Barfield v. Commerce Bancshares

                                                                    F I L E D
                                                             United States Court of Appeals
                                                                     Tenth Circuit
                                      PUBLISH
                                                                     May 1, 2007
                   UNITED STATES CO URT O F APPEALS              Elisabeth A. Shumaker
                                                                     Clerk of Court
                               TENTH CIRCUIT



 JAM ES BARFIELD AND CHRIS
 B ARFIELD ,

             Plaintiffs-Appellants,
       v.                                             No. 06-3087
 COM M ERCE BANK, N.A.,

             Defendant-Appellee.



        A PPE AL FR OM T HE UNITED STATES DISTRICT COURT
                    FOR T HE DISTRICT OF KANSAS
                      (D.C. NO . 05-CV-2218-M LB)


Lawrence W . W illiamson, Jr., Shores, W illiamson and Ohaebosim, LLC, W ichita,
Kansas for Plaintiffs-Appellants.

Charles W . German and Joselyn Verschelden, Rouse Hendricks German M ay PC,
Kansas City, M issouri for Defendant-Appellee.


Before KELLY, M cCO NNELL, and HO LM ES, Circuit Judges.


M cCO NNELL, Circuit Judge.


      Chris Barfield, an African-American man, entered a Commerce Bank

branch in W ichita, Kansas, and requested change for a $50 bill. He was refused

change on the ground that he was not an account-holder. The next day, Chris
Barfield’s father, James Barfield, asked a white friend, John Polson, to make the

same request from the bank. M r. Polson was given change, and the teller never

asked whether he held an account with the bank. A few minutes later, James

Barfield entered the bank, asked for change for a $100 bill, and was told that he

would not be given change unless he was an account-holder.

      James Barfield then enlisted the help of a white news reporter and his

African-American colleague. The two men, separately, visited the bank to request

change. The A frican-American man was asked whether he was an account holder,

and the white man was not.

      The Barfields filed suit under 42 U.S.C. § 1981, alleging racial

discrimination in the impairment of the ability to contract. The Bank moved to

dismiss for failure to state a claim. W hile that motion was pending, the two sides

engaged in extended mediation and negotiation, which ultimately failed. During

that period, the Barfields moved for class certification and to amend their

complaint to include a claim under Title VI of the Civil Rights Act of 1964. The

judge denied both plaintiffs’ motions and granted the defendant’s motion to

dismiss. The Barfields timely appealed.

                                          I.

      Originally enacted in the wake of the Civil W ar, Section 1981(a) states:

      All persons within the jurisdiction of the United States shall have the same
      right in every State and Territory to make and enforce contracts, to sue, be
      parties, give evidence, and to the full and equal benefit of all laws and

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      proceedings for the security of persons and property as is enjoyed by white
      citizens, and shall be subject to like punishment, pains, penalties, taxes,
      licenses, and exactions of every kind, and no other.

42 U.S.C. § 1981(a) (emphasis added). As part of the Civil Rights Act of 1991,

Congress added part b to the statute: “For purposes of this section, the term ‘make

and enforce contracts’ includes the making, performance, modification, and

termination of contracts, and the enjoyment of all benefits, privileges, terms, and

conditions of the contractual relationship.” Id. § 1981(b). The purpose of part b

was to expand the statute to encompass “all phases and incidents of the

contractual relationship.” Rivers v. Roadway Express, Inc., 511 U.S. 298, 302,

308 (1994).

      Section 1981 claims are subject to a three-part test. The claimant must

demonstrate: “(1) that the plaintiff is a member of a protected class; (2) that the

defendant had the intent to discriminate on the basis of race; and (3) that the

discrimination interfered with a protected activity as defined in § 1981.” Hampton

v. Dillard Dep’t Stores, Inc., 247 F.3d 1091, 1102 (10th Cir. 2001). Only the

third prong is at issue here.

      All courts to have addressed the issue have held that a customer’s offer to

do business in a retail setting qualifies as a “phase[] and incident[] of the

contractual relationship” under § 1981. In Christian v. Wal-M art Stores, Inc., 252

F.3d 862 (6th Cir. 2001), the Sixth Circuit upheld a § 1981 claim where an




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African-American customer, ready to make a purchase, was accused of shoplifting

and removed from the store:

       we have no trouble concluding that [the appellant] made herself available
       to enter into a contractual relationship for services ordinarily provided by
       W al-M art: the record reflects that she had selected merchandise to
       purchase, had the means to complete the transaction, and would, in fact,
       have completed her purchase had she not been asked to leave the store.

Id. at 874. The Fifth Circuit has written that “when a merchant denies service or

outright refuses to engage in business with a consumer attempting to contract with

the merchant, that is a violation of § 1981.” Causey v. Sewell Cadillac-Chevrolet,

Inc., 394 F.3d 285, 290 (5th Cir. 2004). See also G reen v. Dillard’s, ___ F.3d

___, 2007 W L 1012941, *5 (8th Cir. Apr. 5, 2007) (“Under § 1981 contract

formation begins and the statutory protections are triggered once a customer has

made some tangible attempt to contract . . . .” (internal quotation marks omitted));

Watkins v. Lovley Dev., Inc., No. Civ. 04-211-B-H, 2005 W L 2746664 (D. M e.

