James v. Circuit City Stores, Inc.

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

MARLENE LUTICIA JAMES, 
Plaintiff-Appellee,
v.  No. 02-1256
CIRCUIT CITY STORES, INCORPORATED,
Defendant-Appellant.

KAREN MOTEN; NIKITA ATKINSON; 
MARQUEL MERRIMAN; KEISHA
JOHNSON; PEGGY REDMAN; PAMELA
NICOLE BROWN; CHERYL DAVIS,
Plaintiffs-Appellees,  No. 02-1257
v.
CIRCUIT CITY STORES, INCORPORATED,
Defendant-Appellant.

Appeals from the United States District Court
for the Eastern District of Virginia, at Richmond.
James R. Spencer, District Judge.
(CA-98-720-3; CA-97-620-3)

Argued: October 30, 2002

Decided: June 4, 2004

Before WIDENER, WILLIAMS, and MOTZ, Circuit Judges.

Affirmed in part, reversed in part, and remanded by published opin-
ion. Judge Williams wrote the opinion, in which Judge Widener and
Judge Motz joined.
2 JAMES v. CIRCUIT CITY STORES
COUNSEL

ARGUED: David Neal Anthony, KAUFMAN & CANOLES, P.C.,
Richmond, Virginia, for Appellant. Susan Elizabeth Huhta, WASH-
INGTON LAWYERS’ COMMITTEE FOR CIVIL RIGHTS AND
URBAN AFFAIRS, Washington, D.C., for Appellees. ON BRIEF:
Kevin D. Holden, Susan C. North, KAUFMAN & CANOLES, P.C.,
Richmond, Virginia; Teri C. Miles, Assistant General Counsel, CIR-
CUIT CITY STORES, INC., Richmond, Virginia; Rex Darrell Berry,
DAVIS, GRIMM, PAYNE, MARRA & BERRY, Seattle, Washing-
ton, for Appellant. Lois G. Williams, Courtney E. Ingraffia, WASH-
INGTON LAWYERS’ COMMITTEE FOR CIVIL RIGHTS AND
URBAN AFFAIRS, Washington, D.C.; James E. Sheffield, Rich-
mond, Virginia; David J. Cynamon, Daisy Bygrave, SHAW PITT-
MAN, L.L.P., Washington, D.C.; John A. Gibney, Jr., SHUFORD,
RUBIN & GIBNEY, P.C., Richmond, Virginia, for Appellees.

OPINION

WILLIAMS, Circuit Judge:

We are presented in this interlocutory appeal with two issues:
whether the federal four-year limitations period in 28 U.S.C.A.
§ 1658 applies to claims under 42 U.S.C.A. § 1981 alleging racial dis-
crimination during the course of an employment relationship, and
whether an agreement to toll the running of the applicable limitations
period entered into by Circuit City Stores, Inc. applies to the claims
of the plaintiffs below. Circuit City appeals from denial of its motion
to dismiss based on the district court’s determinations that the four-
year limitations period of 28 U.S.C.A. § 1658 applies to such claims,
and that the tolling agreement in question covered the plaintiffs’
claims. We conclude that the district court properly determined that
§ 1658 applies to these claims, but that it erred in according the plain-
tiffs the benefit of the tolling agreement. Because we are unable to
discern which of the plaintiffs’ claims the district court would have
found timely but for the tolling agreement, we reverse the district
court’s orders denying Circuit City’s motions to dismiss and remand
for further proceedings consistent with this opinion.
 JAMES v. CIRCUIT CITY STORES 3
I.

On June 27, 1994, Circuit City entered into an agreement (the toll-
ing agreement) with two law firms and certain employees of Circuit
City, that tolled the statute of limitations for certain employment dis-
crimination claims. Specifically, the tolling agreement recites that it
was between

Circuit City Stores, Inc. ("Circuit City"), Shaw, Pittman,
Potts & Trowbridge ("Shaw, Pittman"), the Washington
Lawyers’ Committee for Civil Rights and Urban Affairs (the
"Lawyers’ Committee") and certain former and present
employees of Circuit City who have retained Shaw, Pittman
and/or the Lawyers’ Committee to represent them in a
potential class action against Circuit City (the individual
employees, Shaw, Pittman, and the Lawyers’ Committee
collectively referred to as "the Plaintiffs") . . . .

