Madhat Zubi v. At&t Corp

*221OPINION OF THE COURT

STAPLETON, Circuit Judge:

Plaintiff Appellant Madhat Zubi filed this civil action against AT & T Corporation, alleging that he was discharged because of his race in violation of 42 U.S.C. § 1981. The District Court dismissed the complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6), as barred by a two-year statute of limitations. Zubi argues that the District Court erred in applying a two-year statute of limitations instead of the four-year limitations period prescribed by 28 U.S.C. § 1658. We will affirm the judgment of the District Court.

I.

Mr. Zubi filed the complaint in this case on July 30, 1998, in the United States District Court for the District of New Jersey. It alleges that Zubi was discharged by AT & T because of his race on September 28, 1995. The District Court, applying the teachings of Wilson v. Garcia, 471 U.S. 261, 105 S.Ct. 1938, 85 L.Ed.2d 254 (1985), and its progeny, “borrowed” New Jersey’s two-year statute of limitations for personal injury cases and found Zubi’s claim time barred.

Zubi’s claim arises under 42 U.S.C. § 1981, which provides, in pertinent part, 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 ... as is enjoyed by white citizens.... ” In Patterson v. McLean Credit Union, 491 U.S. 164, 185, 109 S.Ct. 2363, 105 L.Ed.2d 132 (1989), the Supreme Court held that the “make and enforce contracts” language of section 1981 proscribed discriminatory hiring but not discriminatory termination of employment.

Congress responded to the Patterson decision in the Civil Rights Act of 1991 by amending section 1981. The amendments, inter alia, made the preexisting language of section 1981, quoted above, subsection (a) and added a subsection (b) to section 1981 which defined the phrase “make and enforce contracts” as “the making, performance, modification, and termination of contracts and the enjoyment of all benefits, privileges, terms and conditions of the contractual relationship.” Civil Rights Act of 1991, Pub.L. No. 102-166, § 101, 105 Stat. 1071 (codified at 42 U.S.C. § 1981(b)) (emphasis added). Following the 1991 amendments, section 1981 “clearly prohibits discriminatory conduct that occurs both before and after the establishment of the contractual relationship.” Perry v. Woodward, 199 F.3d 1126, 1132 (10th Cir.1999) (emphasis added). Thus, the 1991 amendment to section 1981 “creates liabilities that had no legal existence before the Act was passed.” Rivers v. Roadway Express, Inc., 511 U.S. 298, 313, 114 S.Ct. 1510, 128 L.Ed.2d 274 (1994).

The issue presented to us is a purely legal one, which we review de novo. See Hotel Employees & Restaurant Employees Int’l Union Local 54 v. Elsinore Shore Assocs., 173 F.3d 175, 181 (3d Cir.1999). Zubi argues that the District Court erred in “borrowing” New Jersey’s two-year statute of limitations for personal injury cases. Zubi bases his argument on 28 U.S.C. § 1658, which provides as follows:

Except as otherwise provided by law, a civil action arising under an Act of Congress enacted after the date of the enactment of this section may not be commenced later than 4 years after the cause of action accrues.

Section 1658 was enacted on December 1, 1990. See The Judicial Improvement Act of 1990, Pub.L. No. 101-650, Title III, § 313(a), 104 Stat. 5114. Zubi maintains that, by virtue of the 1991 amendments to section 1981, his lawsuit against AT & T is “a civil action arising under an Act of Congress enacted after [December 1, 1990]” and that section 1658’s four-year limitation period governs.

Zubi’s cause of action for discriminatory termination of employment is based on statutory language that has existed unchanged since its original enactment in *2221870. See Act of May 31, 1870, ch. 114, § 16, 16 Stat. 144. At the same time, it is clear that a person in his position could not have successfully pursued that claim prior to the 1991 amendments to the Civil Rights Act. We must decide whether, for purposes of section 1658, Zubi’s claim arises under the preexisting statutory language on which his claim is based or under the 1991 amendments. As we will explain, we hold that Zubi’s claim arises, under the preexisting statutory language, now codified in 42 U.S.C. § 1981(a), and, therefore, that the District Court properly applied New Jersey’s two-year statute of limitations for personal injury claims.

