SECURITY AND DATA TECHNOLOGIES, INC. v. SCHOOL DISTRICT OF PHILADELPHIA et al
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE MITCHELL S. GOLDBERG ON 11/4/2015. 11/4/2015 ENTERED AND COPIES E-MAILED.(kp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
SECURITY and DATA
SCHOOL DISTRICT OF PHILADELPHIA,
November 4, 2015
This case involves allegations that Plaintiff, Security and Data Technologies, Inc.
(“SDT”) was denied a multi-million dollar contract with the School District of Philadelphia (the
“School District”) on the basis of race. SDT has brought claims against the School District, its
governing body, the School Reform Commission (“SRC”), and its former Superintendent, Arlene
Ackerman pursuant to 42 U.S.C. §§ 1981, 1983.1
Presently before me are Defendants’ motion for summary judgment and Defendants’
related motion to strike several newspaper articles from the summary judgment record. For the
reasons that follow, I will grant Defendants’ motion to strike the articles but deny Defendants’
motion for summary judgment.
Arlene Ackerman died on February 2, 2013. Her estate was substituted as a defendant on
October 24, 2013.
A. Defendants’ Policies and Procedures Concerning Contract Awards
Among other things, the SRC is responsible for approving resolutions, including certain
contract awards, prepared by School District employees. At all relevant times, Robert Archie
served as the Chairman of the SRC. During that time period, School District resolutions
pertaining to contract awards normally went through an “elaborate” multi-step process prior to
presentation to the SRC. The process that was in place during the applicable time period is
detailed below. (Defs.’ Opp. Ex. A, Nunery Dep. 15:3-20:10, 43:17-44:10; Ex. T, Archie Dep.
51:17-52:5; Pl.’s Mem. Ex. A, Archie Dep. 9:22-10:18, 11:2-6; Ex. X, Nunery Dep. 30:1-25; Ex.
HH, Nunery Dep. 131:6-8.)
At the outset, a department head drafted a resolution detailing the “scope of the project,
the amounts of money that would [fund] the project, the individuals involved and what the
measureable outcomes would be.” Next, that resolution was entered into a database to allow
School District managers to code the resolution with the corresponding funding account
numbers. The resolution was then vetted by senior staff and, if necessary, revised. After that
process, resolutions were submitted to Deputy Superintendent Leroy Nunery for review. If
Nunery approved the resolution, it was forwarded to Ackerman for her final decision as to
whether it would be presented to the SRC. If Ackerman granted her approval, the resolution was
forwarded to SRC liaison staff to be docketed for presentation to the SRC. (Pl.’s Mem. Ex. A,
Archie Dep. 9:22-10:18, 11:2-6; Defs.’ Opp. Ex. T, Archie Dep. 51:17-52:5.)
The facts set forth in this section are undisputed unless otherwise indicated.
However, under certain exigent circumstances, resolutions did not pass through this
typical vetting process. Referred to as “walk on” resolutions and generally disfavored by the
SRC, these resolutions were presented to the SRC on an expedited timeline. (Id.)
All resolutions, including “walk on” resolutions, were first presented to the SRC in a
closed executive session. Following the executive session, meetings were opened up to the
public for comment. (Id.)
In 2003, the SRC adopted a written Anti-Discrimination Policy designed to “ensure equal
opportunity in all contracts let by the District,” and to create a “level playing field” on which
minority or women-owned businesses (“M/WBE”) could compete.3 Pursuant to this policy, goals
for M/WBE participation in School District contracts were established based upon research by
the City of Philadelphia’s Minority Business Enterprise Council (“MBEC”).4 In accordance with
this procedure, the MBEC had set a goal of twenty percent M/WBE participation in School
District contracts. In March of 2010, the School District had exceeded this goal by achieving a
M/WBE participation rate of 27.3 percent. (Pl.’s Mem. Ex. A, Archie Dep. 31:23-32:21; Ex. C;
The parties dispute whether Defendants pursued an unwritten policy of increasing
M/WBE contracting above the goal set by the MBEC by awarding contracts on the basis of race.
SDT points to the following record evidence in support of the existence of such a policy: during
Archie’s tenure, SRC commissioners told School District staff that students should see more
minority vendors doing work in the schools. Francis Dougherty, Deputy Chief Business Officer
School District policy defines “majority” contractor as a company that is greater than “51
percent Caucasian owned.” (Pl.’s Mem. Ex. G, Smith-Hoye Dep. 13:1-8.)
According to several School District administrators, the School District did not have procedures
for setting goals for M/WBE participation in any individual contract. (Pl.’s Mem. Ex. G, SmithHoye Dep. 16:2-17:14; Ex. E, Cardwell Dep. 95:23-96:16.)
for Operations, observed “many SRC meetings where the SRC chair Bob Archie would time and
time again spend the bulk of his time on the diose [sic] talking about increasing minority and
women participation rates in the School District.” At a meeting held in March 2010, Archie and
additional SRC commissioners told John Byars, Director of Procurement, that meeting the
MBEC’s goal of twenty percent participation was “not enough.” Jeffrey Cardwell, Senior Vice
President of Facilities and School Operations, testified that the SRC had “badgered” him about
the levels of minority participation reflected in contract resolutions he prepared “every month
from May of 2010 all the way through that year.” (Pl.’s Mem. Ex. A, Archie Dep. 63:16-66:21;
Ex. F, Dougherty Dep. 96:17-22; Ex. E, Cardwell Dep. 98:1-100:5.)
