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Non-contracting party standing: 42 USC 1981
December 07, 2005 by Ross Runkel at LawMemo
42 USC Section 1981 forbids race discrimination in a contractual relationship. Does a non-contracting party have standing to sue for a violation?
Assume this: ABC Corporation has a contract with XYZ Corporation. XYZ is wholly owned by John McDonald, who is black. ABC terminates the contract because of McDonald's race.
- Question 1: Can XYZ recover damages against ABC? (I suppose so, but that's not the question I want to address.)
- Question 2: Can McDonald recover damages against ABC? Another way to ask that: Does McDonald have "standing" to sue when he was not a party to the contract?
The US Supreme Court heard oral arguments on December 6 on Question 2 in Domino’s Pizza, Inc. v. John McDonald. [Summary and briefs]
SCOTUSblog summarizes the arguments here: Recap of Yesterday’s Argument: Domino’s Pizza, Inc., et al. v. John McDonald
My view:
- The Court has to figure out what Congress intended when it wrote the original version of the statute over 100 years ago.
- In those days hardly anybody (hardly any lawyers, that is) thought that a contract suit could be brought by anybody other than the two corporations that signed the contract. I think a majority of the Court will grab that idea to conclude that Congress never intended for non-contracting parties to have rights under Section 1981.
- Some of the Justices have sympathy for McDonald's situation, but the Justices' personal desires should not get in the way of interpreting Congressional intent.
- Another point: McDonald chose to do business through the corporate form. That provided him with certain advantages, such as limited liability. The disadvantage is that he's not a party to any contracts entered into by his corporation.
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