Court Opinion

ID: 9481575
Source: CourtListenerOpinion
Date Created: 2023-08-05 08:24:23.64199+00
Date Added: 2024-06-11T17:48:25.970104
License: Public Domain

WALD, Circuit Judge,
dissenting as to Part H.B.:
I dissent from the majority’s holding that 42 U.S.C. § 1981 does not guarantee free*1575dom from discriminatory contract terminations on the basis of race or creed. I believe that a reasonable interpretation of § 1981’s equal “right [] to make [] contracts” necessarily includes the right to be free from discriminatory termination of those contracts and that Patterson v. McLean Credit Union, 491 U.S. 164, 109 S.Ct. 2363, 105 L.Ed.2d 132 (1989), supports such an interpretation. Accordingly, in my view, the appellants have stated a valid claim under § 1981.
I.
The majority offers two arguments in support of its holding that racially-motivated contract terminations are not actionable under § 1981.1 First, the majority contends that Patterson establishes that the scope of § 1981 does not extend to “post-formation conduct” and that, therefore, contract termination (which indisputably occurs “postformation”) is not actionable under that section. Second, the majority equates termination of a contract with a breach of contract. Since Patterson indicated that racial harassment to the point of breach was beyond the scope of § 1981, the majority argues that contract terminations are similarly not actionable under that section. I believe that each of these arguments is infirm.
A.
The majority’s “postformation” argument is flawed in two ways. First, the analysis relies on selective quotations from the Patterson opinion. Throughout Patterson, the Court spoke not simply of “postformation conduct” but more precisely of “postformation conduct by the employer relating to the terms and conditions of continuing employment.” 109 S.Ct. at 2374 (emphasis supplied). See also id. at 2372 (“problems that may arise later from the conditions of continuing employment”); id. at 2373 (“postformation conduct [that] implicates ... the conditions of continuing employment”); Prather v. Dayton Power & Light Co., 918 F.2d 1255, 1260 (6th Cir.1990) (Boggs, J., dissenting). Termination, although irrefutably “postfor-mation,” does not concern “continuing employment” — but rather the very discontinuation of employment. The holding of Patterson was that harassing conduct in the course of continuing employment was not actionable under § 1981; that case said nothing about the complete termination of employment.
More critically, the majority’s argument depends, almost entirely on drawing very fine and formal distinctions among three concepts: “refusal to contract,” “contract termination,” and “refusal to renew a contract” — even when actual events indicate that any or all of these concepts might apply. The majority contends that the first of these (refusal to contract) is always actionable under § 1981; that the second (contract termination) is never actionable; and that the third (refusal to renew) is sometimes actionable. Accordingly, the sometimes-metaphysical distinctions among these three concepts are outcome-determinative.
For example, in this case, CSI heard rumors of Group Health’s dissatisfaction with CSI’s services and, in mid-September 1987, promptly offered to lower the price for its services. Group Health rejected the offer and, on October 6, 1987, gave notice that it was cancelling its contract with CSI. The majority holds that Group Health’s rejection of CSI’s new offer was not a refusal to *1576contract but rather the termination of an existing contract. Similarly, the majority holds that Group Health’s cancellation of the automatically renewing contract was not a refusal to renew but instead also a contract termination. Therefore, the majority concludes, neither of Group Health’s actions falls within the scope of § 1981.
As this scenario indicates, there are two types of formalism at work here. The first is the formalism of classification: for example, was Group Health’s rejection of CSI’s new offer a (possibly actionable) refusal to renew — or a (never actionable) termination? The survival of CSI’s cause of action turns on this characterization. A second and equally Orwellian formalism is implicated by the timing of the parties’ actions: under the majority’s analysis, if CSI had made a second offer just a few days later — for example, on October 7, just after Group Health terminated the contract — then Group Health’s rejection of the new offer would presumably have constituted a refusal to contract and would therefore be actionable under § 1981.
The pitfalls of the timing-related formalism are illustrated by the Third Circuit’s recent decision in Perry v. Command Performance, 913 F.2d 99 (3d Cir.1990). In that case, Perry’s husband telephoned a hair salon to set up an appointment for his wife. The scheduled hairdresser fell ill and Abbott was asked to style Perry's hair. Abbott, however, balked and “responded loudly, ‘No, no, no, no! I don’t do black hair.... Oh, no, I’m not going to do your hair, I’m from New Hampshire and I don’t deal with blacks.’ ” Id. at 100. The Third Circuit, applying reasoning similar to the majority’s, remanded the ease to the district court for a finding of when the contract between Perry and the salon was formed. Under this analysis, Perry’s § 1981 cause of action turns solely on whether her contract with the salon was made when her husband set the appointment. If it was, then Abbott’s refusal to serve Perry constituted contract termination, and was not barred by § 1981; if, however, a contract for a hair stylist’s services is created only when performance begins, then Abbott’s action was a refusal to contract, and was barred by § 1981.2
The real world of contract belies such stark formalisms. In the context of automatically renewing contracts — such as CSI’s agreement with Group Health or the standard employment-at-will contract — termination and a refusal to renew are, for all intents and purposes, the same thing. In such situations, it is pointless (or, what is worse, conclusory) to quibble over whether the cancellation of a contract is “preformation” or “postformation” conduct — cancellation is both: it is both the end of an existing contract and a refusal to enter into a new contract. Despite these realities, the majority’s analysis hangs precariously upon such ethereal distinctions. Such formalism, I believe, is both unsound and inappropriate in basic civil rights law.
B.
The majority’s second argument is also infirm. Patterson, the majority notes, held that harassment — including harassment amounting to a breach of contract — is not actionable under § 1981. The majority likens termination to harassment to the point of breach and concludes that termination is also not actionable under § 1981. See Majority opinion (“Maj. op.”) at 1571. But the majority’s analogy is flawed: termination is critically different from both harassment and breach.