Defendants argue that their only policy regarding minority contracting is the School
District’s official Anti-Discrimination Policy, which has an express goal of “ensur[ing]
nondiscrimination in the award and administration of District Contracts.” (Pl.’s Mem. Ex. C.)
Senior Vice President for Capital Programs, Patrick Henwood, testified that he was unaware of
any policy, outside of this official directive, that required employees to award certain contracts to
minority contractors. (Defs.’ Opp. Ex. F, Henwood Dep. 119:13-17.)
B. The Camera Project
In the fall of 2010, the School District received the results of a safe schools audit
commissioned by the Pennsylvania Department of Education which identified nineteen schools
as “persistently dangerous.” On September 2, 2010, Ackerman convened a meeting to discuss the
School District’s response to the audit. Among other things, the conversation included a plan to
install new security cameras and upgrade existing cameras throughout the persistently dangerous
schools. (Defs.’ Opp. Ex. A, Nunery Dep. 50:15-22, 54:7-55:12, 59:21-60:20.)
At this meeting, Ackerman stated that she wanted the camera upgrade and installation
work to be completed by September 30, 2010 and tasked Dougherty with coming up with a plan
for accomplishing the work within this timeframe. On September 3, 2010, Dougherty convened a
meeting with staff from the School District’s Information Technology Department and Office of
Climate and Safety to discuss the project. Due to the time sensitive nature of the project, the
participants agreed to forego the formal contract bidding process and proceed with the project as
an emergency. Dougherty explained that, as a result, they looked for vendors who were “prequalified” by the State as eligible for work outside of the normal bidding process. SDT fit this
criterion. (Defs.’ Opp. Ex. A, Nunery Dep. 85:10-19, Ex. B, Dougherty Dep. 99:22-100:19,
117:10-14, 120:18-23, Ex. C, Westall Dep. 70:2-72:14; Pl.’s Mem. Ex. P, Spressart Dep. 68:769:18.)
Dougherty testified that members of the School District staff were “quite pleased” that
SDT was available because SDT had done work for the School District in the past, including
camera installation, performed well and had a good reputation for being cost effective and
efficient. Based on the foregoing, the meeting participants agreed to ask SDT to prepare a quote
for the project. The School District’s Chief Information Officer, Melanie Harris, testified that
“race played no part in that decision.” (Defs.’ Opp. Ex. C, Westall Dep. 70:2-72:17; Ex. D.
Harris Dep. 28:17-29:13; Pl.’s Mem. Ex. F, Dougherty Dep. 143:1-144:4, Ex. Q.)
Later that day, Amy McCole, District Senior Information Technology Manager,
contacted SDT’s Vice President of Sales, Kenneth Spressart, to see if he was available to discuss
the project. On September 7, 2010, Spressart and Joe Snell, also of SDT, met with several School
District officials for approximately one and a half hours. During this meeting, School District
officials described the nature of the project and Spressart confirmed that SDT was capable of
completing the project within the contemplated time frame. School District officials tasked SDT
with “mark[ing]-up floor plans” and “photo-document[ing]” the nineteen persistently dangerous
schools. (Pl.’s Mem. Ex. P, Spressart Dep. 107:2-108:22, 110:2-112:19, 117:1-18.)
Spressart and Snell began visiting the nineteen schools and preparing the documents the
School District requested within a “day or two” of that initial meeting. Once completed, SDT
submitted surveys of the nineteen schools during a meeting with McCole and another School
District employee. At the conclusion of the meeting, SDT was asked to provide an estimate for
the cost of the project. Spressart “threw out a number of four and a half to six and a half million.”
Spressart explained that the “big spread” in his estimate was a product of the fact that SDT
“hadn’t got to where [it] had hard solid numbers to work from.”5 SDT also provided the School
District with a proposal for purchasing the necessary cameras and other security equipment. (Id.
at 117:19-119:-21, 120:12-24, 133:15-134:6, 145:4-12; Defs.’ Opp. Ex. E, Spressart Dep. 187:2188:21.)
The School District asked SDT to submit a proposal that included “as much as [they]
could” in terms of minority participation on the contract.6 In response, SDT, who is owned by
two white male shareholders, stated that they would hire minority-owned sub-contractors for
thirty-three percent of the labor on the project and women-owned sub-contractors for thirty-four
percent of the labor. (Pl.’s Mem. Ex. L, Spressart Dep. 251:22-252:3; Ex. P, Spressart Dep.
208:12-18; Ex. T.)
Spressart testified that SDT did not forego working on any other projects in anticipation of
beginning work on the camera project. (Defs.’ Opp. Ex. E, Spressart Dep. 190:5-24.)
If a proposed prime contractor is a M/WBE, the School District generally considers all diversity
contracting goals satisfied. (Pl.’s Mem. Ex. G, Smith-Hoye Dep. 43:16-24.)
Based on this information, Dougherty and his staff prepared a “walk on” resolution (“the
SDT resolution”) for presentation during the SRC’s next meeting which was scheduled to be
held on September 22, 2010. The resolution, dated September 17, 2010, estimated the project
would cost upwards of $7.5 million. The proposed resolution stated that “MBE participation for
all installation services and contracted labor will be 33%” and “WBE participation for all
installation services and contracted labor will be 34%.” (Pl.’s Mem. Ex. V.)
