Arguello v. Conoco

Decision Date10 April 2000
Docket NumberNo. 98-11280,98-11280
Citation207 F.3d 803
Parties(5th Cir. 2000) DENISE ARGUELLO, ALBERTO GOVEA, GARY IVORY, ANTHONY PICKETT, MICHAEL ROSS,for themselves and all others similarly situated; MANUEL ESCOBEDO, MARTHA I. ESCOBEDO, Plaintiffs-Appellants, v. CONOCO, INC., Defendant-Appellee
CourtU.S. Court of Appeals — Fifth Circuit

Appeal from the United States District Court for the Northern District of Texas

Before POLITZ, DAVIS, and STEWART, Circuit Judges.

CARL E. STEWART, Circuit Judge:

The appellants, a group of Hispanic and African-American consumers, filed suit against appellees, Conoco, Inc. ("Conoco" or "Conoco, Inc.") alleging that they were subjected to racial discrimination while purchasing gasoline and other services. Appellants challenge the district court's 12(b)(6) dismissal of their disparate impact claim under 42 U.S.C. 2000a, and the district court's grant of summary judgment to Conoco on the appellants remaining 42 U.S.C. 1981 and 2000a claims. For the following reasons we affirm in part, and reverse in part.

FACTUAL AND PROCEDURAL BACKGROUND

There are three different incidents which form the background for this appeal. In March 1995, Denise Arguello ("Arguello"), and her father Alberto Govea ("Govea"), along with various other members of their family stopped at a Conoco-owned store 1 in Fort Worth, Texas. After pumping their gasoline Arguello and Govea entered the store to pay for the gasoline and purchase other items. When Arguello approached the counter she presented the store cashier, Cindy Smith ("Smith"), with her items and a credit card. Smith asked to see Arguello's identification. When Arguello gave Smith her Oklahoma driver's license Smith stated that an out-of-state driver's license was not acceptable identification. Arguello disagreed with Smith and Smith began to insult Arguello using profanity and racial epithets. 2 Smith also knocked a six-pack of beer off the counter toward Arguello. After Arguello retreated from the inside of the store, Smith used the store's intercom system to continue yelling racial epithets.

Smith also made obscene gestures through the window.

Moments after the incident occurred Arguello and Govea used a pay phone outside the station to call a Conoco customer service phone number and complain about Smith's conduct. Govea also attempted to reenter the store to discover Smith's name. When Govea attempted to reenter the store, Smith and another store employee locked the doors. Linda Corbin ("Corbin"), a district manager, received Arguello and Govea's complaints. Corbin reviewed video tape from the store, which had no audio, and concluded that Smith had acted inappropriately. When she was confronted by Corbin, Smith admitted to using the profanity, racial epithets, and obscene gestures. Corbin counseled Smith about her behavior but did not suspend, or terminate Smith. Several months after the incident Corbin transferred Smith to another store for Smith's protection after receiving phone calls that a group was planning to picket the store at which the incident took place.

In September 1995, Gary Ivory ("Ivory"), Anthony Pickett ("Pickett"), and Michael Ross ("Ross") visited a Conoco-branded store in Fort Worth, Texas. While inside the store they allege that they were followed by a store employee and after complaining about this treatment a store employee told them "we don't have to serve you people" and "you people are always acting like this." The employee refused to serve them and asked them to leave. Eventually the police were summoned and the policeman ordered the store employee to serve the group.

In November 1996, Manuel Escobedo ("Escobedo") and Martha Escobedo ("Mrs. Escobedo") stopped at a Conoco-branded store in San Marcos, Texas. Escobedo claims that while visiting this store the store employee refused to provide toilet paper for the restroom, shouted profanities at his wife, and said "you Mexicans need to go back to Mexico." Escobedo called Conoco to complain about this incident, and was told by a Conoco customer service supervisor, Pamela Harper, that there was nothing Conoco could do because that station was not owned by Conoco. In a separate incident at a Conoco-branded store in Grand Prairie, Texas Escobedo was allegedly told by the store clerk that "you people steal gas." Finally, Escobedo claims that at two Conoco-branded stores in Laredo, Texas he was required to pre-pay for his gasoline while Caucasian customers were allowed to pump their gas first and then pay.