Oct. 24, 2005) (finding a valid § 1981 claim when a customer attempted to make

a purchase at Dunkin Donuts but was refused service); Henderson v. Jewel Food

Stores, Inc., No. 96C3666, 1996 W L 617165 (N.D. Ill. Oct. 23, 1996) (finding a

valid § 1981 claim when a defendant had initiated but not completed a purchase);

Shen v. A&P Food Stores, No. 93CV1184(FB), 1995 W L 728416 (E.D. N.Y. Nov.

21, 1995) (finding a valid § 1981 claim after Chinese customers attempted to

purchase apple juice and were refused); Washington v. Duty Free Shoppers, Ltd.,

710 F.Supp. 1288, 1289-90 (N.D. Cal. 1988) (finding a valid § 1981 claim when

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African-American customers were stopped after entering a duty-free shop and

asked for their passports but white customers w ere not).

      The question, then, is whether the Barfields’ proposal to exchange money

at a bank is a contract offer in the same w ay as an offer to purchase doughnuts or

apple juice. The claim made by the appellees, and accepted by the district court,

is that the Barfields’ proposed exchange was not a contract because it involved no

consideration: “The bank would not have received any benefit or incurred a

detriment if it had agreed to change the Barfields’ bills.” App. at 56. That

reasoning, however, departs in several significant ways from our understanding of

contract law .

      To determine the contours of a contract, w e look to state common law.

Hampton, 247 F.3d at 1104; 42 U.S.C. § 1988(a). Under Kansas law:

      A contract must be supported by consideration in order to be enforceable.
      State ex rel. Ludwick v. Bryant, 697 P.2d 858 (1985); M itchell v. M iller, 8
      P.3d 26 (2000). ‘Consideration is defined as some right, interest, profit, or
      benefit accruing to one party, or some forbearance, detriment, loss, or
      responsibility, given, suffered, or undertaken by the other.’ 17A Am.Jur.2d,
      Contracts § 113, p. 129. A promise is without consideration when the
      promise is given by one party to another without anything being bargained
      for and given in exchange for it. 2 Corbin on Contracts § 5.20 (rev.
      ed.1995).

Varney Bus. Servs., Inc. v. Pottroff, 59 P.3d 1003, 1014 (K an. 2002). See also

French v. French, 167 P.2d 305, 331 (K an. 1946) (noting that “inconvenience to

the promisee” is valid consideration).




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      In the most straightforward sense, the transaction proposed by the Barfields

was a contract of exchange: they would give up something of value (a large-

denomination bill) in exchange for something they valued more (smaller-

denomination bills). It is hard to see why this is not a contract. If two boys

exchange marbles, their transaction is a contract, even if it is hard for outsiders to

fathom why either preferred the one or the other. Consideration does not need to

have a quantifiable financial value:

      [T]he legal sufficiency of a consideration for a promise [does not] depend
      upon the comparative economic value of the consideration and of what is
      promised in return, for the parties are deemed to be the best judges of the
      bargains entered into. . . . W here a party contracts for the performance of
      an act which will afford him pleasure, gratify his ambition, please his
      fancy, or express his appreciation of a service another has rendered him, his
      estimate of value must be left undisturbed . . . .

In re Shirk’s Estate, 350 P.2d 1, 10 (Kan. 1960).

      The Bank, however, argues that the proposed exchange was not a contract

because it received no remuneration for performing the service of bill exchange.

In other words, rather than view the transaction as an exchange of one thing for

another, the Bank urges us to treat the transaction as a gratuitous service provided

by the Bank, for no consideration. W e cannot regard the Bank’s provision of bill

exchange services as “gratuitous” in any legal sense. Profit-making

establishments often offer to engage in transactions with no immediate gain, or

even at a loss, as a means of inducing customers to engage in other transactions

that are more lucrative; such offers may nonetheless be contractual, and they do

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not lack consideration. See Idbeis v. Wichita Surgical Specialists, P.A., 112 P.3d

81, 90 (Kan. 2005) (holding that unquantifiable consideration, such as an

employee’s goodwill and professional contacts, is adequate to sustain a contract).

If, as is alleged in the complaint, the Bank effectively extends bill exchange

services to persons of one race and not the other, that is sufficient to come within

the ambit of § 1981.

      Appellee relies heavily on a part of this Court’s holding in Hampton v.

Dillard Department Stores, Inc., 247 F.3d 1091 (10th Cir. 2001). That case

involved two individuals— an aunt and a niece— shopping together at a

department store. Id. at 1099. After the aunt, M s. Hampton, made a purchase, a

store clerk offered each of the two women a coupon for a free fragrance sample.

Id. at 1100. The women went to the fragrance counter and were in the process of

redeeming their coupons when they were stopped by a security guard, who

suspected them of shoplifting. Id. The guard searched M s. Hampton’s bag and

found no stolen merchandise; the women, after verbally expressing their

displeasure, left the store without renewing their attempts to obtain fragrance

samples. Id.