On September 22, 2010, Ackerman met with the SRC in a closed executive session. The
SDT resolution was included in materials provided to the SRC in anticipation of the meeting.
While the SRC was in session, Ackerman decided to pull the SDT resolution. Nunery testified
that he could not recall whether the SRC discussed the SDT resolution on September 22, 2010.
(Pl.’s Mem. Ex. X, Nunery Dep. 30:6-25.)
The next day, September 23, 2010, Ackerman convened a meeting with seven School
District employees, including Dougherty, Byars, Cardwell, and Nunery, to discuss the SDT
resolution. (Pl.’s Mem. Ex. M, Byars Dep. 116:8-119:20.) The participants offer differing
accounts of what transpired that day.
According to Byars, the conversation “turned racial” and Ackerman made a comment
“about making sure, you know, all the white boys didn’t get contracts.” Byars testified that
Ackerman also asked “how come a black firm can’t get [the contract]?” According to Byars,
Ackerman then directed him to assume responsibility for the project and to draft a resolution
awarding the contract to a contractor called IBS Communications, Inc. (“IBS”). Byars testified
that everyone present at the September 23rd meeting knew that “SDT is a white-owned
company, and . . . that IBS is an African-American owned company.” (Id.)
Cardwell and Dougherty testified in their depositions that Ackerman confused SDT with
another company who had overcharged the School District in a prior project. Cardwell further
stated that Ackerman simply asked the participants if IBS could be “part” of the project.
Dougherty, on the other hand, testified that Ackerman said “this is something IBS can do. And
we need to make that happen.” Dougherty further testified that Ackerman may have referred to
SDT as a white contractor and discussed “majority or minority contractors” but he was not sure.
(Pl.’s Mem. Ex. F, Dougherty Dep. 166:6-171:14, 177:22-178:13, 181:19-182:9; Defs.’ Opp. Ex.
S, Cardwell Dep. 33:9-20, 47:14-22.)
Regardless of the differing accounts of the September 23, 2010 meeting, a resolution was
drafted to award the contract to IBS as the prime contractor. On October 13, 2010, the SRC
approved the resolution without any deliberation or discussion. IBS had begun work on the
project prior to receiving SRC approval. (Defs.’ Opp. Ex. Q, Byars Dep. 24:10-22, 38:8-12,
59:5-14; Ex. J; Pl.’s Mem. Ex. A, Archie Dep. 91:8-92:4.)
In November of 2010, the circumstances surrounding the contract decision garnered
significant media coverage. Dougherty described a meeting held in response to that media
coverage in which Ackerman stated “they needed to do more, contractors needed to, quote, look
more like her and Lee Nunery, who, for the record, are both of African American descent.” (Pl.’s
Mem. Ex. F, Dougherty Dep. 89:20-90:16.) Regarding the ensuing media coverage, Harris
testified that Ackerman said she “was sick of all the School District business going to majority
vendors and things were going to change.” (Pl.’s Mem. Ex. O, Harris Dep. 95:16-96:1.)
C. Relief Requested by SDT
SDT now seeks $2.1 million in lost profits, compensatory damages, punitive damages, as
well as declaratory and injunctive relief. In support of its lost profits calculation, SDT submitted
an expert report from John F. Maloney. Based on his review of SDT’s financial records,
Maloney concluded that SDT would have achieved a gross profit margin of twenty-nine percent
on the camera project. Drawing on this conclusion, Maloney determined that SDT would have
secured $2.1 million dollars in profits had it been awarded the $7.5 million dollar contract. (Pl.’s
Mem. Ex. AA, Maloney Report.)
Under Federal Rule of Civil Procedure 56(a), summary judgment is proper “if the movant
shows that there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” A dispute is “genuine” if there is a sufficient evidentiary basis on
which a reasonable fact finder could return a verdict for the non-moving party, and a factual
dispute is “material” if it might affect the outcome of the case under governing law. Kaucher v.
County of Bucks, 455 F.3d 418, 423 (3d Cir. 2006) (citing Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986)). The court must view the evidence in the light most favorable to the nonmoving party. Galena v. Leone, 638 F.3d 186, 196 (3d Cir. 2011). However, “unsupported
assertions, conclusory allegations or mere suspicions” are insufficient to overcome a motion for
summary judgment. Schaar v. Lehigh Valley Health Servs., Inc., 732 F. Supp. 2d 490, 493 (E.D.
Pa. 2010) (citing Williams v. Borough of W. Chester, Pa., 891 F.2d 458, 461 (3d Cir. 1989)).
The movant “always bears the initial responsibility of informing the district court of the
basis for its motion, and identifying those portions of [the record] which it believes demonstrate
the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). Where the non-moving party bears the burden of proof on a particular issue at trial, the
moving party’s initial Celotex burden can be met by showing that the non-moving party has
“fail[ed] to make a showing sufficient to establish the existence of an element essential to that
party’s case.” Id. at 322.
After the moving party has met its initial burden, summary judgment is appropriate if the
non-moving party fails to rebut the moving party’s claim by “citing to particular parts of
materials in the record, including depositions, documents, electronically stored information,
affidavits or declarations, stipulations . . . , admissions, interrogatory answers, or other materials”
that show a genuine issue of material fact or by “showing that the materials cited do not establish
the absence or presence of a genuine dispute.” Fed. R. Civ. P. 56(c)(1)(A).