II.

Like virtually all of the courts that have preceded us in addressing the same issue, we find the text of § 1658 ambiguous; it can be, and has been, reasonably read in a number of different ways. See generally Boyd A. Byers, Adventures in Topsy-Turvy Land: Are Civil Rights Claims Arising Under }$ U.S.C. § 1981 Governed by the Federal Four Year “Catchr-All” Statute of Limitations, 28 U.S.C. § 1658?, 38 Washburn L.J. 509 (1999) (detailing the various approaches courts have taken). Three distinct approaches are recognized in the existing case law:

1.When an Act of Congress passed after December 1, 1990, creates a claim that did not previously exist, that claim “arises under an Act of Congress enacted after” December 1, 1990, even though the new statute creates the new claim by amending a previously existing statute. This view of § 1658, when applied in the context of § 1981 of the Civil Rights Act of 1870, as amended by the Civil Rights Act of 1991, results in § 1981 claims, based on the discriminatory termination of contracts being governed by the four-year federal limitations period, and all other claims based on § 1981 being governed by the state statute for personal injury claims.1
2. When an Act of Congress passed after December 1, 1990, amends a statute existing before that date in a manner that substantially alters its meaning, all claims accruing after the passage of the new statute “arise under an Act of Congress enacted after” December 1, 1990, without regard to whether an identical claim arising earlier could have been successfully pursued under the pri- or statute. This view of § 1658, when applied in the context of § 1981 of the Civil Rights Act of 1870, as amended by the Civil Rights Act of 1991, results in all § 1981 claims arising after the 1991 amendment being governed by the four year federal limitations period.2
3. When an Act of Congress passed after December 1, 1990, amends a statute existing before that date, as opposed to creating new law without reference to previously existing statutory language, all claims accruing after the passage of the amendment arise under an Act of Congress enacted before December 1, 1990, without regard to whether an identical claim arising earlier could have been successfully pursued under the pri- or statute. This view, when applied in the context of § 1981 of the Civil Rights Act of 1870, as amended by the Civil Rights Act of 1991, results in all § 1981 claims accruing after the passage of the 1991 amendments being governed by the state limitations period for personal injury claims.3

Each of the foregoing interpretations is textually plausible.4 Given that ambiguity, *223we turn to the rationale behind § 1658, as reflected in its text and legislative history, and seek to determine which reading of the statute will be most consistent with that rationale.5

Congress enacted § 1658 in response to calls for a new, nationally uniform statute of limitations for federal causes of action not having their own explicit limitations period. It did not, however, establish a new, nationally uniform federal statute of limitation for all federal causes of action. Congress could have provided that § 1658 would be applicable to all causes of action that accrued after the effective date of the Act, but it did not. It did not because it valued the avoidance of frustrated expectations more highly than national uniformity. It realized that there was an existing body of caselaw establishing limitations periods for causes of action arising under federal statutes already in existence, and it decided to preserve that body of law in the interest of avoiding the disruption of parties’ settled expectations. See H.R.Rep. No. 101-734, § 111, at 24 (1990) (recognizing that “with respect to many statutes that have no explicit limitations provision, the relevant limitations period has long since been resolved by judicial decision ... [and that] retroactively imposing a four year statute of limitations ... would threaten to disrupt the settled expectations of a great many parties.”). Congress implemented this decision by stipulating that the new four-year statute of limitations would not be applicable to any “civil action arising under an Act of Congress enacted” before December 1,1990.

Given the preeminent value placed by Congress on the avoidance of disappointed expectations, we conclude that the choice between the three proposed readings of § 1658 should be made on the basis of which will provide the greatest certainty in application. Whatever alternative is chosen, some line drawing on a case-by-case basis will be unavoidable, but every effort should be made to minimize the opportunities for debate.

*224The first alternative is the one urged by Zubi. At first blush, it seems to promise a fair degree of certainty in application. Did the new statute create a cause of action that did not previously exist? If so, § 1658 applies; if not, state law applies. But that promise, upon reflection, seems to us illusory. First, as we have pointed out, Zubi’s interpretation results in different statutes of limitations being applied to plaintiffs suing under the same statute depending on the particular facts of their claims. Thus, for example, plaintiffs who invoke § 1981 because they have been victims of discrimination in hiring will have their claims governed by one statute of limitations, while plaintiffs who invoke the same statute because they are victims of a discriminatory discharge will have their claims governed by another. Adoption of such an interpretation would seem to us to generate exactly the kind of confusion and unfairness that Congress sought to avoid.

