The Supreme Court of the United States recently held that to prevail in a claim for racial discrimination under 42 U.S.C. § 1981, "a plaintiff must plead and ultimately prove that, but for race, it would not have suffered the loss of a legally protected right."
In so ruling, the Court vacated the judgment of the U.S. Court of Appeals for the Ninth Circuit and remanded for further proceedings to determine whether the amended complaint contained "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face under the but-for causation standard."
A copy of the opinion is available at: Link to Opinion
An African-American owned entertainment company (the "network") wanted to have "one of the nation's largest cable television conglomerates [the cable TV company], carry its channels." The cable TV company refused, allegedly due to "lack of demand for [the media company's] programming, bandwidth constraints, and its preference for news and sports programming that [the network] didn't offer."
When negotiations stalled, the network sued "seeking billions in damages" and alleging that the cable TV company "systematically disfavored '100% African American-owned media companies'" and thereby "violated 42 U.S.C. § 1981(a), which guarantees, among other things, '[a]ll persons … the same right … to make and enforce contracts .. as is enjoyed by white citizens.'"
The cable TV company moved to dismiss and the trial court granted the motion for failure to state a claim. The plaintiff twice tried to amend its complaint, "[b]ut each time, the court concluded, [plaintiff's] efforts fell short of plausibly showing that, but for racial animus, [the cable TV company] would have contracted with [plaintiff]." The trial court eventually found "that further amendments would prove futile and entered a final judgment for [defendant]."
On appeal, the U.S. Court of Appeals for the Ninth Circuit reversed because the trial court "used the wrong causation standard when assessing [plaintiff's] pleadings. A § 1981 plaintiff doesn't have to point to facts plausibly showing that racial animus was a 'but for' cause of the defendant's conduct. Instead, … a plaintiff must only plead facts plausibly showing that race played 'some role' in the defendant's decision making process."
The Supreme Court of the United States agreed to hear the case on petition for certiorari because of a split between the Ninth and Seventh Circuits. The U.S. Court of Appeals for the Seventh Circuit previously held that "to be actionable, racial prejudice must be a but-for cause … of the refusal to transact."
The SCOTUS began by explaining that "[i]t is 'textbook tort law' that a plaintiff seeking redress for a defendant's legal wrong typically must prove but-for causation. … This ancient and simple … causation test … supplies the 'default' or 'background' rule against which Congress is normally presumed to have legislated when creating its own new causes of action."
The plaintiff argued that § 1981 created an exception to the "but-for" causation rule, and that at the pleading stage, "a § 1981 plaintiff only bears the burden of showing that race was a 'motivating factor' in the defendant's challenged decision[.]"
After examining "the statute's text, its history, and [its] own precedent[,]" the Court concluded "that § 1981 follows the general rule [and] a plaintiff bears the burden of showing that race was a but-for cause of its injury" both at the pleading stage and at trial.
The Court explained that "Congress passed the Civil Rights Act of 1866 in the aftermath of the Civil War to vindicate the rights of former slaves. … While the statute's text does not expressly discuss causation, it is suggestive."
The SCOTUS reasoned that the fact that the statute guarantees the "same right … as is enjoyed by white citizens" leads one to ask "what would have happened if the plaintiff had been white? This focus fits naturally with the ordinary rule that a plaintiff must prove but-for causation. … Nor does anything in the statute signal that this test should change its stripes (only) in the face of a motion to dismiss."
Turning to "[t]he larger structure and history of the Civil Rights Act of 1866[,]" the Court explained that while nothing in the statute expressly created a private right of action "to enforce the right to contract[,]" the Court "created a judicially implied private right of action" in 1975, "a period when the Court often 'assumed it to be a proper judicial function to provide such remedies as are necessary to make effective a statute's purpose.'"
Times have changed, the Court went on, because "we have come to appreciate that '[l]ike substantive federal law itself, private rights of action to enforce federal law must be created by Congress' and '[r]aising up causes of action where a statute has not created them may be a proper function for common law courts, but not for federal tribunals.'"
The SCOTUS looked to the fact that Congress provided for "criminal sanctions in a neighboring section" for violations "on account of" or "by reason of" a person's race as support for its conclusion that nothing in the statute "hint[s] that a different and more forgiving rule might apply at one particular stage in the litigation[,]" and, thus, "it would be more than a little incongruous for us to employ the laxer rules [plaintiff] proposes for this Court's judicially implied cause of action."
Furthermore, "this Court's precedents confirm all that the statute's language and history indicate." For example, the Court described its implied private right of action in 1975 as "afford[ing] a federal remedy against discrimination … on the basis of race,' language (again) strongly suggestive of a but-for causation standard."
Finally, the SCOTUS reasoned that its "treatment of a neighboring provision, § 1982, supplies a final telling piece of evidence." Section 1982 guarantees all citizens the same rights as white citizens to "inherit, purchase, lease, sell, hold and convey real and personal property." Because "this Court has repeatedly held that a claim arises under § 1982 when a citizen is not allowed 'to acquire property … because of color[,] … it is unclear how we might demand less from a § 1981 plaintiff."
The Court rejected the plaintiff's argument that it should adopt the "'motivating factor' causation test found in Title VII of the Civil Rights Act of 1964" because "a critical examination of Title VII's history reveals more than a few reasons to be wary of any invitation to import its motivating factor test into § 1981." To summarize, the Court reasoned that "Title VII was enacted in 1964; this Court recognized its motivating factor test in 1989; and Congress replaced that rule with its own version two years later. Meanwhile, § 1981 dates back to 1866 and has never said a word about motivating factors. So we have two statutes with two distinct histories, and not a shred of evidence that Congress meant them to incorporate the same causation standard."
The SCOTUS also rejected the plaintiff's argument that it should adopt "the burden-shifting framework of McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 804 (1973)[,]" because "[l]ike the motivating factor test, McDonnell Douglas is a product of Title VII practice. … [I]t does not mention the motivating factor test, let alone endorse its use only at the pleadings stage. Nor can this come as a surprise: This Court didn't introduce the motivating factor test into Title VII practice until years after McDonnell Douglas. For its part, McDonnell Douglas sought only to supply a tool for assessing claims, typically at summary judgment, when the plaintiff relies on indirect proof of discrimination. … Under McDonnell Douglas's terms, too, only the burden of production ever shifts to the defendant, never the burden of persuasion[,] … [s]o McDonnell Douglas can provide no basis for allowing a complaint to survive a motion to dismiss when it fails to allege essential elements of a plaintiff's claim."
Because the Ninth Circuit never ruled on whether the plaintiff's amended complaint contained enough facts to "'state a claim that is plausible on its face' under the but-for causation standard[,]" and instead used the wrong standard, the SCOTUS vacated the judgment and remanded the case for further proceedings.
Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Admitted to practice law in Illinois
Alabama | California | Florida | Georgia | Illinois | Massachusetts | New Jersey | New York | Ohio | Pennsylvania | Texas | Washington, DC
NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.
Our updates and webinar presentations are available on the internet, in searchable format, at:
Financial Services Law Updates
The Consumer Financial Services Blog™
California Finance Law Developments