A. Motion to Strike
Defendants have filed a motion to strike several newspaper articles relied upon by SDT
on the basis that the articles constitute inadmissible hearsay and, therefore, cannot be properly
considered on summary judgment.7 See Smith v. City of Allentown, 589 F.3d 684, 693 (3d Cir.
2009) (“Hearsay statements that would be inadmissible at trial may not be considered for
purposes of summary judgment.”)
SDT argues that Defendants’ motion to strike is not procedurally proper and constitutes an
unauthorized supplemental reply in further support of its motion for summary judgment. I agree
Following the 2010 amendments to Federal Rule of Civil Procedure 56, it is inappropriate to
attack the admissibility of summary judgment evidence through a motion to strike. See Ankney
v. Wakefield, 2012 WL 1633803, at *1 (W.D. Pa. May 8, 2012). The current version of rule 56
provides that “a party may object that the material cited to support or dispute a fact cannot be
presented in a form that would be admissible in evidence.” Fed. R. Civ. P. 56(c)(2).
Many courts presented with motions to strike after the 2010 amendments construe motions to
strike as objections under Federal Rule of Civil Procedure 56(c)(2). See Ankney, 2012 WL
1633803, at *1. As such, I will construe Defendants’ motion to strike as an objection. SDT
responded to Defendants’ motion to strike and I will consider the parties’ substantive arguments
regarding the admissibility of the articles.
The articles in question concern the circumstances surrounding the School District’s
decision to award the camera project contract to IBS and attribute statements regarding those
circumstances to School District employees, SDT employees and unnamed sources. In
conjunction with these articles, SDT submitted declarations from two Philadelphia Inquirer
journalists, William Marimow and Martha Woodall, who authored the articles. In their
declarations, both Marimow and Woodall state that (1) if called upon to testify, they would
invoke the reporters’ privilege and refuse to disclose their unnamed sources and (2) all of the
“facts” contained in the articles are “true and accurate.” Outside of some introductory
information, the declarations contain no other substantive statements. (See Pl.’s Mem. Dec. of
Marimow p. 3; Dec. of Woodall p. 3.)
SDT posits that the articles are authenticated through the declarations of Marimow and
Woodall as true and accurate and the statements the articles attribute to various individuals are
admissible as statements of a party opponent pursuant to Federal Rule of Evidence 801(d)(2) or
pursuant to the “residual exception” in Federal Rule of Evidence 807(a). SDT also asserts that
Marimow and Woodall “may” testify despite their explicit statements to the contrary in their
“[G]enerally, newspaper articles and television programs are considered hearsay under
Rule 801(c) when offered for the truth of the matter asserted and statements in newspapers by
individuals other than the article’s author often constitute double hearsay.” Merisant Co. v.
McNeil Nutritionals, LLC, 242 F.R.D. 303, 308 n.3 (E.D. Pa. 2007) (internal quotation marks
omitted). Nonetheless, “hearsay statements can be considered on a motion for summary
judgment if they are capable of admission at trial.” Shelton v. U. of Med. & Dentistry of New
Jersey, 223 F.3d 220, 229 n.2 (3d Cir. 2000).
Pursuant to the “residual exception” to the rule against hearsay, a hearsay statement may
be admissible if:
(1) the statement has equivalent circumstantial guarantees of trustworthiness; (2)
it is offered as evidence of a material fact; (3) it is more probative on the point for
which it is offered than any other evidence that the proponent can obtain through
reasonable efforts; and (4) admitting it will best serve the purposes of these rules
and the interests of justice.
Fed. R. Evid. 807(a). “[T]he residual hearsay exception is to be used only rarely, and in
exceptional circumstances, and is meant to apply only when certain exceptional guarantees of
trustworthiness exist and when high degrees of probativeness and necessity are present.” United
States v. Lawrence, 349 F.3d 109, 117 (3d Cir. 2003) (quotation marks and citation omitted).
After careful review of Federal Rules of Evidence 801(d)(2) and 807(a), I conclude that
the newspaper articles are inadmissible hearsay and cannot be relied upon by SDT to defeat
summary judgment. Even assuming all of the statements attributed to other speakers in those
articles were admissible, the articles themselves constitute an additional layer of hearsay which
must be independently admissible. See Smith v. City of Allentown, 589 F.3d 684, 693 (3d Cir.
2009) (where a statement offered at summary judgment contains two layers of hearsay the
proponent “must demonstrate that both layers of hearsay would be admissible at trial”); Fed. R.
Evid. 805 (“Hearsay within hearsay is not excluded by the rule against hearsay if each part of the
combined statements conforms with an exception to the rule”).
SDT does not offer an explanation as to how the articles themselves are independently
admissible. SDT’s invocation of the residual exception is unavailing because SDT has not
demonstrated that the articles possess exceptional guarantees of trustworthiness. In addition to
the hearsay problem, it is unclear how the statements in the articles could be authenticated at trial
because the journalists who wrote the articles stated that if called to testify they would invoke the
reporters’ privilege. Noting that the journalists “may” testify does not assist SDT’s position. As
such, the articles are inadmissible hearsay and I will not consider them in resolving the motion
for summary judgment.
