Domino's Pizza, Inc. v. McDonald

(Slip Opinion)              OCTOBER TERM, 2005                                       1

                                       Syllabus

         NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
       being done in connection with this case, at the time the opinion is issued.
       The syllabus constitutes no part of the opinion of the Court but has been
       prepared by the Reporter of Decisions for the convenience of the reader.
       See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.


SUPREME COURT OF THE UNITED STATES

                                       Syllabus

        DOMINO’S PIZZA, INC., ET AL. v. MCDONALD

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
                  THE NINTH CIRCUIT

  No. 04–593.      Argued December 6, 2005—Decided February 22, 2006
Respondent McDonald, a black man, is sole shareholder and president
  of JWM Investments, Inc. (JWM). He sued petitioners (collectively
  Domino’s) under 42 U. S. C. §1981, alleging, inter alia, that JWM and
  Domino’s had entered into several contracts, that Domino’s had bro-
  ken those contracts because of racial animus toward McDonald, and
  that the breach had harmed McDonald personally by causing him to
  suffer monetary damages and damages for emotional injuries. The
  District Court granted Domino’s motion to dismiss on the ground that
  McDonald could bring no §1981 claim against Domino’s because
  McDonald was party to no contract with Domino’s. Reversing, the
  Ninth Circuit acknowledged that an injury suffered only by the cor-
  poration would not permit a shareholder to bring a §1981 action, but
  concluded that when there are injuries distinct from those of the cor-
  poration, a nonparty like McDonald may nonetheless sue under
  §1981.
Held: Consistent with this Court’s case law, and as required by the
 statute’s plain text, a plaintiff cannot state a §1981 claim unless he
 has (or would have) rights under the existing (or proposed) contract
 that he wishes “to make and enforce.” The statute, originally enacted
 as §1 of the Civil Rights Act of 1866, now protects the equal right of
 “[a]ll persons” to “make and enforce contracts” without respect to
 race, §1981(a), and defines “make and enforce contracts” to “includ[e]
 the making, performance, modification, and termination of contracts,
 and the enjoyment of all benefits . . . of the contractual relationship,”
 §1981(b). This cannot be read to give McDonald a cause of action be-
 cause he “made and enforced contracts” for JWM as its agent. The
 right to “make contracts” protected by the 1866 legislation was not
 the insignificant right to act as an agent for someone else’s contract-
2                DOMINO’S PIZZA, INC. v. MCDONALD

                                  Syllabus

    ing, but was rather the right, denied in some States to blacks, to give
    and receive contractual rights on one’s own behalf. The statute’s text
    makes this common meaning doubly clear by speaking of the right to
    “make and enforce” contracts. When the 1866 Act was drafted, a
    mere agent, who had no beneficial interest in a contract he made for
    his principal, could not generally sue on that contract. Any §1981
    claim, therefore, must initially identify an impaired “contractual re-
    lationship,” §1981(b), under which the plaintiff has rights. McDon-
    ald’s complaint identifies a contractual relationship between Dom-
    ino’s and JWM, but it is fundamental corporation and agency law
    that a corporation’s shareholder and contracting officer has no rights
    and is exposed to no liability under the corporation’s contracts.
    McDonald’s proposed new test for §1981 standing—whereby any per-
    son may sue if he is an “actual target” of discrimination and loses
    some benefit that would otherwise have inured to him had a contract
    not been impaired—ignores the explicit statutory requirement that
    the plaintiff be the “perso[n]” whose “right . . . to make and enforce
    contracts,” §1981(a), was “impair[ed],” §1981(c), on account of race.
    Shaare Tefila Congregation v. Cobb, 481 U. S. 615, 618; Runyon, supra,
    at 168; and Goodman v. Lukens Steel Co., 482 U. S. 656, 669, distin-
    guished. McDonald’s policy argument that many discriminatory acts
    will go unpunished unless his reading of §1981 prevails goes beyond
    any expression of congressional intent and would produce satellite
    litigation of immense scope. Pp. 4–10.
107 Fed. Appx. 18, reversed.

