Terrell McGinnis v. Ingram Equipment Company, Inc.

918 F.2d 1491, 1990 U.S. App. LEXIS 20714, 55 Empl. Prac. Dec. (CCH) 40,447, 54 Fair Empl. Prac. Cas. (BNA) 716, 1990 WL 183528

• Court: Court of Appeals for the Eleventh Circuit
• Decided: November 27, 1990
• Docket: 88-7596
• Status: Published

Opinions

COX, Circuit Judge:

Ingram Equipment Company, Inc., the defendant, appeals the judgment of the district court in favor of Terrell McGinnis, the plaintiff. We affirm.

I. BACKGROUND

The background most relevant to our disposition of this case is its procedural, rather than factual, history. A more complete description of the facts in this case may be found in the district court’s memorandum opinion. See McGinnis v. Ingram Equip. Co., 685 F.Supp. 224 (N.D.Ala. 1988), vacated, 888 F.2d 109 (11th Cir.1989), vacated, 895 F.2d 1303 (11th Cir.1990). Ingram Equipment Company, Inc. (“Ingram”) hired Terrell McGinnis (“McGinnis”), a black man, in September 1981, and discharged him in March 1986. McGinnis subsequently brought this action in the United States District Court for the Northern District of Alabama, pursuant to the Civil Rights Act of 1866, 42 U.S.C. § 1981 and Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. McGin-nis presented four claims under each statute: 1) discriminatory conditions of employment, including racial harassment; 2) failure to promote based on McGinnis’s race; 3) racially discriminatory demotion; and 4) racially discriminatory discharge.

After a bench trial, the district court entered judgment for McGinnis. Id. The court based Ingram’s liability solely on section 1981. Id. at 224 n. 1. Employers with less than fifteen employees on each working day during a relevant twenty-week period are not subject to Title VII. 42 U.S.C. § 2000e(b). The district court found that Ingram was such an employer.

The district court found that McGinnis had proved that he was subjected to “discriminatory conditions of employment” and that he was “eventually discharged because of his race” id. at 224, and awarded McGinnis $156,164.41. Id. at 228. The court divided the award into two components. First, the court awarded $80,840.53 in back pay. The court arrived at this figure by determining the amount of pay McGinnis would have received from Ingram had he not been demoted from the position of foreman because of his race. Id. at 227. Second, the court decided that McGinnis was entitled to reinstatement, but that reinstatement would be inappropriate in this ease. Consequently, the court awarded an additional $75,323.88 in front pay in lieu of reinstatement. Id. at 227-28. In sum, the district court awarded damages for discriminatory demotion and discriminatory discharge. No damages were awarded for McGinnis's discriminatory conditions of employment claim. Further, the district court did not find for McGinnis on his failure to promote claim.

Ingram appealed the judgment to this court. It presented four arguments in its initial brief: 1) that McGinnis had not proved intentional discrimination; 2) that the district court’s findings of fact should be set aside because they were clearly erroneous; 3) that the district court erred in limiting the use of McGinnis’s deposition at trial; and 4) that the district judge imper-missibly injected himself into the proceedings.

A panel of this court heard oral argument on June 19, 1989. There, for the first time, Ingram argued that the recent Supreme Court decision in Patterson v. McLean Credit Union, 491 U.S. 164, 109 S.Ct. 2363, 105 L.Ed.2d 132 (1989), decided June 15, 1989, defeated at least some of McGinnis’s claims under section 1981. At the conclusion of oral argument, the panel asked counsel to brief the question of whether Patterson should affect the outcome of this case.

A two-judge majority concluded that Patterson had limited federal jurisdiction over section 1981 claims and that the district court’s judgment should be vacated and the case remanded for reconsideration in light of Patterson. McGinnis v. Ingram Equip. Co., 888 F.2d 109, 111 (11th Cir.1989), vacated, 895 F.2d 1303 (11th Cir.1990). The dissenting judge expressed the opinion that Patterson had not limited federal jurisdiction over section 1981 claims, but rather had limited only the scope of the section 1981 cause of action. The dissent concluded that Ingram had waived the right to make any argument based on Patterson by not preserving the issue on appeal. Id. at 112 (Cox, J., dissenting). This court vacated the panel’s opinion and granted rehearing en banc, primarily for the purpose of determining whether the panel had dealt appropriately with the applicability of Patterson to this case. Ingram Equip. Co. v. McGinnis, 895 F.2d 1303 (11th Cir.1990).

In its en banc brief, Ingram 1) argues that Patterson restricts federal jurisdiction over section 1981 claims; 2) asserts that Patterson should be applied retroactively in this case; 3) contends that under the standard adopted in Patterson, Ingram is not liable for failure to promote; and 4) preserves the arguments it presented in its initial brief.