(J.A. at 356.) The agreement suspended the running of "all statutes of
limitations . . . applicable to the alleged class claims . . . between
April 19, 1994 and the Termination Date [October 31, 1995] of this
Agreement."1 (J.A. at 357.) At the time the tolling agreement was exe-
cuted, none of Appellees2 had filed claims against Circuit City or
retained either of the law firms that were parties to the agreement.

During 1997 and 1998, Appellees filed actions against Circuit City
in the United States District Court for the Eastern District of Virginia
alleging that Circuit City failed to promote the plaintiff because of her
race, in violation of 42 U.S.C.A. § 1981. Circuit City filed motions
to dismiss the cases pursuant to Federal Rule of Civil Procedure
1
At the time of the tolling agreement, Shaw, Pittman and the Lawyers’
Committee were investigating allegations of discriminatory employment
practices at Circuit City and contemplating a class action.
2
Karen Moten, Nikita Atkinson, Marquel Merriman, Keisha Johnson,
Peggy Redman, Pamela Nicole Brown, Cheryl Davis, and Marlene Luti-
cia James are the Appellees. All of these parties filed actions against Cir-
cuit City, which, with the sole exception of James’s complaint, were
eventually consolidated by the district court in an order entered Decem-
ber 5, 2001.
4 JAMES v. CIRCUIT CITY STORES
12(b)(6) asserting, inter alia, that under Goodman v. Lukens Steel Co.,
482 U.S. 656, 660 (1987), the proper statute of limitations for Appel-
lees’ § 1981 claims was the most analogous state statute of limita-
tions, in this case Virginia’s two-year statute of limitations for
personal injury claims. See Va. Code Ann. § 8.01-243(a) (Michie
2000). Under that statute of limitations, Circuit City argued, all of
Appellees’ claims were time-barred.

The district court denied Circuit City’s motions in orders entered
on October 26, 2001, holding that the § 1981 claims were timely
because they were governed by the four-year statute of limitations
found in 28 U.S.C.A. § 1658, which applies to "civil actions arising
under an Act of Congress enacted after [December 1, 1990]," 28
U.S.C.A. § 1658 (West 1994), and that the tolling agreement applied
to some, if not all, of Appellees’ claims. In an order entered on
December 6, 2001, the district court amended its orders of October
26, to certify two issues for immediate appeal: (1) the applicable stat-
ute of limitations, and (2) the scope of a tolling agreement executed
by Circuit City. See 28 U.S.C.A. § 1292(b) (West 1993). Circuit City
thereafter moved in this court for leave to file an immediate appeal,
see Fed. R. App. 5, and we granted the motion. We placed this case
in abeyance pending the United States Supreme Court’s decision in
Jones v. R.R. Donnelley & Sons Co., ___ S. Ct. ___, 2004 WL
936488 (May 3, 2004). As Jones has now been decided, we proceed
to address the issues in this case.

II.

We turn first to the statute of limitations issue. The proper statute
of limitations to apply to causes of action like petitioners is an issue
that has divided the courts of appeal. Compare Harris v. Allstate Ins.
Co., 300 F.3d 1183 (10th Cir. 2002); and Anthony v. BTR Automotive
Sealing Systems, Inc., 339 F.3d 506, 514 (6th Cir. 2003); with Jones
v. R.R. Donnelley & Sons Co., 305 F.3d 717 (7th Cir. 2002), rev’d
and remanded, ___ S. Ct. ___, 2004 WL 936488 (May 3, 2004);
Madison v. IBP, Inc., 257 F.3d 780 (8th Cir. 2001), vacated on other
grounds, 122 S. Ct. 2583 (2002); and Zubi v. AT&T Corp., 219 F.3d
220 (3d Cir. 2000).

