Ayers v. United States Brief of the NAACP Legal Defense and Educational Fund as Amicus Curiae in Support of Petitions for Writs of Certiorari to the US Court of Appeals for the Fifth Circuit

    No. 04-593

In  T he

Supreme Court of tjje fHntteb States!

D o m in o ’s P iz z a , LL C , D o m in o ’s P iz z a , In c ., 
a n d  D e b b ie  P e a r ,

Petitioners,
v.

Jo h n  M c D o n a l d ,
Respondent.

On Writ of Certiorari to the 
United States Court of Appeals 

for the Ninth Circuit

BRIEF OF LAWYERS’ COMMITTEE FOR CIVIL 
RIGHTS UNDER LAW, MINORITY BUSINESS 

ENTERPRISE LEGAL DEFENSE AND EDUCATION 
FUND, NATIONAL MINORITY SUPPLIER 

DEVELOPMENT COUNCIL, INC., NAACP LEGAL 
DEFENSE AND EDUCATION FUND, NATIONAL 

ASIAN PACIFIC AMERICAN LEGAL CONSORTIUM, 
AND LEGAL MOMENTUM AS AMICI CURIAE IN 

SUPPORT OF RESPONDENT

Barbara  R. Arnw ine 
John  C. Brittain  
M ichael j . Foreman  
Sarah  C. Craw ford  
Tricia  G. Jefferson  
La w y ers’ Com m ittee  for  

C ivil R ights Un d er  Law  
1401 New York Avenue, N.W., 
Suite 400
Washington, D.C. 20005 
(202) 662-8351

Thom as S. M artin  
Counsel o f Record 

Jonathan  R. DeFosse 
T iffany  A llison  George 
Shaniek  M ills M aynard  
Keith  R, Palfin  
Shearm an  & Sterling  LLP 
801 Pennsylvania Avenue, N.W. 
Washington, DC 20004 
(202) 508-8000

(Additional Counsel Listed on Inside Cover)
September 22, 2005

W ilson-Epes Printing Co ., Inc. -  (202) 789-0096 -  Washington, D. C. 20001



An thony  Robinson  
Sarah  C. von  der  L ippe 
M inority  Business 

Enterprise Legal 
Defense And  
Education  Fund  

1100 Mercantile Lane 
Suite 115-A 
Largo, MD 20774 
(301)583-4648

N ational  M inority  
Supplier  Developm ent 
Cou ncil , In c .,

1040 Avenue of the Americas, 
Second Floor 
New York, NY 10018 
(212) 944-2430
Jennifer  K. Brow n

Legal M om entum
395 Fludson Street
New York, New York 10014
(212)413-7536

A im ee J. Baldillo  
N ational  A sian  Pacific  

A merican  Legal 
Consortium  

1140 Connecticut Avenue, 
NW
Suite 1200
Washington, DC 20036 
(202) 296-2300

Theodore  M. Shaw  
Director-Counsel 

Ja cqueline  A. Berrien  
N orm an  J. Chachkin  
Robert  Stroup 
M atthew  B. Colangelo  
Naacp Legal Defense 

and  Education  Fund  
99 Hudson Street, 16th fl. 
New York, NY 10013 
(212) 965-2200

Counsel for Amici Curiae



QUESTION PRESENTED

May the sole shareholder of a corporation who is the target 
of intentional racial discrimination in the performance and 
enforcement of a contract, and who suffers separate and 
distinct injury as a result thereof, maintain a cause of action 
for personal injuries under 42 U.S.C. § 1981?

(0



11

TABLE OF CONTENTS

QUESTION PRESENTED..... ........ ...................... .........  i

TABLE OF AUTHORITIES........................................... iv

INTEREST OF THE AMICI CURIAE........................... 1

SUMMARY OF ARGUMENT............................. ........ . 4

ARGUMENT............................. ............................ ..........  6

Page

I. THE “BROAD AND SWEEPING NATURE” 
OF SECTION 1981 PROVIDES RELIEF 
FOR THE INJURIES INDIVIDUALS 
SUFFER AS A RESULT OF INTENTIONAL 
RACIAL DISCRIMINATION IN THE 
MAKING AND ENFORCEMENT OF
CONTRACTS.....................................................  6

A. The History of Section 1981 Demands a
Broad Interpretation......................................  7

B. Congress Reiterated Section 1981’s Broad
Reach in the 1991 Amendments..... ............  9

II. A NARROW READING OF SECTION 1981 
CONTRADICTS ITS INTENDED 
PRACTICAL PURPOSE OF PROTECTING 
INDIVIDUALS AGAINST INTENTIONAL 
DISCRIMINATION............................................  10

A. Where an Individual is the Target and 
Direct Victim of Discrimination in the 
Making and Enforcement of a Contract 
Executed by a Corporation He Owns, He is 
Entitled to Relief Under Section 1981 .....  11



I ll

B. Limiting Relief to the Corporation’s In­
juries Ignores the Harm Caused to Indi­
viduals by Discrimination in the Enforce­
ment o f the Contract.............................. .......  14

C. Corporate Law Principles That Govern 
Remedies for Contractual Breach Should 
Not Be Imported into Civil Rights Law so 
as to Defeat the Broad Remedial Purposes
for Which They Were Enacted....................  15

D. Creating Artificial Distinctions Between
Victims of Discrimination Would Force 
Minority Business Owners to Choose 
Between Their Civil Rights and the 
Protection of the Corporate Form...... .........  17

III. ALLOWING THE DIRECT AND TAR­
GETED VICTIMS OF DISCRIMINATION
TO SUE WILL NOT LEAD TO A FLOOD
OF LAWSUITS...................................    21

A. The Ninth Circuit’s Holding Requires a
Separate and Distinct Injury......................... 21

B. The Import of this Case is Limited to
Plaintiffs Who are Direct Targets of Dis­
crimination and Who Own and Operate 
Their Own Businesses..................................  23

CONCLUSION ................................................................. 25

TABLE OF CONTENTS—Continued

Page



IV

Adarand Constructors v. Slater, 228 F.3d 1147
(10th Cir. 2000)...............   18

Ass ’n o f  Data Processing Serv. Orgs. v. Camp,
397 U.S. 150(1970).....................................    12

Barrows v. Jackson, 346 U.S. 249 (1953).............  3
Bellows v. Amoco Oil Co., 118 F.3d 268 (5th Cir.

