United States District Court, Southern District of New York
June 18, 1990
LIA FERNANDEZ AND MARCI LEGGETTE, PLAINTIFFS,
GEORGE KOGAN, BARBARA KOGAN, AND KOGAN AND COMPANY, DEFENDANTS.
The opinion of the court was delivered by: Edelstein, District Judge:
OPINION AND ORDER
This order is issued pursuant to defendants' motion to dismiss
two of plaintiffs' seven claims for failure to state a claim upon
which relief may be granted (Fed.R. Civ.P. 12(b)(6)) and
defendants' motion to dismiss the entire action for lack of
subject matter jurisdiction (Fed.R.Civ.P. 12(b)(1)). These
motions were filed prior to any discovery, and for the purposes
of their resolution, the allegations of the complaint are
construed favorably to the pleader. Scheuer v. Rhodes,
416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974), citing
Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 101, 2 L.Ed.2d 80
(1957) (A motion to dismiss must be denied "unless it appears
beyond doubt that the plaintiff can prove no set of facts in
support of his claim which would entitle him to relief.");
Morales v. New York State Dep't of Corrections, 842 F.2d 27, 30
(2d Cir. 1988).
In light of the Supreme Court's decision in Patterson v. McLean
Credit Union, ___ U.S. ___, 109 S.Ct. 2363, 105 L.Ed.2d 132
(1989), and the subsequent decisions in this District, both of
defendant's motions are granted.
Plaintiffs were employed as salespersons at James II, a New
York City antique store selling 19th century English porcelain.
On or about June 16, 1988, defendants, George and Barbara Kogan,
contacted plaintiff Fernandez and informed her that they wished
to open an antique store in New York City that would be modeled
after James II. The defendants informed Fernandez that they
needed someone of Fernandez's experience to open and manage the
store, Kogan and Company.
On the following day, the Kogans and Fernandez had a meeting
during which the terms of an oral employment contract were
discussed and finalized. Fernandez alleges that she was told that
she would not be terminated for the first year except for good
cause. After contracting, the parties discussed various plans
about the new store's inventory, the composition of defendant
Kogan and Company, and the purchasing trip to take place in
August 1988. During this meeting, the parties also discussed the
need for an additional person, one who knew inventory and other
control systems, and Fernandez suggested that plaintiff Leggette
would be perfect for the job.
On June 28, 1988, the defendants, Barbara and George Kogan, and
plaintiffs met to discuss Leggette's employment. Once again,
various terms of employment were discussed and orally agreed
upon. Leggette similarly alleges she was offered a term of
employment during which she would only be fired for good cause.
During the next two months, the parties made numerous
preparations for the opening of the Kogan and Company store.
During September and October 1988, Fernandez hired four
employees, with the approval of the Kogans, to work as support
staff at the store, three black and one Hispanic (hereinafter
referred to as "minority employees").
Allegedly, Barbara Kogan told Fernandez that the minority
employees should not appear in the store for the press meeting or
during the opening evening party on November 3, 1988. Fernandez
expressed her disagreement with both the directives, but
nevertheless acquiesced. During the first week of business, Ms.
Kogan also allegedly complained about the minority employees' use
of the store bathroom during operating hours and expressed a
desire for them to use another facility. Fernandez complained
that this was wrong, discriminatory and would embarrass and
dispirit the employees. Although Fernandez disapproved of Ms.
Kogan's request, she agreed to inquire about the use of
facilities in the basement
of the building. Ms. Kogan also allegedly stated that the
minority employees should be discouraged from appearing in the
public area of the store when customers were present. Fernandez
once again expressed her disapproval of the treatment of the
employees. Throughout this period, Leggette supported Fernandez's
position regarding the treatment of the minority employees.
On Sunday, November 13, 1988, Ms. Kogan told Fernandez not to
go to the store but rather to meet with the Kogans at their
apartment. When Mr. Fernandez called the store on November 15,
1988 to report that his wife was ill, he was informed she no
longer worked there. Later that same day, Leggette was similarly
informed that Fernandez was no longer employed at Kogan and
On the evening of November 23, 1988, Leggette had a
conversation with Ms. Kogan concerning her medical insurance.
After some disagreement, Leggette was told not to bother
returning to the store the following working day as she was
Plaintiffs filed the current action making seven claims for
relief. The first five claims concern the alleged breach of oral
and express contract provisions and allege that the defendants
fraudulently induced the plaintiffs to terminate their positions
at James II. The sixth and seventh claims, providing this court
with jurisdiction, allege that the plaintiffs were discharged in
retaliation of their support of the minority employees in
violation of 42 U.S.C. § 1981.*fn1
A. Section 1981
Plaintiffs rest their sixth and seventh claims for relief, as
well as the jurisdiction of this court, on alleged violations of
Section 1981 of the Civil Rights Act of 1866. The Section
provides that "all persons shall have the same right . . . to
make and enforce contracts . . . as is enjoyed by white
citizens." 42 U.S.C. § 1981 (1983). The plaintiffs claim that
they were fired for defending the rights of the minority
First, the plaintiffs, who are white, have standing to sue
under Section 1981. See Manoharan v. Columbia Univ. College of
Phys. & Surgeons, 842 F.2d 590 (2d Cir. 1988) (Plaintiffs may
assert a Section 1981 action even though they have not been the
subject of the underlying discrimination.); See also Abel v.
