A divided panel of the Fourth Circuit issued an important Section 1981 decision in a dispute between a minority subcontractor (Worldwide) and a non-minority contractor (DynCorp), arising from the contractor’s termination of a lucrative Iraqi contract with the sub. The sub brought both Section 1981 claims and Virginia state law claims for tortious interference with contractual relations. The jury had awarded a fairly sizable verdict to the subcontractor, and the district court denied the various issues in the defendant’s post-trial Rule 50 motion.

In short, the Fourth Circuit upholds the district court’s rulings on various evidentiary issues, and in a decision that is of broad significance, holds that the jury was entitled to consider the racial animosity of all the persons at DynCorp who were involved with the subcontractor, not just the actual decisionmaker.

Some excerpts follow:

http://pacer.ca4.uscourts.gov/dailyopinions/opinion.pdf/082108.U.pdf

Worldwide Network Services, LLC, et al. v. DynCorp Intl., LLC, No. 08-2108 (4th Cir. Feb. 12, 2010).

Appeals from the United States District Court for the Eastern District of Virginia, at Alexandria. Gerald Bruce Lee, District Judge. (1:07-cv-00627-GBL-JFA)

Before NIEMEYER and DUNCAN, Circuit Judges, and James P. JONES, Chief United States District Judge for the Western District of Virginia, sitting by designation

Affirmed in part and reversed in part by unpublished opinion. Judge Duncan wrote the majority opinion, in which Judge Niemeyer concurred as to Part II.D(1)&(2), and in which Judge Jones concurred as to Parts II.A, II.B, and II.C. Judge Niemeyer wrote a separate opinion concurring in part and dissenting in part. Judge Jones wrote a separate opinion concurring in part and dissenting in part.

DUNCAN, Circuit Judge:

Worldwide Network Services, Inc. (“WWNS”) sued DynCorp International, LLC (“DynCorp”) for discrimination under 42 U.S.C. § 1981 and various torts after DynCorp terminated a subcontract with WWNS related to government work in Iraq and Afghanistan. Upon finding DynCorp liable, a jury awarded WWNS $10 million in punitive damages. On appeal, DynCorp challenges three evidentiary rulings, two jury instructions, and the district court’s denial of DynCorp’s motions under Federal Rule of Civil Procedure 50. For the reasons stated below, we affirm in part and reverse in part, vacating the award of punitive damages.

. . . . the record contains evidence of DynCorp’s racial animus toward WWNS. John Mack, a consultant for DynCorp, testified that Walsh called Gray “a stupid black mother . . . .” J.A. 1723. Also, Rosenkranz terminated DynCorp’s only minority executive Richard Spencer, a Latino, who testified to “some underlying discriminatory things” behind his termination. J.A. 1019.

DeBeer in particular expressed racial animus, often calling Gray “nigger” and “kaffir.” J.A. 872. According to Jones, DeBeer expressed “[t]wo to three times a week” that “people of Anglo descent . . . had made a grave error” because they “had taken the black man as a youth and attempted to clothe him and send him to school” and that “the proper role of the black man was to go out and kill a lion, proving his manhood, at which point in time he should be put to work to feed his family . . . and mated with a woman so that he would have more children, who could then be put to work feeding their family.” J.A. 874. Jones said DeBeer predicted that DynCorp’s relationship with WWNS would end and explained that “that ending was being manufactured by . . . factions within DynCorp” that opposed Cannon. J.A. 869. Jones noted that DeBeer was “consumed by . . . hatred” for “Cannon and everybody associated with him.” J.A. 873.

Finally, DynCorp celebrated WWNS’s demise during a company dinner in October 2006 hosted by Rosenkranz. At the dinner, Walsh received a T-shirt that read, “WWNS - I took them down, and all I got was this lousy T-Shirt.” J.A. 1139. After Walsh put on the T-shirt, DynCorp employee Bill Cavanaugh presented a letter purportedly from Gray to Walsh and read it aloud in mock Ebonics. According to a DynCorp executive, Rosenkranz “was laughing his ass off.” J.A. 1029.

. . . . Regarding the § 1981 discrimination claim, DynCorp had requested an instruction based on Hill v. Lockheed Martin Logistics Mgmt., Inc., 354 F.3d 277 (4th Cir. 2004). The proposed instruction stated:

DynCorp asserts that the person who made the decision not to renew or extend the WWNS CIVPOL subcontract or task orders was not improperly motivated by discrimination. To the extent that WWNS rests its discrimination claim upon the discriminatory motivations of a subordinate employee, WWNS must show by the greater weight of the evidence that the subordinate employee possessed such authority as to be viewed as the one principally responsible for the decision or the actual decisionmaker for DynCorp.

J.A. 1185. The district court refused to give this instruction, explaining: “I don’t think I need to. I think you can prove that they [DynCorp] were responsible or not, and the jury doesn’t have to specify which person did what.” J.A. 1656. Instead, the court instructed: “WWNS must prove that DynCorp intentionally discriminated against WWNS. That is, the race of WWNS’s owners must be proven to have been a motivating factor in DynCorp’s decision not to renew WWNS’s CIVPOL subcontract or issue further task orders thereunder.” J.A. 1762.

