Plaintiffs appeal the district court’s dismissal of their employment discrimination suit alleging that they were discharged in violation of 42 U.S.C. § 1981. Finding that
Patterson v. McLean Credit Union,
— U.S.-,
Facts and Procedural History
Plaintiffs William W. Lavender and Tony Ray Morton, who are both white males,
*806
allege that defendant V & B Transmissions & Auto Repair (V
&
B), a minority-owned business, terminated them on the basis of race in violation of section 1981. Plaintiffs bеgan working for V & B on March 1, 1987. Like all employees, they were hired on a probationary basis for the first 90 days. Under Mississippi law, this meant that V & B could fire the employee for any reason or no reason аt all, so long as the dismissal was not prompted by racial discrimination or some other illegal reason.
See Kelly v. Mississippi Valley Gas Co.,
The plaintiffs were employed by Y & B until May 8, 1987, when they were terminated. The termination was made by letter, and occurred well within the 90-day probationary period. On May 12 and May 22, 1987, plaintiffs filed separate complаints in Mississippi state court alleging breach of contract and libel and slander. On June 16, 1987, V & B removed both actions to federal court on the basis of diversity jurisdiction. The district court consolidated plaintiffs’ clаims on December 16, 1988. In April 1988 the plaintiffs filed a motion to amend their complaint to include an allegation that their employment was terminated because of their race in violation of 42 U.S.C. § 1981. Immediately prior to trial, plaintiffs dismissed their breach of contract and libel and slander claims, leaving only their section 1981 claim.
Jury trial began in February 1989. After reviewing the evidence, the district court granted V & B’s motion for а directed verdict. The plaintiffs brought this appeal.
Discussion
I. Retroactivity of Patterson v. McLean
After the plaintiffs filed notice of appeal in this case, the Supreme Court decided
Patterson v. McLean Credit Union.
The Court in
Patterson
determined that employment discrimination claims alleging rаcial harassment are “not actionable under § 1981, which covers only conduct at the initial formation of the contract and conduct which impairs the right to enforce contract obligations through legal process. Rather, such conduct is actionable under the more expansive reach of Title VII....”
Patterson,
A panel of this court has recently considered the retroactive effect of
Patterson. See Carroll v. General Accident Ins. Co. of Am..,
The first fаctor is that “the decision to be applied retroactively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied, or by deciding an issue of first impression whose resolution was not clearly foreshadowed.”
Id.
at 106,
The second
Chevron
factor requires us to look “to the prior history of the rule in question, its purpose and effect, and whеther retrospective operation will further or retard its operation.”
Chevron,
The third and final factor in this case requires us to weigh the inequity imposed by retroactive application. We recognize that the plaintiffs have incurred the expenses of both trial and this appeal. Although it appears unjust to limit the reach of section 1981 given its prior interpretation, it would also be unjust to subject V & B to a cause of action which, as the Supreme Court has now held, is not permitted under section 1981.
Cf. Carroll,
In addition, we find that the plaintiffs’ reliance is not compelling enough to establish that retroactivity would be inequitable. Although the plaintiffs point out that a Title VII action is now foreclosed, this is not a case in which the plaintiffs decided to fоrego a Title VII action in reliance on our prior interpretation of section 1981. In fact, plaintiffs filed their original claim in state court alleging breach of contract and libel and slander. Only aftеr a year had nearly passed and V & B removed the case to federal court did they decide to pursue a claim of racial discrimination. By this time, of course, the limitation period for Title VII had expired.
In
Patterson,
the plaintiff also filed a section 1981 action presumably because the Title VII limitation period expired.
See Patterson v. McLean Credit Union,
II. The Section 1981 Claims under Patterson
To state a claim under section 1981, the plaintiffs’ claim must involve improper "conduct at the initial formation of the contract” or “conduct which impairs the right to enforce contract obligations through legal procеss.”
Patterson,
The plaintiffs first argue that section 1981 encompasses termination claims. One district court has held that discriminatory termination is actionable under 1981, reasoning that “termination is part of the making of a contract.”
Padilla v. United Air Lines,
[t]he statute prohibits, when based on race, the refusal to enter into a contract with someone, as well as the offer to make a contract only on discriminatory terms. But the right to make contracts does not extend, as a matter of either logic or semantics, to conduct by the employer after the contract relation has been established, including breach of the terms of the contract or imposition of discriminatory working conditions. Such рostformation conduct does not involve the right to make contract, but rather implicates the performance of established contract obligations and the conditions of continuing employment, matters more naturally governed by state contract law and Title VII.
Id.
at 2373. Because the contract here was already established, the termination amounted to postformation conduct. As such, it is not actionable under section 1981.
See Overby v. Chevron USA, Inc.,
Alternatively, plaintiffs argue that the change from probationary status to permanent status was a prbpiotion involving the opportunity to enter into a new contract. The test adopted by the Supreme Court is that a claim for failure to promote is actionable “[o]nly where the promotion rises to the level of an opportunity to enter into a new and distinct relation between the employee and employer.”
Id.
We need not reach this issue, however, because the plaintiffs were fired during the 90-day probationary period. As such, the conduсt that led to the plaintiffs’ termination occurred during employment rather than during the formation of a new contract. Thus, their claim involves termination rather than a failure to promote. Of course like all terminations, this termination precludes any possibility of future promotion and an opportunity to enter into a new contract. But until the plaintiff has actually qualified and applied for a promotiоn, a termination does not involve the opportunity to enter into a new contract.
See Patterson,
III. Failure to Grant Summary Judgment
Finally, the plaintiffs submit that the district court erred by denying their motion for summary judgment. The plaintiffs argue that because V & B failed to answer some of the plaintiffs’ requests for admissions in a timely manner, V & B should be deemed to have admitted those matters. V & B’s answers, however, were only 10 days late, and the district court sanctioned V & B and awarded attorney’s fees to the plaintiffs. Under these circumstances, refusing to grant summary judgment was not an abuse of discretion.
Conclusion
In sum, our analysis of the Chevron factors leads us to the conclusion that the rule in Patterson should be applied retroactively. In accordance with that finding, we also hold plaintiffs have failed to state a cause of action under section 1981, since their claim does not involve an opportunity to enter into a new contract. Finally, we find that the district court’s refusal to grant summary judgment was not an abuse of discretion. Accordingly, the denial of summary judgment is AFFIRMED, and the plaintiffs’ section 1981 claims are hereby DISMISSED.