Bonfanti, 625 F. Supp. 263, (S.D.N.Y. 1985) (permitting an action
under Section 1981 by a white person who has been punished for
trying to vindicate the rights of minorities); Choudhury v.
Polytechnic Institute of New York, 735 F.2d 38 (2d Cir. 1984)
(permitting a retaliatory discharge claim under Section 1981).
Although the plaintiffs' complaint sufficiently states a claim
for relief under the Abel standard,*fn2 after Patterson v.
McLean Credit Union, ___ U.S. ___, 109 S.Ct. 2363, 105 L.Ed.2d
132 (1985), Abel is no longer dispositive.
In Patterson, a black woman alleged she was harassed, passed
over for promotion, and ultimately discharged because of her
race.*fn3 The Court held that Section 1981 does not apply to
conduct by the employer which occurs "after the contract relation
has been established." Id. 109 S.Ct. at 2373. Since Patterson, it
is questionable whether a claim for retaliatory discharge is
still cognizable under Section 1981.*fn4 Compare Hicks v. Brown
Group, 902 F.2d 630 (8th Cir. 1990) with Lavender v. V & B
Transmissions & Auto Repair, 897 F.2d 805 (5th Cir. 1990).
However, the cases in this District overwhelmingly support the
proposition that retaliatory discharge is no longer actionable
under Section 1981. See Williams v. Miracle Plywood Corp., No.
88-7714 (PKL), 1990 WL 26310, 1990 U.S. Dist. LEXIS 2502
(S.D.N.Y. Mar. 8, 1990) (retaliatory discharge does not involve
the right to make or enforce a contract); Long v. AT & T Info.
Sys., 733 F. Supp. 188 (S.D.N.Y. 1990); Miller v. SwissRe
Holding, Inc., 731 F. Supp. 129 (S.D.N.Y. 1990) (holding that
retaliatory dismissal after Patterson is no longer actionable).
This court similarly finds plaintiffs' Section 1981 claims do not
The Patterson Court emphasized that the plain language of the
statute protects only two rights: the right to make contracts and
the right to enforce contracts, The Court explicitly stated that
"[w]here an alleged act of discrimination does not involve the
impairment of one of these specific rights, § 1981 provides
no relief." Patterson, supra, 109 S.Ct. at 2372. The Supreme
Court stressed that lower courts should not "read the terms
`make' and `enforce' beyond their plain and common sense
meaning." Id. at 2377 n. 6.
The Court held that the protection to make contracts "extends
only to the formation of the contract, but not to problems that
may arise later from the conditions of continuing
employment. . . . including breach of the terms of the contract."
Id. at 2372-73. The statute prohibits "the refusal to enter into
a contract, . . ., as well as the offer to make a contract only
on discriminatory terms." Id. at 2372.
The second of these guarantees, the right to enforce contracts,
"embraces protection of a legal process, and of a right of access
to legal process, that will address and resolve contract-law
claims without regard to race." Id. at 2373. This also includes
"wholly private efforts to impede access to the courts or to
obstruct nonjudicial methods of adjudicating disputes." (emphasis
in original) Id.
This court may retroactively apply the Patterson decision to
discrimination which predates it. See Song v. Ives Laboratories,
Inc., 735 F. Supp. 550 (S.D.N.Y. 1990); Miller, supra. The
general rule is that cases are decided "in accordance with the
law existing at the time of the decision." Goodman v. Lukens
Steel Co., 482 U.S. 656, 662, 107 S.Ct. 2617, 2621, 96 L.Ed.2d
572 (1987). Although in Chevron Oil Co. v. Huson, 404 U.S. 97,
106, 92 S.Ct. 349, 355, 30 L.Ed.2d 296 (1971), the Court balanced
three factors to determine when nonretroactivity is appropriate,
courts must apply new decisional law retroactively without regard
to the Huson criteria when the Supreme Court itself has given
retroactive application to a newly-adopted principle "to govern
the very claim at issue in the case before it." Welyczko v. US
Air, Inc., 733 F.2d 239, 241 (2d Cir.), cert. denied,
469 U.S. 1036, 105 S.Ct. 512, 83 L.Ed.2d 402 (1984); See also Song v. Ives
Laboratories, supra, 735 F. Supp. at 551-552. (applying Patterson
retroactively to plaintiff's retaliatory discharge claim). In
Patterson, the Court retroactively applied its ruling concerning
the scope of Section 1981 and barred the very claim that was in
front of the Court. Given the posture of the Patterson decision,
this court will examine the
plaintiffs' Section 1981 claims under the Supreme Court's recent
interpretation of the statute.
