## Facts

- John McDonald, an African American, was the sole shareholder and president of JWM Investments, Inc. (JWM), a Nevada corporation.
- JWM entered into contracts with Domino’s Pizza, Inc. under which JWM would construct four restaurants in Las Vegas and lease them to Domino’s.
- McDonald alleged Domino’s, motivated by racial animus toward him, interfered with and breached the JWM–Domino’s contracts, causing him personal financial loss and emotional distress.
- McDonald alleged a Domino’s agent refused to provide contractually required estoppel certificates needed for financing, interfered with property ownership records, and made a racially charged remark while pressuring McDonald to abandon the deals.
- JWM’s business collapsed and it entered Chapter 11 bankruptcy; the bankruptcy trustee brought JWM’s contract claims against Domino’s, which were settled with a payment and a complete release of claims between those parties.
- Separately, McDonald sued Domino’s in his individual capacity under 42 U.S.C. § 1981.

## Issues

1. Whether a plaintiff who is neither a party to a contract nor a third-party beneficiary may sue under 42 U.S.C. § 1981 for racial discrimination that allegedly impaired and caused breach of a contract between others.

## Decision

- The Supreme Court unanimously reversed the Ninth Circuit (Justice Alito did not participate).
- The Court held that a plaintiff cannot state a § 1981 claim unless he has, or would have, rights under the existing or proposed contract he seeks “to make and enforce.”
- Because JWM—not McDonald—was the contracting party, McDonald had no contractual rights under the JWM–Domino’s agreements and could not sue under § 1981.

## Legal Principles

- Section 1981 protects a person’s right “to make and enforce contracts,” requiring identification of an impaired contractual relationship under which the plaintiff has enforceable rights.
- Corporate and agency law generally provide that a corporation’s shareholder and officer, even if the sole shareholder and primary negotiator, has no personal rights or liabilities under the corporation’s contracts.
- A “distinct personal injury” theory does not substitute for the statutory requirement of personal contractual rights; § 1981 liability turns on impairment of the plaintiff’s own contract-related rights, not merely discriminatory conduct affecting someone else’s contract.

## Conclusion

The Court held that § 1981 permits suit only by a plaintiff with personal rights under the impaired contract (or proposed contract), and therefore a corporate shareholder or officer may not bring an individual § 1981 claim based on alleged discrimination affecting contracts entered into by the corporation.


Domino’s Pizza, Inc. v. McDonald, 546 U.S. 470 (2006)