      They brought suit in federal court alleging interference with contractual

rights under § 1981. Although the district court allowed M s. Hampton’s § 1981

claim to proceed to the jury and this Court upheld the jury verdict in her favor,

the district court dismissed the claim of her niece, M s. Cooper, on summary

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judgment, and this Court affirmed. Appellee suggests that our affirmance of

summary judgment against M s. Cooper stands for the broad proposition that

gratuitous offers do not constitute contracts within the meaning of Section 1981,

and argues that because the Bank’s service of providing change w as gratuitous,

any racial discrimination with respect to that service would fall outside the ambit

of the statute.

       Appellee reads Hampton too broadly. Hampton did not establish any

sweeping limitations on the coverage of Section 1981. Rather, Hampton was

based on a specific finding that the coupon in question in that case was a contract

benefit valid only upon purchase of merchandise. Id. at 1104-05. Because M s.

Cooper’s aunt made a purchase, “she completed the invited performance in

accordance with the terms of the offer” and thus had a valid contractual right to

the coupon and its attendant benefits. Id at 1104. In contrast, M s. Cooper never

“ma[de] or attempt[ed] to make a purchase at Dillard’s,” id. at 1118, and thus she

had no right to the contractual benefit. Hampton thus stands for the sensible

proposition that a customer who fails to comply with a store’s contractual terms

cannot then claim that subsequent conduct by the store’s employees interfered

with her contractual right.

       Instead of holding, as the Bank asserts, that offers of free merchandise can

never constitute contracts under § 1981, Hampton reserves that question for

another day. Id. at 1105. However, its consideration of the issue in dicta supports

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the conclusion we come to today. In describing the coupon, the Hampton Court

noted that a retail establishment’s offer of a free service or sample in fact could

constitute a contract within the meaning of Section 1981. The establishment

receives a benefit from such offers because “to sample those products, the

customer would traverse the store, perhaps eyeing other merchandise for

purchase.” Id. at 1105.

       W e therefore reverse the district court’s dismissal of the Barfield’s Section

1981 claim.

                                           II.

       The Barfields moved to amend their complaint on November 5, 2005,

seeking to add class allegations. The federal rules provide that leave to amend a

complaint “shall be freely given when justice so requires.” Fed. R. Civ. P. 15(a).

W e review a denial of leave to amend a complaint for abuse of discretion. Foman

v. Davis, 371 U.S. 178, 182 (1962).

       Unlike the original complaint, which contained specific factual allegations,

the new allegations included only generalized conclusions, alleging that the bank

had:

       a.   Den[ied] qualified   African-Americans the opportunity to open checking
            accounts;
       b.   Den[ied] qualified   African-Americans the opportunity to open saving’s
            [sic] accounts;
       c.   Den[ied] qualified   A frican-Americans home loans;
       d.   Den[ied] qualified   A frican-Americans small business loans;



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      e.   Refus[ed] to cash checks drawn on Commerce Bank accounts presented
           by African-Americans;
      f.   Refus[ed] to exchanging [sic] currency of A frican-Americans;
      g.   Refus[ed] to cash cashier’s checks presented by African-Americans;
           and
      h.   Den[ied] qualified A frican-Americans personal loans.

App. at 26. The district court noted that “[t]he Barfields have not . . . asserted

any actual facts to support these allegations, such as the identities of the

individuals who were denied services, the dates on which these events occurred,

etc. Further, the pleading contains no allegations that the Barfields were denied

any of these additional services.” Id. at 59.

      The Federal Rules of Civil Procedure require a plaintiff to provide “a short

and plain statement of the claim showing that the pleader is entitled to relief.”

Fed. R. Civ. P. 8(a)(2). This standard, known as “notice pleading,” is intended to

“give the defendant fair notice of what the plaintiff’s claim is and the grounds

upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957). Although we

“do not require a claimant to set out in detail the facts upon which he bases his

claim,” id., we do require enough specificity for the defendant to be able to

respond to the allegations. As Judge Friendly has noted, Rule 8 requires more

than a statement that the defendant has violated the statute in question: “[a] mere

allegation that defendants violated the antitrust laws as to a particular plaintiff

and commodity[, or that] a defendant made an undescribed contract with the

plaintiff and breached it, or that a defendant owns a car and injured plaintiff by



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driving it negligently” is not sufficient to meet the notice pleading requirements.

Klebanow v. N.Y. Produce Exch., 344 F.2d 294, 299 (2d Cir. 1965).

      Because the plaintiffs’ proposed am ended claim “furnishes not the slightest

clue as to what conduct by the defendants is claimed to” violate federal law, id., it

leaves defendants “without fair notice as to the grounds upon which plaintiffs’ . .

. allegation rests and . . . in no position to produce a responsive pleading,”

M ountain View Pharmacy v. Abbott Labs., 630 F.2d 1383, 1388 (10th Cir. 1980).

As the amendment makes out no valid new complaint, we hold that the district

court did not abuse its discretion in denying leave to amend.

                                          III.

      W e REV ER SE the district court’s ruling on the motion to dismiss,

A FFIR M the denial of permission to amend the complaint, and REM AND for

further proceedings in accordance with this opinion.




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