SCOTUS Raises Bar On Contract Discrimination Claims

Sherman & Howard L.L.C.

Sherman & Howard L.L.C.

Today the U.S. Supreme Court raised the bar on a wide-ranging Civil War Era statute that prohibits discrimination in the making and enforcement of contracts. Comcast Corp. v. National Association of African-American Owned Media (No. 18-1171, March 23, 2020)

Congress enacted 42 U.S.C. Section 1981 in 1866 in order to ensure that former slaves enjoyed the same rights to enter into contracts as did non-slaves. Section 1981 specifically prohibits discrimination in the making and enforcement of contracts, and the prohibition goes beyond employment contracts to all forms of contract. Congress amended Section 1981 in 1991 to ensure an expansive definition of what it means to make or enforce a contract.

An African-American owned studio sued Comcast for $20 billion, claiming that Comcast refused to air its programming content because the studio was African-American owned. Comcast moved to dismiss, arguing that the complaint only alleged that the studio owner’s race was “a” reason for Comcast’s refusal to contract with the studio. Comcast argued that Section 1981 requires a plaintiff to plead and prove that race was the “but-for” cause of the discriminatory act. Proof that race was “the” cause of the conduct rather than merely “a” cause is far more exacting and difficult for plaintiffs. The district court agreed with Comcast and dismissed the case. The Ninth Circuit disagreed, holding that “but-for” causation is not required under Section 1981. The Supreme Court unanimously reversed the Ninth Circuit and concluded that “but-for” causation is required at the pleading stage, summary judgment, and trial.

Aside from the obvious fact that Comcast now makes Section 1981 cases harder to pursue, it is noteworthy for several other points. First, this was an appeal from a granted motion to dismiss. The case reinforces the need for plaintiffs in Section 1981 cases to specifically plead but-for causation and the detailed facts that would support it. Second, the Court punted on an issue that arises regularly in Section 1981 cases—whether Section 1981 prohibits discrimination in the process of entering into contracts or just in the outcomes of contract processes. Third, and most interesting, Justice Gorsuch’s opinion for the entire Court seems to tee up an argument that there is, in reality, no private right of action under Section 1981. The opinion repeatedly points out that the Section 1981 private right of action was a creature of the Court’s own creation in 1975 rather than a product of the text of Section 1981. Given the current textualist majority on the Court, is Justice Gorsuch inviting an argument to reverse the Court’s precedent and nullify any Section 1981 private right of action? And if so, how does one explain the unanimous decision? Stay tuned.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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