As stated above, in 1987, the Supreme Court held that "[b]ecause
§ 1981 does not contain a statute of limitations, federal courts should
 JAMES v. CIRCUIT CITY STORES 5
select the most appropriate or analogous state statute of limitations."
Goodman, 482 U.S. at 660. Because "racial discrimination . . . is a
fundamental injury to the individual rights of a person," the state stat-
ute applicable to personal injury claims should be borrowed. Id. at
661. As we have stated, the statute of limitations for personal injury
claims in Virginia is two years.

In 1990, Congress enacted § 1658, which states that "except as oth-
erwise provided by law, a civil action arising under an Act of Con-
gress enacted after the date of the enactment of this section
[December 1, 1990] may not be commenced later than four years after
the cause of action accrues." 28 U.S.C.A. § 1658.3 Section 1981 was
first enacted over one hundred years ago. Had § 1981 remained
unchanged since that time, or since December 1, 1990, Goodman
would plainly still control. That is not the case, however.

At the time of the Supreme Court’s decision in Goodman, in 1987,
§ 1981 read as follows:

All persons within the jurisdiction of the United States shall
have the same right in every State and Territory to make and
enforce contracts, to sue, be parties, give evidence, and to
the full and equal benefit of all laws and proceedings for the
security of persons and property as is enjoyed by white citi-
zens and shall be subject to like punishments, pains, penal-
ties, taxes, licenses, and exactions of every kind and to no
other.
3
Although the language "may not be commenced later than 4 years
after the cause of action accrues" in § 1658 might be interpreted as set-
ting only an outer boundary on the limitations period for covered causes
of action (and thus leaving the courts free, for instance, to continue a
practice of borrowing a shorter state statute of limitations), the Supreme
Court has indicated that § 1658 is to be read as establishing the applica-
ble limitations period for the causes of action to which it applies. See
North Star Steel Co. v. Thomas, 515 U.S. 29, 34 n.* (1995) (noting that
"for statutes passed after December 1, 1990 . . . § 1658 . . . supplies a
general, 4-year limitations period for any statute enacted without one of
its own").
6 JAMES v. CIRCUIT CITY STORES
42 U.S.C.A. § 1981 (West 1990). Before 1989, courts often inter-
preted this language to permit actions asserting race discrimination at
any point during an employment relationship. In Patterson v. McLean
Credit Union, 491 U.S. 164 (1989), however, the Supreme Court
interpreted "the right to make . . . contracts" in § 1981 to extend "only
to the formation of a contract, but not to problems that may arise later
from the conditions of continuing employment," and "the right . . . to
enforce contracts" to extend only to "protection of a legal process and
of a right of access to legal process, that will address and resolve
contract-law claims without regard to race." Id. at 176-77. The statute
did not make actionable, the Supreme Court held, "conduct by the
employer after the contract relation has been established, including
breach of the terms of the contract or imposition of discriminatory
working conditions." Id. at 177. Claims such as those at issue here,
alleging discrimination after the formation of the employment rela-
tionship (post-formation conduct claims), were not actionable under
§ 1981 after the Patterson decision.

Shortly thereafter, Congress passed the Civil Rights Act of 1991
(the 1991 Act). Among other changes, the 1991 Act amended § 1981
in response to Patterson, redesignating the original text as subsection
(a), adding subsections (b) and (c), and giving each of these subsec-
tions a short title. Subsection (b), entitled " ‘Make and enforce con-
tracts’ defined," effectively overrides Patterson, stating that, for
purposes of § 1981, "the term ‘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." 42 U.S.C.A. § 1981(b) (West 1994).
Thus after the enactment of the 1991 Act, claims based on conduct
occurring after the formation of the contractual relationship (post-
formation conduct) are actionable under § 1981. Based on this his-
tory, our sister circuits have split over whether the 4-year statute of
limitations in § 1658 applies to claims made possible by the 1991 Act.

