638 F. 2d 1137 - Setser v. Novack Investment Company S

Michael J. Hoare, Chackes & Hoare, St. Louis, Mo., for appellant.

H. Kent Munson, Stein & Seigel, St. Louis, Mo., for appellees.

Before STEPHENSON and HENLEY, Circuit Judges, and HUNTER,* District Judge.

ELMO B. HUNTER, District Judge.

This is an appeal from a final judgment entered below against the appellant Chester Setser and in favor of appellees Novack Investment Co. d/b/a Budig Western Trucking Co. and Alvin S. Novack.1 For the following reasons, we reverse and remand for jury trial.

Appellant brought his action alleging only violations of 42 U.S.C.A. § 1981 (§ 1981).2 Appellant, a white male, contended in the district court that he was refused employment with appellees in the fall of 1973 for the unlawful reasons of racial discrimination and retaliation by appellees after appellant filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC). Appellant argues on appeal that the district court erred in striking his demand for jury trial and that the district court erroneously found that the appellees did not discriminate or retaliate against appellant. Appellees contend that even if they did discriminate, they did so lawfully because they were following affirmative action guidelines pursuant to Executive Order 11246.3 Further, appellees assert that as a matter of law retaliation is not cognizable as a cause of action under § 1981.

I.

The complaint sought only monetary damages for backpay, lost insurance benefits, expenses incurred in seeking alternative employment, inconvenience, humiliation and embarrassment, pain and suffering, punitive damages, interest, attorneys' fees and costs. The appellant moved for a jury trial and the appellees opposed such a request only for the claims seeking lost wages, interest, attorneys' fees and costs. On November 8, 1977, the district court, sua sponte, entered its order denying appellant's demand for jury trial on all issues. The district court's order explained the ruling by stating that "this court has consistently held that a jury trial is unavailable in § 1981 cases."

Appellant argues that there is a constitutional guarantee of the right to a jury trial under the Seventh Amendment in an action brought pursuant to § 1981 on all claims for "legal" relief.4 Even though the Supreme Court has yet to identify specifically the parameters of the jury trial right in § 1981 actions, an analysis of various judicial authorities indicates that parties are constitutionally entitled to jury trials under § 1981 on all legal claims. The Supreme Court has definitively held that "(t)he Seventh Amendment does apply to actions enforcing statutory rights, and requires a jury trial upon demand, if the statute creates legal rights and remedies enforceable in an action for damages in ordinary courts of law." Curtis v. Loether, 415 U.S. 189, 194, 94 S.Ct. 1005, 1008, 39 L.Ed.2d 260 (1974).5 And, it is clearly settled that actions brought pursuant to § 1981 afford plaintiffs both legal and equitable relief. See Johnson v. Railway Express Agency, 421 U.S. 454, 95 S.Ct. 1716, 44 L.Ed.2d 295 (1975). The legal rights available include "compensatory and, under certain circumstances, punitive damages." Johnson v. Railway Express Agency, supra, 421 U.S. at 460, 95 S.Ct. at 1720. See also Johnson v. Ryder Truck Lines, Inc., 575 F.2d 471 (4th Cir. 1978); Garner v. Giarrusso, 575 F.2d 300 (5th Cir. 1978); Mahone v. Waddle, 564 F.2d 1018 (3d Cir. 1977); McCrary v. Runyon, 515 F.2d 1082 (4th Cir. 1975), aff'd., 427 U.S. 160, 96 S.Ct. 2586, 49 L.Ed.2d 415 (1976); Tucker v. Harley Davidson Motor Co., 454 F.Supp. 738, 743 (D.Wis.1978); Peterson v. Lehigh Valley Dist. Council, 453 F.Supp. 735 (E.D.Pa.1978). Further, many lower courts have recognized the appropriateness of submitting all legal contentions encompassed within a § 1981 cause of action to the jury. See Santos v. Mt. Sinai Hospital, (S.D.N.Y.1980); Seymore v. Reader's Digest Ass'n., Inc., 493 F.Supp. 257, 267 (S.D.N.Y.1980); Johnson v. Sea Drilling Corp., 486 F.Supp. 462, 463-64 (E.D.La.1980); McCray v. Standard Oil Co., 76 F.R.D. 490, 501 (N.D.Ill.1977); Saad v. Burns Intern. Sec. Services, Inc., 456 F.Supp. 33 (D.D.C.1978); Miller v. Doctors General Hospital, 76 F.R.D. 136 (D.Okl.1977); Tucker v. Harley Davidson Motor Co., supra, 454 F.Supp. at 744; Marshall v. Electric Hose & Rubber Co., 413 F.Supp. 663, 666-68 (D.Del.1976); but compare Blum v. Gulf Oil Corp., 597 F.2d 936, 938 (5th Cir. 1979); and Baker v. City of Detroit, 458 F.Supp. 379, 384 (E.D.Mich.1978). We agree with appellant that the district court erred in not granting a jury trial in an action based on § 1981 on all legal claims.