1997)......................................................................  22
Bryant v. Aiken R eg’l Med. Ctrs., 333 F.3d 536

(4th Cir. 2003)....................................................   14
Builders A ss’n o f  Greater Chicago v. City o f

Chicago, 298 F. Supp. 2d 725 (N.D. 111. 2003)... 18
Burnett v. Grattan, 468 U.S. 42 (1984).................  6
Carter v. Duncan-Huggins, Ltd., 727 F.2d 1225

(D.C. Cir. 1984).................................      14
Chavis v. Clayton County School Dist., 300 F.3d

1288 (11th Cir. 2002)....................................   8
Concrete Works o f  Colo. v. City and County o f

Denver, 321 F.3d 950 (10th Cir. 2003)............ . 18, 20
Cunningham v. Kartridg Pak Co., 332 N.W.2d

881 (Iowa 1983)........................    22
Danco, Inc. v. Wal-Mart Stores, 178 F.3d 8 (1st

Cir. 1999)..............................................................  16
Edwards v. Walter Jones Const. Co., No. 98- 

4366, 2000 WL 302710 (6th Cir. Mar. 17,
2000)...................................................................... 22

Franchise Tax Bd. o f  California v. Alcan
Aluminium Ltd., 493 U.S. 331 (1990).... ...........  22, 23

Gersman v. Group Health Assoc., 931 F.2d 1565 
(D.C. Cir. 1991), rev’d on other grounds, 502
U.S. 1068 (1992)................................................  13,23

Gomez v. Alexian Bros. Hosp. o f  San Jose, 698 
F.2d 1019 (9th Cir. 1983)...................................  14,21

TABLE OF AUTHORITIES

CASES Page



V

Goodman v. Lukens Steel Co., 482 U,S. 656
(1987) .................................................................  6, 12

Guides, Ltd. v. Yarmouth Group Prop. Mgmt.,
Inc., 295 F.3d 1065 (10th Cir. 2002).................  16

Hudson Valley Freedom Theater v. Heimbach,
671 F.2d 702 (2d Cir. 1982)...............................  13

Johnson v. Railway Express Agency, 421 U.S.
454(1975).............................................................  3

Jones v. Alfred H. Mayer Co., 392 U.S. 409
(1968)................................................. ................... 7, 8

Leatherman v. Tarrant County Narcotics Intel­
ligence & Coordination Unit, 507 U.S. 163
(1993)..................................................................... 4

McDonald v. Domino’s Pizza, 107 Fed. Appx. 18
(9th Cir. 2004)...................................................... 21

McDonald v. Santa Fe Trail Transp. Co., 427
U.S. 273 (1976).................................................... 6 ,8

NAACP v. Alabama, 357 U.S. 449 (1957)..............  3
Northern Contracting v. Illinois, et al., No. 00-C- 

4515, 2004 WL 422704 (N.D. 111. Mar. 3,
2004)................................ ....... ......... .....................  18

O ’Connor v. 11 W. 30th St. Restaurant Corp.,
Nos. 94 Civ. 2951, 93 Civ. 8895, 1995 WL
354904 (S.D.N.Y. Jun. 13, 1995)..............   24

Patterson v. McLean Credit Union, 491 U.S. 164
(1988) .................................................................  3 ,8 ,9

Puryear v. County o f  Roanoke, 214 F.3d 514 (4th
Cir. 2000)..............................................................  9

R. G. Dun & Co. v. Shipp, 91 S.W.2d 330 (Tex.
1936).......................................................    22

Ritchie v. McMullen, 79 F. 522 (6th Cir. 1897)...... 22
Runyon v. McCrary, 427 U.S. 160 (1976).............  6, 7, 8
Saint Francis College v. Al-Khazraji, 481 U.S. 

604(1987)

TABLE OF AUTHORITIES—Continued
Page

3



VI

Searcy v. Houston Lighting & Power Co., 907
F.2d 562 (5th Cir. 1990).............. ........... ....... . 16

Sherbrooke Turf, Inc. v. Minn. D ep’t o f  Transp.,
etal., 345 F.3d 964 (8th Cir. 2003)...... ............  18

Smith v. Martin, 542 F.2d 688 (6th Cir. 1976).....  23
Sullivan v. Little Hunting Park, 396 U.S. 229

(1969)......................        3 ,8
Trainor v. Apollo Metal Specialities, 318 F.3d

976 (10th Cir. 2002).......................................... 9
Vierling v. Baxter, 141 A. 728 (Pa. 1928)....... . 22
Village o f  Arlington Heights v. Metro. Housing

Dev. Corp., 429 U.S. 252 (1977)........................ 13
Worth v. Seldin, 422 U.S. 490 (1975).................. . 12
Whidbee v. Garzarelli Food Specialties, Inc., 223 

F.3d 62 (2d Cir. 2000)........................................  23

STATUTES AND LEGISLATIVE MATERIALS
28U.S.C. § 1658...................................     6
42 U.S.C. § 1981...................................................... passim
H.R. Rep. No. 101-644 (Pt. I)............................ . 6, 9
H.R. Rep. No. 102-40 (Pt. I).............................5, 6, 10, 14

MISCELLANEOUS
1 Fletcher Cyclopedia Corporations § 2.10........... 19
Stephen B. Presser, Thwarting the Killing o f the 

Corporation: Limited Liability, Democracy, 
and Economics, 87 Nw. U. L. Rev. 148 (1992).. 19

The Boston Consulting Group, The New Agenda 
fo r  Minority Business Development (June
2005).....................................................................  19,20

U.S. Small Business Administration, Office of 
Advocacy, Minorities in Business (Nov.
2001)................. .................... ................................ 20

TABLE OF AUTHORITIES— Continued
Page



The Lawyers’ Committee for Civil Rights Under Law, the 
Minority Business Enterprise Legal Defense and Education 
Fund, the National Minority Supplier Development Council, 
Inc., the NAACP Legal Defense and Educational Fund, Inc., 
and the National Asian Pacific American Legal Consortium 
submit this brief as amici curiae with the consent of the 
parties, in support of Respondent’s argument that an 
individual who is the actual target of a discriminatory actor’s 
racially motivated breach of a contract can bring suit under 42 
U.S.C. § 1981 for the damages he suffers even if he is not a 
formal party to the contract.

Amici are nonprofit organizations devoted to helping 
minorities and minority-owned businesses participate fully in 
the mainstream of American economic life. As courts and 
legislatures throughout the country have recognized, there is a 
long-standing pattern and practice of racial discrimination 
directed at minorities and minority business owners. The 
Court’s decision will determine the extent to which § 1981 
protects the individual rights of business owners to be free 
from intentional racial discrimination. Amici strongly 
believe, and the language and intent of § 1981 recognizes, 
that the protections of § 1981 are vital to addressing the 
distinct disadvantages that minority business owners face as a 
result of discrimination in the marketplace. Because this 
Court’s decision will have a profound impact on the rights of 
minority business owners throughout the country, amici wish 
to present their views concerning the scope of § 1981 ’s 
protections.

INTEREST OF THE AMICI CURIAE 1

1 Counsel for amici curiae authored this brief in its entirety. No person 
or entity other than amici curiae, their staffs, or their counsel made a 
monetary contribution to the preparation or submission of this brief. 
Letters of consent to the filing of this brief have been filed with the Clerk 
of the Court pursuant to Supreme Court Rule 37.3.



2

The Lawyers’ Committee for Civil Rights Under Law (the 
“Lawyers’ Committee”) is a nonprofit civil rights organi­
zation that was formed in 1963 at the request of President 
Kennedy in order to involve private attorneys throughout the 
country in the national effort to ensure the civil rights of all 
Americans. Its Board of Trustees includes several past 
Presidents of the American Bar Association, past Attorneys 
General of the United States, law school deans and professors 
and many of the nation’s leading lawyers. Through the 
Lawyers’ Committee and its independent local affiliates, 
hundreds of attorneys have represented thousands of clients in 
civil rights cases across the country. The Lawyers’ Com­
mittee is interested in ensuring that the goal of civil rights 
legislation, to eradicate discrimination, is fully realized, and is 
concerned in this case with the ability of 42 U.S.C. § 1981 to 
protect business owners from unlawful racial discrimination.

