Gregory v. Dillards Inc., No. 05-3910 (8th Cir. May 12, 2009) (en banc)

By Paul Mollica

After some four years on appeal and two oral arguments, this retail discrimination case is finally decided by the Eighth Circuit, with the plaintiffs on the losing side. By a 6-5 vote, the court entirely dispatches this case to state court, holding that there is no federal-law remedy — at least, under § 1981 — for racially-biased surveillance in a department store.

Gregory v. Dillards Inc., No. 05-3910 (8th Cir. May 12, 2009) (en banc):  The core language of section 1981 provides that “[a]ll persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts . . . .as is enjoyed by white citizens.”  In the 1991 Civil Rights Act, Congress abrogated the Patterson v. McLean Credit Union, 485 US 617 (1988), decision by defining “make and enforce contracts” as including “the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.”

Applying section 1981 to employment settings poses no analytical difficulties, as the employment relationship itself is treated at law as a “contract.”  Yet many cases have wrestled with, and reached different outcomes about, when the “contract” arises in a retail setting.  This decision is potentially the most far-reaching of these cases to date at the federal court of appeals level.  It poses a challenge to any case falling short of a straight denial of service on account of race.

Four plaintiffs proceeded to summary judgment on a claim that a Dillard’s store in Columbia, Missouri selectively assigned its security guards to follow black customers.  Several former employees of the store testified that they routinely observed security guards and managers treat white and black customers differently.  The most provocative allegation:  a special security code — directing staff to be “on the lookout” — allegedly sounded whenever African-American customers entered the store.

Defendant did not dispute for summary judgment purposes that the surveillance paractices were racially motivated.  Instead, it disputed that the customers entered a “contract” with the store by shopping there.  Because the customers were not prevented from carrying out transactions by the store — for the most part, the plaintiffs left the store in disgust or frustration of their own accord — the district court held that no “contract” was formed within the meaning of section 1981.  The original three-judge panel had substantially reversed that decision, with Judge Murphy writing for the majority, and Judge Colloton dissenting.

The six-judge majority en banc affirms the decision below entirely.  The majority opinion, signed this time by Judge Colloton, holds that to keep faith with the term “contract,” some threshold beyond mere browsing through merchandise had to be met. To state a claim, a shopper â€œmust show an attempt to purchase, involving a specific intent to purchase an item, and a step toward completing that purchase.” And “[t]o the extent that the plaintiffs urge us to expand our interpretation of the statute . . . and to declare that a shopper need only enter a retail establishment to engage in protected activity under § 1981, we decline to do so.”

Thus, the majority holds as a matter of law that “discriminatory surveillance by a retailer is insufficient to establish interference with protected activity under § 1981.” The majority allows one “out” to mitigate the harshness of its decision:  that surveillance carried out by “severe or pervasive” means â€” perhaps accompanied by physical duress? or carried out in an especially cruel way? — might violate section 1981 (although how that would turn the shopping experience into an actionable contract, the majority does not explain).  In sum, the court dismisses all of the federal claims, and remands the parallel Missouri Human Rights Act claims to state court.  (There was a side-issue about whether another thirteen customers were properly dismissed on the ground that they failed to state a claim in their complaint; but this, too, substantially rose or fell on the legal issue of what constituted a “contract.”)

The majority closes with these thoughts:

“Private parties engage in a variety of behavior that individual federal judges may deem unacceptable, but not all of it is unlawful. Whether and how federal law should regulate particular activity that is considered morally or socially unacceptable is a policy judgment made by Congress and the President. . . .In a significant economic sector such as retail shopping, the potential benefits of sanctioning and deterring offensive and undesirable conduct through federal legislation likely must be weighed against the costs of litigation (including non-meritorious claims) that may be generated by expanded regulation, the potential costs of different retail security measures that may be necessitated by such legislation, and the potential increase in shoplifting (presently estimated to be a $13 billion annual drain on retailers) if merchants are discouraged from conducting legitimate security activity for fear of triggering addition al lawsuits. We make no judgment about the wisdom of any policy option, but we conclude that § 1981 as presently drawn does not regulate the retail shopping environment to the extent urged by the plaintiffs in this case.”

Judge Benton, dissenting in part, agrees that the thirteen plaintiffs’ claims failed at the complaint stage, but joined the dissent in finding that the four remaining plaintiffs presented a genuine issue of material fact about whether they had entered a contract with the store by shopping there.

Judge Murphy, writing for four judges, would have held that what proceeds the formation of a sale is also safeguarded by section 1981 — what is described as a “tangible attempt to contract.”  “It is difficult to generalize about when a shopper’s interactions with a merchant ripen into a protected ‘tangible attempt to contract’ because by definition the determination must be fact based. What is clear, however, is that § 1981 prohibits discrimination in ‘all phases and incidents’ of a contractual relationship, Rivers v. Roadway Express, Inc., 511 U.S. 298, 302 (1994), thus clearly reaching conduct preceding the actual consummation of a contract.”  The dissent elaborated on its proposed standard:

“The steps toward contract formation will vary by context. The purchase of a standardized commercial product-a can of soda or a packet of chewing gum-from a low service convenience store requires virtually no interaction between customer and clerk aside from the tender of payment. Mere seconds may elapse between the formation of a customer’s intent to purchase and the final exchange of cash for goods. The protected activity may therefore be quite brief. On the other hand, a consumer’s purchase of expensive durable goods-a new washer and dryer or a new car-often involves significant customer education, inspection of wares, comparison of prices and features, negotiation of financing agreements, and extended assistance by informed sales agents. In such circumstances the process of contract formation may be quite lengthy, and the customer’s specific intentions may wax and wane throughout. The set of protected activities may therefore comprise a wide range of precontractual interactions and services.

“In the specific context of department store shopping, it is incontrovertible that customers will often want to inspect garments for quality and fit or sample fragrances for scent before concluding a purchase. Modern retailers such as Dillard’s place much of their merchandise on open display, inviting browsers to examine, sample, and inspect their goods, all with an eye towards generating sales. The atmosphere and ambience of a high end retail store are part of its overall allure and contribute both to the shopping experience and the customer’s willingness to consider goods for purchase. When a shopper in good faith takes advantage of these opportunities, she is surely protected by § 1981. It would be remarkable indeed to conclude otherwise and to permit a merchant out of pure racial animus to deny African American
customers access to fitting rooms so long as it allowed such customers to purchase outfits straight from the rack.”

Now what about the dog that does not bark?  In over 50 pages there is not so much as single citation to Title II of the Civil Rights Act of 1964, 42 U.S.C. § 2000a, in which Congress expressly declared that “[a]ll persons shall be entitled to the full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations of any place of public accommodation, as defined in this section, without discrimination on the ground of race, color, religion, or national origin.”  This is the basic federal statute that rang an end to de jure Jim Crow nationwide.  The activity challenged here (unequal surveillance of African-Americans) easily falls within the broad ambit of this section.  So Congress, forty-five years ago, made the very “policy judgment” that the majority considered to be an open issue.  Presumably, the plaintiffs sought no relief under this section because the Supreme Court stated 40 years ago — in an apparent obiter dictum — that Title II has no damage remedies, only injunctive relief and attorneys fees.  Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 402 (1968) (per curiam).  Now, here’s a remedy that Congress could painlessly write into law, and probably ought to (unless the Supreme Court reverses this decision).