  SCALIA, J., delivered the opinion of the Court, in which all other
Members joined, except ALITO, J., who took no part in the consideration
or decision of the case.
                       Cite as: 546 U. S. ____ (2006)                              1

                            Opinion of the Court

    NOTICE: This opinion is subject to formal revision before publication in the
    preliminary print of the United States Reports. Readers are requested to
    notify the Reporter of Decisions, Supreme Court of the United States, Wash-
    ington, D. C. 20543, of any typographical or other formal errors, in order
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SUPREME COURT OF THE UNITED STATES
                                  _________________

                                  No. 04–593
                                  _________________


   DOMINO’S PIZZA, INC., ET AL., PETITIONERS v.
               JOHN MCDONALD
 ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
            APPEALS FOR THE NINTH CIRCUIT
                             [February 22, 2006]

  JUSTICE SCALIA delivered the opinion of the Court.
  We decide whether a plaintiff who lacks any rights
under an existing contractual relationship with the defen-
dant, and who has not been prevented from entering into
such a contractual relationship, may bring suit under Rev.
Stat. §1977, 42 U. S. C. §1981.
                             I
   Respondent John McDonald, a black man, is the sole
shareholder and president of JWM Investments, Inc.
(JWM), a corporation organized under Nevada law. He
sued petitioners (collectively Domino’s) in the District
Court for the District of Nevada, claiming violations of
§1981. The allegations of the complaint, which for present
purposes we assume to be true, were as follows.
   JWM and Domino’s entered into several contracts under
which JWM was to construct four restaurants in the Las
Vegas area, which would be leased to Domino’s. After the
first restaurant was completed, Domino’s agent Debbie
Pear refused to execute the estoppel certificates for JWM
required by the contracts to facilitate JWM’s bank financ-
ing. The relationship between the parties further deterio-
2              DOMINO’S PIZZA, INC. v. MCDONALD

                        Opinion of the Court

rated when Pear persuaded the Las Vegas Valley Water
District to change its records to show Domino’s, rather
than JWM, as the owner of the land JWM had acquired for
restaurant construction. McDonald had to go to the Water
District to prove JWM’s ownership of the land. In the
course of what were apparently many and fruitless discus-
sions between McDonald and Pear, McDonald “explained
that he intended to see [the contracts] through to comple-
tion,” even though Pear made clear that unless he agreed
to back out of the contractual relationship, he would suffer
serious consequences. App. to Pet. for Cert. 12–13. At one
point Pear said to McDonald “ ‘I don’t like dealing with you
people anyway,’ ” refusing to specify what she meant by
“ ‘you people.’ ” Id., at 13. Pear threatened to use Dom-
ino’s attorneys to “bury” McDonald if he should sue. Ibid.
The contracts between Domino’s and JWM ultimately
remained uncompleted.
    At least in part because of the failed contracts, JWM
filed for Chapter 11 bankruptcy. The trustee for JWM’s
bankruptcy estate initiated an adversary proceeding
against Domino’s for breach of contract. For whatever
reason, the trustee chose not to assert a §1981 claim alleg-
ing Domino’s interference with JWM’s right to make and
enforce contracts. The breach of contract claim was set-
tled for $45,000, and JWM gave Domino’s a complete
release. Consequently, no further claims arising out of the
same episode could be pursued on JWM’s behalf.1 While
the bankruptcy proceedings were still ongoing, McDonald
filed the present §1981 claim against Domino’s in his
personal capacity.
——————
   1 Since JWM settled its claims and is not involved in this case, we

have no occasion to determine whether, as a corporation, it could have
brought suit under §1981. We note, however, that the Courts of Ap-
peals to have considered the issue have concluded that corporations
may raise §1981 claims. See, e.g., Hudson Valley Freedom Theater, Inc.
v. Heimbach, 671 F. 2d 702, 706 (CA2 1982).
                 Cite as: 546 U. S. ____ (2006)           3