After several days of deliberation, the jury returned a split verdict. It found in DynCorp’s favor on Counts 4-6 and one of DynCorp’s counterclaims, awarding DynCorp $178,000 for breach of the WPPS Subcontract. The jury found in WWNS’s favor on all other claims. It awarded WWNS compensatory damages of $3.42 million for Count 1 (§ 1981 discrimination), $83,000 for Count 3 (tortious interference with contract), $558,510.42 for Count 7 (breach of CivPol Subcontract), $42,092.62 for Count 8 (breach of WPPS Subcontract), and $720,000 for Count 9 (breach of implied covenant of good faith and fair dealing). The jury also awarded WWNS $10 million in punitive damages.

. . . . We first consider DynCorp’s challenge to the district court’s failure to give its proposed jury instruction regarding the § 1981 discrimination claim.

. . . . Because DynCorp’s proposed instruction regarding the § 1981 claim was based on Hill, in reviewing the district court’s failure to give that instruction we must consider Hill’s applicability to this case. Ethel Hill was a Lockheed mechanic who repaired aircraft at military bases under contracts between Lockheed and the United States. Her work was overseen by a “lead person” who reported to her supervisor. Lockheed also assigned a safety inspector to each jobsite who reported to the lead person but lacked supervisory authority. Hill received three written reprimands based on errors discovered by her jobsite’s safety inspector and was terminated pursuant to company policy. Hill alleged discrimination by that inspector, who had often called her a “damn woman” and “useless old lady” who should retire. Hill, 354 F.3d at 283. . . . . Accordingly, we found summary judgment appropriate because Hill had not shown evidence that the safety inspector could be considered the actual decisionmaker or the one principally responsible for the decision to terminate Hill. Id. at 297-98. DynCorp argues that the Hill rule governs the case now before us. After carefully studying Hill, we disagree. In that case, the ultimate question was whether Lockheed intentionally discriminated in deciding to terminate Hill. . . .

Using this interpretation, and assuming for purposes of this appeal that Hill applies under § 1981, we conclude that DynCorp can take no comfort from Hill on the facts before us. DynCorp relies on Hill to argue that, because it alleges that Cashon was solely responsible for the decision to terminate the CivPol Subcontract, the jury should not have been allowed to consider the racial animus of anyone other than Cashon. We note, however, that Hill does not enable DynCorp to self-select the decisionmaker whose motives are the purest. Furthermore, we find Hill inapplicable for two separate reasons.

First, the Hill rule’s initial premise, namely, that the plaintiff “rests a discrimination claim . . . upon the discriminatory motivations of a subordinate employee,” assumes that a formal decisionmaker can be identified. Id. at 291. In this case, however, WWNS and DynCorp offered conflicting evidence regarding who had authority to terminate the CivPol Subcontract. Cashon testified to having this authority but also admitted that he answered to Rosenkranz regarding his decision. Moreover, other evidence indicated that Cashon, Merrick, Rosenkranz, and Walsh were authorized to make that decision collectively. Significantly, Walsh was the one who directed DynCorp’s accounting department to stop payment to WWNS for completed work. By contrast, this problem of identification was absent from Hill and Reeves, where none debated who had formal decisionmaking authority.

Second, even assuming that only Cashon could be considered the formal decisionmaker, we are unwilling to conclude that Walsh and Rosenkranz, who supervised Cashon, should be treated like the Hill and Reeves subordinate employees who lacked authority over the formal decisionmaker.

. . . . In this case, § 1981 liability required proof that race actually motivated DynCorp’s decision to terminate the CivPol Subcontract, that is, that race “actually played a role in the . . . decisionmaking process and had a determinative influence on the outcome.” Reeves, 530 U.S. at 141. DynCorp alleges that only Cashon made the decision to terminate the CivPol Subcontract. Accordingly, DynCorp concludes that all other DynCorp executives’ alleged racial animus must be ignored under Hill. In that light, DynCorp asserts that the verdict cannot stand. We disagree with the initial premise that only Cashon made the decision. The record contains sufficient evidence from which a reasonable jury could conclude that Cashon, Rosenkranz, Merrick, and Walsh made a collective decision to terminate the CivPol Subcontract. The record also contains evidence that Rosenkranz and Walsh harbored racial animus against Gray and Bailey. This evidence includes Walsh’s racial slur, Spencer’s termination by Rosenkranz, Walsh stopping payments to WWNS, and the checkered October 2006 dinner celebrating WWNS’s misfortune. Therefore, sufficient evidence of discrimination was presented for § 1981 liability.

. . . . WWNS established a prima facie case of discrimination by showing that (1) DynCorp terminated the CivPol Subcontract, (2) WWNS had been designated a Small Disadvantaged Business by the SBA because Gray and Bailey are African American, (3) Cashon’s glowing evaluations of WWNS in January and March 2006 rated WWNS “excellent” or “good” across the board and stated that DynCorp would hire WWNS again, and (4) EDO Corp. was not minority-owned. In turn, DynCorp articulated a legitimate, nondiscriminatory reason for terminating the CivPol Subcontract. Cashon testified that the reason was WWNS’s poor performance. We believe a reasonable jury could have concluded that DynCorp’s stated reason was merely a pretext for discrimination. For example, the jury might have disbelieved Cashon’s testimony about DynCorp’s stated reason because Cashon himself had given WWNS glowing evaluations. Therefore, we affirm the district court’s denial of DynCorp’s Rule 50(b) motion regarding the § 1981 claim.