II. DISCUSSION

A. Federal Jurisdiction

Ingram asserts that Patterson limits the jurisdiction of federal courts over section 1981 claims. It then points out that one of its affirmative defenses in its answer in the trial court was lack of subject matter jurisdiction. Therefore, Ingram argues, the issue of jurisdiction, and hence the issue of Patterson’s application to this case was preserved in the trial court. Further, subject matter jurisdiction can never be waived, and thus the issue was preserved on appeal also.

We disagree with Ingram’s analysis. Section 1981 is not a jurisdictional statute. It is a substantive statute that creates a cause of action. Patterson merely limited the type of conduct that gives rise to an actionable section 1981 claim. That is, Patterson limited the scope of a section 1981 claim. The decision had no effect on a federal court’s authority to determine whether a claimant states a cause of action under section 1981.

The test of federal jurisdiction is not whether the cause of action is one on which the claimant can recover. Rather, the test is whether “the cause of action alleged is so patently without merit as to justify ... the court’s dismissal for want of jurisdiction.” Dime Coal Co. v. Combs, 796 F.2d 394, 396 (11th Cir.1986) (quoting Hagans v. Lavine, 415 U.S. 528, 542-43, 94 S.Ct. 1372, 1381-82, 39 L.Ed.2d 577 (1974) (quoting Bell v. Hood, 327 U.S. 678, 683, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946)). McGinnis’s cause of action is clearly not frivolous or “patently without merit.” Where the “defendant’s challenge to the court’s jurisdiction is also a challenge to the existence of a federal cause of action, the proper course of action for the district court (assuming that the plaintiff’s federal claim is not immaterial and made solely for the purpose of obtaining federal jurisdiction and is not insubstantial and frivolous) is to find that jurisdiction exists and deal with the objection as a direct attack on the merits of the plaintiff’s case.” Williamson v. Tucker, 645 F.2d 404, 415 (5th Cir.) cert. denied, 454 U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981);¹ see also Simanonok v. Simanonok, 787 F.2d 1517, 1519-20 (11th Cir.1986); Dime Coal at 396. This is such a case. In sum, Ingram has not preserved any Patterson issue by raising lack of subject matter jurisdiction in the district court or in this court.

B. Should Patterson Affect the Outcome of this Case?

The next question we must consider is whether Patterson should affect the outcome of this case. As noted, Ingram first raised its Patterson arguments at oral argument. Ingram did not contend at pretrial or at trial that the conduct with which it was charged was not actionable under section 1981. Nor did Ingram’s initial brief on appeal make this argument. Rather, until oral argument, Ingram’s argument was factual—that it did not intentionally discriminate.

We note that in its answer in the district court, Ingram included a boilerplate “failure to state a claim upon which relief can be granted” affirmative defense, pursuant to Fed.R.Civ.P. 12(b)(6). Answer at 3. It can be argued that this was enough to preserve the Patterson issue. We need not decide whether this was sufficient because in the pretrial order, which supersedes the pleadings (see Fed.R.Civ.P. 16(e)), Ingram abandoned its “failure to state a claim” defense. Pretrial Order at 2. In addition, Ingram’s motion for directed verdict is barren of any reference to a defense based on a failure to state a claim under section 1981. Thus, the issue was not preserved in the district court.

In order to properly determine whether Patterson should affect the outcome of this case, we must review the findings of the district court and the arguments Ingram makes.

1. Discriminatory Conditions of Employment

Ingram argues that under Patterson, section 1981 no longer extends to claims of racially discriminatory working conditions. The district court did not award damages on this claim, and no one questions that result. Therefore, the effect of Patterson on claims of discriminatory working conditions under section 1981 is irrelevant to this appeal.

2. Failure to Promote

Ingram argues that under section 1981, in light of Patterson, McGinnis does not have a cause of action for failure to promote. At the same time, Ingram acknowledges that the district court did not find a failure to promote. See, e.g., Appellant’s Supplemental Brief at 4; Appellant’s En Banc Brief at 48. A careful reading of the district court’s memorandum opinion reveals that the district court indeed did not find for McGinnis on his failure to promote claim, and no damages were awarded on that claim. The district court did find that McGinnis had been demoted, but a demotion is not a failure to promote. Obviously then, the question of the effect of Patterson on a failure to promote claim under section 1981 is also completely irrelevant to this appeal.

3. Discriminatory Demotion and Discriminatory Discharge

Ingram argues that under Patterson, section 1981 does not extend to claims for racially discriminatory demotion or to claims for racially discriminatory discharge.² We are faced with the question whether we should confront these new issues.