In March 1997, Arguello, Govea, the Escobedos, Ivory, Pickett, and Ross ("plaintiffs" or "appellants") filed suit against Conoco, Inc. on behalf of themselves and all other similarly situated parties. 3 The plaintiffs alleged that Conoco was in violation of 42 U.S.C. 1981 4 and 2000a ("Title II") 5 and state law for refusing to serve Hispanic and African-American customers, and subjecting this class of customers to substandard service and racially derogatory remarks. The plaintiffs also claimed that Conoco had illegal policies and practices which disparately impacted Hispanics and African-Americans.

In July 1997, the district court issued an order dismissing all claims based on the plaintiffs' allegations of disparate impact and the plaintiffs' state law claims. In October 1998, the district court granted summary judgment to Conoco on all of the plaintiffs' remaining claims.

DISCUSSION

Appellants raise several issues on appeal. First, appellants contend that the district court erred in finding no agency relationship between Conoco, Inc. and the Conoco-branded stores. Appellants also argue that the district court erred in finding no agency relationship between Conoco, Inc. and Cindy Smith because Smith acted outside the scope of her employment. Appellants argue in the alternative that even if Smith was outside the scope of her employment Conoco had a non-delegable duty to prevent racial discrimination, and further that Conoco should be held liable because it ratified Smith's conduct. Finally, appellants contend that the district court improperly dismissed their disparate impact claims under Title II. We will consider each of these issues in turn.

A.Standard of Review

This court reviews a grant of summary judgment de novo. Neff v. American Dairy Queen Corporation, 58 F.3d 1063, 1065 (5th Cir. 1995). Summary judgment should be granted if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). We review the facts drawing all inferences most favorable to the party opposing the motion. Neff, 58 F.3d at 1065 (quoting Reid v. State Farm Mut. Auto Ins. Co., 784 F.2d 577, 578 (5th Cir. 1986)).

B.Agency Relationship between Conoco, Inc. and Conoco-branded Stores

The incidents involving Ivory, Ross, Pickett and the Escobedos occurred at Conoco-branded stores. These Conoco-branded stores are independently owned, and have entered into Petroleum Marketing Agreements ("PMA") that allow them to market and sell Conoco brand gasoline and supplies in their stores. The district court held that no agency relationship existed between Conoco, Inc. and the Conoco branded stores. The district court found that Conoco, Inc. did not control the details of the daily operations of the Conoco branded stores, including personnel decisions.

The Supreme Court has suggested that in order to impose liability on a defendant under 1981 for the discriminatory actions of a third party, the plaintiff must demonstrate that there is an agency relationship between the defendant and the third party. General Building Contractors Association v. Pennsylvania United Engineers and Constructors, 458 U.S. 375,393, 102 S.Ct. 3141, 3151-52, 73 L.Ed.2d 835 (1982). Agency is a fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act. Id. at 391 (citing Restatement (Second) of Agency 1 (1958) ("Restatement")). At the core of agency is a "fiduciary relation" arising from the "consent by one person to another that the other shall act on his behalf and subject to his control...equally central to the master-servant relation is the master's control over or right to control the physical activities of the servant." Id. at 393 (citing Restatement 1). Therefore, to establish an agency relationship between Conoco, Inc. and the branded stores the plaintiffs must show that Conoco, Inc. has given consent for the branded stores to act on its behalf and that the branded stores are subject to the control of Conoco, Inc.

Appellants argue that the PMAs establish that Conoco, Inc. has an agency relationship with the branded stores. They argue that the PMAs give Conoco, Inc. control of the branded stores because the PMAs require the branded stores to maintain their businesses according to the standards set forth in the PMAs. Plaintiffs further contend that Conoco, Inc. controls the customer service dimension of the Conoco-branded stores. As evidence the plaintiffs point to a statement in the PMA that instructs the branded stores that "all customers shall be treated fairly, honestly, and courteously." Furthermore, the plaintiffs assert that Conoco, Inc. has the power to debrand the Conoco-branded stations for not complying with the contractual terms of the PMA. Thus, because of this debranding power the plaintiffs reason that Conoco controls the operations of their brand marketers in all areas which are discussed in the PMA, including customer service. The plaintiffs also produced summary judgment evidence that Conoco, Inc. conducts random, bi-yearly inspections of the branded stores to determine if business is being conducted in accordance with the standards of the PMA.6

Despite the plaintiffs' interpretation of the PMAs and the evidence of inspections, the plain...

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