The Minority Business Enterprise Legal Defense and 
Education Fund, Inc. (“MBELDEF”) is a nonprofit corpora­
tion founded in 1980 by former Maryland Congressman 
Parren J. Mitchell. The primary purpose of MBELDEF is to 
promote and protect programs and policies that provide 
opportunities for minority businesses to grow and thrive and 
to contribute to our communities and national economy. 
MBELDEF provides legal advocacy for minority businesses, 
over three quarters of which are single shareholder corpora­
tions or sole proprietorships according to Census Bureau 
surveys.

The National Minority Supplier Development Council, Inc. 
(“NMSDC”) is a nonprofit corporation founded in 1979 that 
seeks to provide minority businesses access to purchasing 
opportunities in the public and private sectors. Currently, 
NMSDC has 39 regional offices and a national office that 
coordinate these efforts on a local and national level. Over 
60% of NMSDC certified minority businesses are incorpo­
rated and 75% of the certified minority businesses specializ­



3
ing in construction are corporations. A large percentage of 
NMSDC certified incorporated businesses have fewer than 3 
shareholders and many have only one.

The NAACP Legal Defense and Educational Fund, Inc. 
(“LDF”) is a non-profit corporation established under the 
laws of the State of New York formed to redress injustice 
caused by racial discrimination and to assist African- 
Americans in securing their constitutional and statutory 
rights. For over six decades, LDF attorneys have repre­
sented parties in litigation before this Court and the lower 
courts on matters of race discrimination in general, and 
employment discrimination in particular, including in 
Patterson v. McLean Credit Union, 491 U.S. 164 (1988); 
Saint Francis College v. Al-Khazraji, 481 U.S. 604 (1987); 
and Johnson v. Railway Express Agency, 421 U.S. 454 
(1975). LDF attorneys also litigated important cases re­
garding standing to assert civil rights claims, including 
Sullivan v. Little Hunting Park, 396 U.S. 229 (1969); NAACP 
v. Alabama, 357 U.S. 449 (1957); and Barrows v. Jackson, 
346 U.S. 249(1953).

The National Asian Pacific American Legal Consortium 
(“NAPALC”) is a national non-profit, non-partisan organi­
zation whose mission is to advance the legal and civil rights 
of Asian Americans. Collectively, NAPALC and its 
Affiliates, the Asian American Institute, Asian Law Caucus 
and the Asian Pacific American Legal Center, have over 50 
years of experience in providing legal public policy, 
advocacy, and community education on discrimination 
issues. NAPALC and its Affiliates have a long-standing 
interest in racial discrimination issues that have an impact on 
the Asian American community, and this interest has resulted 
in NAPALC’s participation in a number of amicus briefs 
before the courts.

Legal Momentum (the new name of NOW Legal Defense 
and Education Fund) advances the rights of women and girls



4
by using the power of the law and creating innovative public 
policy. Legal Momentum is committed to vigorous enforce­
ment of the civil rights laws to eradicate all forms of 
discrimination, including race discrimination. It is particu­
larly interested in this case because § 1981 provides a crucial 
guarantee of nondiscrimination to the hundreds of thousands 
of women of color who own small businesses.

The resolution of this case will have a significant effect on 
the extent to which the amici can protect the rights of their 
clients.

SUMMARY OF ARGUMENT

In the present case, the Court is called on to determine the 
proper scope of one of the nation’s oldest and most important 
civil rights laws, 42 U.S.C. § 1981, which bars all intentional 
racial discrimination in the making, performance, and 
enforcement of contracts. Respondent John McDonald 
(“McDonald”), an African-American and the sole shareholder 
and operator o f JWM Investments, Inc. (“JWM”), filed suit 
under § 1981 when Petitioners, Domino’s Pizza, LLC, 
Domino’s Pizza, Inc. and Debbie Pear, terminated a 
construction contract with JWM because McDonald is black.2 
As a direct result of Petitioners’ intentional discrimination, 
McDonald—the target of that discrimination—suffered 
severe physical, emotional and financial injuries distinct from 
the injuries suffered by JWM. The Ninth Circuit held that 
McDonald had stated a valid cause of action under § 1981 for 
his personal injuries.

The Ninth Circuit’s decision fits squarely within the 
parameters of the language of § 1981, comports with decades 
of case law interpreting that statute, and furthers Congress’

2 These facts must be taken as true, because this case comes before the 
Court on a motion to dismiss. See, e.g., Leatherman v. Tarrant County 
Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164 (1993).



5
clearly expressed purpose in enacting the law and amending it 
in 1991. By its terms, § 1981 prohibits, without exception, 
all discrimination in the making, performance and enforce­
ment o f contracts. The courts applying this prohibition have 
consistently interpreted § 1981 to provide remedies for every 
class and category of personal, as well as corporate, injury 
flowing from intentional racial discrimination. This 
expansive approach to the application o f § 1981 is grounded 
in the unambiguous intention of Congress to provide full 
relief to those who are the targets of discriminatory actions in 
the area of commercial contracts. Indeed, § 1981 reflects the 
unambiguous determination of Congress to foster the 
participation of newly freed slaves in the marketplace by 
protecting them from discrimination and harassment in 
contracting. It was passed as a response to widespread acts of 
violence and intimidation aimed at creating an economic 
environment that was hostile to black participation. It was 
designed from its inception to broadly protect the economic 
interests of minority individuals and to enable them to enter 
and enforce contracts in a society free from discrimination.

The core historical purpose of § 1981 was to offer fu ll 
protection to individuals, like John McDonald, from the 
“terrible humiliation, pain and suffering” of intentional racial 
discrimination in contracting. H.R. Rep. No. 102-40 (Pt. I), 
at 14-15 (1991). The decision below adheres to this core 
principle by permitting individuals who are the target of 
discrimination in contracting to seek redress for the personal 
injuries they suffer, regardless of whether the subject contract 
was signed by the individual in his personal capacity or as the 
sole shareholder and only employee of a corporation.

Recognizing that victims of intentional racial discrimi­
nation have a cause of action for their personal injuries under 
the circumstances presented in this case is consistent with 
Congress’ intention that § 1981 foster minority participation 
in the marketplace. It would be more than unfortunate if 
millions of minority business owners like McDonald were



6

forced to choose between the advantages of the corporate 
form and the availability of remedies for personal injuries 
resulting from violations of their civil rights. Minority 
business owners should not be forced to check their race at 
the door. The Court should thus affirm the decision below.

