Rapid Test Products , Inc . v. Durham School Services , Inc .

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-4066
R APID T EST P RODUCTS , I NC .,
Plaintiff-Appellant,
v.
D URHAM S CHOOL S ERVICES , I NC .,
Defendant-Appellee.
____________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 03 C 2431—James B. Moran, Judge.
____________
A RGUED M ARCH 28, 2006—D ECIDED A UGUST 18, 2006
____________
Before P OSNER , E ASTERBROOK , and W ILLIAMS , Circuit
Judges.
E ASTERBROOK , Circuit Judge. Rapid Test Products
contends in this suit under 42 U.S.C. §1981 that Durham
School Services has discriminated against it because
Rapid Test’s owner is a black woman. Durham signed a
contract with a school district in Illinois; the contract was
subject to a set-aside reserving some subcontracts for
disadvantaged business enterprises, and this program
treats both race and sex as kinds of disadvantage. Rapid
Test negotiated with Durham and believed that it had
received a subcontract under the set-aside program;
Durham actually made one payment (which Durham
characterizes as an advance for services that Rapid Test

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2 No. 05-4066
never rendered). Eventually, however, Durham gave the
subcontract to one of Rapid Test’s competitors, owned by an
Asian man. The school district, which had been informed at
one time that Rapid Test would be a subcontractor, agreed
to the substitution.
The district court granted summary judgment to Durham
after concluding that the parties’ dealings had been too
indefinite to create a contract. 2005 U.S. Dist. L EXIS 17105
(N.D. Ill. Aug. 12, 2005). The conclusion that no contract
came into being does not require elaboration. Preliminary
negotiations between a general contractor and a potential
subcontractor do not create a contractual obligation even if
the general contractor uses the subcontractor’s name
and specifications in a bid accepted by the party ulti-
mately paying for the goods or services. The district
judge’s opinion is persuasive on this subject.
If the district judge were wrong about this, Rapid Test
still could not benefit: §1981 establishes a rule against
discrimination in contracting and does not create any
entitlement to be the beneficiary of a contract reserved for
firms owned by specified racial, sexual, ethnic, or religious
groups. Sections 1981 and 1983 do far more to undermine
set-aside programs than to provide means to enforce them
in federal court. See Adarand Constructors, Inc. v. Peña,
515 U.S. 200 (1995); McDonald v. Santa Fe Trail Transpor-
tation Co., 427 U.S. 273, 285-95 (1976); Randle v. LaSalle
Telecommunications, Inc., 876 F.2d 563 (7th Cir. 1989).
Arguments that a particular set-aside program is a lawful
remedy for prior discrimination may or may not prevail if
a potential subcontractor claims to have been excluded, but
it is to victims of discrimination rather than frustrated
beneficiaries that §1981 assigns the right to litigate.
That conclusion does not, however, bring the litigation to
an end. Section 1981 protects the right to make contracts,
and if Durham engaged in racial discrimination when

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No. 05-4066 3
choosing an Asian-American man over an African-American
woman then Rapid Test would have a good claim independ-
ent of any effort to use §1981 to enforce set-aside programs.
See, e.g., Sanghvi v. St. Catherine’s Hospital, 258 F.3d 570,
573 (7th Cir. 2001). After oral argument we called for
supplemental briefs so that the parties could address the
effect of McDonald and later decisions. Rapid Test told us
that it wants to show that Durham engaged in race and sex
discrimination by preferring an Asian-American man over
an African-American woman. Such a claim cannot be
negated by the lack of an enforceable contract: if race or sex
discrimination is the reason why Durham did not award a
subcontract to Rapid Test, then §1981 provides relief.
Even if the set-aside program is the only reason why
Durham was in the market for subcontractors, it cannot
prefer one minority group over another in making a decision
about which firm it will engage. For this purpose it makes
no difference whether the set-aside is proper under
Adarand: If the program is lawful, then everyone within its
scope must receive an equal opportunity to compete; and if
it is not valid then all potential subcontractors must enjoy
equal opportunities. Either way, Rapid Test cannot be
disfavored on account of race or sex.
The district judge recognized that §1981 covers the
making as well as the breaking of contracts but wrote:
“[Rapid Test] does not allege that defendant discrim-
inated against it in the formation of a contract. . . . There-
fore, its claim depends on the existence of a contract”. The
supposition behind this approach is that complaints
must allege legal theories, so that, by omitting from its
complaint an argument that Durham discriminated in the
opportunity to make contracts, Rapid Test limited the
suit to one based on discriminatory breach of contract. Yet
complaints need not set out either legal theories or compre-
hensive factual narratives. See Swierkiewicz v. Sorema
N.A., 534 U.S. 506 (2002); Simpson v. Nickel, 450 F.3d 303,

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4 No. 05-4066
305-06 (7th Cir. 2006); Bartholet v. Reishauer A.G., 953
F.2d 1073 (7th Cir. 1992). Under Fed. R. Civ. P. 8 a com-
plaint pleads claims, which is to say grievances. The
grievance specified in Rapid Test’s complaint is straightfor-
ward: Durham refused (on account of Rapid Test’s propri-
etor’s race and sex) to use its services. Whether that refusal
took the form of failure to make a contract, or a decision to
break a contract, is a detail—and under §1981 an irrelevant
detail.
As it happens, moreover, Rapid Test’s complaint does
allege discriminatory refusal to enter into a contract.
Paragraph 43 of the complaint, for example, protests
“Durham’s intentional exclusion of a minority woman from
participation in contractual opportunities”. See also ¶41.
Now maybe Rapid Test did not do enough to alert the
district judge to this aspect of its claim—once a party moves
for summary judgment, the other side cannot rest on its
pleadings but must produce evidence and provide appropri-
ate legal support—but in this court Rapid Test’s argument
is explicit (Br. 25-26). Instead of responding that Rapid Test
failed to preserve its point in the district court, Durham has
ignored this portion of Rapid Test’s appellate argument. So
if anything was forfeited in the district court, the benefit of
that forfeiture has been forfeited in turn on appeal.
The district court never addressed the question wheth-
er Rapid Test has evidence to back up its claim that race
and sex discrimination, rather than a nondiscriminatory
reason such as inability to perform the services Durham
wanted, account for Durham’s decision to deal with a
different subcontractor. That question should be addressed
by the district court in the first instance. The judgment
is vacated, and the case is remanded for that purpose. If the
district court concludes that Rapid Test has made out a
good federal claim, it should reinstate and resolve the state-
law claims as well.

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No. 05-4066 5
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—8-18-06

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