                     Opinion of the Court

   The gravamen of McDonald’s complaint was that Dom-
ino’s had broken its contracts with JWM because of racial
animus toward McDonald, and that the breach had
harmed McDonald personally by causing him “to suffer
monetary damages and damages for pain and suffering,
emotional distress, and humiliation.” Id., at 16. The
complaint demanded that Domino’s discharge its “obliga-
tions under the contracts which McDonald would have
received, but for the discriminatory practices, including,
but not limited to front pay, back pay and other lost bene-
fits,” as well as “compensatory damages for pecuniary
losses, including pain and suffering, emotional distress,
mental anguish, and humiliation,” and punitive damages.
Id., at 17.
    Domino’s filed a motion to dismiss the complaint for
failure to state a claim. It asserted that McDonald could
bring no §1981 claim against Domino’s because McDonald
was party to no contract with Domino’s. The District
Court granted the motion. It noted that Domino’s had
“rel[ied] on the basic proposition that a corporation is a
separate legal entity from its stockholders and officers,”
id., at 6, and concluded that a corporation may have
“standing to assert a §1981 claim” but that “a president or
sole shareholder may not step into the shoes of the corpo-
ration and assert that claim personally.” Id., at 7 (citing
Guides, Ltd. v. Yarmouth Group Prop. Management, Inc.,
295 F. 3d 1065, 1072–1073 (CA10 2002)).
   The Court of Appeals for the Ninth Circuit reversed. It
agreed that an “injury suffered only by the corporation”
would not permit a shareholder to bring a §1981 action.
107 Fed. Appx. 18 (2004). But relying on its earlier deci-
sion in Gomez v. Alexian Bros. Hospital of San Jose, 698
F. 2d 1019, 1021–1022 (1983), the Ninth Circuit concluded
that when there are “injuries distinct from that of the
corporation,” a nonparty like McDonald may nonetheless
bring suit under §1981. 107 Fed. Appx., at 18–19. The
4            DOMINO’S PIZZA, INC. v. MCDONALD

                     Opinion of the Court

Court of Appeals acknowledged that this approach set it
apart from other Circuits. Ibid. We granted certiorari.
544 U. S. 998 (2005).
                              II
  Among the many statutes that combat racial discrimi-
nation, §1981, originally §1 of the Civil Rights Act of 1866,
14 Stat. 27, has a specific function: It protects the equal
right of “[a]ll persons within the jurisdiction of the United
States” to “make and enforce contracts” without respect to
race. 42 U. S. C. §1981(a). The statute currently defines
“make and enforce contracts” to “includ[e] the making,
performance, modification, and termination of contracts,
and the enjoyment of all benefits, privileges, terms, and
conditions of the contractual relationship.” §1981(b).
  McDonald argues that the statute must be read to give
him a cause of action because he “made and enforced
contracts” for JWM. On his reading of the text, “[i]f Dom-
ino’s refused to deal with the salesman for a pepperoni
manufacturer because the salesman was black, that would
violate the section 1981 right of the salesman to make a
contract on behalf of his principal.” Brief for Respondent
12. We think not. The right to “make contracts” guaran-
teed by the statute was not the insignificant right to act as
an agent for someone else’s contracting—any more than it
was the insignificant right to act as amanuensis in writing
out the agreement, and thus to “make” the contract in that
sense. Rather, it was the right—denied in some States to
blacks, as it was denied at common law to children—to
give and receive contractual rights on one’s own behalf.
Common usage alone is enough to establish this, but the
text of the statute makes this common meaning doubly
clear by speaking of the right to “make and enforce” con-
tracts. When the Civil Rights Act of 1866 was drafted, it
was well known that “[i]n general a mere agent, who has
no beneficial interest in a contract which he has made on
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                          Opinion of the Court

behalf of his principal, cannot support an action thereon.”
1 S. Livermore, A Treatise on the Law of Principal and
Agent 215 (1818).2
   Any claim brought under §1981, therefore, must ini-
tially identify an impaired “contractual relationship,”
§1981(b), under which the plaintiff has rights.3 Such a
contractual relationship need not already exist, because
§1981 protects the would-be contractor along with those
who already have made contracts. We made this clear in
Runyon v. McCrary, 427 U. S. 160 (1976), which subjected
defendants to liability under §1981 when, for racially-
motivated reasons, they prevented individuals who “sought
to enter into contractual relationships” from doing so, id., at
172 (emphasis added). We have never retreated from what
should be obvious from reading the text of the statute:
Section 1981 offers relief when racial discrimination blocks
the creation of a contractual relationship, as well as when
racial discrimination impairs an existing contractual rela-

