OPINION OF THE COURT
DOMINO'S PIZZA, INC. V. MCDONALD
546 U. S. ____ (2006)
SUPREME COURT OF THE UNITED STATES
NO. 04-593
DOMINO’S PIZZA, INC., et al., PETITIONERS
v. JOHN McDONALD
on writ of certiorari to the united states court of
appeals for the ninth circuit
[February 22, 2006]
Justice Scalia delivered the
opinion of the Court.
We decide whether a plaintiff who
lacks any rights under an existing contractual relationship with
the defendant, and who has not been prevented from entering into
such a contractual relationship, may bring suit under Rev. Stat.
§1977, 42 U. S. C. §1981.
I
Respondent John McDonald, a black
man, is the sole shareholder and president of JWM Investments, Inc.
(JWM), a corporation organized under Nevada law. He sued
petitioners (collectively Domino’s) in the District Court for the
District of Nevada, claiming violations of §1981. The allegations
of the complaint, which for present purposes we assume to be true,
were as follows.
JWM and Domino’s entered into
several contracts under which JWM was to construct four restaurants
in the Las Vegas area, which would be leased to Domino’s. After the
first restaurant was completed, Domino’s agent Debbie Pear refused
to execute the estoppel certificates for JWM required by the
contracts to facilitate JWM’s bank financing. The relationship
between the parties further deteriorated when Pear persuaded the
Las Vegas Valley Water District to change its records to show
Domino’s, rather than JWM, as the owner of the land JWM had
acquired for restaurant construction. McDonald had to go to the
Water District to prove JWM’s ownership of the land. In the course
of what were apparently many and fruitless discussions between
McDonald and Pear, McDonald “explained that he intended to see [the
contracts] through to completion,” even though Pear made clear that
unless he agreed to back out of the contractual relationship, he
would suffer serious consequences. App. to Pet. for Cert. 12–13. At
one point Pear said to McDonald “ ‘I don’t like dealing with
you people anyway,’ ” refusing to specify what she meant by
“ ‘you people.’ ”
Id., at 13. Pear threatened to
use Domino’s attorneys to “bury” McDonald if he should sue.
Ibid. The contracts between Domino’s and JWM ultimately
remained uncompleted.
At least in part because of the failed
contracts, JWM filed for Chapter 11 bankruptcy. The trustee for
JWM’s bankruptcy estate initiated an adversary proceeding against
Domino’s for breach of contract. For whatever reason, the trustee
chose not to assert a §1981 claim alleging Domino’s interference
with JWM’s right to make and enforce contracts. The breach of
contract claim was settled for $45,000, and JWM gave Domino’s a
complete release. Consequently, no further claims arising out of
the same episode could be pursued on JWM’s behalf.[
Footnote 1] While the bankruptcy proceedings
were still ongoing, McDonald filed the present §1981 claim against
Domino’s in his personal capacity.
The gravamen of McDonald’s complaint was that
Domino’s had broken its contracts with JWM because of racial animus
toward McDonald, and that the breach had harmed McDonald personally
by causing him “to suffer monetary damages and damages for pain and
suffering, emotional distress, and humiliation.”
Id., at
16. The complaint demanded that Domino’s discharge its “obligations
under the contracts which McDonald would have received, but for the
discriminatory practices, including, but not limited to front pay,
back pay and other lost benefits,” as well as “compensatory damages
for pecuniary losses, including pain and suffering, emotional
distress, mental anguish, and humiliation,” and punitive damages.
Id., at 17.
Domino’s filed a motion to dismiss the
complaint for failure to state a claim. It asserted that McDonald
could bring no §1981 claim against Domino’s because McDonald was
party to no contract with Domino’s. The District Court granted the
motion. It noted that Domino’s had “rel[ied] on the basic
proposition that a corporation is a separate legal entity from its
stockholders and officers,”
id., at 6, and concluded that
a corporation may have “standing to assert a §1981 claim” but that
“a president or sole shareholder may not step into the shoes of the
corporation and assert that claim personally.”
Id., at 7
(citing
Guides, Ltd. v.
