Cheung v. Merrill Lynch, Pierce, Fenner & Smith

• Decision Date: 23 January 1996
• Docket Number: No. 95 Civ. 5700 (LLS).,95 Civ. 5700 (LLS).
• Citation: 913 F. Supp. 248
• Parties: Paul CHEUNG and Edmond Cheung, Plaintiffs, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Mark Tully, and Frank Sullivan, Defendants.
• Court: U.S. District Court — Southern District of New York

913 F. Supp. 248

Paul CHEUNG and Edmond Cheung, Plaintiffs, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Mark Tully, and Frank Sullivan, Defendants.

No. 95 Civ. 5700 (LLS).

United States District Court, S.D. New York.

January 23, 1996.

Nahum A. Kianovsky, Vanessa A. Ploumis, P.C., New York City, for plaintiffs.

Jill L. Rosenberg, Orrick, Herrington & Sutcliffe, New York City, for defendants.

Opinion and Order

STANTON, District Judge.

Defendants move pursuant to Fed.R.Civ.P. 12(b)(6) for dismissal of the complaint, which alleges that defendants refused to open an investment account for plaintiffs for unlawful discriminatory reasons.

BACKGROUND

The complaint alleges the following:

Paul and Edmond Cheung, who are father and son, sought to open an investment account at Merrill Lynch's 200 Park Avenue office. They spoke by telephone with Mark Tully, a financial consultant at that office, and then met with him to discuss investment alternatives. The Cheungs told Tully that although they were not sure how they wanted to invest their money, they wanted to open an account at Merrill Lynch.

Tully told them their account was open but not yet active and that to activate their account they would only need to make a phone call. It was agreed that the Cheungs would tell Tully how they wished to invest the money. Tully assured the Cheungs that there were no obstacles — including Paul Cheung's Canadian citizenship — which would prevent them from opening an account. (Complaint, ¶¶ 10-12.)

The Cheungs met with Tully again about a month later at the 200 Park Avenue office for the purpose of giving Tully a check for $100,000 and telling him how they wanted to invest it. Tully left the conference room in which they were meeting to prepare power of attorney documents for the Cheungs' signature.

Frank Sullivan, the branch manager of the 200 Park Avenue office, entered the room. He "became hostile, and demanded that Plaintiffs state their business." He picked up Paul Cheung's Canadian passport and asked whether he was a Canadian citizen. Mr. Cheung answered affirmatively. Sullivan picked up the Cheungs' completed application, which had been signed at the earlier meeting, reviewed it, and left the room. (Id. ¶¶ 14-19.)

When Tully returned, he told the Cheungs that Sullivan had instructed him to terminate the meeting, and that the Cheungs would not be permitted to open an account with Merrill Lynch because they were not United States citizens. The Cheungs pointed out that Edmond Cheung was a U.S. citizen and that they could open the account under his name. After conferring again with Sullivan, Tully told the Cheungs that they could not open an account under Edmond's name because he hadn't been a citizen "long enough." Tully refused to discuss the matter further. The Cheungs left the office. (Id. ¶¶ 20-24.)

The Cheungs assert claims under 42 U.S.C. § 1981, the New York State Human Rights Law ("NYSHRL"), the New York City Administrative Code and New York common law. Paul Cheung claims defendants discriminated against him on the basis of his Canadian citizenship, race, sexual orientation and disability — specifically, defendants' perception that he was infected with the human immunodeficiency virus (HIV). Edmond Cheung claims defendants discriminated against him because they thought he was not a U.S. citizen and on the basis of his race and relationship to someone perceived to have a disability. Both assert claims under New York state law for intentional infliction of emotional distress.

DISCUSSION

Defendants contend that particular types of discrimination are not prohibited by some of the statutes under which plaintiffs sue. With respect to the race discrimination claims, they urge that the complaint fails to set forth facts from which discriminatory motive can be inferred.

Defendants argue that the claims under the New York City Administrative Code must be dismissed because plaintiffs did not comply with that Code's pre-filing requirement.

Alternatively, defendants seek dismissal of all claims against Tully on the ground that the complaint alleges that he carried out others' instructions and thus himself lacked the necessary discriminatory motive.

In considering a motion to dismiss under Fed.R.Civ.P. 12(b)(6), "a court must accept the allegations contained in the complaint as true, and draw all reasonable inferences in favor of the non-movant; it should not dismiss the complaint "`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.'" Sheppard v. Beerman, 18 F.3d 147, 150 (2nd Cir.), cert. denied, ___ U.S. ___, 115 S.Ct. 73, 130 L.Ed.2d 28 (1994) (citations omitted).