ARGUMENT

I. THE “BROAD AND SWEEPING NATURE” OF 
SECTION 1981 PROVIDES RELIEF FOR THE 
INJURIES INDIVIDUALS SUFFER AS A RE­
SULT OF INTENTIONAL RACIAL DISCRIMI­
NATION IN THE MAKING AND ENFORCE­
MENT OF CONTRACTS

Section 1981 “was meant, by its broad terms, to proscribe 
discrimination in the making or enforcement of contracts.” 
McDonald v. Santa Fe Trail Trans. Co., 427 U.S. 273, 295 
(1976). The protections and remedies provided by § 1981 
have become an “important part of the fabric of our law.” 
Runyon v. McCrary, 427 U.S. 160, 190 (1976) (Stevens, J., 
concurring). Although these protections concern the right to 
contract, § 1981 does not and was never intended to merely 
replicate the remedies that commercial law provides for 
breaches of contract. See Goodman v. Lukens Steel Co., 482 
U.S. 656, 661 (1987) (noting “Section 1981 has a much 
broader focus than contractual rights”), superceded by statute 
on other grounds, 28 U.S.C. § 1658. Rather, § 1981 serves 
the constitutional imperative of eradicating the badges of 
slavery and compensating victims of intentional discrimina­
tion, like McDonald, for the severe physical, emotional and 
financial injuries that they suffer. H.R. Rep. No. 101-644 (Pt. 
I), at 8 (1990); H.R. Rep. No. 102-40 (Pt. I), at 14-15; Burnett 
v. Grattan, 468 U.S. 42, 53 (1984) (noting “[t]he goals of the 
federal [civil rights] statutes are compensation of persons 
whose civil rights have been violated”). Without question, 
the primary goal of § 1981 is to protect human beings from 
discrimination.



7
A. The History of Section 1981 Demands a Broad 

Interpretation

Section 1981 was derived from § 1 of the Civil Rights Act 
of 1866 (14 Stat. 27). Runyon, 427 U.S. at 168-69; H.R. Rep. 
No. 101-644 (1990). As this Court has noted, that Act was 
“cast in sweeping terms.” Jones v. Alfred H. Mayer Co., 392 
U.S. 409, 422 (1968). From the beginning, the protections of 
§ 1981 were focused on securing fundamental civil rights for 
individuals subject to discrimination. Indeed, the most im­
mediate goal of the Act was to remedy discrimination that 
freed slaves faced in the wake of Reconstruction and the 
Thirteenth Amendment. Id. at 432. The Act was created 
against a landscape of intense persecution, intimidation, and 
harassment aimed at preventing African-Americans from 
enjoying the full benefits of the American economy. As 
Senator Trumbull of Illinois, the Chairman of the Judiciary 
Committee, said in 1866:

[the Thirteenth Amendment] declared that all persons in 
the United States should be free. This measure is 
intended to give effect to that declaration and secure to 
all persons within the United States practical freedom. 
There is very little importance in the general declaration 
of abstract truths and principles unless they can be 
carried into effect, unless the persons who are to be 
affected by them have some means of availing 
themselves of their benefits.

See id. at 431-32 (quoting Cong. Globe, 39th Cong., 1st 
Sess., 43).

Although the immediate goal of the Civil Rights Act of 
1866 was to secure equal rights for freed slaves, this Court 
has held that the overall purposes of the statute were much 
broader. “[T]he statutory structure and legislative history 
persuade us that the 39th Congress was intent upon 
establishing in the federal law a broader principle than would 
have been necessary simply to meet the particular and



8

immediate plight o f the newly freed Negro slaves.” 
McDonald, 427 U.S. at 296. Rather, “the Act was meant, by 
its broad terms, to proscribe discrimination in the making or 
enforcement of contracts against, or in favor of, any race.” 
Id. at 295.

The Court has previously rejected attempts to narrowly 
interpret the “great fundamental rights” secured by the Civil 
Rights Act of 1866:3

A narrow construction of the language of § 1982 would 
be quite inconsistent with the broad and sweeping nature 
of the protection meant to be afforded by § 1 of the Civil 
Rights Act of 1866, 14 Stat. 27, from which § 1982 [and 
§ 1981] was derived.4

Sullivan v. Little Hunting Park, 396 U.S. 229, 237 (1969) 
(allowing a white property owner to bring suit based on the 
exclusion of his African-American tenant from a community 
recreation center because “the white owner is at times the 
only effective adversary of the unlawful restrictive 
covenant”); see also Alfred H. Mayer, 392 U.S. at 431 (noting 
that the legislative history describing the objectives and terms 
of the Civil Rights Act of 1866 “beliefs] any attempt to read it 
narrowly”). Several Circuit Courts of Appeals have noted 
that civil rights laws such as § 1981 cannot be mechanically 
applied, but rather must be liberally construed to achieve 
Congress’ broad remedial purposes. See, e.g., Chavis v. 
Clayton County School Dist., 300 F.3d 1288, 1292 (11th Cir.
2002) (“[T]he Reconstruction civil rights acts . . .  are to be 
‘accord(ed) [] a sweep as broad as (their) language.’”)

3 The one exception was Patterson v. McLean Credit Union, 491 U.S. 
164 (1988), to which Congress immediately responded by amending 
§ 1981 to make clear its broad reach. See infra Section I.B.

4 This Court has noted that §§ 1981 and 1982 are both derived from the 
Civil Rights Act of 1866 and there is “no reason to construe these sections 
differently.” Runyon, 427 U.S. at 171 (citing Tillman v. Wheaton-Haven 
Recreation Ass’n, 410 U.S. 431, 440 (1973)).



9
(quoting Griffin v. Breckenridge, 403 U.S. 88, 97 (1971)); 
Trainor v. Apollo Metal Specialities, 318 F.3d 976, 983 (10th 
Cir. 2002) (“In our review o f the antidiscrimination laws we 
must be mindful of their remedial purposes, and liberally 
interpret their provisions to that end.”); Puryear v. County o f  
Roanoke, 214 F.3d 514, 522 (4th Cir. 2000) (stating that 
when applying a remedial statute, “courts must construe the 
legislation broadly to effect its purposes”).

B. Congress Reiterated Section 1981’s Broad 
Reach in the 1991 Amendments

Congress also has left no misimpression about the broad 
and enduring remedial purposes of § 1981. In 1991, 
Congress amended the statute in response to the Court’s 
holding in Patterson v. McLean Credit Union, 491 U.S. 164
(1989). In Patterson, the Court narrowly applied the terms of 
§ 1981 to hold that the prohibition on discrimination in the 
“making” of a contract did not extend to discrimination in the 
performance of a contract. Id. at 176-77. In the 1991 
amendments, Congress disagreed with this mechanical 
application of § 1981 ’s terms. Congress was particularly 
concerned that a gap not be created in the broad protections 
and remedies provided to the individuals harmed by inten­
tional racial discrimination. The amendments’ legi­
slative history indicated that Patterson prevented “victims of 
intentional discrimination [from being made] whole for 
physical and emotional injury resulting therefrom.” H.R. 
Rep. No. 101-644 (Pt. I), at 18 (1990) (noting also that 
Patterson gave employers “free rein to discriminate against 
their employees once they are hired”). Foreshadowing the 
claims in this case, Congress noted that “[vjictims of 
intentional discrimination often endure terrible humiliation, 
pain and suffering while on the job. This distress often 
manifests itself in emotional disorders and medical problems, 
which in turn cause victims of discrimination to suffer 
substantial out-of-pocket medical expenses and other eco­



10
nomic losses as a result o f the discrimination.” H.R. Rep. No. 
102-40, at 14-15 (1991). Accordingly, the 1991 amendments 
defined § 1981 ’s use of the phrase “make and enforce con­
tracts” to include the “making, performance, modification, 
and termination of contracts, and the enjoyment of all 
benefits, privileges, terms, and conditions o f the contractual 
relationship.” 42 U.S.C. § 1981(b).

