Opinion ID: 162486
Heading Depth: 2
Heading Rank: 4

Heading: Discriminatory Referrals Apart from Contract

Text: 84 SPI argues that, even if its contract-based claim fails, its suit should have survived summary judgment based on a pure discriminatory referral theory. That is, SPI argues that § 1981 bars a party (Allstate) from discriminating on the basis of race when it makes referrals which lead to contracts between the referred party (SPI) and third parties (Allstate's insureds). 4 In light of the standards set forth by courts addressing this theory of liability, the district court found that the evidence in this case did not support such a § 1981 claim, and we agree. 85 In Phelps v. Wichita Eagle-Beacon, 886 F.2d 1262 (10th Cir.1989), the defendant newspaper ran a story about Phelps. Phelps sued the newspaper, alleging, inter alia, that the story (which Phelps viewed as hostile) interfered with his `prospective business opportunities' in violation of § 1981. Id. at 1267. We rejected this claim with the following explanation: 86 [W]e find that vague and conclusory allegation insufficient to state a deprivation of the right to make and enforce contracts that is protected by Section 1981. Plaintiff has the same right as others to enter into contracts with those who wish to contract with him. Even if the state [sic] has defamed him and thus arguably made him less attractive to some who otherwise might want to contract with him, the defamation does not deny him the basic right to contract. 87 Id. (citation to Patterson omitted). Although Phelps pre-dates the Civil Rights Act of 1991, we recently have cited Phelps for the proposition that a § 1981 claim for interference with the right to make and enforce a contract must involve the actual loss of a contract interest, not merely the possible loss of future contract opportunities. Hampton v. Dillard Dep't Stores, Inc., 247 F.3d 1091, 1104 (10th Cir.2001) (internal quotation marks omitted). 88 Two years after Phelps, the Seventh Circuit decided Daniels v. Pipefitters' Ass'n Local Union No. 597, 945 F.2d 906 (7th Cir.1991). The defendant union operated a job referral service pursuant to a collective bargaining agreement. Employers who needed welders or pipefitters would call the union to inform the union of its labor needs, and the union would refer the members. The job referral system was an important source of jobs. Some contractors, including ... the largest contractor in the area, made a practice of hiring only those workers referred from the union. Id. at 911. Because Local 597's job referral service was the primary mechanism through which contractors hired union employees, the court concluded that [i]n essence, no referral meant no job and no opportunity for union members to enter into employment contracts with employers. Id. at 914. Daniels was an African-American member of Local 597 who alleged that the union racially discriminated against its African-American members in making referrals in violation of § 1981. 89 The union appealed from a jury verdict in Daniels's favor, arguing that it did not interfere with Daniels's right to make contracts because its referral service was nothing more than a mechanism to encourage union members to find employment. Id. Alternatively, the defendant argued that [o]bstructing someone's right to contract with others is ... unactionable under § 1981. Id. (emphasis added). The court rejected both of these arguments: 90 This kind of race-based impediment to contract formation constitutes exactly the sort of racially discriminatory interference with the right to contract that remains actionable under § 1981. To hold otherwise would impose a sort of § 1981 privity of contract requirement that would effectively protect third parties such as labor unions from § 1981 liability. 91 .... Local 597 is not an unrelated third party whose interference with the contract bears an attenuated or haphazard connection to contracting between its members and the employer. On the contrary, Local 597 is the necessary intermediary and conduit connecting job opportunities to job referrals. 92 Id. at 914-15. 93 Three district court opinions also offer insight on this issue. In Vakharia v. Swedish Covenant Hospital, 765 F.Supp. 461 (N.D.Ill.1991), Vakharia was a doctor who alleged that the defendant hospital violated § 1981 when it interfered with her ability to contract with patients by limiting the number of patients she could see, removing her from a first call schedule, and ultimately suspending her. Id. at 471. The court stated that § 1981 prohibits discriminatory interference by a third party with the exercise of the right to make contracts. Id. The court concluded that the alleged interferences (e.g., limiting the number of patients) all seem to fall easily within the rubric of proscribed conduct and allowed Vakharia's § 1981 claim to proceed. Id. at 471-72. 