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April 22, 2005
This corporation was a 42 USC 1981 "person"
Section 1981 prohibits race discrimination relating to contract formation and performance. A corporation does not have a "race" so you would think a corporate independent contractor could not be a "person" under 1981. Usually true, but here's an exception.
Bains LLC was a corporation, and all the stock was owned by three brothers who were US citizens born in India. The brothers and many of the corporation's employees were religiously observant Sikhs who wore turbans and long beards.
Bains LLC contracted with ARCO to haul fuel to ARCO's Seattle terminal. Bill Davis was ARCO's lead man at the terminal, and he made life difficult for Bains' drivers - verbally harassing them, slowing them down, making them stand in the rain, etc. Bains complained to Davis' boss, the abuse continued, Bains complained again. Then ARCO terminated Bains LLC without giving a reason and without the required 30 day notice.
A jury returned a verdict for Bains: ARCO breached the contract - damages $50,000. ARCO discriminated on account of race - nominal damages $1 plus punitive damages of $5,000,000. Yes, five million dollars punitive damages on top of a one dollar compensatory damages, but 9th Circuit ordered the punitives reduced to no more than $450,000. Bains LLC v. ARCO Products (9th Cir 04/19/2005).
How can a corporation prevail under Section 1981? The 9th Circuit explains that Bains LLC "acquired an imputed racial identity." This was the theory used in Thinket Ink v. Sun Microsystems (9th Cir 2004).
My view: Perhaps a small corporation whose shareholders are all of one race should be treated as a Section 1981 "person," but not for the reasons given in the Thinket case. In Thinket the 9th Circuit analyzed whether a corporation could have "standing," and relied on the classical standing cases. Those cases might be relevant if the corporation is suing to redress injuries to others (e.g., shareholders, employees), but not so relevant when the corporation sues to redress an injury to itself. In those cases, the more relevant inquiry is one of pure statutory interpretation: Did Congress intend for a corporation to be a "person" under Section 1981? Perhaps, given 1981's history as a post-Civil War statute designed to eradicate the badges and incidents of slavery. In any event, the Bains case appears to be the prevailing view.
Posted April 22, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
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