Thus, the 1991 amendments were intended to ensure that 
§ 1981 provided full remedies for the injuries suffered by 
victims of intentional discrimination in any aspect of the 
contractual relationship. Congress made clear that it intended 
to “strengthen existing remedies to provide more effective 
deterrence and ensure compensation commensurate with the 
harms suffered by victims of intentional discrimination.” Id. 
at 18. Congress noted that it intended § 1981 to “bar all race 
discrimination in contractual relations.” Id. at 92 (emphasis 
added).

II. A NARROW READING OF SECTION 1981 
CONTRADICTS ITS INTENDED PRACTICAL 
PURPOSE OF PROTECTING INDIVIDUALS 
AGAINST INTENTIONAL DISCRIMINATION

Petitioners claim that McDonald is not entitled to be 
made whole for injuries squarely within the ambit of 
§1981 protection because he opted to make and enforce the 
contracts at issue using the corporate form for his busi­
ness. Under Petitioners’ proposed limitation o f § 1981, 
McDonald has injury but no standing, while his corporation 
has standing but only limited injuries. This limitation holds 
great advantages for parties engaged in intentional dis­
crimination because the corporation is unable to recover for 
the severe physical, emotional and financial injuries often 
suffered by those personally harmed as a direct result of 
discrimination. This crabbed analysis creates a broad gap in 
the protections of § 1981, denying individual remedies to



victims of intentional discrimination who operate their busi­
nesses in the corporate form.

The constriction of § 1981 claims advocated by Petitioners 
is inconsistent with the broad remedial purpose of the statute 
because it would: (a) deny relief to individuals who were the 
actual targets of intentional discriminatory contract en­
forcement; (b) ignore the separate and distinct injuries that 
individuals suffer from discrimination in the enforcement of 
contracts; (c) compromise the remedial goals o f the statute by 
importing elements o f contract law inimical to the statute’s 
expansive goals; and (d) force minority victims o f dis­
crimination to forfeit remedies for actual injury in order to 
obtain the advantages of the corporate form.

A. Where an Individual is the Target and Direct 
Victim of Discrimination in the Making and 
Enforcement of a Contract Executed by a 
Corporation He Owns, He is Entitled to Relief 
Under Section 1981

McDonald is a direct victim of discrimination. Petitioners 
intentionally discriminated against McDonald on the basis of 
his race. Petitioners terminated their contracts with Mc­
Donald’s corporation because McDonald is African-Ameri­
can. McDonald is the sole shareholder, director, and officer 
of JWM and the only person who interacted with Petitioners 
in making and attempting to enforce the contracts. Because 
Petitioners did not want to do business with McDonald on the 
basis of his race, they terminated their contracts with the 
company that he owns and operates. McDonald suffered 
severe physical, emotional and financial injuries as a direct 
result o f  Petitioners ’ discrimination.

McDonald is asserting his individual right to be free from 
racial discrimination and is seeking redress for the personal 
harms that he suffered as a result of the intentional dis­
crimination Petitioners targeted at him. McDonald is not

11



12
asserting the legal rights of a third party, i.e., JWM, nor is he 
seeking to benefit as a third party beneficiary from the 
contract between JWM and Petitioners. The harms that 
McDonald suffered were not suffered by JWM. No one is in 
a better position than McDonald himself to seek redress for 
the personal indignities and harms that he suffered as a result 
of Petitioners’ discriminatory conduct towards him.

This Court has found standing where there is injury-in-fact 
and “the interest sought to be protected by the com­
plainant is arguably within the zone of interests sought to be 
protected or regulated by the statute.” A ss’n o f  Data 
Processing Serv. Orgs. v. Camp, 397 U.S. 150, 153-54 (1970) 
(finding standing because plaintiffs’ interests were within the 
zone protected under the Bank Service Corporation Act). 
Here, McDonald is clearly within the zone of interests 
protected by § 1981.5 He is an African-American who was 
subjected to discrimination during the performance and 
enforcement of four contracts with Petitioners, and thus is 
exactly the type of person that Congress intended to protect 
under § 1981. The statute was enacted to protect the 
individual right to be free from discrimination. See supra 
Section I. As this Court has explained, § 1981 ’s command 
that “competence and capacity to contract shall not depend on 
race” is “part of a federal law barring racial discrimination, 
which . . .  is a fundamental injury to the individual rights of a 
person.” Goodman, 482 U.S. at 661 (emphasis added).

For minority-owned single shareholder corporations like 
McDonald’s, while the corporation can suffer certain econo­
mic effects from discrimination, the target of the dis­
crimination is the individual who interacts with the dis­

5 The analysis would not differ under the alternative standard of 
whether the “statutory provision on which the claim rests properly can be 
understood as granting persons in the plaintiffs position a right to judicial 
relief.” Worth v. Seldin, 422 U.S. 490, 500 (1975).



13
criminatory actor. This Court’s jurisprudence, as well as 
common sense, dictates that “a corporation . . . has no racial 
identity and cannot be the direct target of the petitioners’ 
alleged discrimination.” Village o f Arlington Heights v. 
Metro. Housing Dev. Corp., 429 U.S. 252, 263 (1977). A 
corporation is entitled to sue under § 1981, however, when it 
is harmed because of its relationship with a member of a 
protected class. See, e.g., Gersman v. Group Health Assoc., 
931 F.2d 1565, 1568 (D.C. Cir. 1991) (holding that a 
corporation has standing to litigate because it can suffer harm 
from discrimination), rev’d  on other grounds, 502 U.S. 1068 
(1992); Hudson Valley Freedom Theater v. Heimbach, 671 
F.2d 702, 708 (2d Cir. 1982) (holding that a corporation that 
is harmed by discriminatory action has standing to litigate 
that harm).

While allowing a raceless entity such as a corporation to 
sue is appropriate given the broad purposes for which 
Congress enacted § 1981, restricting § 1981 so that ONLY 
the corporation can sue would eviscerate the law’s core 
purpose of protecting the individual’s right to be free from 
discrimination in the making and enforcement of con­
tracts. McDonald is a member of the protected class under 
§ 1981 and was the direct target of Petitioners’ racial 
discrimination, regardless of whether he was acting in his 
individual capacity or as an agent for his corporation. In the 
case of a corporation with a single shareholder and operator, 
it is only that individual’s racial identity that is at issue. If the 
discriminatory actor does not like the shareholder’s race and 
does not want to do business with that individual, the decision 
not to enter into or honor contracts with the corporation is 
based on prejudice towards the individual.

In the present case, Petitioners discriminated against 
McDonald as an individual and he is entitled to redress for 
personal injuries that fall clearly within the zone of interests 
that § 1981 protects.



14
B. Limiting Relief to the Corporation’s In­

juries Ignores the Harm Caused to Individuals 
by Discrimination in the Enforcement of the 
Contract

When intentional discrimination in contracting is targeted 
at and causes injuries to the sole shareholder and operator of a 
corporation, the human victim of the discrimination would 
not be recognized or made whole if only the corporation 
could bring a lawsuit under § 1981. In enacting § 1981, 
Congress recognized that civil rights laws must address the 
injuries that individual victims of intentional discrimination 
often suffer, including humiliation, pain, suffering, emotional 
disorders, medical problems, and accompanying medical 
expenses and other economic harm. See H.R. Rep. No. 102- 
40, at 14-15 (1991). These injuries are separate and distinct 
from any injuries that a corporation might suffer as a result of 
discrimination.