Yarmouth Group Prop.
Management, Inc., 295 F. 3d 1065, 1072–1073 (CA10
2002)).
The Court of Appeals for the Ninth Circuit
reversed. It agreed that an “injury suffered only by the
corporation” would not permit a shareholder to bring a §1981
action. 107 Fed. Appx. 18 (2004). But relying on its earlier
decision in
Gomez v.
Alexian Bros. Hospital of San
Jose, 698 F. 2d 1019, 1021–1022 (1983), the Ninth Circuit
concluded that when there are “injuries distinct from that of the
corporation,” a nonparty like McDonald may nonetheless bring suit
under §1981. 107 Fed. Appx., at 18–19. The Court of Appeals
acknowledged that this approach set it apart from other Circuits.
Ibid. We granted certiorari.
544 U. S. 998
(2005).
II
Among the many statutes that
combat racial discrimination, §1981, originally §1 of the Civil
Rights Act of 1866, 14 Stat. 27, has a specific function: It
protects the equal right of “[a]ll persons within the jurisdiction
of the United States” to “make and enforce contracts” without
respect to race. 42 U. S. C. §1981(a). The statute currently
defines “make and enforce contracts” to “includ[e] the making,
performance, modification, and termination of contracts, and the
enjoyment of all benefits, privileges, terms, and conditions of the
contractual relationship.” §1981(b).
McDonald argues that the statute
must be read to give him a cause of action because he “made and
enforced contracts” for JWM. On his reading of the text, “[i]f
Domino’s refused to deal with the salesman for a pepperoni
manufacturer because the salesman was black, that would violate the
section 1981 right of the salesman to make a contract on behalf of
his principal.” Brief for Respondent 12. We think not. The right to
“make contracts” guaranteed by the statute was not the
insignificant right to act as an agent for someone else’s
contracting—any more than it was the insignificant right to act as
amanuensis in writing out the agreement, and thus to “make” the
contract in that sense. Rather, it was the right—denied in some
States to blacks, as it was denied at common law to children—to
give and receive
contractual rights on one’s own
behalf
. Common usage alone is enough to establish this,
but the text of the statute makes this common meaning doubly clear
by speaking of the right to “make
and enforce” contracts.
When the Civil Rights Act of 1866 was drafted, it was well known
that “[i]n general a mere agent, who has no beneficial interest in
a contract which he has made on behalf of his principal, cannot
support an action thereon.” 1 S. Livermore, A Treatise on the Law
of Principal and Agent 215 (1818).[
Footnote 2]
Any claim brought under §1981, therefore, must
initially identify an impaired “contractual relationship,”
§1981(b), under which the plaintiff has rights.[
Footnote 3] Such a contractual relationship need
not already exist, because §1981 protects the would-be contractor
along with those who already have made contracts. We made this
clear in
Runyon v.
McCrary, 427 U. S. 160 (1976),
which subjected defendants to liability under §1981 when, for
racially-motivated reasons, they prevented individuals who
“
sought to enter into contractual relationships” from
doing so,
id., at 172 (emphasis added). We have never
retreated from what should be obvious from reading the text of the
statute: Section 1981 offers relief when racial discrimination
blocks the creation of a contractual relationship, as well as when
racial discrimination impairs an existing contractual relationship,
so long as the plaintiff has or would have rights under the
existing or proposed contractual relationship.
Absent the requirement that the plaintiff
himself must have rights under the contractual relationship, §1981
would become a strange remedial provision designed to fight racial
animus in all of its noxious forms, but only if the animus and the
hurt it produced were somehow connected to
somebody’s
contract. We have never read the statute in this unbounded—or
rather,
peculiarly bounded—way. See,
e.g.,
Patterson v.
McLean Credit Union, 491 U. S. 164, 176
(1989);
Burnett v.
Grattan, 468 U. S. 42, 44, n. 2
(1984);
General Building Contractors Assn., Inc. v.
Pennsylvania, 458 U. S. 375, 396
(1982).
