Black Agents & Brokers Agency, Inc. v. Near North Insurance Brokerage, Inc.

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 04-2750
BLACK AGENTS & BROKERS AGENCY, INC.,
MILTON WARD, MELVIN WARD, in their
capacity as shareholders and officers of
Black Agents & Brokers Agency, Inc., et al.,
Plaintiffs-Appellants,
v.
NEAR NORTH INSURANCE BROKERAGE, INC.,
MAJESTIC STAR CASINO, LLC, TRUMP
INDIANA, INC., et al.,
Defendants-Appellees.
____________
Appeal from the United States District Court for
the Northern District of Indiana, Hammond Division.
No. 01 C 419—Philip P. Simon, Judge.
____________
ARGUED APRIL 8, 2005—DECIDED MAY 27, 2005
____________
Before FLAUM, Chief Judge, and BAUER and WOOD,
Circuit Judges.
BAUER, Circuit Judge. Plaintiffs-Appellants Black Agents
& Brokers Agency, Inc. (“BABA”) and its shareholders
brought claims of breach of contract, fraud, and discrimina-
tion on the basis of race in violation of 42 U.S.C. § 1981
2 No. 04-2750
against defendant-appellee Near North Insurance Brokerage,
Inc. (“Near North”) and defendants-appellees Trump Indi-
ana, Inc., Majestic Star Casino, LLC, and Buffington
Harbor Casinos, LLC (“the Riverboats”).1 The district court
granted motions by Near North and the Riverboats for
summary judgment, and BABA appealed. We affirm.
I. Background
In 1995, Near North sought to write insurance for the
Riverboats, which operate casinos on Lake Michigan in
Gary, Indiana. Under Indiana law, the Riverboats have an
affirmative duty to grant a percentage of their contracts to
minority-owned businesses. See IND. CODE §§ 4-33-14-1 et seq.
Near North recognized that it stood a better chance of win-
ning the Riverboats’ business if it had a relationship with
a minority-owned company. With this in mind, Near North
approached BABA, a state-certified minority-owned busi-
ness, to explore a co-brokerage arrangement. In 1996, Near
North and BABA negotiated and finalized the Consulting
Agreement that is at issue here. Pursuant to this Agreement,
BABA was to serve as an “independent contractor” to
Near North, and Near North would pay BABA $45,000
annually for services that included public relations work,
information gathering, and scheduling meetings. The term
of the Consulting Agreement was for one year, starting July
15, 1996, renewable for additional yearly periods or modifi-
able “only upon the signed, written agreement of both
1
The district court granted summary judgment on the defendants’
motion that BABA’s individual shareholders who are named in
the complaint are without standing to redress a breach of contract
or an illegal act of discrimination done to a corporation. See, e.g.,
Carney v. Gen. Motors Corp., 23 F.3d 1154, 1157 (7th Cir. 1994).
Since appellants failed to address this matter on appeal, this issue
has been waived.
No. 04-2750 3
parties.” The Consulting Agreement also stated that each
party had the right to cancel upon giving sixty days’ notice.
After Near North and BABA finalized the Consulting
Agreement, both parties made a joint presentation to the
Riverboats. Afterwards, the Riverboats negotiated with
Near North exclusively and, in 1996, decided to enter into
a contract to purchase insurance from Near North. Pursuant
to this insurance contract between the Riverboats and Near
North, Near North would submit to the Riverboats invoices
for the insurance premiums in BABA’s name. Upon receiv-
ing the invoice, the Riverboats would write a check payable
to BABA in full payment of the premium, which BABA
would endorse to Near North and return to the Riverboats.
The Riverboats would then mail the endorsed check in full
payment of the insurance premium to Near North. Near
North would then cut a separate check to BABA in the
amount of $45,000 as payment for BABA’s services, pursu-
ant to their Consulting Agreement.
This consulting arrangement between Near North and
BABA continued beyond the one-year term of the Agreement,
but not without modifications. In 1998, Near North unilater-
ally reduced the flat annual fee it paid to BABA to $40,000,
and in 1999 Near North began paying BABA quarterly, as
opposed to annually. During this time, Near North—not the
Riverboats—paid all of BABA’s fees. After the initial joint
presentation to the Riverboats in 1996, BABA’s sole
interaction with the Riverboats involved endorsing insur-
ance premium checks over to Near North.
In 2000, one of BABA’s principals defected, and a dispute
arose when he tried to take with him some of BABA’s busi-
ness, including the Near North account. Confusion ensued,
and Near North stopped its quarterly payments to BABA.
BABA responded by suing both Near North and the
Riverboats (which continued to make their premium pay-
ments to Near North), alleging breach of contract, fraud,
4 No. 04-2750
and discrimination on the basis of race in violation of 42
U.S.C. § 1981. At trial, the district court granted motions by
Near North and the Riverboats for summary judgment and
for partial judgment on the pleadings. In an opinion issued
on June 7, 2004, the district court ruled that BABA’s breach
of contract claim against the Riverboats failed as a matter
of law because the two parties were not bound by an
enforceable agreement; BABA’s breach of contract claim
against Near North failed because their modified Consulting
Agreement was terminable at will. BABA’s § 1981 claim
against both defendants failed as matter of law for lack of
evidence of intent on the parts of Near North or the
Riverboats to discriminate on the basis of race. As for the
fraud claims, the district court found that BABA had
abandoned its claim against Near North, and that it lacked
standing to bring a claim of fraud against the Riverboats.
BABA appealed the district court’s rulings on its breach of
contract and § 1981 claims.