B. Motion for Summary Judgment
In their motion for summary judgment, Defendants argue that 1) SDT has not acquired a
racial identity, and, therefore cannot bring a Section 1981 claim; 2) there is no direct evidence in
the record to support SDT’s theory that Ackerman intentionally discriminated against SDT on
the basis of its racial identity; 3) SDT has failed to offer any evidence to support its municipal
liability claim against the SRC and the School District; and 4) several of SDT’s damages
calculations are deficient.
a. Racial Identity
Defendants first argue that SDT has not acquired a racial identity and, therefore, cannot
establish a violation of Section 1981. That section provides that “[a]ll persons within the
jurisdiction of the United States shall have the same right in every State and Territory to make
and enforce contracts.” 42 U.S.C. § 1981(a). To “make and enforce contracts” includes the
“making, performance, modification, and termination of contracts, and the enjoyment of all
benefits, privileges, terms, and conditions of the contractual relationship.” Id. at § 1981(b).
In order to establish a right to relief under Section 1981, a plaintiff must establish the
following elements: (1) racial identity; (2) an intent to discriminate on the basis of race by the
defendant; and (3) discrimination concerning one or more of the activities enumerated in Section
1981. Pryor v. Nat’l Collegiate Athletic Ass’n, 288 F.3d 548, 569 (3d Cir. 2002).
The United States Court of Appeals for the Third Circuit has yet to address the question
of whether a corporation can have a racial identity for purposes of Section 1981. As noted at the
motion to dismiss stage, I agree with the holdings of the United States Court of Appeals for the
Fifth and Ninth Circuits that a corporation may acquire a racial identity and, therefore, standing
under Section 1981 in certain circumstances. See Holland/Blue Streak v. Barthelemy, 849 F.2d
987, 989 (5th Cir. 1988) (corporation stated claim where it alleged “that it was discriminated
against in the awarding of the airport concession contract because it is primarily a white business
enterprise”); Thinket Ink Info. Res., Inc. v. Sun Microsystem, Inc., 368 F.3d 1053, 1058-59 (9th
Cir. 2004) (“under some circumstances corporations have satisfied the prudential standing
requirements to assert § 1981 claims”).
The parties disagree as to the correct standard for determining under what circumstances
a corporation can be said to have acquired a racial identity. Defendants argue that a corporation
has standing under Section 1981 only if it is officially certified as a corporation with a racial
identity and the majority of its shareholders are of the same race. Defendants derive this rigid
mandatory two-part test from Thinket Ink Info. Resources, Inc. v. Sun Microsystems, Inc., 368
F.3d 1053 (9th Cir. 2004).
The plaintiff in Thinket, a minority-owned company, was certified by the United States
Small Business Administration (“SBA”) as a “firm owned and operated by socially and
economically disadvantaged individuals, eligible to receive federal contracts under the SBA’s
. . . business development program.” Id. at 1055. All of the company’s shareholders were African
American. Id. In concluding that the plaintiff had acquired an imputed racial identity, the Ninth
Circuit reasoned that “[t]he corporate plaintiff here alleges direct racial discrimination based on
its status as an SBA-certified minority-owned business and the race of its shareholders. Those
allegations easily bring the corporation within the ‘zone of interest’ protected by § 1981.” Id. at
1060. The Ninth Circuit concluded that “we join our sister circuits in holding that if a
corporation either suffers discrimination harm cognizable under § 1981, or has acquired an
imputed racial identity, it is sufficiently within the statutory zone of interest to have prudential
standing to bring an action under § 1981.” Id.
Based on the foregoing, the Thinket case does not hold that a corporation can only
acquire an imputed racial identity if it is officially certified as possessing such an identity.
Rather, that Court more broadly held that a corporation can bring a Section 1981 claim if it has
(1) acquired a racial identity or (2) suffered racial discrimination. Id.
Consistent with Thinket, courts have recognized that corporations may acquire racial
identities for purposes of bringing Section 1981 claims in several different ways. For example,
the Tenth Circuit has held that a corporation has standing to assert a claim of discrimination
under Section 1981 “where such discrimination is based on the race of one of its employees.”
See, e.g, Guides, Ltd. v. Yarmouth Group Prop. Mgt., Inc., 295 F.3d 1065, 1072 (10th Cir.
Others courts have held that a corporation may assert a claim under Section 1981 when it
is owned and/or controlled by members of one racial group. See, e.g., Florence Urgent Care v.
Healthspan, Inc., 445 F. Supp. 2d 871, 877 (S.D. Ohio 2006) (company found to have standing
under Section 1981 on the basis that it was “owned entirely by doctors of Arab descent”);
Contemporary Pers., Inc. v. Godiva Chocolatier, Inc., 2009 WL 2431461, at * 2 (E.D. Pa. Aug.
6, 2009) (collecting cases in which corporations were found to have an imputed racial identity
where “the owner, majority of shareholders and/or president are members of the specific class
that is alleged to have been discriminated against”); Major Tours, Inc. v. Colorel, 799 F. Supp.
2d 376, 392 n.9 (D.N.J. 2011) (company had imputed racial identity based on the race of the
Consistent with the second method identified by Thinket, courts have also recognized
that “corporations injured on account of racial discrimination have standing to sue under §
1981.” Witte v. Zoological Soc’y of Phila., 2007 WL 433473, at * 3 (E.D. Pa. Feb. 7, 2007)
(collecting cases); accord Gersman v. Group Health Ass’n, Inc., 931 F.2d 1565, 1568 (D.C. Cir.
