Bains LLC v. Arco Products Co.

• Citation: 405 F.3d 764
• Decision Date: 19 April 2005
• Docket Number: No. 02-35906.,No. 02-35993.,02-35906.,02-35993.
• Parties: BAINS LLC, dba Flying B, Plaintiff-Appellee, v. ARCO PRODUCTS COMPANY, a division of Atlantic Richfield Co., Defendant-Appellant. Bains LLC, dba Flying B, Plaintiff-Appellee, v. Arco Products Company, a division of Atlantic Richfield Co., Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 764

405 F.3d 764

BAINS LLC, dba Flying B, Plaintiff-Appellee, v. ARCO PRODUCTS COMPANY, a division of Atlantic Richfield Co., Defendant-Appellant.

Bains LLC, dba Flying B, Plaintiff-Appellee, v. Arco Products Company, a division of Atlantic Richfield Co., Defendant-Appellant.

No. 02-35906.

No. 02-35993.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 4, 2003.

Filed April 19, 2005.

COPYRIGHT MATERIAL OMITTED

Scott W. Fowkes (argued and briefed) and Richard C. Godfrey (briefed), Kirkland & Ellis, Chicago, IL, and Michael Reiss (briefed) and Paula Lehmann (briefed), Davis Wright Tremaine LLP, Seattle, WA, for the appellant.

Erik J. Heipt (argued and briefed) and Edwin S. Budge (briefed), Budge & Heipt, PLLC, Seattle, WA, for the appellee.

Appeal from the United States District Court for the Western District of Washington; Thomas S. Zilly, District Judge, Presiding. D.C. No. CV-01-00235-TSZ.

Before KLEINFELD, GOULD, and TALLMAN, Circuit Judges.

KLEINFELD, Circuit Judge.

This is a punitive damages case involving nominal compensatory damages brought by a corporation for racial discrimination.

Facts

This case went to trial before a jury, so we state the facts and interpret the evidence most favorably to the party that was successful at trial.¹

The facts are well laid out in the published decision of the district court.² In 1999 an Olympic Pipeline Company petroleum pipeline ruptured, interfering with the transportation of fuel from refineries in Northwest Washington to a distribution center in Seattle. It took two years to fix the pipeline. During that period ARCO hired a number of companies to truck fuel from its Blaine, Washington refinery to the distribution center.

Paul, Gary, and Deep Bains are American citizens who were born in the Punjab region of India. The Bains brothers bought a gas station and convenience store in Okanogan, Washington. They were the first Sikh family in the area. They did business under the name "Flying B," signifying that the Bains brothers were flying high in the American business world. Flying B soon owned five gas stations and employed thirty people. The brothers bought a tanker truck for about $100,000 and got the necessary permits to haul gasoline to their stations. That investment put the Bains brothers in an excellent position to make some money when the Olympic pipeline ruptured and ARCO needed help. In March 2000 they signed a contract with ARCO to haul fuel. By then Flying B was doing business as a corporation, the stock of which was owned solely by the three Bains brothers.

In June 2000, Flying B started hauling fuel for ARCO, and in August, after getting the necessary permits and safety clearances from ARCO, the company bought three more trucks and hired more drivers, although the Bains brothers themselves continued to drive trucks as well. But after four and a half months, about 600 loads (or 6.5 million gallons of gasoline), and 130,000 miles, Flying B's work ended on October 30, 2000, when ARCO terminated it.

During the period that Flying B transported fuel for ARCO, the Bains brothers and their drivers had to endure a considerable measure of abuse from Bill Davis, the lead man at ARCO's Seattle terminal where the drivers dropped off their fuel. Davis did not like the Flying B drivers and purposely made their unloading work at the Seattle terminal difficult. He made a point of delaying the Flying B drivers by ignoring their presence when they needed their papers signed after a delivery. Because ARCO paid by the load (about $460 for each load), the delays meant that Flying B's drivers could haul fewer loads and make less money. Davis made them stand out in the rain while other drivers were allowed to stay in their trucks or seek shelter. Davis also falsely accused Flying B drivers of various safety violations and made them clean up spills left by other drivers instead of making those responsible clean up their own spills.

Davis's rudeness included — and by inference arose from — his ethnic animus against Sikhs. Paul and Deep Bains, and many of the other Flying B drivers, were religiously observant Sikhs who wore turbans and long beards. Davis started his relationship with Paul Bains by refusing to shake his hand. He called Paul a "diaperhead" to his face despite Paul's protest that his turban was an important religious symbol. "Mr. Bains" or "Paul" were apparently too hard for Davis to say — he preferred "raghead." One of Flying B's hired drivers said Davis commonly called him "stupid Indian," "motherfucking Indian," and similar sobriquets, and when he asked for a rag after Davis had told him to clean up a spill, Davis refused and told him to take the "fucking rag from your head and clean it."

