Corporation Has
Standing to Sue for Discrimination
The
Ninth Circuit recently ruled that a minority-run company has standing to
sue for race discrimination under 42 U.S.C. 1981. Writing for the majority,
Judge Sidney Thomas wrote, "When a corporation has acquired a racial
identity, either as a matter of law or by imputation, then it can be the
direct target of discrimination and has standing to pursue a claim under
1981." Thinket Ink Information
Resources, Inc. v. Sun Microsystems, Inc., No.02-16754 (9th Cir. May
17, 2004).
When
does a corporation have a "racial identity" that would grant it
the same rights to sue for discrimination as a person? The Thinket case expands the law regarding standing in this
area.
Minority-Owned Company Brought Suit
The
discrimination suit was filed by Thinket Ink
Information Resources, Inc. ("Thinket").
Thinket is a minority-owned technology services
contractor. Thinket was certified by the Small
Business Administration as a firm owned and operated by socially and
economically disadvantaged individuals and was eligible to receive certain
federal contracts. Each of Thinket's shareholders
is an African-American.
Thinket supplied Sun Microystems
with systems support services. Initially, Thinket
contracted with Sun Microsystems through individual purchase orders.
Eventually, after three failed attempts, Thinket
was able to obtain a Master Service Agreement with Sun Microsystems that
made Thinket in essence a preferred vendor that
Sun would turn to first.
Eventually,
the business relationship soured. Thinket alleged
that Sun Microsystems refused to contract with Thinket
solely because Thinket was an African-American
owned business. The court took up the issue of whether Thinket,
as a corporation, had standing to sue for race discrimination.
Supreme Court Dictum Left Uncertainty
The
issue of whether a corporation can assert a section 1981 claim has been
debated ever since the 1977 U.S. Supreme Court ruling in Village of
Arlington Heights v. Metropolitan Housing Development Corp., 429 U.S.
252, 263 (1977) in which Justice Powell stated that "as a corporation,
[the plaintiff] has no racial identity and cannot be the direct target of
the petitioner's alleged discrimination." The Supreme Court did not
decide the case on the issue of standing of the corporation, but the dictum
was oft repeated in later federal court decisions.
However,
some courts had found exceptions to the Supreme Court's statement and
determined that corporations did, under certain circumstances, have
standing to sue under 1981. For instance, the First Circuit had previously
allowed a corporate plaintiff to sue for race discrimination, and the
Second Circuit held that a corporation had standing to assert claims of
race discrimination in the disbursement of grant funds. See Des Vergnes v. Seekonk Water District, 601 F.2d 9 (1st
Cir. 1979) and Hudson Valley Freedom Theater, Inc. v. Heimbach, 671 F.2d 702
(2d Cir. 1982).
Company Had Racial Identity
In
this case, the Ninth Circuit found that the company had an imputed racial
identity that meant it could be the target of discrimination and thus had
standing to sue. Thinket was required to be
certified as a corporation with a racial identity to receive governmental
benefits. All of its shareholders were African-American. The company was
alleging it was the victim of direct racial discrimination based on its
status as a certified minority-owned business and the race of the
shareholders.
These
facts, according to the Ninth Circuit, brought Thinket
within the "zone of interest" protected by 1981. In order to have
standing, a plaintiff's claim must fall within the zone of interests
protected or regulated by the statutory provision invoked in the suit.
Here, the court observed that if a corporation can suffer harm from
discrimination, it has standing to litigate that harm.
Company Still Faces Hurdles
While
the Ninth Circuit ruled that Thinket had standing
to sue, the company still faces hurdles in proceeding with its lawsuit. The
case was previously dismissed as time barred. However, the recent Supreme
Court ruling in Jones v. R.R. Donnelley & Sons, Co., 541 U.S.
__, 124 S.Ct. 1836 (2004), extended the statute
of limitations in 1981 claims from the one year statute of limitations for
California personal injury actions to the federal catchall limitations
period which allows four years to bring suit.
In
light of the Supreme Court's Jones decision, the Ninth Circuit
remanded Thinket to the district court to
reconsider the its finding that the claims were
time-barred.
Tips for Employers
The
implication of this case is broad: If corporations have the characteristics
of a protected class then they should be allowed to bring
anti-discrimination claims. The court is in essence saying that the civil
rights laws work both ways as they apply to corporations, giving
corporations the obligation to respect civil rights and the right to demand
that their own civil rights be respected.
The
crucial point of Thinket for employers is
that they should apply their non-discrimination policies to their dealings
with corporations, and not simply with individuals. When deciding who
should receive business contracts or whose contracts should be terminated,
discrimination based on protected characteristics should be strictly
prohibited.
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