Under the Patterson analysis, the plaintiffs' claim of
retaliatory discharge is not, as a matter of law, cognizable
under Section 1981. The plaintiffs' discharge took place several
months after the initial contract formation. At best, such
conduct amounts to a breach of contract under state law and the
Supreme Court specifically held that "conduct amounting to a
breach of contract under state law is precisely what the language
of § 1981 does not cover." Patterson, supra, 109 S.Ct. at
2376. To do so "would federalize all state-law claims for breach
of contract where racial animus is alleged." Id.
The plaintiffs allege that at the time of contracting the
defendants had no intention of fulfilling their contractual
obligations. However, plaintiffs do not allege that racial
motivation was a factor in this bad-faith. All the alleged acts
of discrimination against the minority employees which
precipitated the firings occurred after the initial contract
formation. Therefore, plaintiffs' claims do not involve the right
to make contracts on non-discriminatory terms and are not covered
by Section 1981.
Additionally, plaintiffs do not allege that the defendants in
any way obstructed the former's access to the courts, as
evidenced by plaintiffs' presence before this court. Therefore,
the plaintiffs fail to state a claim upon which relief may be
granted under Section 1981.
Plaintiffs contend that since they are not able to file a Title
VII action,*fn5 they should be permitted to pursue the present
action. However, the plaintiffs misconstrue the Patterson
decision. The holding did not rest on the overlap of Title VII
and Section 1981 provisions, but rather the Court held the
availability of Title VII deterred it from making a "tortious
construction" of Section 1981. Patterson, supra, 109 S.Ct. at
2375. The interpretation was based on "a fair and natural reading
[of] the statute." Id. at 2377. Thus, plaintiffs' argument is
untenable. Accordingly, defendant's motion to dismiss claims six
and seven is granted.
B. Subject Matter Jurisdiction
Having dismissed plaintiffs' claims based on Section 1981, this
court now must decide whether subject matter jurisdiction exists
to hear the remainder of the plaintiffs' action.
In United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130,
16 L.Ed.2d 218 (1966), the Supreme Court held that a state claim
may be attached to a colorable federal claim if the two claims
arise out of "a common nucleus of operative facts." Id. at 725,
86 S.Ct. at 1138. The plaintiffs' Section 1981 claims were
colorable, not "insubstantial, immaterial, or frivolous" and
arose out of the same operative set of facts as the breach of
contract claims. Cf. Bell v. Hood, 327 U.S. 678, 682-83, 66 S.Ct.
773, 776, 90 L.Ed. 939 (1946) (A suit "may sometimes be dismissed
for want of jurisdiction where the alleged claim under the
Constitution or federal statutes clearly appears to be immaterial
and made solely for the purpose of obtaining jurisdiction or
where such claim is wholly insubstantial and frivolous.").
However, "if the federal claims are dismissed before trial, even
though not insubstantial in a jurisdictional sense, the state
claims should be dismissed as well." Gibbs, supra, 383 U.S. at
726, 86 S.Ct. at 1139 (footnote omitted); See also Baylis v.
Marriott Corp., 843 F.2d 658, 665 (2d Cir. 1988) ("When all bases
for federal jurisdiction have been eliminated from a case . . .
the federal court should ordinarily dismiss the state claims.")
In determining whether to exercise pendant jurisdiction, a
district court should balance "the considerations of comity,
fairness to the litigants, judicial economy, and the avoidance of
needless decisions of state law." Federman v. Empire Fire and
Marine Ins. Co., 597 F.2d 798, 809 (2d Cir. 1979) (citing Gibbs,
supra, 383 U.S. at 715, 86 S.Ct. at 1130). In the present case,
federal-law claims have been eliminated before full-scale
discovery has begun and only plaintiffs' state-law claims remain.
The above considerations of fairness, economy, and avoiding
needless decision of state law resolve in favor of this court not
retaining jurisdiction over the action. See Williams, supra, slip
op. at 13; See also Baylis, supra, at 665.
Accordingly, this court declines to exercise jurisdiction over
the remainder of this controversy. The plaintiffs' first through
fifth causes of action are dismissed without prejudice to their
renewal in state court.
Defendant's motion to dismiss plaintiff's Section 1981 claims
for failure to state a claim, pursuant to Fed.R.Civ.P. 12(b)(6),
is granted. The plaintiffs' remaining state-law claims are
dismissed for lack of subject matter jurisdiction pursuant to
Fed.R. Civ.P. 12(b)(1).