——————
   2 McDonald’s “pepperoni salesman” analogy is imprecise.      It would
better parallel the facts here if the analogy had been to a salesman
unable to collect on accounts receivable because he was black, rather
than to one who was unable to make the contract in the first place. The
fundamental point, however, is the same: An individual seeking to
make or enforce a contract under which he has rights will have a claim
under 42 U. S. C. §1981, while one seeking to make or enforce a con-
tract under which someone else has rights will not.
   3 We say “under which the plaintiff has rights” rather than “to which

the plaintiff is a party” because we do not mean to exclude the possibil-
ity that a third-party intended beneficiary of a contract may have rights
under §1981. See, e.g., 2 Restatement (Second) of Contracts §304, p.
448 (1979) (“A promise in a contract creates a duty in the promisor to
any intended beneficiary to perform the promise, and the intended
beneficiary may enforce the duty”). Neither do we mean to affirm that
possibility. See, e.g., Blessing v. Freestone, 520 U. S. 329, 349 (1997)
(SCALIA, J., concurring) (“Until relatively recent times, the third-party
beneficiary was generally regarded as a stranger to the contract, and
could not sue upon it”). The issue is not before us here, McDonald
having made no such claim.
6            DOMINO’S PIZZA, INC. v. MCDONALD

                     Opinion of the Court

tionship, so long as the plaintiff has or would have rights
under the existing or proposed contractual relationship.
   Absent the requirement that the plaintiff himself must
have rights under the contractual relationship, §1981
would become a strange remedial provision designed to
fight racial animus in all of its noxious forms, but only if
the animus and the hurt it produced were somehow con-
nected to somebody’s contract. We have never read the
statute in this unbounded—or rather, peculiarly
bounded—way. See, e.g., Patterson v. McLean Credit Un-
ion, 491 U. S. 164, 176 (1989); Burnett v. Grattan, 468 U. S.
42, 44, n. 2 (1984); General Building Contractors Assn., Inc.
v. Pennsylvania, 458 U. S. 375, 396 (1982).
   Nor has Congress indicated that we should. We held in
Patterson that the prior version of §1981 did “not apply to
conduct which occurs after the formation of a contract and
which does not interfere with the right to enforce estab-
lished contract obligations.” 491 U. S., at 171. In 1991,
Congress amended the statute, see 105 Stat. 1071, adding
§1981(b), which defines “make and enforce” to bring post-
formation conduct, including discriminatory termination,
within the scope of §1981. See Jones v. R. R. Donnelley &
Sons Co., 541 U. S. 369, 383 (2004). But while Congress
revised Patterson’s exclusion of postformation conduct, it
let stand Patterson’s focus upon contract obligations. In
fact, it positively reinforced that element by including in
the new §1981(b) reference to a “contractual relationship.”
   McDonald’s complaint does identify a contractual rela-
tionship, the one between Domino’s and JWM. But it is
fundamental corporation and agency law—indeed, it can
be said to be the whole purpose of corporation and agency
law—that the shareholder and contracting officer of a
corporation has no rights and is exposed to no liability
under the corporation’s contracts. McDonald now makes
light of the law of corporations and of agency—arguing, for
instance, that because he “negotiated, signed, performed,
                  Cite as: 546 U. S. ____ (2006)            7

                      Opinion of the Court

and sought to enforce the contract,” Domino’s was wrong
to “insist that [the contract] somehow was not his ‘own.’ ”
Brief for Respondent 4. This novel approach to the law
contradicts McDonald’s own experience. Domino’s filed a
proof of claim against JWM during its corporate bank-
ruptcy; it did not proceed against McDonald personally.
The corporate form and the rules of agency protected his
personal assets, even though he “negotiated, signed, per-
formed, and sought to enforce” contracts for JWM. The
corporate form and the rules of agency similarly deny him
rights under those contracts.
   As an alternative to ignoring corporation and agency
law, McDonald proposes a new test for §1981 standing:
Any person who is an “actual target” of discrimination,
and who loses some benefit that would otherwise have
inured to him had a contract not been impaired, may bring
a suit. Under this theory, an individual is the “actual
target” if he was the reason a defendant chose to impair its
contractual relationship with a third party. McDonald’s
formulation simply ignores the explicit statutory require-
ment that the plaintiff be the “perso[n]” whose “right . . .
to make and enforce contracts,” §1981(a), was “im-
pair[ed],” §1981(c), on account of race. It is just the statu-
tory construction we have always rejected.
   McDonald points to several of our prior cases involving
plaintiffs whose status as contracting parties was unclear.
Because they nonetheless prevailed, McDonald reasons,
contractual privity cannot be a sine qua non of a §1981
claim. In those cases, however, we did not discuss, much
less decide, the privity question. In Shaare Tefila Congre-
gation v. Cobb, 481 U. S. 615 (1987), we decided the narrow
question whether Jews are a separate and protected race
under §1982. Id., at 618. Similarly, in Runyon, supra, the
arguments and the opinion addressed “only two basic ques-
tions: whether §1981 prohibits private, commercially oper-
ated, nonsectarian schools from denying admission to pro-
8            DOMINO’S PIZZA, INC. v. MCDONALD