As recognized in a range of legal contexts, a contract consists of a bundle of rights. Cf. Hishon v. King & Spalding, 467 U.S. 69, 74-75, 104 S.Ct. 2229, 2233, 81 L.Ed.2d 59 (1984); Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972). An employment contract, for example, encompasses, inter alia, claims to certain wages, benefits, privileges, work conditions, and remedies. Harassment or other discrimination in the performance of a contract deprives the target of one or more of these claims. Even when a party is harassed to the point of breach, she retains *1577her rights under the contract and can enforce the contract under state law. But contract termination, in contrast, strips a target of all of her claims, of the entire bundle of rights.3 And in this critical way, termination is different in kind from harassment or breach.
The Patterson Court itself made this distinction in holding that, while there would ordinarily be no cause of action for a discriminatory failure to promote, if “the promotion rises to the level of an opportunity for a new and distinct relation between the employee and the employer,” § 1981 would be implicated. 109 S.Ct. at 2377 (emphasis supplied) (citing Hishon). To extend the metaphor, a failure to promote is not actionable under § 1981 if the new position would alter only a few sticks in the bundle (by providing a pay raise, or a new office, or a new title), but rather only if the new position effectively involved an entirely new bundle of rights — such as the move from law associate to partner in Hishon. By severing all relations between the parties, termination represents an even more dramatic change than a Hishon-type promotion and so falls completely outside of Patterson’s holding.
This understanding of § 1981’s protection against discriminatory termination is also supported by the Supreme Court’s rulings on the scope of § 1982, which guarantees all persons equal rights “to inherit, purchase, sell, hold and convey real and personal property.” 42 U.S.C. § 1982.4 The Court has frequently ruled that § 1982 bars racially-motivated refusals to sell or rent property. See, e.g., Sullivan v. Little Hunting Park, Inc., 396 U.S. 229, 90 S.Ct. 400, 24 L.Ed.2d 386 (1969); Tillman v. Wheaton-Haven Recreation Association, Inc., 410 U.S. 431, 93 S.Ct. 1090, 35 L.Ed.2d 403 (1973). However, in Memphis v. Greene, 451 U.S. 100, 101 S.Ct. 1584, 67 L.Ed.2d 769 (1981), the Court indicated that not all infringements on the use of property were within the reach of § 1982. In Greene, the city closed the main thoroughfare between an all-white neighborhood and a predominantly black neighborhood. Although the closing was found to “inconvenience” black residents, the Court concluded that such an injury “does not involve any impairment of the kind of property interests that we have identified as being within the reach of § 1982.” Id. at 124, 101 S.Ct. at 1598. As in property, so as in contract: although a partial deprivation of equal rights is not actionable, a total deprivation is actionable.
Thus, contrary to the suggestion of the majority, there is a critical difference between breach and termination, between Patterson's harassment and Group Health’s rescission: while Patterson retained some rights under her contract, CSI was left with no contractual rights whatsoever. Simply put, discriminatory contract termination involves nothing less than the complete wranaking of contracts and thus falls squarely within the scope of § 1981’s guarantee of “the same right [to] make [] contracts.”
II.
Ultimately, the shortcomings of the majority’s analysis stem from its constricted interpretation of § 1981. In narrowly interpreting § 1981’s guarantee to “[a]ll persons [of] the same right ... to make and enforce contracts” the majority must distinguish “formation” from “termination” and “renewal” and ends up entangled in legal formalisms and distinctions that are analytically unsatisfying.
*1578I would apply a more straightforward interpretation of § 1981. In my view, § 1981's guarantee of “the same right [ ] to make [] contracts” prohibits persons from refusing to stand in a contractual relationship with another party solely because of that party’s race. Whether that refusal takes the form of a refusal to contract, a termination, or a refusal to renew a contract makes no difference. In each case, one party is wholly denied the opportunity to engage in contractual relations on the basis of his race. Interpreting § 1981 in this way, I believe that freedom from racially-motivated termination of a contract is, both practically and logically, an inextricable aspect of the equal right “to make [ ] contracts.” 5
As a practical matter, if § 1981 prohibits an employer from refusing to hire an applicant because of her race, yet allows the employer to fire that person the next day because of her race, then the law’s promise of “the same right [ ] to make [ ] contracts” is empty. Section 1981 cannot meaningfully be interpreted to distinguish between the employer who says to an applicant face-to-face “I would hire you, but for your race” and the employer who hires a person sight unseen and then, upon meeting him, promptly fires him because of his race. In real-life terms, the employee who is not hired and the employee who is fired end up in precisely the same place: without a job because of the color of their skins.
As a logical matter as well, the equal right to make contracts necessarily encompasses the freedom from racially-motivated contract terminations. Stated broadly, contracts and contract law comprise an effort to reduce future uncertainty in social interaction, to forge predictability by melding the institution of promises and the rule of law. As the opening sentence of Corbin’s classic treatise states: “The main purpose of contract law is the realization of reasonable expectations induced by promises.” 1 Corbin on Contracts § 1 (1963). By enacting § 1981, Congress established that this basic form of power — the power to use legal institutions to reduce uncertainty about the future — must be equally available to persons of all races.6 Congress’ intent is as thwarted by the racially-motivated termination of contracts as it is by the racially-motivated refusal to contract. Either practice denies an individual equal access to contracts and contract law, and either practice is a violation of § 1981.
In sum, like the Eighth Circuit panel whose decision is now pending reconsideration, I conclude that “[t]he right to make contracts would be rendered virtually meaningless unless it encompasses the right to be free from discriminatory deprivations of such contracts.” Hicks v. Brown Group, Inc., 902 F.2d 630, 639 (8th Cir.1990), vacated, — U.S. -, 111 S.Ct. 1299, 113 L.Ed.2d 234 (1991). Any narrower interpretation of § 1981 is both analytically unsatisfying and morally troubling.
For these reasons, I respectfully dissent.