Having concluded that appellant is entitled to a jury trial on all of his legal claims, we are next confronted with appellant's argument that backpay should properly be characterized as a legal damage and thus be an issue for the jury. The question of the proper characterization of backpay arises here in the unusual context of a plaintiff who is not also seeking the equitable remedy of reinstatement. See Lynch v. Pan American World Airways, 475 F.2d 764, 765 (5th Cir. 1973); Booker v. Electrical Workers Union, Local 2021 IBEW (AFL-CIO), 431 F.Supp. 1035, 1036-37 (D.Okl.1977); Flores v. Local 25 International Brotherhood of Electrical Workers, AFL-CIO, 407 F.Supp. 218, 220 (E.D.N.Y.1976); see also Donoghue v. Behler, 429 F.Supp. 403, 406 (D.N.J.1977). Basically, it seems that two rationales have supported the characterization of backpay as an equitable remedy in employment discrimination cases. First, many courts have concluded that backpay is incidental to the much broader equitable remedy of reinstatement, see Lynch v. Pan American World Airways, supra. And second, various courts have analogized backpay to the equitable doctrine of restitution. See, e. g., Robinson v. Lorillard Corp., 444 F.2d 791, 802 (4th Cir. 1971), cert. dismissed, 404 U.S. 1006, 92 S.Ct. 573, 30 L.Ed.2d 655 (1972); Equal Employment Opportunity Commission v. Detroit Edison Co., 515 F.2d 301, 308 (6th Cir. 1975), vacated on other grounds, 431 U.S. 951, 97 S.Ct. 2668, 53 L.Ed.2d 267 (1977); Harkless v. Sweeney Independent School District, 427 F.2d 319, 324 (5th Cir. 1970); and Demkowicz v. Endry, 411 F.Supp. 1184, 1191 (S.D.Ohio 1975). After a careful examination, we find both rationales to be of questionable merit in an action brought pursuant to § 1981.6

The courts that have included backpay as an adjunct equitable remedy to reinstatement have analogized claims brought under § 1981 to Title VII claims, where there is seeming unanimity of judicial thinking interpreting that statute as providing solely equitable relief.7 See Johnson v. Georgia Highway Express, Inc., 417 F.2d 1122, 1125 (5th Cir. 1975); Harmon v. May Broadcasting Co., 583 F.2d 410 (8th Cir. 1978); Slack v. Havens, 522 F.2d 1091, 1094 (9th Cir. 1975); see also Hildebrand v. Board of Trustees of Michigan State University, 607 F.2d 705 (6th Cir. 1975); and Comment, Developments Title VII, 84 Harv.L.Rev. 1109, 1265-66 (1971). While Congress apparently intended only court granted relief in Title VII, see Curtis v. Loether, supra, 415 U.S. at 197, 94 S.Ct. at 1009; Lorillard v. Pons, supra, 434 U.S. at 584-85, 98 S.Ct. at 872, no such limitation is apparent under § 1981. See Johnson v. Railway Express Agency, supra, 421 U.S. at 459-60, 95 S.Ct. at 1719-1720. Further, the judicial analysis that has construed backpay as incidental to reinstatement appears to be the theoretical equivalent of the repudiated "clean-up doctrine" in equity. See Dairy Queen v. Wood, 369 U.S. 469, 82 S.Ct. 894, 8 L.Ed.2d 44 (1962); Ross v. Bernhard, 396 U.S. 531, 90 S.Ct. 733, 24 L.Ed.2d 729 (1970); and James & Hazard, Civil Procedure, Ch. 8 (2d ed. 1977).8

