July 11, 2023

Restaurant Fails to State a Corporate Claim for Race Discrimination

Bar Bites: A Food & Beverage Law Blog
Nathan A. Adams IV
Bar Bites: A Food & Beverage Blog

In Sheba Ethiopian Rest., Inc. v. DeKalb Cnty., Ga., No. 21-13077, 2023 WL 3750710 (11th Cir. June 1, 2023), the plaintiff alleged that the county selectively enforced its fire and zoning codes against it and other Ethiopian restaurants and thereby engaged in race discrimination against the restaurants in violation of 42 U.S.C. §§ 1981 and 1985(3).

The plaintiff was a restaurant-turned-nightclub, licensed by DeKalb County to offer food, alcohol and live music until the early morning hours. The establishment was Black-owned and had a majority of Black customers. Beginning in 2015, a private citizen who lived near the restaurant spearheaded a campaign to "cripple" the Ethiopian restaurant community. She urged the county to take action against the restaurants with considerable effect. For example, in March 2017, the fire marshal issued a "Notice of Fire Hazard" directing the plaintiff to shut down operations until it received approval to reopen. The county revoked the plaintiff's alcohol license and business license, denied a new business license and terminated its legal nonconforming use status under the zoning code. The plaintiff appealed with mixed results. In comparison, the plaintiff alleged that the county did not shut down certain businesses that also had fire code violations or zoning nonconformities but were not Black-owned and did not serve primarily Black customers.

In the U.S. District Court for the Northern District of Georgia, the county argued that the plaintiff failed to state a claim for race discrimination because the plaintiff is a corporation and so it does not have a race and because it was not clearly established by the U.S. Court of Appeals for the Eleventh Circuit that the plaintiff can acquire a racial identity or suffer race discrimination. The district court denied the motion to dismiss the county and county officials, but the Eleventh Circuit reversed as to the officials.

The Eleventh Circuit observed that the U.S. Supreme Court has recently ruled that a corporation may engage in the exercise of religion, but previously suggested that corporations cannot have a race and left the issue open in the most recent case to raise the question. Other circuits have decided that question in favor of the plaintiff, but not the Eleventh Circuit. Consequently, the court ruled there was no clearly established law in the Eleventh Circuit determining that officials are liable under Section 1981 for discriminating on the basis of race against a corporation. The court was careful to add that it was not deciding the merits of the county's appeal to wit: whether corporations can – or cannot – state a race discrimination claim under Section 1981. In fact, the court decided that it lacked pendent appellate jurisdiction over the county's (as opposed to the officials') appeal, which would have required it to reach the merits of the plaintiff's race discrimination claim on an interlocutory basis. The Eleventh Circuit also distinguished the viability of a corporate retaliation claim because it is based on conduct, whereas discrimination is based on race.

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