. Patterson itself did not decide whether discriminatory contract terminations were actionable under § 1981. See Jett v. Dallas Independent School District, 491 U.S. 701, 109 S.Ct. 2702, 2709, 105 L.Ed.2d 598 (1989); Lytle v. Household Manufacturing, Inc., 494 U.S. 545, 110 S.Ct. 1331, 1339, 108 L.Ed.2d 504 (O’Connor, J., concurring) (1990). The Seventh Circuit also recognized as much, stating:
We show no disrespect to the Supreme Court by suggesting that the scope of Patterson is uncertain. The glory of the Anglo-American system ... is that general principles are tested in the crucible of concrete controversies. A court cannot be assumed to address and resolve in the case in which it first lays down a rule every controversy within the semantic reach of the rule.
Malhotra v. Cotter & Co., 885 F.2d 1305, 1312 (7th Cir.1989).

. For a further discussion of such anomalies, see Burton, Racial Discrimination in Contract Performance, 25 Harv.C.R.-C.L.L.Rev. 431, 431-33 (1990).

. The majority’s suggestion that a "termination ... is more appropriately dealt with under state contract law,” Maj. op. at 1571, seems to confuse termination with breach. Like the plaintiff in this case, most terminated parties in a commercial contract would have no state contract law claim.

. Because the "operative language of both § 1981 and § 1982 is traceable to the [Civil Rights] Act of [ ] 1866,” the Supreme Court has suggested that, whenever possible the two sections be given a common interpretation. Tillman v. Wheaton-Haven Recreation Association, Inc., 410 U.S. 431, 439-40, 93 S.Ct. 1090, 1094-95, 35 L.Ed.2d 403 (1973); see also Shaare Tefila Congregation v. Cobb, 481 U.S. 615, 107 S.Ct. 2019, 95 L.Ed.2d 594 (1987).

. The legislative history of § 1981 strongly supports this understanding of the equal "right [ ] to make [ ] contracts." See Hicks v. Brown Group, Inc., 902 F.2d 630, 642-48 (8th Cir.1990), vacated, — U.S. -, 111 S.Ct. 1299, 113 L.Ed.2d 234 (1991); see also Sullivan, Historical Reconstruction, Reconstruction History, and the Proper Scope of Section 1981, 98 Yale L.J. 541 (1989).

. This view of § 1981 makes sense of that section's protection of both the right to "make” and the right to “enforce” contracts. If discriminatory conduct takes place within a contract (such as breach or harassment), a plaintiff can seek redress in contract law and § 1981 need only protect the plaintiffs access to the courthouse (the right to "enforce”); if, however, discriminatory conduct fully bars a plaintiff’s access to contracts and contract law and deprives her of a contract-law remedy (as does termination), § 1981 creates a more substantive cause of action (the right to "make” contracts).