1991), judgment vacated on other grounds, 502 U.S. 1068 (1992) (“In our view, however, the
determination whether a corporation has a racial identity is not determinative of whether that
corporation has standing to bring a discrimination claim. Rather than assume that racial identity
is a predicate to discriminatory harm, we might better approach the problem by assuming that, if
a corporation can suffer harm from discrimination, it has standing to litigate that harm.”)
The above precedent is consistent with the plain language of Section 1981 and furthers
Section 1981’s purpose of providing redress for racial discrimination. Therefore, I conclude that
a corporation can bring a Section 1981 claim if it has acquired a racial identity or if it has
suffered racial discrimination. Therefore, the question before me is whether the evidence, viewed
in the light most favorable to SDT, would support a conclusion that SDT has either acquired a
racial identity or has suffered racial discrimination. I find that there is sufficient evidence to
create a genuine issue of material fact as to whether SDT has acquired a racial identity.8
The following disputed facts support this conclusion: Byars stated that all of the
September 23, 2010 meeting participants were aware that SDT was owned by white shareholders
and that IBS was minority owned; Ackerman referred to SDT as part of the “white boys” who
were receiving School District contracts and asked whether a “black firm” could receive the
contract instead; and the School District asked SDT to make a commitment to use M/WBE sub8
As discussed below, I also find that SDT has offered sufficient evidence on which a reasonable
fact finder could find that SDT suffered harm as a result of race discrimination and, therefore,
may assert a Section 1981 claim based on that theory as well.
contractors – a commitment which the School District considered generally unnecessary when
the proposed prime contractor was a M/WBE. As such, I conclude that Byars’ testimony creates
a genuine issue of material fact regarding racial identity.
Nonetheless, Defendants seem to argue that Byars’ testimony is insufficient to create a
genuine issue of material fact because his account of the September 23, 2010 meeting is
contradicted by the testimony of other individuals who were also present at the meeting. These
alleged inconsistencies may be explored on cross-examination and are properly resolved at trial,
not through summary judgment.
b. Evidence of Discrimination
Defendants contend that there is no direct evidence to support SDT’s theory that
Ackerman intentionally discriminated against SDT on the basis of race.9 Defendants first urge
that there is no evidence that Ackerman was aware of the race of SDT’s shareholders and, as
such, there is also no evidence that Ackerman’s decision to pull the SDT resolution was
motivated by racial animus. In support, Defendants note that several of the September 23, 2010
meeting participants testified that Ackerman confused SDT with another company which had
overcharged the School District in connection with a previous project.
“[B]oth the direct evidence test introduced by Price Waterhouse v. Hopkins, 490 U.S. 228, 109
S.Ct. 1775, 104 L.Ed.2d 268 (1989), and the burden-shifting framework introduced by
McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973)” may
be used to determine whether a plaintiff has made out a violation of Section 1981. Anderson v.
Wachovia Mortg. Corp., 621 F.3d 261, 267-68 (3d Cir. 2010).
SDT contends that it can prevail under either the McDonnell-Douglas burden shifting analysis or
under the Price Waterhouse direct evidence test. Defendants, however, urge that the burden
shifting framework does not apply here because SDT is relying solely on Ackerman’s alleged
statements made after the September 23, 2010 meeting as direct evidence of discriminatory
intent. Having concluded that SDT has offered sufficient direct evidence to withstand summary
judgment, I need not consider the parties’ arguments regarding the applicability of the burden
Defendants also argue that SDT cannot rely on Ackerman’s “stray remarks” following
the September 23, 2010 meeting to prove direct discrimination because 1) they were made
temporally remote from the decision to pull the SDT resolution and 2) Ackerman was not a final
decision maker and, therefore, her statements cannot be used to establish that the actual decision
made by the SRC to award the contract to IBS was made with discriminatory intent.
As an initial matter, Defendants’ assertion that there is no evidence in the record to
establish that Ackerman regarded SDT as a “majority” contractor is simply inaccurate. As noted
above, Byars testified directly on this very issue. Defendants may not ignore Byars’ testimony
simply because they do not find him credible or persuasive in light of other evidence in the
I find that there is sufficient evidence from which a reasonable fact finder could conclude
that the decision to de-select SDT and award the contract to IBS was motivated by intent to
discriminate on the basis of race. Viewed in the light most favorable to SDT, the following
evidence supports this conclusion: Byars testified that the day after Ackerman pulled the SDT
resolution she stated that she was making sure “all these white boys” did not receive all of the
School District’s contracts; Byars’ further testimony that Ackerman asked why a “black firm”
was not selected for the project and directed that the contract be awarded to IBS; Dougherty’s
testimony that, two months after the award, Ackerman said she was tired of the School District’s
business going to contractors who do not look like her; Harris’ testimony that Ackerman said, in
the context of the media coverage of the contract award, that she was sick of contracts going to
Defendants also argue that there is no evidence that Ackerman suggested that IBS be selected
to serve as the prime contractor on the project. In support, Defendants cite to Cardwell’s
testimony that Ackerman asked the September 23rd meeting participants if IBS could be “part” of
the project. Even assuming this distinction is material, Defendants again ignore Byars’ testimony
majority vendors.11 Based on the foregoing, a reasonable jury could find that the evidence
supports a conclusion that the decision to de-select SDT in favor of IBS was the product of race
discrimination in violation of Section 1981.
c. Municipal Liability
Defendants further urge that, even if SDT can prove that Ackerman acted with
discriminatory intent, SDT failed to offer any evidence to support its municipal liability claim
against the School District and the SRC.
