Hispanic and African-American consumers sued Conoco under 42 U.S.C. §§ 1981 and 2000a (Title II), alleging racial discrimination in gasoline-station transactions. The claims arose from several incidents at both Conoco-owned stores and independently owned, Conoco-branded stores.
At a Conoco-owned Fort Worth store, cashier Cindy Smith allegedly refused to accept Denise Arguello's out-of-state driver's license for a credit-card purchase, used racial epithets and profanity toward Arguello and her father, Alberto Govea, knocked beer toward Arguello, and continued shouting epithets over the store intercom. Smith later admitted much of the conduct to a Conoco district manager, who counseled her but neither suspended nor fired her.
Other plaintiffs alleged discriminatory treatment at independently owned Conoco-branded stations, including being followed, refused service, told that "you people" would not be served, subjected to anti-Mexican remarks, and required to prepay for gasoline when white customers were not. Those stores operated under Petroleum Marketing Agreements with Conoco.
The district court dismissed the plaintiffs' state-law and Title II disparate-impact claims under Rule 12(b)(6). It later granted Conoco summary judgment on the remaining §§ 1981 and 2000a claims, holding that Conoco was not an agent-principal with the branded stores and that Smith acted outside the scope of her employment. The Fifth Circuit affirmed in part, reversed in part, and remanded the claims arising from Smith's conduct.
Issue #1
Whether Conoco could be held liable for discriminatory conduct at independently owned Conoco-branded stores on an agency theory.
Holding
No. The Petroleum Marketing Agreements and inspection practices did not establish an agency relationship between Conoco and the independently owned branded stores.
Reasoning
Agency requires both consent that another act on the principal's behalf and the principal's control over that actor. The central inquiry is whether Conoco controlled, or had the right to control, the branded stores' relevant day-to-day operations.
The marketing agreements expressly described the branded retailers as independent businesses rather than Conoco employees, partners, or agents. Although the agreements required retailers to meet Conoco standards and treat customers fairly and courteously, that contractual quality control did not give Conoco operational control.
Conoco's authority to debrand a retailer and its periodic inspections did not change the result. The inspections principally concerned product displays and labeling, not customer service or personnel decisions. Under the Fifth Circuit's analogous franchise precedent, such standards do not make a franchisor the operator or principal of an independently owned outlet.
Because the plaintiffs offered no evidence that Conoco participated in the branded stores' daily operations or employment decisions, Conoco could not be liable as a matter of law for the incidents involving Ivory, Pickett, Ross, and the Escobedos at those stores.
Issue #2
Whether Conoco could be vicariously liable under §§ 1981 and 2000a for racial discrimination by Smith, a nonsupervisory cashier at a Conoco-owned store.
Holding
Yes, potentially. The evidence created a genuine factual dispute over whether Smith acted within the scope of her employment, so summary judgment for Conoco was improper.
Reasoning
The court declined to extend the restricted supervisory-employee framework from Faragher, a Title VII workplace-harassment case, to public-accommodation discrimination. In a consumer transaction, a clerk's supervisory status matters far less, and limiting liability to supervisors would often effectively eliminate business liability because customers usually deal with nonsupervisory workers.
Instead, ordinary agency principles govern. A master may be liable for a servant's torts committed within the scope of employment. Relevant factors include the time, place, and purpose of the conduct; its relationship to authorized tasks; the extent of the departure from normal methods; and whether the employer could reasonably expect the conduct.
Smith's conduct occurred while she was on duty, inside the Conoco store, during an effort to process Arguello's purchase and credit-card transaction. Her ordinary duties included selling goods, handling customer transactions, and using the station intercom—the very position and instruments through which the alleged discrimination occurred.
Smith's racial insults, obscene gestures, and abusive behavior plainly departed from normal customer-service methods, and Conoco may not have expected them. But intentional or even criminal conduct does not automatically fall outside the scope of employment when it occurs while the employee performs authorized functions.
The parties drew competing inferences from substantially undisputed facts. The plaintiffs could infer that Smith's authority to conduct sales put her in a position to discriminate during a customer transaction; Conoco could infer that she acted solely from personal racial animus. Resolving that inference was for a factfinder, not the court on summary judgment.
Issue #3
Whether Conoco had a nondelegable duty to prevent Smith's discrimination, or ratified Smith's conduct after learning of it.
Holding
No. Section 1981 does not impose a nondelegable duty making Conoco a guarantor against all third-party discrimination, and Conoco's response did not amount to ratification.
Reasoning
The Supreme Court's decision in General Building Contractors foreclosed the proposed nondelegable-duty theory. Section 1981 prohibits intentional discrimination; it does not make an employer automatically responsible for every discriminatory act by a third party without a sufficiently close agency connection.
Ratification requires that the principal know of the employee's act and adopt, confirm, or fail to repudiate it. Here, Conoco's district manager investigated the complaint, concluded that Smith had acted inappropriately, and counseled Smith about her conduct.
Conoco's decision not to suspend or fire Smith may have been inadequate from the plaintiffs' perspective, but it did not show that Conoco adopted or approved her discriminatory conduct. The record therefore did not support liability through ratification.
Issue #4
Whether Title II permits a disparate-impact claim and, if so, whether the plaintiffs adequately pleaded such a claim.
Holding
The court did not decide whether Title II generally recognizes disparate-impact claims; it held that these plaintiffs failed to state a viable disparate-impact claim in any event.
Reasoning
The court assumed for argument's sake that disparate impact might be cognizable under Title II. Even on that assumption, plaintiffs had to identify a facially neutral Conoco policy or practice that caused a discriminatory effect on a particular protected group.
The complaints merely asserted in general terms that Conoco's neutral policies or practices disparately affected Black and Hispanic consumers. They did not identify a specific policy, explain how it operated, or allege its disparate effect on a defined consumer class.
The allegations instead described roughly six episodes of intentional discriminatory treatment. Discovery also showed only ten to twenty race-discrimination complaints to Conoco over a two-year period, which did not establish a widespread discriminatory impact on minority customers. Thus, the district court properly dismissed the disparate-impact claims for failure to state a claim.