929 F.3d 618
8th Cir.2019Background
- Missouri contracted with EngagePoint, a minority-owned IT firm, to redesign state health-benefits software; the project was federally and state funded and estimated at $147 million.
- EngagePoint faced cash-flow problems; Missouri official Douglas Nelson allegedly encouraged actions to improve liquidity.
- Brevet Direct Lending (Brevet) provided a $20 million loan to EngagePoint after a conference call with Nelson, who allegedly implied EngagePoint would continue as prime contractor.
- Days after the loan, EngagePoint’s role declined and Missouri later terminated the contract, refused payment for past work, and replaced EngagePoint, leaving EngagePoint unable to repay Brevet.
- Brevet sued Nelson and Missouri for fraudulent inducement (misrepresentations leading to the loan) and for racial discrimination under 42 U.S.C. § 1981 and Title VI; the district court dismissed, and the Eighth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraudulent inducement | Nelson falsely led Brevet to believe EngagePoint would remain as prime contractor, inducing the loan | Statements were opinions/predictions and complaint lacks particularized false factual statements | Dismissed — plaintiff failed to plead a false statement of present fact with the particularity required for fraud |
| § 1981 — derivative claim on EngagePoint contract | § 1981 protects contractual rights; Brevet was injured by Missouri’s discriminatory termination of EngagePoint | § 1981 does not permit derivative suits by third parties for another party’s contract | Dismissed — Brevet cannot sue on EngagePoint’s contract under § 1981 (no derivative right) |
| § 1981 — direct discrimination against Brevet | Nelson discriminated against Brevet because of its association with EngagePoint’s Asian-Indian American management | Brevet was not the direct target and allegations are conclusory and inadequately pleaded | Dismissed — no plausible allegation that Brevet was the direct target of race-based discrimination |
| Title VI — private right of action for incidental harm | Brevet claims Title VI liability for discrimination in a federally funded program that harmed it incidentally | Title VI protects participants/beneficiaries; suits are limited to parties within the statute’s zone of interests | Dismissed — Brevet lacks standing under Title VI; incidental harms to third parties fall outside the statute’s zone of interests |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (complaint must state a plausible claim to survive dismissal)
- Star City Sch. Dist. v. ACI Bldg. Sys., 844 F.3d 1011 (8th Cir. 2017) (standard of review on dismissal)
- Mitec Partners, LLC v. U.S. Bank Nat’l Ass’n, 605 F.3d 617 (8th Cir. 2010) (fraud pleadings require who, what, where, when, how)
- Domino’s Pizza, Inc. v. McDonald, 546 U.S. 470 (2006) (§ 1981 does not permit derivative claims on another’s contract)
- Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014) (zone-of-interests test for statutory causes of action)
- Alexander v. Sandoval, 532 U.S. 275 (2001) (text and structure determine availability of private remedies under statutes)