee] is employed to perform,” occurring “sub- stantially within the authorized time and space limits,” and actuated, at least in part, by “a purpose to serve the master.” Id, § 228. However, an employer may be liable for the actions of an employee which are outside the scope of employment if (1) the employer intended the conduct or consequences of the actions; (2) the employer was negligent or reckless; (3) the conduct violated a non- delegable duty of the employer; or (4) the employee purported to act or to speak on behalf of the employer and there was reliance upon apparent authority; or the employee was aided in accomplishing the tort by the existence of the agency relation. Restatement (Second) of Agency, § 219 (1957). Traditionally, the intentional torts of an employee have been determined to be outside of the scope of the employee’s employment. Such acts are viewed as being committed for reasons of personal ill will and not for the purpose of serving the employer. See Id, § 235 crnt. a. illus. 2. While employers are not absolutely absolved of responsibility for their employees’ intentional torts it is “accepted that ‘it is less likely that a willful tort will properly be held to be in the course of employment and that the liability of the master for such torts will natu- rally be more limited.” Burlington, 118 S.Ct. at 2266, quoting F. Mechem, Outlines of the Law of Agency § 394, p. 266 (P. Mechem 4th ed., 1952). In this case, Plaintiffs Arguello and Govea contend that Conoco’s employee, Ms. Cindy Smith, was acting within her scope of employment when she began berat- ing them with racial slurs. Since the plaintiffs are alleging the existence of the agency relationship, they io have the burden of establishing its existence. Karl Rove & Co. v. Thornburg, 39 F.3d 1273, 1296 (5th Cir. 1994). The only summary judgment evidence Plaintiffs have offered in support of their claim of agency is that Ms. Smith was working in her job as a cashier when she engaged in her offensive behavior and that she claimed that it was her duty to refuse Ms. Arguello’s out-of-state driver's license. Even taken in the light most favorable to the Plaintiffs, this quantum of summary judgment evidence is simply insufficient to overcome the common- sense conclusion that her offensive actions were not within the scope of her employment. Plaintiffs have not furnished any summary judgment evidence establish- ing Conoco’s corporate polices as to the acceptance of credit cards from customers or requests for identifica- tion. Additionally, Plaintiffs do not provide any sum- "mary judgment evidence that Ms. Smith was under the impression that her behavior would somehow benefit her employer. Consequentiy, this Court finds that Ms. Smith was acting outside the scope of her employment and, therefore, Defendant Conoco is not liable for her personal discriminatory acts. Furthermore, Conoco cannot be held liable for Ms. Smith’s actions under any of the other agency principles delineated in Section 219 of the Restatement (Second) of Agency. Plaintiffs have not offered any summary judg- ment evidence to demonstrate Conoco intended for her to behave in this way. There is no summary judgment evidence to find Conoco reckless or negligent. Plaintiffs’ allegations do not concern a non-delegable duty. No summary judgment evidence has been offered to estab- lish that Ms. Smith was somehow aided in accomplish- ing the tort by the existence of her relationship with Conoco. Finally, Plaintiffs have not alleged that Conoco REIT. dehy) At SO a RRR A SAE SIT ORGY ROS Cire CONS wang het has in any way ratified Ms. Smith’s behavior; indeed, the facts are to the contrary. See p .3, supra. Since Conoco is not liable for the actions of Ms. Smith as a matter of law, and there are no genuine issues of material fact, Defendant Conoco’s Motion for Summary Judgment is granted with respect to Plaintiffs Arguello and Govea’s claims against Defendant Conoco. IV. CONCLUSION Defendant Conoco is entitled to judgment as a matter of law. Defendant Conoco’s Motion for Summary Judg- ment is GRANTED as to all claims of all plaintiffs. Judgment will be entered accordingly. SO ORDERED. DATED: October 7, 1998 /s/ Barefoot Sanders BAREFOOT SANDERS SENIOR U.S. DISTRICT COURT JUDGE NORTHERN DISTRICT OF TEXAS — A-38 — D STATES DISTRICT COURT HERN DISTRICT OF TEXAS H IN THE UNITE FOR THE NORT Civil Action No. 3-97-CV-0638- DENISE ARGUELLO, et al., Plaintiffs Vv CONOCO, INC., Defendant. JUDGMENT [Filed: October 7, 1998] the Court’s entered pursuant to ber 7, 1998. Memorandum Opinion and Order, filed Octo IT IS ORDERED, ADJUDGED and DECREED by the Court that the Plaintiffs take nothing by their suit against the Defendant Conoco, Inc., and that this suit be, and it is hereby, DISMISSED with prejudice. SIGNED this 7 day of October, /s/ Barefoot Sanders BAREFOOT SANDERS SENIOR U.S. DISTRICT COURT JUDGE NORTHERN DISTRICT OF TEXAS This Judgment is 1998. s — A-39 — APPENDIX C CONOCO INC. PETROLEUM MARKETER AGREEMENT This Agreement, effective on the lst day of April, 1993 (“Effective Date”), by and between Conoco Inc., a Delaware corporation (hereinafter called “Conoco”), and Classic Group, Inc. (hereinafter called “Marketer”), whose mailing address is 5840 W. Interstate 20, #280, City of Arlington, TX, Zip 76017. WITNESSETH: WHEREAS, Conoco is engaged in the business of oil exploration, refining and marketing under Conoco trade- marks and trade names, and has made a significant investment over the years in developing quality prod- ucts and promoting the Conoco trademarks and trade names; and WHEREAS, Marketer recognizes that Conoco has a protectible business interest in ensuring that Marketer’s distribution of Conoco-branded products under t [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_1157%3A1. Public record. Not legal advice.