                      Opinion of the Court

spective students because they are Negroes, and, if so,
whether that federal law is constitutional as so applied.”
Id., at 168 (footnote omitted). And in Goodman v. Lukens
Steel Co., 482 U. S. 656 (1987), we decided only the two
contested issues: that §1981 was subject to the state per-
sonal injury limitations period, id., at 660–664, and that it
violates Title VII of the Civil Rights Act of 1964 and §1981
for a union to decline to press black employees’ grievances
under the governing collective-bargaining agreement, id., at
669. “The Court often grants certiorari to decide particular
legal issues while assuming without deciding the validity of
antecedent propositions, and such assumptions—even on
jurisdictional issues—are not binding in future cases that
directly raise the questions.” United States v. Verdugo-
Urquidez, 494 U. S. 259, 272 (1990) (citations omitted).
  McDonald resorts finally to policy arguments. Unless
his reading of the statute prevails, he warns, many dis-
criminatory acts will go unpunished. Corporations, for
instance, may choose not to bring suit for the racially
motivated contract breach. It is not likely to be a common
occurrence that the victim of a contract breach will forgo a
potent available remedy. Injured parties “usually will be
the best proponents of their own rights,” Singleton v.
Wulff, 428 U. S. 106, 114 (1976). And if and when “the
holders of those rights . . . do not wish to assert them,” id.,
at 113–114, third parties are not normally entitled to step
into their shoes. Moreover, §1981 is only one of a multi-
tude of civil rights statutes. Many of McDonald’s hypo-
thetical examples of unpunished discrimination would in
fact be reachable under Title VII—or even under general
criminal law. See, e.g., Brief for Respondent 27 (concern-
ing a scenario in which “Domino’s officials had beaten up
McDonald in an attempt to intimidate him”). The most
important response, however, is that nothing in the text of
§1981 suggests that it was meant to provide an omnibus
remedy for all racial injustice. If so, it would not have
                     Cite as: 546 U. S. ____ (2006)                    9

                          Opinion of the Court

been limited to situations involving contracts. Trying to
make it a cure-all not only goes beyond any expression of
congressional intent but would produce satellite §1981
litigation of immense scope. McDonald’s theory would
permit class actions by all the minority employees of the
nonbreaching party to a broken contract (or, for that mat-
ter, minority employees of any company failing to receive a
contract award), alleging that the reason for the breach (or
for the refusal to contract) was racial animus against
them.
   Consistent with our prior case law, and as required by
the plain text of the statute, we hold that a plaintiff can-
not state a claim under §1981 unless he has (or would
have) rights under the existing (or proposed) contract that
he wishes “to make and enforce.” Section 1981 plaintiffs
must identify injuries flowing from a racially motivated
breach of their own contractual relationship, not of someone
else’s. Because the District Court correctly recognized and
applied these principles, the Ninth Circuit erred in revers-
ing its judgment.4
                             *     *      *

  The judgment of the Ninth Circuit is accordingly


——————
  4 McDonald also argues in his merits brief (for the first time) that we

should affirm the Ninth Circuit’s judgment because Domino’s interfered
with McDonald’s own contracts with JWM. Counsel for McDonald
asserted at oral argument that this contention is not a new argument
(see this Court’s Rule 15.2), but is a “sort of formulatio[n] of the same
argument” that he had properly raised. Tr. of Oral Arg. 28. As such, it
fails for the same reasons that the argument fails in its original incar-
nation. McDonald acknowledges that JWM did not breach any contrac-
tual obligation to him, see Brief for Respondent 44, and so any injury
he may have received still derived from impairment of the contractual
relationship between JWM and Domino’s, under which McDonald has
no rights.
10         DOMINO’S PIZZA, INC. v. MCDONALD

                  Opinion of the Court

                                              Reversed.

  JUSTICE ALITO took no part in the consideration or
decision of this case.