After months of Davis's abuse, the morale of Flying B drivers suffered and drivers threatened to quit. Even the non-Sikh Flying B drivers felt degraded by Davis's attitude toward their association with their company. Davis asked both Patrick Dauer and A.C. Morgan, the only two Caucasian Flying B drivers, "How did you get hooked up with these fuckers?"

Eventually the Bains brothers decided to report Davis's abuse to Al Lawrence, the manager of the Seattle terminal and Davis's boss. The brothers decided that Deep would talk to Lawrence. Deep told Lawrence all about Davis's behavior, such as the names that Davis had called them — "diaperhead," "stupid fucking Indian," "raghead," and "towelhead" — as well as how Davis had told them to go back to India, and how he made the Flying B drivers use slower pumps and stand outside in the rain. Deep told Lawrence that the Flying B drivers were threatening to quit because of the hostile atmosphere. Lawrence responded that perhaps Davis was upset about something and asked Deep to let him know if anything happened in the future.

But the problems continued and Davis kept up his abuse. The Flying B drivers were subjected to lengthy security checks when other drivers were not. Deep complained to Lawrence again, but it did not do any good. Davis continued his ethnic abuse, and the security delays reserved exclusively for Flying B drivers continued. Gary Bains went to Lawrence and advised him yet again of the continuing abuse. But instead of stopping Davis's abuse, Lawrence and ARCO stopped Flying B. ARCO terminated Flying B without giving a reason and without notice, not even the thirty-day minimum notice required by their contract. Flying B was forced to lay off a number of employees and to sell their now superfluous trucks. Deep Bains contacted Tim Reichert, the Los Angeles central dispatch manager, who was above Lawrence in the ARCO hierarchy, to contest the termination, but to no effect. Reichert claimed that there were too many trucks for the job. After this litigation had begun, ARCO claimed that Flying B had committed various safety violations, including driving unsafe trucks, drivers smoking or using cell phones while delivering fuel, and drivers failing to clean up spills.

An important part of the case was whether the ethnic nastiness and coarse language was only Davis's independent foray into obnoxiousness, or whether ARCO, through Davis's supervisor, Al Lawrence, ought to have known about Davis's behavior and done something about it. The parties also disputed whether ARCO's termination of Flying B had anything to do with the racism. In addition to the Bains' testimony that they had complained to Lawrence, a driver for another company, Torrance Holmes, testified that once he started chatting with the Bains brothers, Lawrence quit talking to him. Holmes also testified that he heard Davis brag that "we kicked those ragheads out of here and they're never coming back."

In his own testimony, Bill Davis admitted that he had used the term "raghead" "once in a while" when referring to the Bains brothers in conversations with coworkers, typically when other people complained about Flying B drivers. Davis had admitted during discovery that he had used the term "raghead" with his boss Al Lawrence, but later clarified that this was when Lawrence had asked him whether he had called the Flying B drivers "ragheads," and Davis responded that he had not. Thus, the gist of Davis's testimony was that he called the Flying B drivers "ragheads" only behind their backs, not to their faces. Lawrence never disciplined or reprimanded Davis, but Davis claimed that he quit using the term after his chat with Lawrence. Davis said he knew about ARCO's policy that prohibited racial discrimination and discriminatory language. Of course the jury may have disbelieved any or all of ARCO's exonerating testimony.

An economist testified that Flying B suffered a $576,000 loss on account of the termination. He calculated this based solely on the profits the company would have made from November 1, 2000, when Flying B was terminated, to June 30, 2001, when the pipeline was fixed and ARCO no longer needed drivers to move the fuel.

Tim Reichert, the manager above Lawrence who had the authority to terminate Flying B and did so, testified that he knew nothing about the ethnicity of Flying B's owners or drivers. Reichert said that his motivations for terminating the contract were Al Lawrence's assertions that Flying B had a large number of safety violations, and his own concern that there were too many carriers transporting fuel to the terminal.

Al Lawrence testified that Bill Davis had advised him of numerous infractions by Flying B, such as not using buckets to catch spills, leaving valves open, using cell phones while pumping, and lining up trucks improperly so as to inconvenience other drivers. Almost all the complaints he heard about involved Flying B, even though they were the smallest carrier ARCO used. Lawrence said that he suspended Flying B exclusively because of safety violations, and that race was never a factor. But Lawrence conceded he had not documented any of these safety concerns when they occurred. Lawrence had...