Nor has Congress indicated that we should. We
held in
Patterson that the prior version of §1981 did “not
apply to conduct which occurs after the formation of a contract and
which does not interfere with the right to enforce established
contract obligations.” 491 U. S., at 171. In 1991, Congress amended
the statute, see 105 Stat. 1071, adding §1981(b), which defines
“make and enforce” to bring postformation conduct, including
discriminatory termination, within the scope of §1981. See
Jones v.
R. R. Donnelley & Sons Co.,
541 U. S. 369,
383 (2004). But while Congress revised
Patterson’s
exclusion of postformation conduct, it let stand
Patterson’s focus upon contract obligations. In fact, it
positively reinforced that element by including in the new §1981(b)
reference to a “
contractual relationship.”
McDonald’s complaint does identify a
contractual relationship, the one between Domino’s and JWM. But it
is fundamental corporation and agency law—indeed, it can be said to
be the whole purpose of corporation and agency law—that the
shareholder and contracting officer of a corporation has no rights
and is exposed to no liability under the corporation’s contracts.
McDonald now makes light of the law of corporations and of
agency—arguing, for instance, that because he “negotiated, signed,
performed, and sought to enforce the contract,” Domino’s was wrong
to “insist that [the contract] somehow was not his ‘own.’ ”
Brief for Respondent 4. This novel approach to the law contradicts
McDonald’s own experience. Domino’s filed a proof of claim against
JWM during its corporate bankruptcy; it did
not proceed
against McDonald personally. The corporate form and the rules of
agency protected his personal assets, even though he “negotiated,
signed, performed, and sought to enforce” contracts for JWM. The
corporate form and the rules of agency similarly deny him rights
under those contracts.
As an alternative to ignoring corporation and
agency law, McDonald proposes a new test for §1981 standing: Any
person who is an “actual target” of discrimination, and who loses
some benefit that would otherwise have inured to him had a contract
not been impaired, may bring a suit. Under this theory, an
individual is the “actual target” if he was the
reason a
defendant chose to impair its contractual relationship with a third
party. McDonald’s formulation simply ignores the explicit statutory
requirement that the plaintiff be the “perso[n]” whose “right … to
make and enforce contracts,” §1981(a), was “impair[ed],” §1981(c),
on account of race. It is just the statutory construction we have
always rejected.
McDonald points to several of our prior cases
involving plaintiffs whose status as contracting parties was
unclear. Because they nonetheless prevailed, McDonald reasons,
contractual privity cannot be a
sine qua non of a §1981
claim. In those cases, however, we did not discuss, much less
decide, the privity question. In
Shaare Tefila
Congregation v.
Cobb, 481 U. S. 615 (1987), we
decided the narrow question whether Jews are a separate and
protected race under §1982.
Id., at 618. Similarly, in
Runyon, supra, the arguments and the opinion
addressed “only two basic questions: whether §1981 prohibits
private, commercially operated, nonsectarian schools from denying
admission to prospective students because they are Negroes, and, if
so, whether that federal law is constitutional as so applied.”
Id., at 168 (footnote omitted). And in
Goodman v.
Lukens Steel Co., 482 U. S. 656 (1987), we
decided only the two contested issues: that §1981 was subject to
the state personal injury limitations period,
id., at
660–664, and that it violates Title VII of the Civil Rights Act of
1964 and §1981 for a union to decline to press black employees’
grievances under the governing collective-bargaining agreement,
id., at 669. “The Court often grants certiorari to decide
particular legal issues while assuming without deciding the
validity of antecedent propositions, and such assumptions—even on
jurisdictional issues—are not binding in future cases that directly
raise the questions.”
United States v.
Verdugo-Urquidez, 494 U. S. 259, 272
(1990) (citations omitted).
McDonald resorts finally to policy arguments.
Unless his reading of the statute prevails, he warns, many
discriminatory acts will go unpunished. Corporations, for instance,
may choose not to bring suit for the racially motivated contract
breach. It is not likely to be a common occurrence that the victim
of a contract breach will forgo a potent available remedy. Injured
parties “usually will be the best proponents of their own rights,”
Singleton v.