In keeping with the fundamental purpose of the statute and 
the undeniable realities of the potential harms of dis­
crimination, courts have allowed individuals to recover for 
the emotional and mental harms they suffered as a result of 
intentional discrimination. See, e.g., Bryant v. Aiken R eg’l 
Med. Ctrs., 333 F,3d 536, 546-47 (4th Cir. 2003) (affirming 
lower court award of damages to victim of intentional 
discrimination for injuries including “emotional distress”); 
Carter v. Duncan-Huggins, Ltd., 727 F.2d 1225, 1238 (D.C. 
Cir. 1984) (affirming lower court award of damages to victim 
of intentional discrimination for injuries including 
“humiliation and other emotional harm”); Gomez v. Alexian 
Bros. Hosp. o f  San Jose, 698 F.2d 1019, 1021 (9th Cir. 1983) 
(affirming lower court award of damages to victim of 
intentional discrimination for injuries including “humiliation 
and embarrassment”). These are precisely the types of 
injuries that McDonald has alleged that he, not JWM, 
suffered due to Petitioners’ discriminatory actions. As a



15
direct result of Petitioners’ discrimination, McDonald suf­
fered the loss of his reputation, his business, his credit rating, 
and his health. Contract recovery for JWM would not even 
begin to compensate McDonald for his injuries.

Petitioners’ interpretation o f § 1981 would deny the 
individuals who are the targets o f discrimination redress for 
harms that they uniquely suffer. This interpretation would 
vitiate the remedy for harm inflicted upon the human target of 
discrimination, simply by virtue of the fact that the victim 
utilized the corporate form in executing his contract. Such an 
interpretation would turn a blind eye to egregious racial 
harassment of the sole shareholder of a corporation so long as 
such harassment did not result in an injury to the corporation.

C. Corporate Law Principles That Govern Rem­
edies for Contractual Breach Should Not Be 
Imported into Civil Rights Law so as to Defeat 
the Broad Remedial Purposes for Which They 
Were Enacted

This Court should not interpret unrelated principles of 
corporate and contract law to defeat the broad remedial 
purposes of the civil rights laws. As noted above, in passing 
and amending § 1981, Congress intended to prohibit all 
intentional discrimination in contractual relationships. See 
supra Section I. This remedial goal is not qualified. Nothing 
in the language or history of § 1981 suggests that its 
application should vary based on whether, as a matter of 
corporate law, a person operates as a sole proprietorship, a 
corporation, a limited liability company, a partnership, a 
limited liability partnership, or any number of other business 
entities.

Minority individuals must be allowed remedies for in­
tentional racial discrimination in the enforcement o f con­
tracts, irrespective of their decision to contract as a corporate 
entity. Three circuits below reached the opposite conclusion



16
relying upon a purely mechanical application of concepts 
drawn from the body of law governing traditional remedies 
for breach of contract.6 Although § 1981 concerns the 
making and enforcement of contracts, it is neither part of the 
commercial code nor an articulation of contract law remedies. 
Rather, § 1981 is a broad and prophylactic effort to advance 
constitutional guarantees through remedial legislation whose 
sole purpose was to free individuals from the burdens of 
discriminatory action. These protections should not be sub­
ject to caveat or qualification based on corporate or contract 
law principles engrafted on legislation designed to serve 
entirely different goals. Congress did not intend to draw 
artificial distinctions between essentially identical victims of 
discrimination based solely on whether they sign contracts as 
a corporation or a sole proprietorship.

6 The First, Fifth and Tenth Circuits have engaged in such analysis. 
See Danco, Inc. v. Wal-Mart Stores, 178 F.3d 8, 14 (1st Cir. 1999) 
(refusing an individual cause of action because the “suffering [to the 
individual], however real, is not automatically damage to [the 
corporation]”); Searcy v. Houston Lighting & Power Co., 907 F.2d 562, 
565 (5th Cir. 1990) (refusing an individual cause of action because 
shareholders do not have rights to raise claims in place of a corporation); 
Guides, Ltd. v. Yarmouth Group Prop. Mgmt., Inc., 295 F.3d 1065, 1072 
(10th Cir. 2002) (refusing an individual cause of action because “a 
stockholder cannot maintain a personal action against a third party for 
harm caused to the corporation”). With only minimal explanation, these 
courts elevate corporate form over civil rights law by resolving the debate 
based on whether the § 1981 plaintiff is a formal signatory to the contract. 
E.g., Danco, 178 F.3d at 14 (explaining, “not surprisingly, that the 
contract in question was between [defendant] and [the corporation],” not 
the sole shareholder). Their holdings are problematic for two reasons. 
First, requiring that § 1981 plaintiffs are formal signatories goes well 
beyond any of the “make and enforce” language in the statute. Second, 
and perhaps more disturbing, these courts have essentially abdicated then- 
duty to conduct a thorough examination of the issues and have failed even 
to offer a plausible rationale for allowing a legal fiction—the corporate 
form—to trump important federal rights.



17
Section 198 F s  human focus is at odds with any attempt to 

subject it to a mechanical application of corporate or contract 
law principles that are foreign to the origin and purpose of 
this civil rights law.7 To engraft the remedial limitations of 
corporate or contract law on a federal civil rights statute so as 
to limit recovery for intentional discrimination defeats the 
Congressional intent. There is simply no principled support 
for the proposition that corporate form was ever intended to 
be the determinative factor in the availability of § 1981 relief 
for injury stemming from racial discrimination or a basis to 
subordinate the intentionally broad purpose of civil rights 
laws to the mechanical application of state corporation laws.

D. Creating Artificial Distinctions Between 
Victims of Discrimination Would Force Mi­
nority Business Owners to Choose Between 
Their Civil Rights and the Protection of the 
Corporate Form

Limiting standing under § 1981 to the corporate entity, in 
situations where a minority business owner has chosen to 
incorporate and then suffered intentional racial discrimination 
in the performance of a contract, would result in unequal

7 Even if it were appropriate to do so, however, a strict application of 
corporate law principles to § 1981 would not limit standing to corporate 
entities when intentional discrimination was targeted at the owner of that 
entity. McDonald has suffered a separate and distinct injury from that 
suffered by the corporate entity. See infra Section III.A (discussing 
“separate and distinct” injury doctrine). When a shareholder suffers such 
an injury, even if the corporate entity is harmed by the same act, corporate 
law allows the shareholder to bring a direct tort or other action against the 
third party that caused the harm. See id. Section 1981 is backed by a 
constitutional imperative to protect human dignity and promote economic 
advancement. It cannot be the case that a racial minority has less of a 
right to bring an action under § 1981 than he does to bring common law or 
state statutory claims as to which Congress has no interest and the 
constitution generates no imperative.



18
application of the civil rights laws to virtually identical 
victims of discrimination. Those who enter “personal con­
tractual relationship[s],” Petitioners’ Brief (“Pet. Br.”) at 39, 
would be entitled to remedies for their injuries. By contrast, a 
person who enters the same contract, endures the same 
discrimination, and suffers the same injuries would have no 
remedies under § 1981 if he or she operates the business as a 
corporation. Sole shareholders should not be required to 
check their race at the door in order to obtain the protections 
of the corporate form. The civil rights laws, designed to 
protect individual dignity and deter harmful discrimination, 
do not turn on such technical distinctions of corporate law.