Implicit within the analysis used by courts holding that backpay should be awarded as an incident to reinstatement is the recognition that backpay is somehow dissimilar to traditional equitable remedies. Some courts have attempted to liken backpay to a form of restitution in order to characterize backpay as equitable. See Equal Employment Opportunity Commission v. Detroit Edison Co., supra; Robinson v. Lorillard Corp., supra ; and Demkowicz v. Endry, supra. Such characterization appears to us to misconceive the concept of restitution.9 In essence, restitution seeks to return to an injured party that which a wrongdoer has taken away. See Restatement, Restitution, § 1-2 (1937); Samuel v. University of Pittsburgh, 375 F.Supp. 1119, 1135 (W.D.Pa.1974); Newco Land Co. v. Martin, 358 Mo. 99, 213 S.W.2d 504, 510 (Mo.1948); Savage-Scofield Co. v. City of Tacoma, et al., 105 P. 1032 (Wash.1909). In many instances of § 1981 discrimination in an employment context, the injured party has not conferred any benefit on the alleged wrongdoer that would warrant a restitutionary recovery for backpay. This is certainly true, as here, in a case of wrongful refusal to hire. But, it is also true in many situations of unlawful firings and unlawful failures to promote. See Comment, Developments Section 1981, supra, 15 Harv.Civ.Rights Civ.Lib.L.Rev. at 250.

In our view, the remedy of backpay in § 1981 cases is more appropriately characterized as a compensatory, legal damage. A number of district courts already have adopted this view. See Santos v. Mt. Sinai Hospital, supra; Partin v. St. Johnsbury Co., Inc., 447 F.Supp. 1297, 1303 n.6 (D.R.I.1978); Devore v. Edgefield County School District, 68 F.R.D. 423, 427 (D.S.C.1975).10 We conclude that backpay or lost wage determinations are inherently in the nature of legal damages.11 The calculations necessary to determine the hours of lost work stemming from a § 1981 violation are straight forward damage computations certainly within the practical capabilities of juries. See, e. g., Pons v. Lorillard, supra, 549 F.2d at 954.12 In sum, we hold that the district court erred in denying appellant's demand for jury trial on all of his legal claims including his claim for backpay.

In anticipation of the foregoing conclusion, appellees argued that the evidence presented at trial failed to develop a submissible case.13 After a very careful review of the entire record in this case, it is apparent that there was a marked degree of conflicting evidence that should appropriately be assessed by a jury. As such, we are satisfied that it is not possible to conclude as a matter of law that the appellees failed to produce a submissible case on the issues of liability or damages.14 See generally Atlantic & Gulf Stevedores, Inc. v. Ellerman Lines, Ltd., 369 U.S. 355, 360, 82 S.Ct. 780, 783, 7 L.Ed.2d 798 (1962); and Madrid v. Mine Safety Appliance Co., 486 F.2d 856 (10th Cir. 1973).

II.

We are next confronted with appellees' difficult argument that even if they had engaged in discriminatory practices regarding appellant, they did so "lawfully" insofar as they were attempting to comply with a governmentally encouraged affirmative action plan.15 Essentially, appellees contend that their reliance on their affirmative action plan adopted pursuant to Executive Order 11246 constitutes an absolute bar to a cause of action under § 1981 by a white individual for alleged racial discrimination. Appellant argues that when he applied for employment with appellees he was told, in effect, that if he were black he would have been hired. As such, appellant's position is that appellees' "but for" conduct states a violation of § 1981 and appellant should be able to proceed with an action for money damages.