Under Monell v. Department of Social Services, 436 U.S. 658 (1978), a municipality
may only be liable for the constitutional torts of its employees in one of three ways: (1) if its
employee “acted pursuant to a formal government policy or a standard operating procedure long
accepted within the government entity;” (2) “when the individual has policy making authority
rendering his or her behavior an act of official government policy;” or (3) “if an official with
authority has ratified the unconstitutional actions of a subordinate, rendering such behavior
official for liability purposes.” McGreevy v. Stroup, 413 F.3d 359, 367 (3d Cir. 2005).
Defendants contend that SDT has not offered sufficient evidence to withstand summary
judgment under any of the foregoing methods of establishing municipal liability. For the reasons
that follow, I disagree.12
While the two months passage of time may lessen the probative value of these alleged
statements by Ackerman, I am required to view the evidence in the light most favorable to SDT.
Regarding the third method – i.e. ratification, Defendants contend that SDT has not offered any
evidence that the SRC was aware of the purportedly discriminatory basis for Ackerman’s
recommendation that IBS receive the contract when it voted to approve the resolution. Having
found that there is sufficient evidence to defeat summary judgment under the first two methods
of establishing municipal liability, I need not resolve the parties’ arguments regarding the
ratification method at this time.
i. Act Pursuant to a Formal Policy or Standard Operating Procedure
Regarding the first method of proving municipal liability, Defendants argue that there is
no evidence that they had a formal policy or standard operating procedure of selecting minorityowned contractors over majority-owned contractors on the basis of race outside of its official
Anti-Discrimination Policy. Defendants note that SDT’s own employees admitted that they never
observed any evidence of such a discriminatory custom, policy or practice in their prior dealings
with School District. (See Defs.’ Opp. Ex. G, Spressart Dep. 67:22-68:19.) Defendants urge that
their only policy was set forth in the School District’s official Anti-Discrimination Policy which
expressly prohibited race discrimination in the contracting process.
SDT counters that Defendants ignore the evidence in the record which establishes that
members of the SRC repeatedly and explicitly directed School District employees to increase
minority contracting over and above the twenty percent participation rate set by the MBEC and
award contracts on the basis of race.
I agree with SDT and conclude that there is sufficient evidence upon which a reasonable
fact finder could find that Defendants had an unwritten policy of favoring race discrimination in
contract awards. Cardwell, Byars and Dougherty each testified that throughout 2010 the SRC
repeatedly stated that the School District should increase minority contracting even though it
already exceeded goals set by the MBEC. In fact, SRC Chairman Archie admitted as much.
Viewed in the light most favorable to SDT, this evidence is sufficient to withstand Defendants’
summary judgment challenge to the municipal liability claims.
ii. Act by an Individual with Policy Making Authority
Regarding the second method for proving liability under Monell, a municipality will be
liable when the individual who took the challenged action “has policy making authority
rendering his or her behavior an act of official government policy.” McGreevy, 413 F.3d at 367
(citing Pembaur v. Cincinnati, 475 U.S. 469, 480-81 (1986). “A policy-maker is an official who
has final, unreviewable discretion to make a decision or take action.” McGreevy, 413 F.3d at
369, citing Kneipp v. Tedder, 95 F.3d 1199, 1213 (3d Cir. 1996). “The identification of officials
who possess final policymaking authority with regard to a given act is an issue of state or local
law,” and “the determination as to who is a decisionmaker for the purposes of § 1983 liability is
not a decision for the jury, but is for the court to decide as a matter of law.” Dolly v. Borough of
Yeadon, 428 F. Supp. 2d 278, 284 (E.D. Pa. 2006)
Defendants argue that the SRC, not Ackerman, was the final policymaker with respect to
the decision to award IBS the contract. In support, Defendants cite to a Pennsylvania statute that
The affirmative vote of a majority of all the members of the board of school
directors in every school district, duly recorded, showing how each member
voted, shall be required in order to take action on the following subjects: . . .
Entering into contracts of any kind, including contracts for the purchase of fuel or
any supplies, where the amount involved exceeds one hundred dollars ($100).
24 Pa. Cons. Stat. Ann. § 5-508. Defendants also accurately note that the Pennsylvania statute
describing the duties of school superintendents does not include the authority to enter into
contracts on behalf of a school district. See Id. at § 10-1081.
SDT counters that its claim is that Ackerman blocked SDT’s ability to form a contract by
exercising her “supreme authority as superintendent to decide what was and was not presented to
the SRC for approval.” (Pl.’s Mem. p. 17 n.7.) As such, SDT urges that it is irrelevant that
Ackerman lacked final authority to enter into a contract on behalf of the School District.
SDT explains that Ackerman was the highest level policymaker in terms of the ability to
block the opportunity to form contracts with the School District. SDT cites to a School District
policy, implemented pursuant to a state law allowing the SRC to delegate responsibilities, that
provides “[t]he Superintendent or designee shall develop and present to the SRC for its approval
district safety plans that addresses [sic] school safety issues and includes applicable requirements
of law and regulations.” (Pl.’s Mem. Ex. II.) Based on this policy, SDT argues that Ackerman
alone was authorized to develop and present to the SRC a resolution regarding the camera
project as it was a response to the safe schools audit. Additionally, SDT notes that IBS started
working on the project prior to SRC review or approval of the resolution to award IBS the
contract. (See Pl.’s Mem. Ex. Y, Byars Dep. 49:9-14.)