Fortunately, the Supreme Court recently addressed the question of
what statute of limitations is to be applied to claims under § 1981 —
that is, whether some (or all) § 1981 claims "arise[ ] under an Act of
Congress enacted after [December 1, 1990]" and are thus subject to
§ 1658’s four-year limitations period, or whether the analogous state
statute of limitations applies to such claims. In Jones v. R.R. Donnel-
 JAMES v. CIRCUIT CITY STORES 7
ley & Sons Co., ___ S. Ct. ___, 2004 WL 936488 (May 3, 2004), the
Supreme Court held that "a cause of action ‘aris[es] under an Act of
Congress enacted" after December 1, 1990—and therefore is gov-
erned by § 1658’s 4-year statute of limitations—if the plaintiff’s
claim against the defendant was made possible by a post-1990 enact-
ment." Slip Op. at 12-13. Because the claims at issue here, like the
claims in Jones, "did not allege a violation of the pre-1990 version of
§ 1981 but did allege violations of the amended statute, those claims
‘ar[ose] under’ the amendment to § 1981 contained in the 1991 Act."
Slip Op. at 14. In light of this conclusion, the four-year statute of limi-
tations, rather than the shorter period drawn from state law, applies
to the claims at issue here, and the district court did not err in apply-
ing it.

III.

Circuit City also argues that the district court erred in determining
that the tolling agreement it executed with two law firms representing
potential class claimants covered Appellees, such that the limitations
periods for their claims were tolled while the agreement remained in
place. Virginia law governs this question of contract interpretation,
see Volt Info. Sci., Inc. v. Bd. of Trustees of Leland Stanford Univ.,
489 U.S. 468, 474 (1989) (interpretation of private contracts is a ques-
tion of state law), and our review is de novo.

The Supreme Court of Virginia has noted that "[t]he guiding light"
of contract interpretation under Virginia law "is the intention of the
parties as expressed by them in the words they have used, and courts
are bound to say that the parties intended what the written instrument
plainly declares." Golding v. Floyd, 539 S.E.2d 735, 737 (Va. 2001)
(quoting Magann Corp. v. Electrical Works, 123 S.E.2d 377, 381 (Va.
1962)). Accordingly, we examine the text of the tolling agreement to
determine whether the parties intended to cover the claims in ques-
tion.

First, as Circuit City argues, Appellees do not fall within the
descriptions of the parties to the agreement itself. The agreement
states that it is between Circuit City, Shaw, Pittman, the Lawyers’
Committee, and "certain former and present employees of Circuit
City who have retained Shaw, Pittman and/or the Lawyers’ Commit-
8 JAMES v. CIRCUIT CITY STORES
tee to represent them in a potential class action against Circuit City."
(J.A. at 357.) As Appellees concede, they had not retained Shaw, Pitt-
man or the Lawyers’ Committee to represent them at the time of the
tolling agreement, and therefore are not properly described as parties
to the agreement.

Appellees argue that they are nevertheless entitled to the benefit of
the agreement because it states that it tolls the limitations period as
to "the alleged class claims." (J.A. at 356.) Their claims, they assert,
are the kind of claims against Circuit City contemplated by the parties
to the tolling agreement, who entered the agreement in the expecta-
tion that a class action might subsequently be filed. Although the
terms of the agreement are not entirely clear, we conclude that the
most natural reading of "alleged class claims" is claims that would
fall within the class contemplated by the parties and that had been
alleged as of the time of the agreement. Thus, to the extent former or
present employees of Circuit City had filed complaints against Circuit
City, or otherwise raised their claims at the time of the tolling agree-
ment, those claims might well be covered by the tolling agreement
even though such claimants had not retained Shaw, Pittman or the
Lawyers’ Committee to represent them. Appellees, however, had not
raised their claims of discrimination at any time before the tolling
agreement was executed or prior to its termination. Accordingly, we
conclude that they are not entitled to its benefit.4

IV.

We conclude that the district court correctly applied the federal
four-year statute of limitations to Appellees’ claims here. In according
the benefit of the tolling agreement to those plaintiffs, however, the
district court erred. For the reasons stated above, the order of the dis-
trict court is reversed in part and remanded for proceedings consistent
with this opinion.
4
The district court found each of Appellees’ claims timely based on the
four-year statute of limitations and giving them the benefit of the tolling
agreement, but did not determine precisely the dates on which each of
Appellees’ claims accrued. Because we cannot discern which of the
claims the district court would have found timely but for the tolling
agreement, we remand for that determination.
 JAMES v. CIRCUIT CITY STORES 9
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED