McKnight v. General Motors Corp.

Citation53 Fair Empl. Prac. Cas. (BNA) 505,908 F.2d 104
Decision Date21 August 1990
Docket Number89-1526,Nos. 89-1379,s. 89-1379
Parties53 Fair Empl.Prac.Cas. 505, 54 Empl. Prac. Dec. P 40,147, 59 USLW 2048, 59 USLW 3374, 16 Fed.R.Serv.3d 1451 Gary McKNIGHT, Plaintiff-Appellee, Cross-Appellant, v. GENERAL MOTORS CORPORATION, Defendant-Appellant, Cross-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Robert J. Gingras, Fox, Fox, Schaefer & Gingras, Madison, Wis., for plaintiff-appellee.

Lawrence T. Lynch, Maureen A. McGinnity, Foley & Lardner, Milwaukee, Wis., for defendant-appellant.

Before POSNER and EASTERBROOK, Circuit Judges, and FAIRCHILD, Senior Circuit Judge.

POSNER, Circuit Judge.

Gary McKnight brought suit under 42 U.S.C. Sec. 1981 (which dates back to the Civil Rights Act of 1866), and Title VII of the Civil Rights Act of 1964, 42 U.S.C. Sec. 2000e et seq., claiming that General Motors fired him both because he is black and also in retaliation for his having filed claims of racial discrimination against the company. A jury returned a verdict for McKnight on the section 1981 claim, awarding him $110,000 in compensatory damages (of which half represented back pay) and $500,000 in punitive damages. On the basis of the jury's verdict, the judge entered judgment for McKnight on the Title VII count as well but declined to order him reinstated--the only relief, besides back pay, that McKnight had requested under Title VII. 705 F.Supp. 464 (E.D.Wis.1989). General Motors appeals from the judgment against it and McKnight cross-appeals from the denial of reinstatement.

While this case was before us, the Supreme Court decided Patterson v. McLean Credit Union, --- U.S. ----, 109 S.Ct. 2363, 105 L.Ed.2d 132 (1989), and we must decide whether, as urged by General Motors, Patterson wipes out McKnight's section 1981 claims. General Motors did not question the applicability of section 1981 to McKnight's claims in the district court, and the failure to urge a point in the trial court ordinarily forfeits the right to urge it on appeal. Yet the principle that judicial decisions normally are applied retroactively, and so to cases pending on appeal when the decision was made, EEOC v. Vucitech, 842 F.2d 936, 941 (7th Cir.1988), was held in Carroll v. General Accident Ins. Co., 891 F.2d 1174, 1175 n. 1 (5th Cir.1990), to require the application of Patterson to a case--a discharge case like this--pending on appeal even though the defendant had failed to question the applicability of section 1981 in the district court. Is this holding sound?

Patterson was a racial-harassment case rather than a discharge case, and the Supreme Court affirmed the court of appeals, which had held that racial harassment was not actionable under section 1981. It was only after oral argument that the Supreme Court, in an order setting the case for reargument, 485 U.S. 617, 108 S.Ct. 1419, 99 L.Ed.2d 879 (1988) (per curiam), requested the parties to brief the question whether Runyon v. McCrary, 427 U.S. 160, 96 S.Ct. 2586, 49 L.Ed.2d 415 (1976), which had held that section 1981 forbids private as well as public discrimination, and which the court of appeals in Patterson had not even cited, should be overruled. In the end, the Court decided not to overrule Runyon, but in the course of its wideranging reexamination of section 1981 indicated (as it seems to us) that claims of racially motivated discharge are not actionable under that statute. This result could not reasonably have been anticipated before the order setting the case for reargument. ("Claims of racially discriminatory ... firing ... fall easily within Sec. 1981's protection." Patterson v. McLean Credit Union, 805 F.2d 1143, 1145 (4th Cir.1986), aff'd on other grounds --- U.S. ----, 109 S.Ct. 2363, 105 L.Ed.2d 132 (1989).) A party should be allowed to take advantage of a decision rendered during the pendency of his case, even if he had not reserved the point decided, if the decision could not reasonably have been anticipated. A contrary rule would induce parties to drown the trial judge with reservations.

But the order to reargue Patterson was issued more than five months before the trial in the present case began. General Motors had plenty of time in which to mount a timely challenge to the applicability of section 1981, and we may assume that by doing so it would have preserved its right to rely on the peculiar and unexpected course that Patterson in the end took; that was to overrule Runyon with respect to some discriminatory conduct but not other, although the conduct no longer actionable includes, as we shall see, the type of discriminatory conduct charged in this case. But General Motors did not question the applicability of section 1981 to this case until Patterson was decided, by which time the trial was over and the case was in this court.

Yet if by this delay General Motors waived its right to invoke Patterson, a question we need not answer, McKnight cannot benefit. For while vigorously contesting the applicability of Patterson to the facts of his case, he has never argued that General Motors has waived its right to rely on Patterson. A defense of waiver is itself waivable. McKnight waived any defense of waiver that he might have had. United States v. Rodriguez, 888 F.2d 519, 524 (7th Cir.1989).

McKnight makes two claims under section 1981, and we must now consider the impact of the Patterson decision on each. The claims are termination on grounds of race and retaliation for filing antidiscrimination complaints.

By providing that all persons "shall have the same right ... to make and enforce contracts ... as is enjoyed by white citizens," the statute confers two distinct rights to be free from racial discrimination: a right in making contracts and a right in enforcing them. As explained in Patterson, the first right is violated by a "refusal to enter into a contract with someone, as well as the offer to make a contract only on discriminatory terms. But the right to make contracts does not extend, as a matter of either logic or semantics, to conduct by the employer after the contract relation has been established, including breach of the terms of the contract or imposition of discriminatory working conditions." 109 S.Ct. at 2372-73. Since the plaintiff in Patterson had charged not a discriminatory refusal or offer of employment but, instead, racial harassment by her employer, the Court ordered the case dismissed. And so it must be with McKnight's claim of discriminatory termination: his right to make a contract was not infringed when he was fired. In so concluding, we side with the Fifth and Ninth Circuits, Carroll v. General Accident Ins. Co., supra; Lavender v. V & B Transmissions & Auto Repair, 897 F.2d 805 (5th Cir.1990); Courtney v. Canyon Television & Appliance Rental, Inc., 899 F.2d 845, 849 (9th Cir.1990), and against the Eighth. Hicks v. Brown Group, Inc., 902 F.2d 630, 635-38 (8th Cir.1990).

We are mindful of the argument that employment at will--the form of McKnight's employment relationship with General Motors--should be analyzed not as a single contract but as a series of fresh contracts made every day of continued employment; on this view, termination on racial grounds prevents the employee from making the next day's contract of employment, and is therefore actionable. This analysis is artificial, however, and not only because of its anomalous consequence of giving employees at will more protection under civil rights law than employees for a term have. Employment at will is not a state of nature but a continuing contractual relation. Wages, benefits, duties, working conditions, and all (but one) of the other terms are specified and a breach of any of them will give the employee a cause of action for breach of contract. Jordan v. Duff & Phelps, Inc., 815 F.2d 429, 438 (7th Cir.1987); Epstein, In Defense of the Contract at Will, 51 U.Chi.L.Rev. 947 (1984). All that is missing is a provision that gives the contract a fixed term or that entitles one or both parties to a specified amount of notice before the other party can cancel the contract without liability. A contract for employment at will may end abruptly but it is a real and continuing contract nonetheless, not a series of contracts each a day--or a minute--long.

A second possible objection to interpreting Patterson as a bar to claims of discriminatory discharge is specific to this case and pivots on a transfer that McKnight received during his employment with General Motors. A managerial employee in the accounting division of General Motors' Oak Creek, Wisconsin plant, McKnight--the jury may be taken to have found--had been laid off on account of his race, had filed an antidiscrimination complaint with Wisconsin's equal opportunity commission and later in a Wisconsin state court, and then, when GM learned of these complaints, had been recalled from layoff, pressured to drop his antidiscrimination complaints, and assigned to the manufacturing division of the Oak Creek plant to supervise a production line notorious for its problems--he was being set up for failure.

When does a transfer within a firm count as making a new contract for purposes of section 1981? The Supreme Court in Patterson and this court in Malhotra v. Cotter & Co., 885 F.2d 1305 (7th Cir.1989), have said that when a promotion would create a new employment contract, a racially motivated refusal to make the promotion is an interference with the plaintiff's right to make contracts free of racial prejudice, and therefore violates section 1981. Otherwise a person applying for a position from outside the company would have greater legal rights than a person already employed by the company, even if the employee worked in a division, in a job classification, and on terms of employment, unrelated to the position being applied for. Precisely how different the new employment relation must be to make a racially motivated...

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