The threshold issue that we must determine is whether appellant has arguably stated a cause of action under § 1981 based on his allegations. The Supreme Court has grappled with the concept of "reverse discrimination" in a number of recent decisions. See Franks v. Bowman Transportation Co., 424 U.S. 747, 96 S.Ct. 1251, 47 L.Ed.2d 444 (1976); University of California Regents v. Bakke, 438 U.S. 265, 98 S.Ct. 2733, 57 L.Ed.2d 750 (1978); United Steelworkers of America v. Weber, 443 U.S. 193, 99 S.Ct. 2721, 61 L.Ed.2d 480 (1979); Fullilove v. Klutznick, --- U.S. ----, 100 S.Ct. 2758, 65 L.Ed.2d 902 (1980). The entire history of judicial analysis in this troubling area has been checkered. See Boyd, Affirmative Action in Employment The Weber Decision, 66 Iowa L.Rev. 1 (1980); and United States v. City of Miami, Fla., 614 F.2d 1322, 1337 (5th Cir. 1980).16 Nevertheless, the Supreme Court in Weber has indicated that no absolute bars may be erected that completely preclude the advancement of white individuals. United Steelworkers of America v. Weber, supra, 443 U.S. at 208, 99 S.Ct. at 2726; see also University of California Regents v. Bakke, supra ; and Moseley v. Goodyear Tire & Rubber Co., 612 F.2d 187, 191 (5th Cir. 1980). We believe that under appellant's version of the facts in this action there is established a cause of action under § 1981. Assuming appellant was told that but for his race a job would have been available to him,17 then appellees have created an absolute preclusion of whites from consideration for employment. Appellees' argument that reliance on their affirmative action program gives them, in essence, a license to discriminate on racial grounds cannot be accepted. We refuse to agree that the institution of an affirmative action plan absolutely sanctions racial discrimination.18 While we agree that the government as well as private employers have an interest in promoting the substantial societal goal of advancing the concept of affirmative action, we do not agree that an employer solely on the basis of race can refuse to even consider the application of a white individual. Such a practice, in our view, creates the type of absolute bar or preclusion forbidden by the Supreme Court.

This determination in light of the damage action nature of this case leads us into the uncharted area of the relief available to appellant. Given that the Supreme Court has seemingly approved certain voluntary affirmative action programs that address racial imbalances in actions seeking injunctive relief, see United Steelworkers of America v. Weber, supra,19 there are still unresolved questions regarding the nature of the legal relief, if any, that a white employee or applicant who is subjected to an illegal implementation of an affirmative action plan is entitled.

In this appeal we are presented with a claim exclusively for money damages. The Supreme Court in Franks v. Bowman Transportation Co., supra, left unanswered the question of whether an employee who is adversely affected by an affirmative action plan has a cause of action for money damages. Chief Justice Burger, while concurring in part and dissenting in part, noted that

... competitive-type seniority relief at the expense of wholly innocent employees can rarely, if ever, be equitable if that term retains traditional meaning. More equitable would be a monetary award to the person suffering the discrimination .... Such monetary relief would serve the dual purpose of deterring wrongdoing by the employer or union or both as well as protecting the rights of innocent employees. Id. at 780-81, 96 S.Ct. at 1271; see also the majority opinion at 777 n.38, 96 S.Ct. at 1270 n.38.

And, Justice Powell observed that

(t)he second, and in my view controlling distinction between these types of relief is the impact on other workers. As noted above, the granting of backpay and of benefit-type seniority furthers the prophylactic and make whole objectives of the statute without penalizing other workers. But competitive seniority benefits, as the term implies, directly implicates the rights and expectations of perfectly innocent employees. The economic benefits awarded discrimination victims would be derived not at the expense of the employer but at the expense of other workers. Putting it differently, those disadvantaged sometimes to the extent of losing their jobs entirely are not the wrongdoers who have no claim to the Chancellor's conscience, but rather are innocent third parties.

Id. 424 U.S. at 788, 96 S.Ct. at 1276. See also Justice Powell's views in University of California Regents v. Bakke, 438 U.S. 265, 310, 98 S.Ct. 2733, 2758, 57 L.Ed.2d 750 (1978).