Agency Principles of Sec. 1981 (Civil Rights Act)

Domino's Pizza, Inc. v. McDonald

John McDonald (a black man) is the sole shareholder and president of JWM Investments, which entered into several contracts with Domino’s pizza. Domino’s agent, Debbie Pear, refused to execute estoppel certificates. The relationship between the two companies became progressively worse. At one point Pear said “I don’t like dealing with you people anyway.” JWM filed for chapter 11, and settled the breach of contract claim. McDonald filed his own (Sec. 1981) claim, arguing that Domino’s had broken its contracts because of racial animus, and seeking damages. The District court held that even as a sole shareholder and president, since the contracts were between JWM and Domino’s McDonald had no claim. The Ninth Circuit held that where there are “injuries distinct from that of the corporation,” a nonparty could bring suit.

Section 1981 was originally Section 1 of the Civil Rights Act of 1866, and protects the equal rights of all “persons within the jurisdiction of the United States [to] make and enforce contracts” without respect to race. The Court here holds that the right to “make and enforce contracts” did not include the right to “act as an agent for someone else contracting. Instead, the Court argues, “make” compliments the word “enforce,” meaning that 1981 only entitles all persons to “give and receive contractual rights on one’s own behalf.” “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.” Congress chose to amend the law by including post-formation conduct, but at the same time included reference to a “contractual relationship.” Just as Domino’s had no claim to McDonald’s property during the company’s chapter 11, McDonald has no claim under the contract between only Domino’s and JWM.

The Court then explains that the prior cases that McDonald cites to demonstrate that “contractual privity cannot be a sine qua non of a Sec. 1981 claim” actually decide much narrower questions. Finally, the Court rejects his arguments for a change in public policy.