A general principle of appellate review is that an appellate court will not consider issues not presented to the trial court. “[J]udicial economy is served and prejudice is avoided by binding the parties to the theories argued below.” Higginbotham v. Ford Motor Co., 540 F.2d 762, 768 n. 10 (5th Cir.1976). We may, however, in the exercise of our discretion consider issues not preserved in the trial court “when a pure question of law is involved and a refusal to consider it would result in a miscarriage of justice.” Martinez v. Mathews, 544 F.2d 1233, 1237 (5th Cir.1976); see also Booth v. Hume Publishing, Inc., 902 F.2d 925, 928 (11th Cir.1990).

We acknowledge the general principle that an appellate court should apply the law in effect at the time it renders its decision. Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 486 n. 16, 101 S.Ct. 2870, 2879 n. 16, 69 L.Ed.2d 784 (1981); Bradley v. School Bd. of Richmond, 416 U.S. 696, 711, 94 S.Ct. 2006, 2016, 40 L.Ed.2d 476 (1974); Jones v. Preuit & Mauldin, 876 F.2d 1480, 1483 (11th Cir.1989) (en banc). Likewise we recognize the general rule that judicial decisions normally are applied retroactively. Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07, 92 S.Ct. 349, 355, 30 L.Ed.2d 296 (1971). Our decision today does not affect these longstanding principles because these maxims are true only with regard to arguments actually presented to trial and appellate courts. Here we confront new arguments and issues not presented until a late stage of the proceedings, rather than simply new law that could be applied to arguments already developed. A party normally waives its right to argue issues not raised in its initial brief. See FSLIC v. Haralson, 813 F.2d 370, 373 n. 3 (11th Cir.1987); Rogero v. Noone, 704 F.2d 518, 520 n. 1 (11th Cir.1983).

We conclude there would be no miscarriage of justice if we decline to address any arguments based on Patterson in this case. Ingram asserts that it should be allowed to present its Patterson arguments because there was no way it could have predicted the Supreme Court’s ultimate conclusions in the Patterson case. Although it may be true that no one could have predicted the Supreme Court’s resolution of the Patterson case, it is also true that the general argument that section 1981 does not extend to the conduct with which Ingram was charged was available to Ingram at the time of trial and at the time of appeal.

The Fourth Circuit rendered its decision in Patterson on November 25, 1986, Patterson v. McLean Credit Union, 805 F.2d 1143 (1986) aff'd in part and vacated in part, 491 U.S. 164, 109 S.Ct. 2363, 105 L.Ed.2d 132 (1989), approximately eight months before McGinnis filed his claim (July 17, 1987), about fourteen months pri- or to the beginning of the trial in this case (January 19, 1988) and over two years before Ingram filed its initial brief on appeal (January 6, 1989). The Fourth Circuit opinion clearly limited the scope of a section 1981 claim, at least with regard to racial harassment. Id. at 1145-46 (claim for racial harassment not cognizable under section 1981).

Further, the Supreme Court granted cer-tiorari to review the scope of section 1981 on October 5, 1987, Patterson v. McLean Credit Union, 484 U.S. 814, 108 S.Ct. 65, 98 L.Ed.2d 29 (1987), still over three months before trial. After certiorari was granted, the Court requested counsel to brief and argue an additional question that went to the heart of the scope of section 1981: Whether the decision in Runyon v. McCrary3 should be reconsidered. Patterson v. McLean Credit Union, 485 U.S. 617, 108 S.Ct. 1419, 99 L.Ed.2d 879 (1988). This took place on April 25, 1988, three months after trial, but over eight months before Ingram filed its initial brief on appeal.

It is true that the Fourth Circuit found that racially discriminatory discharge was still actionable under section 1981, Patterson v. McLean Credit Union, 805 F.2d 1143, 1145 (1986), aff'd in part and vacated in part, 491 U.S. 164, 109 S.Ct. 2363, 105 L.Ed.2d 132 (1989), so that arguably Ingram could not have predicted that the Court might intimate that section 1981 might not extend to discharge. Regardless, the argument that the scope of section 1981 did not extend to the conduct in question in this case was available to Ingram. Ingram, for whatever reason, chose not to make it. Instead, Ingram argued only that it did not intentionally discriminate.

The dissent suggests that if Ingram had made this argument, Rule 11 sanctions would have been appropriate. We are aware of no case in this circuit or anywhere in the nation in which a court imposed sanctions on a party who had acknowledged adverse precedent, but argued that the precedent should be reversed. Rule 11 “is not intended to chill an attorney’s enthusiasm or creativity in pursuing factual or legal theories." Fed.R.Civ.P. 11, advisory committee notes on 1983 amendment. Nor surprisingly, all the cases cited by the dissent⁴ to support its contention that we are “forcing attorneys into a Hobbesian dilemma” involve failures, through inexcusable ignorance or dishonesty, candidly to present relevant precedent.⁵ The attorneys in those cases misrepresented what the law actually was instead of arguing what the law should be; sanctions therefore were appropriate.