I. COVERAGE

A. Section 1981

Defendants argue that the Cheungs' citizenship discrimination claims are not cognizable under 42 U.S.C. section 1981. Section 1981 provides:

(a) 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 proceedings for the security of persons and property as is enjoyed by white citizens.... (c) The rights protected by this section are protected against impairment by nongovernmental discrimination and impairment under color of State law.

Section 1981(c) was added by the Civil Rights Act of 1991, Pub.L. No. 102-166, § 101, 105 Stat. 1071 (1991), which applies to conduct occurring after the November 1991 effective date. See Rivers v. Roadway Express, ___ U.S. ___, ___ - ___, 114 S.Ct. 1510, 1519-20, 128 L.Ed.2d 274 (1994) (section 101 does not apply to preenactment conduct). The amended version applies to the Cheungs' section 1981 claim, which arose in December 1994.

It is settled law that section 1981 prohibits both public and private discrimination based on race. See Runyon v. McCrary, 427 U.S. 160, 173-74, 96 S.Ct. 2586, 2596, 49 L.Ed.2d 415 (1976). The Supreme Court has held that section 1981 also prohibits states from enacting laws which discriminate on the basis of citizenship. See Takahashi v. Fish & Game Commission, 334 U.S. 410, 419, 68 S.Ct. 1138, 1142-43, 92 L.Ed. 1478 (1948) (invalidating state statute barring persons ineligible for citizenship from obtaining commercial fishing licenses).

Neither the Supreme Court nor the Second Circuit has decided whether section 1981 (in its pre- or post-1991 form) prohibits private discrimination based on citizenship. Construing the pre-1991 version, the two courts of appeals which considered the question reached opposite results. Compare Duane v. GEICO, 37 F.3d 1036, 1042 (4th Cir.1994) (private discrimination prohibited) with Bhandari v. First National Bank of Commerce, 829 F.2d 1343, 1351-52 (5th Cir. 1987) (private discrimination not prohibited), vacated, 492 U.S. 901, 109 S.Ct. 3207, 106 L.Ed.2d 558 (1989), reinstated on remand, 887 F.2d 609 (5th Cir.1989), cert. denied, 494 U.S. 1061, 110 S.Ct. 1539, 108 L.Ed.2d 778 (1990).

However, the enactment of section 1981(c) in 1991 mooted the arguments made in Bhandari and Duane over whether Congress, in enacting the provisions which later became present-day section 1981, meant to prohibit private citizenship discrimination. When Congress enacted section 1981(c), it was well-established that section 1981 prohibited public discrimination on the basis of citizenship.¹ Section 1981 does not exempt private citizenship discrimination from its coverage, nor is there evidence in the legislative history that Congress did not intend to prohibit private citizenship discrimination.

Accordingly, section 1981 must be construed to prohibit private discrimination on the basis of citizenship.

B. New York State Human Rights Law

The Cheungs assert citizenship and race discrimination claims under the NYSHRL. Paul Cheung also claims that defendants discriminated against him on the basis of a perceived disability — HIV infection — and Edmond Cheung claims he was discriminated against because of his relationship to an HIV-infected person.

Specifically, the Cheungs rely on section 296(2)(a), which provides:

It shall be an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place of public accommodation, resort or amusement, because of the race, creed, color, national origin, sex, or disability or marital status of any person, directly or indirectly, to refuse, withhold from or deny to such person any of the accommodations, advantages, facilities or privileges thereof....

N.Y.Exec.L. § 296(2)(a).

Defendants, conceding for the purpose of this motion that Merrill Lynch may be a "public accommodation" under state and city law, (see Defendants' Reply Brief at 2, 9 n. 6), argue that the NYSHRL does not prohibit discrimination on the basis of citizenship.

Because section 296(2)(a) does not by its terms forbid discrimination on the basis of citizenship, the Cheungs' citizenship discrimination claims under that section must be dismissed unless the proscription against national origin discrimination encompasses discrimination against non-citizens.

No court has addressed that question in the NYSHRL context. The Supreme Court, interpreting Title VII's² proscription against employment discrimination on the basis of national origin, has held that discrimination on the basis of citizenship is not national origin discrimination. See Espinoza v. Farah Mfg. Co., 414 U.S. 86, 95, 94 S.Ct. 334, 340, 38 L.Ed.2d 287 (1973). The Court defined national origin as "the country where a person was born, or, more broadly, the country from which his or her ancestors came." Id., 414 U.S. at 88, 94 S.Ct. at 336.

The reasoning in Espinoza applies with equal force to the NYSHRL. Citizenship and national origin are not the same: a U.S. citizen can be discriminated against on the basis of the country from which he or his ancestors came....