Meanwhile, Near North became involved in a separate
court proceeding, and on August 31, 2004, the district judge
issued a stay of all claims and proceedings against Near
North. Pursuant to this order, Near North filed a motion
with this court on November 24, 2004, seeking a stay of all
proceedings against Near North relating to this appeal. We
granted the stay with respect to Near North only on January
7, 2005.
II. Discussion
A district court’s grant of summary judgment is reviewed
de novo. Franklin v. City of Evanston, 384 F.3d 838, 843
(7th Cir. 2004) (citing Dykema v. Skoumal, 261 F.3d 701,
704 (7th Cir. 2001)). “To succeed on a motion for summary
judgment, the moving party must show that there is no gen-
uine issue of material fact and that it is entitled to judgment
as a matter of law.” FED. R. CIV. P. 56(c); see also Celotex
No. 04-2750 5
Corp. v. Catrett, 477 U.S. 317, 322 (1986). This court must
draw every reasonable inference from the record in the light
most favorable to the non-moving party. Haefling v. United
Parcel Serv., Inc., 169 F.3d 494, 497 (7th Cir. 1999). The
production of only a scintilla of evidence, however, is in-
sufficient to defeat a summary judgment motion. Anderson
v. Liberty Lobby, 477 U.S. 242, 252 (1986). In light of this
court’s order staying all claims and proceedings against
Near North, we will confine our analysis as much as possi-
ble to BABA’s arguments as they pertain to the Riverboats.
A. BABA’s Breach of Contract Claim
The district court ruled that BABA had produced no gen-
uine issue of material fact that it had an enforceable agree-
ment with the Riverboats. BABA challenges that ruling
here, arguing that an agreement can be inferred from the
three parties’ conduct. Specifically, BABA contends that a
reasonable jury could have found that an agreement existed
by virtue of the Riverboats having been aware of the
Consulting Agreement between Near North and BABA when
it signed an agreement to buy insurance from Near North,
and the Riverboats having written its insurance premium
checks payable to BABA.
Under Indiana law a contract may be established by con-
duct, but only if it can be inferred that the parties mutually
intended to be bound by the agreement. See Indianapolis v.
Twin Lakes Enterprises, Inc., 568 N.E.2d 1073, 1079
(Ind.Ct.App. 1991). The district court was correct that the
record contains no evidence that the Riverboats intended to
be bound to an agreement with BABA. The Riverboats
bought insurance from Near North. The Riverboats ulti-
mately sent all of their checks in payment of insurance
premium fees to Near North; BABA admits that it was not
entitled to these fees. Rather, to the extent that BABA had
an enforceable agreement, it was with Near North, which
6 No. 04-2750
paid BABA a commission pursuant to their Consulting
Agreement. Tellingly, when BABA stopped receiving its
commission fees, it complained not to the Riverboats, but to
Near North. The evidence in no way inferred the creation of
an enforceable agreement with the Riverboats. It was not
error for the district court to conclude that there was no
contract to breach.
B. BABA’s § 1981 Claim
BABA argues that the Riverboats and Near North dis-
criminated against it by limiting the scope of BABA’s
brokerage responsibilities in the terms of the Consulting
Agreement, and by reducing BABA’s commissions and modi-
fying its payment schedule, all because of race. The district
court granted summary judgment for the Riverboats and
Near North. BABA challenges that ruling, arguing that the
district court failed to explore whether the formation of the
Consulting Agreement evidenced discriminatory intent and
erred in deciding that the termination of the Consulting
Agreement was not motivated by race. Specific to the
Riverboats, BABA alleges that inferences of an intent to
discriminate on account of race could be drawn from the
Riverboats’ role in encouraging Near North to partner with
BABA, so that the Riverboats could report their compliance
with Indiana’s minority-owned business law.
Section 1981 prohibits discrimination in the making and
enforcement of private contracts. Sanghvi v. St. Catherine’s
Hospital, Inc., 258 F.3d 570, 573 (7th Cir. 2001). To state a
claim under § 1981, BABA must allege facts in support of
the following propositions: (1) BABA is a member of a racial
minority; (2) the Riverboats intended to discriminate on the
basis of race; and (3) the discrimination deprived BABA of
one or more rights enumerated in § 1981, such as the
making and enforcing of a contract. Morris v. Office Max,
No. 04-2750 7
Inc., 89 F.3d 411, 413 (7th Cir. 1996). BABA unquestionably
satisfies the first prong of the test. We are unconvinced,
however, that discriminatory intent has been shown under
the second prong.
To begin with, it is difficult to understand how the
Riverboats could have intended to discriminate against
BABA in the making and termination of a contract when
the two were never parties to a binding agreement, nor were
they trying to enter into an agreement. BABA was only party
to the Consulting Agreement, and that was with Near North,
not the Riverboats. Moreover, BABA asks us to endorse a
position that would subject to potential liability all employ-
ers who seek to comply with Indiana’s law. That would be
a perverse result, and we decline to endorse that approach.
Therefore, we find that the district court did not impermis-
sibly limit the scope of its inquiry, as no reasonable inference
of an intent on the part of the Riverboats to discriminate on
the basis of race can be gleaned from the record.
III. Conclusion
For the foregoing reasons, we AFFIRM the district court’s
grant of summary judgment as it pertains to BABA’s claims
against the Riverboats. Pursuant to this court’s order dated
January 7, 2005, granting a stay of proceedings against
Near North, we do not rule on BABA’s appeal insofar as it
relates to Near North.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—5-27-05
8 No. 04-2750