Arguello v. Conoco, Inc.
2003 WL 21000817, 2003 U.S. App. LEXIS 8544, 330 F.3d 355 (2003)
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Rule of Law:
To establish a claim of race discrimination under 42 U.S.C. § 1981 in the retail context, a plaintiff must show that an actual attempt to contract was thwarted or that discriminatory contractual terms were imposed, not merely that offensive conduct occurred during a successfully completed transaction.
Facts:
- Denise Arguello and Alberto Govea, both Hispanic, stopped with their family at a Conoco store.
- Arguello's husband pumped gas; Arguello and Govea (her father) went inside the store to pay for the gas and buy some beer.
- Cindy Smith, a Conoco clerk, was rude to Arguello when she reached the counter, demanding identification less friendly than she had been with previous customers.
- Arguello presented her valid Oklahoma driver’s license, which Smith initially refused to accept but eventually did, completing Arguello's purchase for gas and other items.
- During Arguello’s purchase, Govea became increasingly frustrated with Smith's treatment of his daughter, left the beer he intended to buy on the counter, and walked out of the store.
- After Arguello completed her sale, Smith shouted obscenities, made racially derogatory remarks, and shoved a six-pack of beer off the counter.
- As Arguello and her family left the store, Smith screamed racist remarks over the intercom, laughed, and made crude gestures.
- When Govea attempted to re-enter the store to determine Smith’s name for a complaint, Smith locked him out while laughing and making crude gestures.
Procedural Posture:
- Denise Arguello and Alberto Govea, along with other plaintiffs, initially sued Conoco, Inc. under 42 U.S.C. §§ 1981 and 2000a, and state law, in the United States District Court for the Northern District of Texas.
- The district court dismissed or granted summary judgment for defendants on all claims, except for those of Arguello and Govea.
- A panel of the Fifth Circuit Court of Appeals reinstated and remanded for trial the claims raised by Arguello and Govea, while affirming the rejection of all other claims and plaintiffs (Arguello v. Conoco, Inc., 207 F.3d 803, 813 (5th Cir. 2000)).
- A jury in the United States District Court for the Northern District of Texas found for plaintiffs Arguello and Govea on the § 1981 claim and awarded compensatory and punitive damages.
- The district court granted Conoco’s motion for judgment as a matter of law (j.m.l.) under FED. R. CIV. P. 50(b), finding no basis for a reasonable jury to conclude that plaintiffs were prevented from contracting on a discriminatory basis in violation of § 1981 (Arguello v. Conoco, Inc., 2001 U.S. Dist. LEXIS 18471 (N.D. Tex. Nov. 9, 2001)).
- Arguello and Govea (Plaintiffs-Appellants) appealed the district court's judgment as a matter of law and the denial of injunctive relief to the United States Court of Appeals for the Fifth Circuit.
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Issue:
Does racial harassment and offensive conduct by a retail employee, unaccompanied by an actual thwarting of a contract or the imposition of discriminatory contractual terms, constitute a violation of 42 U.S.C. § 1981, which guarantees the right to make and enforce contracts on non-discriminatory terms?
Opinions:
Majority - Jerry E. Smith
No, racial harassment and offensive conduct by a retail employee, unaccompanied by an actual thwarting of a contract or the imposition of discriminatory contractual terms, does not constitute a violation of 42 U.S.C. § 1981. The Fifth Circuit affirmed the district court's judgment as a matter of law, concluding that the plaintiffs failed to establish the third element of a § 1981 claim: that the discrimination concerned one or more of the enumerated activities in the statute, specifically the ability 'to make and enforce contracts.' Citing Morris v. Dillard Dep’t Stores, Inc., the court reiterated that a plaintiff must demonstrate 'the loss of an actual, not speculative or prospective, contract interest' and 'some tangible attempt to contract' that was 'thwarted.' The court distinguished retail transactions from employment agreements, noting that retail sales are single, discrete transactions, unlike the continuing contractual relationship of employment. While the Civil Rights Act of 1991 expanded § 1981 to cover 'all phases and incidents of the contractual relationship,' this applies to ongoing relationships like employment, not completed retail sales. Govea voluntarily abandoned his purchase and was not actually prevented from contracting for the beer; his later attempt to re-enter the store was not for a purchase. Arguello successfully completed her purchase, receiving all she was entitled to under the retail-sales contract. The offensive conduct, while egregious, did not prevent contract formation or alter substantive terms. The court further distinguished cases involving discriminatory service in restaurants (where a continuing relationship beyond a simple purchase exists) and cases involving discriminatory prepayment or check-writing policies (where discriminatory contractual terms themselves violate § 1981). Here, there were no allegations of discriminatory contractual terms, only offensive conduct.
Analysis:
This case significantly narrows the application of 42 U.S.C. § 1981 in the retail context, limiting its scope primarily to situations where an actual contractual opportunity is prevented or where discriminatory terms are imposed. It clarifies that egregious racial harassment during a successfully completed transaction, while morally reprehensible, does not, by itself, create a claim under § 1981 as construed by the Fifth Circuit. This ruling emphasizes the 'loss of an actual...contract interest' requirement, distinguishing retail sales from employment contracts and potentially reducing the efficacy of § 1981 as a tool against discriminatory customer service when a transaction is completed without altered terms. Future plaintiffs will need to demonstrate direct interference with the ability to form or enforce a contract on equal terms, rather than solely relying on proof of discriminatory conduct.