If the Court were to narrow the application of § 1981 based 
on such artificial distinctions, members of protected classes 
would be presented with a Hobson’s choice between 
relinquishing their civil rights and operating their businesses 
subject to unlimited personal liability. Such a narrowing of 
the application of § 1981 would add one additional barrier to 
the growth and expansion of minority businesses, a class of 
businesses that already faces widespread discrimination in 
today’s marketplace.8 Section 1981, which was specifically 
designed to remedy discrimination in the economic world, 
should not be interpreted to require racial minorities to aban­
don their civil rights if  they seek to advance their economic 
interests via incorporation.

The ability to incorporate is vital for minority-owned small 
businesses. Incorporation “facilitate[s] legitimate business 
transactions, eliminatefs] unreasonable liabilities and at the

8 See, e.g., Sherbrooke Turf, Inc. v. Minn. D ep’t o f Transp., et al., 345 
F.3d 964, 969-71 (8th Cir. 2003); Concrete Works o f Colo. v. City and 
County o f  Denver, 321 F.3d 950, 960-70 (10th Cir. 2003); Adarand 
Constructors v. Slater, 228 F. 3d 1147, 1167-74 (10th Cir. 2000); 
Northern Contracting v. Illinois, et al., No. 00-C-4515, 2004 WL 422704, 
at *13-17 (N.D. 111. Mar. 3, 2004); Builders Ass’n o f Greater Chicago v. 
City o f  Chicago, 298 F. Supp. 2d 725, 742 (N.D. 111. 2003).



19
same time safeguards] the investor, the creditor and those 
dealing with the corporation.” 1 Fletcher Cyclopedia Cor­
porations § 2.10, pps. 10-11. The limited liability aspect of 
the corporate form was designed to facilitate the economic 
advancement of society. Stephen B. Presser, Thwarting the 
Killing o f  the Corporation: Limited Liability, Democracy, 
and Economics, 87 Nw. U. L. Rev. 148, 163 (1992) 
(“[L]imited liability came about because of a wish to further 
economic progress and to maximize state wealth through 
encouraging investment.”). Limited liability is particularly 
important for small businesses, which represent the vast 
majority of businesses owned by racial minorities. Indeed, it 
has been noted that:

[A]n . . . important factor contributing to limited 
liability’s present stronghold in American corporate law 
was a desire to encourage individual investment in 
smaller firms. It is of a piece with other nineteenth- 
century manifestations o f rugged individualism, and 
reflects a traditional American policy to favor the small- 
scale entrepreneur. Limited liability, insofar as it 
reflects a venerable desire to help out smaller investors, 
those more typical o f the people, thus reflects democracy 
as much as economics. Perhaps, then, limited liability 
ought to be most sacred for smaller firms, and not those 
possessing great economic wealth.

Id.

A recent study by the Ewing Marion Kauffman Foun­
dation (the “Kauffman Study”) concluded that minority 
businesses are not maintaining pace with the larger U.S. 
business community.8 It is no secret that minority businesses 
in the U.S: have historically experienced severe impediments 
to business formation and growth—they are generally smaller

s The Boston Consulting Group, The New Agenda for Minority Busi­
ness Development, at 1-3 (June 2005).



in size9 and disproportionately fewer in number than their 
white counterparts.10 In order to succeed, existing minority 
businesses must be prepared to form strategic alliances, 
participate in mergers and acquisitions, and access the capital 
markets. In reality, however, most minority businesses today 
disproportionately operate as sole proprietorships: 82% of 
minority businesses are sole proprietorships versus 71% of 
non-minority firms.11 The Kauffman Study makes clear that 
in order to compete in today’s global economy, these sole 
proprietorships must increasingly take advantage of the 
protections afforded by doing business in the corporate form.

Denying standing under § 1981 to victims of intentional 
discrimination who opt to make, perform and enforce con­
tracts through a corporation would force minority business 
owners to choose between their civil rights and the benefits of 
the corporate form. Such a result would be inconsistent with 
the goals of § 1981. See supra Section I.

20

9 Seventy-nine percent of minority businesses do not have paid 
employees and, of those that have paid employees, 69% have fewer than 
nine. U.S. Small Business Administration, Office of Advocacy, 
Minorities in Business, at 15 (Nov. 2001).

10 This is not to say that minority businesses and small businesses alike 
do not have the capacity to complete large construction contracts. To the 
contrary, the Court of Appeals in Concrete Works o f Colo. v. City and 
County o f Denver, 321 F.3d 950 (10th Cir. 2003), found that a firm’s size 
does not affect its qualifications, willingness, or ability to perform 
construction services and that the smaller size and lesser experience of 
minority- and women-owned businesses are, themselves, the result of 
industry discrimination. Id. at 981, 990-92. In fact, the trial court there 
found that most firms have few full-time permanent employees and must 
grow or shrink their performance capacity according to the volume of 
business they are doing. Id. at 981 (upholding the constitutionality of 
Denver’s minority and women business enterprise program).

11 See Kauffman Study at 31.



III. ALLOWING THE DIRECT AND TARGETED 
VICTIMS OF DISCRIMINATION TO SUE WILL 
NOT LEAD TO A FLOOD OF LAWSUITS

Petitioners and their amici wrongly suggest that affirming 
the Ninth Circuit’s decision will result in a deluge of civil 
rights lawsuits by virtually any person, no matter how 
tenuous their relationship to the alleged discrimination. 
According to Petitioners, the Ninth Circuit’s holding allows 
anyone tangentially related to the contract to sue under 
§ 1981 and radically expands the class of potential plaintiffs 
to an “essentially limitless” number. Pet. Br. at 37. The 
Court must not fall prey to such scare tactics. In reality, the 
Ninth Circuit’s holding is limited in two important respects. 
First, the ruling expressly restricts § 1981 standing to persons 
who have suffered a separate and distinct injury from that o f 
the corporation. Second, the facts o f the case limit its im­
port to plaintiffs who are the direct targets of discrimina­
tion (not mere bystanders) and who own and operate their 
own businesses.

A. The Ninth Circuit’s Holding Requires a 
Separate and Distinct Injury

The Ninth Circuit’s ruling requires every individual 
plaintiff bringing a claim under § 1981 to show injuries that 
are distinct from that of the corporation. See Mc­
Donald v. Domino’s Pizza, 107 Fed. Appx. 18, 19 (9th Cir. 
2004). In doing so, the court relied on Gomez v. Alexian 
Bros. Hosp. o f San Jose, 698 F.2d 1019 (9th Cir. 1983). In 
Gomez, plaintiff and his corporation were denied a contract to 
provide hospital services because he and his employees were 
Hispanic and the hospital was wary of “too many brown 
faces.” Id. at 1020. The plaintiff sued under § 1981 for 
personal injuries that were distinct from the corporation’s 
injuries, including loss of employment as director of the 
defendant’s emergency room, humiliation and embarrass­
ment. Id. at 1021. The court allowed the plaintiff to bring his

21



22
claim because he suffered a distinct and palpable injury and 
his interests were within the zone of interests to be protected 
by § 1981. Id. This comports with a long line of cases al­
lowing shareholders to sue for injuries that are unique to 
them. E.g., Franchise Tax Bd. o f  California v. Alcan 
Aluminium Ltd., 493 U.S. 331, 336 (1990) (recognizing that 
an exception to the “longstanding equitable restriction that 
generally prohibits shareholders from initiating actions to 
enforce the rights of the corporation” allows “a shareholder 
with a direct, personal interest in a cause of action to bring 
suit even if the corporation’s rights are also implicated”); see 
also Ritchie v. McMullen, 79 F. 522, 524 (6th Cir. 1897); 
Cunningham v. Kartridg Pak Co., 332 N.W.2d 881, 883 
(Iowa 1983); R. G. Dun & Co. v. Shipp, 91 S.W.2d 330, 331 
(Tex. 1936); Vierlingv. Baxter, 141 A. 728, 729 (Pa. 1928).