Recognition of two classes of plaintiffs under § 1981, when applied in a state with a statute of limitations for § 1981 claims larger than four years, is likely to result in unsuspecting plaintiffs who have relied on established precedent finding themselves barred from relief. Conversely, recognizing two classes, when applied in a state with a statute for § 1981 claims shorter than four years, is likely to result in defendants finding themselves faced with potential liability on claims they believed extinguished.

More importantly, determining what is a “new” claim, created by an amendment, is a task fraught with uncertainty. Amendments vary in their purpose, and the line between an amendment that modifies an existing right and one that creates a new right is often difficult to draw. This is well illustrated by other amendments effected by the Civil Rights Act of 1991.

Amendments frequently are intended to clarify the law when there has been a difference of opinion regarding the interpretation of an existing statute. In such situations, conflicting views on whether the clarifying amendment created new rights or merely codified the preexisting caselaw are what occasion the amendment. Congress in its deliberations over the Civil Rights Act of 1991, for example, concluded that the Supreme Court in Price Waterhouse v. Hopkins, 490 U.S. 228, 109 S.Ct. 1775, 104 L.Ed.2d 268 (1989), had suggested that no violation of Title VII occurred when discriminatory animus is a factor in, but not a but-for cause of, an adverse employment action. See H.R.Rep. No. 102-40(1), § 203, at 45 (1991). In response, it adopted an amendment to the Civil Rights Act of 1964 “clarifying” that “an unlawful employment practice is established when the complaining party demonstrates that race, color, religion, sex, or national origin was a motivating factor for any employment practice, even though other factors also motivated the practice.” Civil Rights Act of 1991, Pub.L. No. 102-166, § 107(a), 105 Stat. 1071, 1076. Adoption of Zubi’s interpretation of § 1658 would surely lead to litigation over whether a plaintiff alleging that race was a motivating factor in his discharge asserts a newly-created claim or an old one based on the 1964 Act. See Miller v. CIGNA Corp., 47 F.3d 586 (3d Cir.1995) (discussing the conflicting views of the Price Waterhouse opinions on the nature of the required showing of causal nexus).

Amendments are also frequently designed to ease the plaintiffs burden of demonstrating a violation of an existing statute by eliminating an element of his prima facie case or providing a way around an affirmative defense. Congress, for example, understood the Supreme Court decision in Wards Cove Packing Co. v. Atonio, 490 U.S. 642, 109 S.Ct. 2115, 104 L.Ed.2d 733 (1989), to stand for the proposition that a plaintiff in a disparate-impact case established no violation of Title VII in the absence of an allegation and proof that the challenged employment practice was not a business necessity. See H.R.Rep. No. 102-40(1), §§ 201-02, at 23-45 (1991). It also understood Wards Cove to elimi*225nate the preexisting rule that such a plaintiff could prevail, even in the face of a showing of business necessity, by showing an alternative practice with less disparate impact. See id. In response, Congress in 1991 amended the Civil Rights Act of 1964 to stipulate that a violation of Title VII is established with a showing of disparate impact and to restore the alternative-practice theory of recovery. See Civil Rights Act of 1991, Pub.L. No. 102-166, § 105, 105 Stat. 1071, 1074. In each of these situations, there will be plaintiffs situated so that they will be able to recover under the amended statute but would not have been able to do so under the preexisting one. Are plaintiffs who are so situated asserting newly-created claims that did not previously exist so as to come within the scope of § 1658?

Finally, we note that the Civil Rights Act of 1991 also amended Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act of 1990 to authorize, for the first time, the award of compensatory and punitive damages for intentional discrimination. See Civil Rights Act of 1991, Pub.L. No. 102-166, § 102, 105 Stat. 1071, 1072-74. Is a suit brought solely to recover such damages governed by the federal limitations period on the theory that these amendments created new claims or by the state statutes on the theory that they provide only an additional remedy for an existing cause of action?