94 In Morrison v. American Board of Psychiatry & Neurology, Inc., 908 F.Supp. 582 (N.D.Ill.1996), the defendant board was responsible for certifying psychiatrists such as Morrison. Morrison alleged that certification is a large, if not the primary factor which patients consider and many hospitals require in choosing or hiring a physician. Id. at 583 (internal quotation marks omitted). The board argued that this allegation was insufficient because Morrison has not alleged that Board has interfered with her efforts to make a specific contract, as contrasted with assertions of `lost economic opportunities' that are too speculative to be recognized under Section 1981, and because Board does not have the kind of `active control' over Morrison's ability to contract that is needed to call Section 1981 into play. Id. at 587. The court rejected these arguments and upheld Morrison's claim. Morrison has alleged more than abstract or pie-in-the-sky lost economic opportunities. She says expressly that without Board certification she will suffer the identifiable harm of being unable to contract with the many medical facilities that require Board certification. Id. at 588. The court distinguished Phelps as involving a speculative assertion that contrasts sharply with the Morrison allegations that ... many medical facilities and private patients make Board certification a prerequisite to employment. Id. 95 Finally, in Shirkey v. Eastwind Community Development Corp., 941 F.Supp. 567 (D.Md.1996), Shirkey challenged his non-hiring for a position under § 1981. In addition to suing the non-profit employer, he also sued the church organization that ran the non-profit and allegedly promulgated the discriminatory policy. The church argued that it could not be sued under § 1981 because it was not Shirkey's employer. Citing Daniels and Vakharia, the court noted that interference with third-party contracting is actionable under § 1981. Id. at 573. Because the church formulated the policy that resulted in Shirkey's non-hiring, it cannot credibly claim an attenuated and distant relationship between its actions and the hiring decision. Id. at 573-74. 96 In the case at hand, the district court rejected SPI's argument on the following basis: 97 [T]he Court finds Daniels [discussed above] to be inapplicable. 98 In Daniels, the union's job referral service was described as the necessary intermediary and conduit connecting job opportunities to job referrals. In this case, there has been no evidence presented that being placed on the QVP list was a necessary requirement for SPI in order to enter into contracts with Allstate's customers/insureds. In fact, plaintiff admits that from 1990 to the present, it received approximately two (2) to ten (10) referrals per year from the Allstate claims office. This statistic includes the years prior to 1996, when it is undisputed that plaintiff was not on the QVP list. 99 Accordingly, the court finds the cases offered in support of plaintiff's assertion that its claim is still actionable even without the existence of a contract or contractual right, to be factually and materially distinguishable. See Daniels, 945 F.2d at 914 (finding that in essence, no referral meant no job and no opportunity for union members to enter into employment contracts with employers); Morrison v. Am. Bd. of Psychiatry & Neurology, Inc., 908 F.Supp. 582 (N.D.Ill.1996) (section 1981 claim was supported by allegation that Board discriminated against plaintiff based on her race by denying board certification which was required in order to practice psychiatry with many medical facilities); Vakharia, 765 F.Supp. at 472 (finding that plaintiff was only able to obtain patients through assignment by Hospital and referral by staff surgeons). Thus, viewing the facts and evidence in the light most favorable to plaintiff, the Court finds that Allstate was not in a position to interfere with plaintiff's ability to enter into new contracts as would support a claim under § 1981. 100 We agree with the district court that SPI has failed to present a claim under § 1981. Relief is available under § 1981 where a party discriminatorily uses its authority to preclude an individual from securing a contract with a third party. However, this requires the individual to show that the party both possessed sufficient authority to significantly interfere with the individual's ability to obtain contracts with third parties, and that the party actually exercised that authority to the individual's detriment. We believe SPI falls short in both respects. SPI's complaint is only that it did not always receive the benefit of referrals by Allstate, but § 1981 does not support such a claim.