Like Gomez, there is no dispute that McDonald has alleged 
injuries that are personal to him and distinct from any injuries 
suffered by JWM. He is not seeking to step into the 
corporation’s shoes—rather, he is seeking redress for his own 
damages, which include the loss of bank financing, injury to 
his personal credit, injury to his ability to acquire home- 
owners’ insurance, emotional distress, and personal medical 
problems.

Thus, the Ninth Circuit’s decision provides no support for 
plaintiffs who bring individual § 1981 claims along­
side corporations in federal courts without alleging a separate 
and distinct injury. For example, although the plaintiff in 
Bellows v. Amoco Oil Co., 118 F.3d 268, 277 (5th Cir. 1997), 
brought suit in an individual capacity, he did not allege 
personal injuries but sought rather to recover only the eco­
nomic losses suffered by his corporation. Similarly, in 
Edwards, Gersman, and Smith, the plaintiffs failed to allege 
personal injuries resulting from discrimination that were 
distinct from the corporation’s injury. See Edwards v. Walter 
Jones Const. Co., No. 98-4366, 2000 WL 302710, at *1 (6th



23
Cir. Mar. 17, 2000); Gersman v. Group Health Assoc., 931 
F.2d 1565, 1569 (D.C. Cir. 1991), rev’d on other grounds, 
502 U.S. 1068 (1992); Smith v. Martin, 542 F.2d 688, 690 
(6th Cir. 1976). It is well settled that a shareholder cannot 
maintain a personal action for harm caused to his corporation. 
E.g., Alcan Aluminium, 493 U.S. at 336. Because Petitioners’ 
cast of hypothetical and remotely related plaintiffs would not 
be able to show a separate and distinct harm from the 
corporation, they would not be enabled by the Ninth Circuit’s 
decision.

B. The Import of this Case is Limited to Plaintiffs 
Who are Direct Targets of Discrimination and 
Who Own and Operate Their Own Businesses

McDonald was not “tangentially related,” “incidental,” or 
“merely an affiliate” of JWM as Petitioners and its amici 
insist—indeed, for all practical purposes, McDonald was 
JWM. JWM was a close corporation, wholly owned by 
McDonald and operated by him as owner. McDonald is the 
person who negotiated, created, and performed the contracts. 
He was solely responsible for ensuring that JWM’s 
contractual obligations were met and the required work was 
done. In fact, all of Petitioners’ interactions regarding the 
contracts were solely with McDonald. It was McDonald who 
rejected modification of the contracts and McDonald who 
adamantly fought against Petitioners’ termination of the 
contracts. To deal with JWM was, practically speaking, to 
deal with McDonald.

The argument that McDonald, having availed himself of 
the corporate form, gives up all rights to sue for distinct 
injuries under § 1981 is specious. There are numerous 
instances in which the law disregards the corporate form in 
cases of wrong-doing by shareholders—especially in cases 
where the corporation has only one or a few shareholders who 
are directly implicated in the discrimination or who act as an 
alter ego for the corporation. See, e.g. Whidbee v. Garzarelli



24
Food Specialties, Inc., 223 F.3d 62, 74-75 (2d Cir. 2000); 
O ’Connor v. 11 W. 30th St. Restaurant Corp., Nos. 94 Civ. 
2951, 93 Civ. 8895, 1995 WL 354904, at *4 (S.D.N.Y. Jun. 
13, 1995). Likewise, sole corporate shareholders like 
McDonald must be allowed to invoke the protection of 
§ 1981 when they are themselves the victim of discrimination 
prohibited by § 1981. It would be odd indeed if  the law were 
construed so that McDonald, as the owner of a corporation, 
were to be subject to suit under § 1981— and simultaneously 
left without any remedy at all when he himself is the victim 
o f race discrimination.

Accordingly, the Ninth’s Circuit’s ruling has a narrow and 
compelling application where the plaintiff: (1) was the direct 
target of the discrimination; (2) suffered separate and distinct 
harm; and (3) owned and operated his business in such a way 
that to deal with the corporation was essentially to deal with 
him. As a result, Petitioners’ dire predictions about the 
impact of this case have no basis. There is simply no support 
in the Ninth Circuit’s decision for the claim that “every 
employee of a large corporation would have standing to bring 
a lawsuit alleging that his or her employer lost a big contract 
for racially discriminatory reasons.” See Pet. Br. at 38. 
Petitioners and their amici are wrong to assert that the 
decision below opens the federal courts to suits by people 
whose only claim is that they have suffered because of a 
violation o f some other person’s right. See EEAC Br. at 15. 
That is not the case at all. Rather, what the Ninth Circuit has 
done is to ensure that remedies remain available for actual 
injuries to the human victims of racial discrimination in the 
making and enforcement of contracts as Congress intended in 
enacting § 1981.



25
CONCLUSION

For the foregoing reasons, the decision below should be 
affirmed.

Respectfully submitted,

Barbara R. Arnwine 
John C. Brittain 
Michael J. Foreman 
Sarah C. Crawford 
Tricia G. Jefferson 
Lawyers’ Committee for 

Civil Rights Under Law 
1401 New York Avenue, N.W., 
Suite 400
Washington, D.C. 20005 
(202) 662-8351

Anthony Robinson 
Sarah C. von der Lippe 
Minority Business

Enterprise Legal Defense 
And
Education Fund 

1100 Mercantile Lane 
Suite 115-A 
Largo, MD 20774 
(301) 583-4648

National Minority 
Supplier Development 
Council, Inc.,

1040 Avenue of the Americas, 
Second Floor 
New York, NY 10018 
(212) 944-2430

Jennifer K. Brown
Legal Momentum
395 Hudson Street
New York, New York 10014
(212)413-7536

Thomas S. Martin 
Counsel o f Record 

Jonathan R. DeFosse 
Tiffany Allison George 
Shaniek Mills Maynard 
Keith R. Palfin 
Shearman & Sterling LLP 
801 Pennsylvania Avenue, N.W. 
Washington, DC 20004 
(202) 508-8000

Aimee J. Baldillo 
National Asian Pacific 
American Legal 
Consortium
1140 Connecticut Avenue, NW 
Suite 1200
Washington, DC 20036 
(202) 296-2300

Theodore M. Shaw 
Director-Counsel 

Jacqueline A. Berrien 
Norman J. Chachkin 
Robert Stroup 
Matthew B. Colangelo 
Naacp Legal Defense 

and Education Fund 
99 Hudson Street, 16th fl.
New York, NY 10013 
(212) 965-2200

Counsel for Amici Curiae
September 22, 2005