Wulff, 428 U. S. 106, 114
(1976). And if and when “the holders of those rights … do not wish
to assert them,”
id., at 113–114, third parties are not
normally entitled to step into their shoes. Moreover, §1981
is only one of a multitude of civil rights statutes. Many of
McDonald’s hypothetical examples of unpunished discrimination would
in fact be reachable under Title VII—or even under general criminal
law. See,
e.g., Brief for Respondent 27 (concerning a
scenario in which “Domino’s officials had beaten up McDonald in an
attempt to intimidate him”). The most important response, however,
is that nothing in the text of §1981 suggests that it was meant to
provide an omnibus remedy for
all racial injustice. If so,
it would not have been limited to situations involving contracts.
Trying to make it a cure-all not only goes beyond any expression of
congressional intent but would produce satellite §1981 litigation
of immense scope. McDonald’s theory would permit class actions by
all the minority employees of the nonbreaching party to a broken
contract (or, for that matter, minority employees of any company
failing to receive a contract award), alleging that the reason for
the breach (or for the refusal to contract) was racial animus
against them.
Consistent with our prior case law, and as
required by the plain text of the statute, we hold that a plaintiff
cannot state a claim under §1981 unless he has (or would have)
rights under the existing (or proposed) contract that he wishes “to
make and enforce.” Section 1981 plaintiffs must identify injuries
flowing from a racially motivated breach of their own contractual
relationship, not of someone else’s. Because the District Court
correctly recognized and applied these principles, the Ninth
Circuit erred in reversing its judgment.[
Footnote 4]
* * *
The judgment of the Ninth Circuit
is accordingly
Reversed.
Justice Alito took no part in the
consideration or decision of this case.
Footnote 1
Since JWM settled its claims and is not
involved in this case, we have no occasion to determine whether, as
a corporation, it
could have brought suit under §1981. We
note, however, that the Courts of Appeals to have considered the
issue have concluded that corporations may raise §1981 claims. See,
e.g., Hudson Valley Freedom Theater, Inc. v.
Heimbach, 671 F. 2d 702, 706 (CA2 1982).
Footnote 2
McDonald’s “pepperoni salesman” analogy is
imprecise. It would better parallel the facts here if the analogy
had been to a salesman unable to collect on accounts receivable
because he was black, rather than to one who was unable to make the
contract in the first place. The fundamental point, however, is the
same: An individual seeking to make
or enforce a contract
under which he has rights will have a claim under 42 U. S. C.
§1981, while one seeking to make
or enforce a contract
under which someone else has rights will not.
Footnote 3
We say “under which the plaintiff has rights”
rather than “to which the plaintiff is a party” because we do not
mean to exclude the possibility that a third-party intended
beneficiary of a contract may have rights under §1981. See,
e.g., 2 Restatement (Second) of Contracts §304, p. 448
(1979) (“A promise in a contract creates a duty in the promisor to
any intended beneficiary to perform the promise, and the intended
beneficiary may enforce the duty”). Neither do we mean to affirm
that possibility. See,
e.g.,
Blessing v.
Freestone, 520 U. S. 329, 349
(1997) (Scalia, J., concurring) (“Until relatively recent times,
the third-party beneficiary was generally regarded as a stranger to
the contract, and could not sue upon it”). The issue is not before
us here, McDonald having made no such claim.
Footnote 4
McDonald also argues in his merits brief (for
the first time) that we should affirm the Ninth Circuit’s judgment
because Domino’s interfered with McDonald’s own contracts with JWM.
Counsel for McDonald asserted at oral argument that this contention
is not a new argument (see this Court’s Rule 15.2), but is a “sort
of formulatio[n] of the same argument” that he had properly raised.
Tr. of Oral Arg. 28. As such, it fails for the same reasons that
the argument fails in its original incarnation. McDonald
acknowledges that JWM did not breach any contractual obligation to
him, see Brief for Respondent 44, and so any injury he may have
received still derived from impairment of the contractual
relationship between JWM and Domino’s, under which McDonald has no
rights.
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