These amendments effected by the Civil Rights Act of 1991 illustrate the many categories of amendments that would raise litigable issues under § 1658 if Zubi’s interpretation of that section were adopted. Because of the resulting uncertainties of application, we conclude that embracing that interpretation would be inconsistent with Congress’ wish to avoid unnecessary uncertainty.

We reach the same conclusion with respect to the second suggested reading of § 1658. Under that reading, application of § 1658 requires differentiating amendments that effect only technical changes from amendments that “substantially alter” the meaning of the preexisting statute, a task that is imprecise at best. Moreover, while this reading avoids the confusion that would be created by claims under the same statutory section being governed by different statutes of limitations, it would be a source of even greater confusion because claims accruing after the amendment would be governed by § 1658 even though the identical claim could have been pursued under the preexisting statute and would have been governed by state law. Thus, even though § 1658 purports on its face to preserve existing limitations law, a claim under! 1981, as amended, for discrimination in hiring would be governed by a different limitations statute than an identical! 1981 claim that accrued prior to the 1991 amendment. We believe such a result would directly conflict with Congress’ express desire to give § 1658 only prospective effect.

It is the third alternative that seems to us to promise the least uncertainty of application. The underlying rationale of that reading is that when Congress amends a preexisting statute it does not create a “new act,” and claims arising under the statute as amended continue to arise under the preexisting statute. It is, thus, only when Congress establishes a new cause of action without reference to preexisting law that ! 1658 applies. Thus, when determining whether Congress has amended a preexisting statute or created a “new act,” how Congress characterizes its own action should be determinative. We conclude that this is the closest thing to a bright line that can be drawn while remaining faithful to the statutory text and its legislative history.

We realize that our approach will not provide an indisputable answer in all situations.6 We believe that it will provide *226such an answer in the vast majority- of situations, however, and clearly it provides such an answer here. As we explained earlier, Congress here chose to build upon a statutory text that has existed since 1870. Accordingly, we hold that Zubi’s civil action arises under an Act of Congress enacted before December 1, 1990, and is governed by New Jersey’s two year statute of limitations.7

III.

At oral argument in this case, it was suggested that 42 U.S.C. § 1988 specifically provides a statute of limitations for civil rights actions and, therefore, that section 1658, even assuming that Zubi’s case arises under the 1991 amendments, is inapplicable. See 28 U.S.C.§ 1658 (“Except as otherwise provided by law, a civil action arising under an Act of Congress enacted after the date of the enactment of this section may not be commenced later than 4 years after the cause of action accrues.”) (emphasis added). We instructed the parties to brief the issue, and we now hold that section 1988 does not provide a statute of limitations for civil actions arising under acts of Congress enacted after December 1, 1990, so as to preclude application of section 1658.

Section 1988 provides that the civil rights laws:

shall be exercised and enforced in conformity with the laws of the United States, so far as such laws are suitable to carry the same into effect; but in all cases where they are not adapted to the object, or are deficient in the provisions necessary -to furnish suitable remedies and punish offenses against law, the common law, as modified and changed by-the constitution and statutes of the State wherein the court have jurisdiction of- such civil or criminal cause is held, so far as the same is not inconsistent with the Constitution and laws of the United States, shall be extended to and govern the said courts in the trial and disposition of the cause....

42 U.S.C. § 1988(a).

Section 1658 specifies a four-year statute of limitations for a class of claims (ie., those claims arising under statutes enacted after December 1, 1990). It excludes from that class only those claims with respect to which another statute provides a different limitations period. Section 1988 does not provide a specific limitations period for claiips that would otherwise be governed by § 1658; it provides only for the borrowing of state rules when there are no federal rules suitable to carry the- civil rights laws into effect. Because we see no reason why § 1658 is not suitable to effectuate the civil rights laws with respect to the class of claims to which it applies, § 1988 provides no authority for borrowing a state statute of limitations for such claims.