Based on the foregoing, I conclude that SDT has offered sufficient evidence to establish
that Ackerman was the final policy maker with respect to what contract resolutions, especially
those involving safety issues, were presented to the SRC for consideration. This conclusion is
bolstered by the fact that Section 1981’s “prohibition against racial discrimination in the making
and enforcement of contracts applies to all phases and incidents of the contractual relationship.”
Rivers v. Roadway Exp., Inc., 511 U.S. 298, 302 (1994). As such, Defendants’ summary
judgment challenge to the municipal liability claims is denied.
Next, Defendants raise a host of objections regarding the nature and measure of damages
SDT requested in its First Amended Complaint. Defendants first argue that, in the event that
SDT can establish liability, any recovery must be limited to nominal damages because the
undisputed evidence demonstrates that SDT has not suffered an actual, concrete injury as a result
of the alleged discrimination. In support, Defendants note that SDT spent eight to ten days doing
a walk-through of schools but SDT did not turn down any other work, hire employees or
purchase equipment in anticipation of beginning work on the camera project. Defendants also
emphasize that SDT did not prepare a formal proposal because it believed it was premature to do
so. Relatedly, Defendants contend that SDT’s damages calculation is speculative.
SDT responds that an appropriate measure of damages is the profit that it would have
received on the contract but for Ackerman’s allegedly discriminatory intervention. To
demonstrate that its damages calculation is not speculative, SDT notes that its expert’s opinions
are consistent with Spressart’s testimony regarding his knowledge of the industry and SDT’s past
profit margins on comparable projects with the School District.
In light of Spressart’s testimony and the report of SDT’s expert, John F. Maloney, I find
that SDT has offered more than sufficient evidence on the issue of damages to withstand
summary judgment. Given the disputed issues of fact which exist regarding the nature and extent
of SDT’s alleged injury, it would be inappropriate to resolve, prior to trial, whether SDT’s
damages claim is appropriate or speculative. As such, Defendants’ argument seeking to limit
SDT’s ability to recover to nominal damages is premature.
Defendants next argue that SDT has offered no evidence to support its request for
punitive damages. Under Sections 1981 and 1983, punitive damages are recoverable where the
“defendant’s conduct is shown to be motivated by evil motive or intent, or when it involves
reckless or callous indifference to the federally protected rights of others.” Smith v. Wade, 461
U.S. 30, 56 (1983). “[P]unitive damages claims against . . . individual defendants acting in their
individual capacities remain viable under §§ 1981 and 1983.” Udujih v. City of Philadelphia, 513
F. Supp. 2d 350, 358 (E.D. Pa. 2007) (citing Bennis v. Gable, 823 F.2d 723, 734 (3d Cir.
SDT is only seeking punitive damages against Ackerman in her individual capacity.
Defendants, nonetheless, argue that such a claim is not permissible because Ackerman is entitled
to qualified immunity. According to Defendants, SDT’s rights under Section 1981, as a whiteowned corporation, were not clearly established.
Defendants urge that the “undisputed facts show that [Ackerman] confused SDT with a
separate company – hardly a basis to permit punitive damages to be put to a jury.” (Defs.’ Opp.
p. 25.) Again, Defendants’ characterization of the summary judgment record is not accurate and
ignores evidence proffered by SDT. Simply because Defendants believe that this evidence is not
credible is hardly a reason to grant summary judgment. There is sufficient evidence on the
punitive damages issue to withstand summary judgment. Defendants, however, may renew their
objection to SDT’s request for punitive damages after these disputed issues of fact are resolved
Lastly, Defendants argue that SDT failed to mitigate whatever damages it sustained and,
therefore, it should be barred from recovering any damages. To the extent that a duty to mitigate
attaches to a Section 1981 claim, “[m]itigation is an affirmative defense, so the burden of
proving a failure to mitigate is on the defendant.” Koppers Co., Inc. v. Aetna Cas. and Sur. Co.,
98 F.3d 1440, 1448 (3d Cir. 1996).
Defendants failed to offer evidence that there was
comparable work available to SDT and that SDT failed to pursue such work after the contract
was awarded to IBS.
As noted above, SDT has offered sufficient evidence to withstand summary judgment on its
allegation that Ackerman pulled the SDT resolution and directed the contract be awarded to IBS
on the basis of race. If accepted by a fact finder, such evidence makes out a constitutional
violation that was clearly established in September of 2010.
As noted above, numerous courts have found that a corporation can acquire a racial identity and
Section 1981 has long prohibited race discrimination in the context of making and enforcing
contracts. The United States Supreme Court has clearly held that Section 1981 prohibits
“discrimination in the making or enforcement of contracts against, or in favor of, any race.”
McDonald v. Santa Fe Trail Transp. Co., 427 U.S. 273, 287 (1976).
Given that Defendants raised this argument for the first time in a passing objection to SDT’s
request for punitive damages and not as an independent substantive challenge to the 1981 claim
itself, it appears that Defendants realize that their qualified immunity argument is on shaky
For the foregoing reasons, Defendants’ motion to strike is granted and Defendants’
motion for summary judgment is denied. An appropriate order follows.
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