Two recent cases are instructive on this point. The circumstances in Bailey v. Northern Indiana Public Service Co., 910 F.2d 406 (7th Cir.1990) and in McKnight v. General Motors Corp., 908 F.2d 104 (7th Cir.1990) were very similar to the circumstances in this case. In these cases, the Seventh Circuit addressed arguments based on Patterson in cases that were pending on appeal when Patterson was decided. However, these cases differ from ours in one very important respect. In each case, the plaintiff had waived its argument that the defendant had waived its right to argue that the conduct in question was not actionable under section 1981. In other words, the waiver argument had itself been waived. See Bailey at 409-10 n. 2; McKnight at 108. By contrast, McGin-nis presented a timely waiver argument in response to Ingram’s belated Patterson arguments. Had the defendants in Bailey and McKnight presented waiver arguments, the result in those cases might very well have been different. Judge Posner makes this point in McKnight:

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 to mount a timely challenge to the applicability of section 1981 ...

Even 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.

McKnight at 108. Here, we answer the question that Judge Posner found unnecessary to confront.

In Patterson itself the Court refused to consider the argument that Patterson’s failure to promote claim was not actionable “[b]eeause respondent has not argued at any stage that petitioner’s claim is not cognizable under § 1981.... ” Patterson, 491 U.S. 164, -, 109 S.Ct. 2863, 2377, 105 L.Ed.2d 132 (1989). Similarly, in Jett v. Dallas Independent School District, — U.S. -, 109 S.Ct. 2702, 105 L.Ed.2d 598 (1989) the plaintiff was permitted to challenge his discharge under section 1981 because the defendant had “at no stage in the proceedings ... raised the contention that the substantive scope of the ‘right ... to make ... contracts’ protected by § 1981 does not reach the injury suffered by petitioner here.” Id. at -, 109 S.Ct. at 2709.⁶

Finally, we believe our decision to decline to address arguments based on Patterson in this case comports with our role as a decision-making body. Any questions that Patterson might raise regarding the scope of section 1981 are not properly presented for decision in this case. We simply decide the issues that were timely presented to us by the litigants.

In conclusion, we hold that under these circumstances, Ingram waived its right to argue that discriminatory demotion and discriminatory discharge are not actionable under section 1981 and that in the exercise of our discretion we should decline to address these issues in this case.

C. The Arguments Ingram Preserved

Having concluded that we will not hear any arguments based on Patterson, we now turn to the timely arguments Ingram makes. A review of the record demonstrates that these arguments lack merit.

The judgment of the district court is AFFIRMED.⁷

1 . In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), this court adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to October 1, 1981.

2 . We note that Ingram timidly pursues the argument that under Patterson section 1981 does not extend to discriminatory discharge. Ingram’s supplemental brief on appeal contains a single conclusory reference to the discharge issue. Appellant's Supplemental Brief at 4. Similarly, in its en banc brief, Ingram makes two extremely cursory references to the discharge issue. Appellant's En Banc Brief at 18, 50. Additionally, Ingram acknowledges in its en banc supplemental brief that "[t]he issue of discharge has not been raised at anytime [sic] during this proceeding ..." Appellant’s En Banc Supplemental Brief at v. Nevertheless, we have a practice of reading briefs liberally to ascertain the issues on appeal, see U.S. v. Milam, 855 F.2d 739 (11th Cir.1988) and we will assume that Ingram did argue, beginning with its supplemental brief to the panel, that under Patterson, section 1981 no longer reaches discriminatory discharge.

3 . 427 U.S. 160, 96 S.Ct. 2586, 49 L.Ed.2d 415 (1976). In Runyon, the Supreme Court concluded, inter alia, that section 1981 "prohibits racial discrimination in the making and enforcement of private contracts.” Id. at 167-69, 96 S.Ct. at 2593.

4 . See infra, p. 1500, n. 4.

5 .The facts of one of the cases cited by the dissent, Collins v. Walden, 834 F.2d 961 (11th Cir.1987), are inapposite. There, the court affirmed the district court’s imposition of sanctions because "[t]he complaint ... was factually groundless and patently frivolous.” Id. at 964.

6 . We recognize the distinction between the nature of review by the Supreme Court and the nature of review by a court of appeals. In Patterson and Jett, however, the Supreme Court refused to consider new arguments because those arguments had never been presented during the proceedings, not because of the special nature of the Court’s review of lower court decisions.

7 . All pending motions in this case are rendered moot by this opinion.