Indeed, reading § 1988 as one of the exceptions to the scope of § 1658 would produce a result that Congress clearly did not'intend. Section 1988 reflects a con*227gressional preference for federal law when it may be appropriately applied. Nothing in § 1658 conflicts with this preference, and as we have indicated, it provides a limitations period that can appropriately be applied. Accordingly, we decline to read these statutory provisions in a way that would result in the application of state limitations law to a claim within the scope of § 1658 (i.e., a claim arising under a federal statute enacted after December 1, 1990).

IV.

For the reasons stated herein, we will affirm the judgment of the District Court.

. See, e.g., Miller v. Federal Express Corp., 56 F.Supp.2d 955, 965 (W.D.Tenn.1999).

. See, e.g., Alexander v. Precision Machining, Inc., 990 F.Supp. 1304 (D.Kan.1997).

. See, e.g.. Lane v. Ogden Entertainment, Inc., 13 F.Supp.2d 1261 (M.D.Ala.1998).

.It is true, as some courts have stressed, that statutory amendments become law only when an "Act" is enacted by Congress and that the phrase "Act of Congress” can reasonably be read to include any legislative measure that amends preexisting statutory text. On the other hand, treating every amendment to an *223existing statute as a new Act of Congress is not required by the text of § 1658. It is common parlance to refer to legislation like the Civil Rights Act of 1870 as an "Act of Congress” and to refer to causes of action as arising thereunder even though based on statutory provisions that have later been amended in some way.

. We thus respectfully disagree with the dissent’s position that the "plain meaning” rule dictates the resolution of the issue before us. As the dissent points out, it is clear that Congress' authority under Article III of the Constitution to bestow jurisdiction on the federal courts includes what is referred to as "federal ingredient" jurisdiction — jurisdiction over cases where the plaintiff's claim is not created by federal law but where a federal question is an "ingredient” of the action. Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738, 6 L.Ed. 204 (1824). It is equally clear, however, that "arising under” federal law in 28 U.S.C. § 1331, which grants federal question jurisdiction to the federal courts, has a narrower meaning than "arising under” federal law in Article III of the Constitution. Specifically, § 1331 "arising under” jurisdiction does not include "federal ingredient” jurisdiction where Congress has determined that there should be no private cause of action for violation of the federal law. Merrell Dow Phannaceuticals, Inc. v. Thompson, 478 U.S. 804, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986) (“a complaint alleging a violation of a federal statute as an element of a state cause of action, when Congress has determined that there should be no private, federal cause of action for the violation, does not state a claim 'arising under the Constitution, laws, or treaties of the United States.’ 28 U.S.C. § 1331.”) "Arising under” thus does not have a single "plain meaning” even where used solely in the context of federal court jurisdiction. More importantly, Article III and § 1331, even if they did embody the same concept of "arising under,” would not provide an apt analogy to § 1658. Article III and § 1331 primarily distinguish between cases arising under federal law and cases arising under state or foreign law for the purpose of describing judicial jurisdiction. Section 1658 seeks to distinguish between cases arising under certain Acts of Congress from cases arising under other Acts of Congress for the purpose of preserving existing statute of limitations case law. Because of these disparate purposes, we think it doubtful that Congress had the notion of federal ingredient jurisdiction in mind when it enacted § 1658.

. Congress casts its legislation in a myriad of different ways, and we do not mean to en*226dorse an inflexible standard predicated solely on the terminology utilizéd by Congress. At times, for example, Congress "amends” "Parts” of the Code by deleting them in their entirety and substituting an entirely different text. We do not suggest that such “amendments” be treated as anything other than a new act of Congress. We believe in most instances potential litigants will be able to identify situations in which Congress is building on a preexisting act and situations in which it is creating a new act.

. The dissent reads "action” to mean "civil lawsuit,” "Act of Congress” to include anything published in the United States Statutes at Large, and "arising under” to mean having "an ingredient” supplied by a post-1991 Act. If "ingredient” here means essential ingredient, then the dissent’s approach is the functional equivalent of the "new claim” approach that Zubi urges and is subject to the uncertainties we have discussed. If "ingredient” means something less, then the dissent's approach seems to us likely to result in the four-year limitations period applying to any civil lawsuit containing a claim based on a statute that has been amended in any way after December 1, 1991. We believe that result would be inconsistent with the intent to preserve settled limitations law.