Supreme Court Rules Four-Year Statute of Limitations Applies to All Claims of Race Discrimination Under Section 1981
 
September 10, 2004
 
Robert W. Vyverberg- Chicago

Deciding an issue that had divided the Federal Appellate Courts, the U.S. Supreme Court recently ruled that the four-year statute of limitations enacted by Congress in 1990 applies to claims of racial discrimination and harassment brought under the Civil Rights Act of 1866, a statute commonly known as Section 1981. 42 U.S.C. §1981. The Court’s May 3, 2004, decision in Jones v. R.R. Donnelley & Sons Co. is a victory for plaintiffs and will lengthen the limitations period for Section 1981 claims across the country.

Past Interpretations of Section 1981

As originally enacted in 1866, Section 1981 granted all U.S. citizens “the same right in every State and Territory to make and enforce contracts … as is enjoyed by white citizens.” In a 1989 decision, the U.S. Supreme Court prohibited post-contract employment claims, such as racial harassment claims, under Section 1981. Congress directly responded to this ruling by amending Section 1981 in the Civil Rights Act of 1991, to expressly allow plaintiffs to pursue claims for racial harassment and racial discrimination based on the termination of the employment relationship.

In 1990, Congress enacted a four-year “catch-all” statute of limitations that applied to any action “arising under an Act of Congress enacted after” December 1, 1990, unless the applicable statute already contained a statute of limitations. 28 U.S.C. §1658. Many federal statutes, including Section 1981, do not contain a specific statute of limitations. Prior to §1658, federal courts commonly “borrowed” a statute of limitations from a state with a connection to the controversy. (In Illinois, for example, Section 1981 claims were previously governed by a two-year limitations period applicable to personal injury claims.) This “borrowing” practice had led to a tremendous amount of litigation and often required resolution of the limitations issue on a statute-by-statute (and state-by-state) basis.

Lower Courts Disagree About Which Limitations Period Applies

The R.R. Donnelly case involved a class action lawsuit originally brought in 1994 by former African-American employees of an R.R. Donnelly manufacturing division in Chicago. The plaintiffs claimed to have been subjected to a racially hostile work environment, which allegedly included white employees dressing up in Ku Klux Klan attire, racial epithets, extensive racist graffiti, the distribution of racist literature, and damage to cars being driven by African-American employees. The plaintiffs also claimed to have been victims of a pattern of discrimination during their employment, citing the alleged denial of transfers after a Chicago plant closure and the hiring of African-Americans only for temporary jobs, as well as alleged disparate treatment with respect to pay, promotions, and discipline.

R.R. Donnelly moved to dismiss the lawsuit, arguing that the class claims were barred by the Illinois two-year statute of limitations. The district court disagreed, ruling that plaintiffs’ Section 1981 claims were governed by the four-year “catch-all” statute of limitations contained in §1658. The district court ultimately concluded that the 1991 amendments to Section 1981 created a new cause of action, and the four-year statute of limitations applied because plaintiffs’ claims arose under this new cause of action.

The Seventh Circuit reversed the district court’s ruling on appeal. It concluded that plaintiffs’ racial harassment and discrimination claims did not “arise under” the amendments to Section 1981 that were contained in the Civil Rights Act of 1991. The court also ruled that §1658 applied only when Congress created “a wholly new cause of action,” not merely an amendment to a statute existing before December 1, 1990, when §1658 went into effect. In accordance with prior rulings, the Seventh Circuit held that plaintiffs’ Section 1981 claims were governed by the “borrowed” two-year statute of limitations under Illinois law.

The Third and Eighth Circuit Courts of Appeal have reached the same result as the Seventh Circuit in R.R. Donnelly. Two other Courts of Appeal – the Sixth and Tenth Circuits – had ruled that the four-year statute of limitations applied to Section 1981 claims.

Supreme Court Applies Four-Year Limitation Period

The Supreme Court accepted the case to resolve this split of authority. The Court ultimately sided with the district court and held that the four-year “catch-all” statute of limitations applied to plaintiffs’ claims. While it recognized that the “arising under” language contained in §1658 could lead to very different interpretations, the Court concluded that Congress intended to enact through §1658 a uniform statute of limitations for federal cases, specifically to eliminate or limit the problems associated with “borrowing” state statutes of limitation. “We conclude that a cause of action ‘aris[es] under an Act of Congress enacted’ after December 1, 1990 – and therefore is governed by §1658’s 4-year statute of limitations – if the plaintiff’s claim against the defendant was made possible by a post-1990 enactment.” This rule would apply even in a situation like that presented in R.R. Donnelly, where the underlying statute (Section 1981) was enacted before 1990 (in 1866), but a post-1990 amendment to that statute (the 1991 Civil Rights Act) actually gave rise to plaintiffs’ specific cause of action (post-hire racial harassment and discrimination claims).

Decision Increases Risks of Section 1981 Claims

While the R.R. Donnelly decision has not received the same level of publicity as other recent Supreme Court rulings, its potential reach is significant. From a plaintiff/employee’s perspective, there are several advantages in bringing an employment discrimination claim under Section 1981, as opposed to Title VII. Plaintiffs may recover unlimited compensatory and punitive damages under Section 1981, and they are not required to exhaust their pre-suit remedies by filing predicate charges with the EEOC. Moreover, on whole, plaintiffs previously enjoyed substantially longer statutes of limitation under Section 1981, and this advantage has only increased with the R.R. Donnelly decision. The practical consequence of a four-year limitations period for Section 1981 claims is that plaintiffs in most states will have more time to sue, will be able to rely upon additional years’ worth of conduct in support of their claims, and will be able to recover damages for longer periods. This has the potential to significantly increase employers’ exposure, particularly in the class action setting.

For more information, contact Robert W. Vyverberg via e-mail at robert.vyverberg@hklaw.com or call toll free, 1-888-688-8500.

 

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