Broadmoor House, Inc. v. Regional Center of the East Bay

Background

Broadmoor House, Inc., Darrell Mellion, and Lesa Mellion sued the Regional Center of the East Bay (RCEB). The plaintiffs alleged that RCEB breached a settlement agreement arising from an earlier lawsuit. They separately alleged that RCEB racially discriminated against them in connection with a contract, in violation of 42 U.S.C. § 1981, a federal law protecting certain contractual rights from racial discrimination.

The plaintiffs alleged that they were RCEB vendors providing services to RCEB’s consumers with developmental disabilities. They claimed they were treated adversely because of race, or, for Broadmoor House, because of its owners’ race. The allegations included that Black-owned vendors had more empty beds, experienced greater delays in invoice payments, and received less favorable treatment than white vendors.

Motion and Legal Standard

RCEB moved to dismiss the Section 1981 claim. It argued that the plaintiffs had not adequately alleged either impairment of a contractual right or intentional racial discrimination. The court applied the pleading standard requiring enough facts to make a claim plausible, while accepting factual allegations as true but not accepting unsupported legal conclusions.

The court identified four elements of a Section 1981 claim: membership in a racial group; impairment of a contractual right with the defendant; intentional discrimination based on race; and race as the but-for cause of the contractual impairment.

Court’s Analysis

The court held that the plaintiffs had not adequately alleged impairment of a contractual right. Although they apparently alleged that they had contracts with RCEB, the complaint did not provide details about those contracts. Without knowing what contractual rights the plaintiffs had, the court could not determine whether RCEB’s alleged conduct impaired an existing contractual relationship.

The court also held that the plaintiffs had not adequately alleged intentional discrimination. Their factual allegations described racial disparities, but disparate racial impact alone is not enough to state a Section 1981 claim. The court therefore also found that the plaintiffs had not adequately alleged that race was the but-for cause of a contractual impairment.

Disposition

The court granted RCEB’s motion to dismiss without prejudice. The plaintiffs have 28 days from issuance of the order to file an amended complaint if they choose to pursue the Section 1981 claim. Any amended complaint must allege facts showing what contractual rights the plaintiffs had and how those rights were impaired, or that they were prevented from entering into contracts. It must also allege intentional discrimination, rather than only disparate impact or RCEB’s knowledge of disparities.

The motion addressed the Section 1981 claim. The opinion does not state a separate disposition of the plaintiffs’ settlement-agreement claim.