Unpublished Disposition, 933 F.2d 1013 (9th Cir. 1989)

MEMORANDUM^* 

Ernest L. Clarke appeals the district court's dismissal of his second amended complaint claiming racial discrimination in employment under 42 U.S.C. § 1981. Clarke alleges that his employer, Loma Linda Foods, and certain officials thereof impaired his ability to make contracts on the basis of race. We affirm.

DISCUSSION

Clarke first contends that the United States District Court for the Northern District of Illinois erred by transferring venue to the Central District of California pursuant to 28 U.S.C. § 1391.¹  Section 1391 states:

(b) A civil action wherein jurisdiction is not founded solely on diversity of citizenship may be brought only in the judicial district where all defendants reside, or in which the claim arose, except as otherwise provided by law.

28 U.S.C. § 1391(b) (1988). Here, the parties agree that all the defendants did not reside in one state or judicial district. Hence, venue is only proper in the judicial district "in which the claim arose." Id.

Clarke maintains that the discriminatory acts complained of took place in Illinois. The appellees assert that all the operative decisions and conduct that Clarke complains of took place in California. In cases in which it is not clear that the claim arose in only one specified district, the Supreme Court has stated that:

a plaintiff may choose between those two (or conceivably even more) districts that with approximately equal plausibility--in terms of the availability of witnesses, the accessibility of other relevant evidence, and the convenience of the defendant (but not the plaintiff)--may be assigned as the locus of the claim.

Leroy v. Great Western United Corp., 443 U.S. 173, 185 (1979).

The district court transferred Clarke's action to the Central District of California pursuant to 28 U.S.C. § 1406(a). A transfer under section 1406(a) is proper only if the venue is improper in the transferor court. Central Valley Typographical Union No. 46 v. McClatchy Newspapers, 762 F.2d 741, 744 (9th Cir. 1985). The district court determined that under Leroy, Clarke's action arose in California, not Illinois.

We review the district court's determination of where the claim arose de novo. Id. at 745.

We hold that the district court did not err by transferring Clarke's action to the Central District of California. We agree with the district court's findings that all the operative decisions and conduct by Loma Linda Foods, Clarke's previous employer and the primary defendant in this action, and by its co-defendant personnel took place in California. Loma Linda Foods is a California-based corporation. The meeting at which it was determined that the Great Lakes Sales Territory, for which Clarke was one of three sales representatives, would be closed took place in California. The decision that Clarke's new sales location would be in New York was made in California. These events culminated in a dispute between Clarke and Loma Linda Foods that eventually led to his constructive termination. In light of the Supreme Court's guidance in Leroy to the effect that "the availability of witnesses, the accessibility of other relevant evidence, and the convenience of the defendant (but not the plaintiff)" will be considered, we agree with the district court that Clarke's claim does not meet the test of being of "approximately equal plausibility." See Leroy, 443 U.S. at 185. We therefore conclude that venue was improper in Illinois, and that the district court's transfer of Clarke's action to the Central District of California was not error.

Clarke also contends that the district court abused its discretion by dismissing his pendent state claims. Clarke asserts that these state claims, alleging breach of contract, breach of the covenant of good faith and fair dealing, and intentional interference with a contract, share a common nucleus of operative fact with the federal claims and therefore should not have been dismissed.

We review a district court's decision to dismiss pendent state law claims for an abuse of discretion. Forsberg v. Pacific Northwest Bell Tel. Co., 840 F.2d 1409, 1421 (9th Cir. 1988).

The Supreme Court has cautioned that:

pendent jurisdiction is a doctrine of discretion, not of plaintiff's right. Its justification lies in considerations of judicial economy, convenience and fairness to litigants; if these are not present a federal court should hesitate to exercise jurisdiction over state claims, even though bound to apply state law to them. Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties...."

United Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966) (footnote and citation omitted). Here, the district court dismissed the claims upon reasoning that the state law claims would predominate in the lawsuit and result in decisions of California law, that the state law claims would require substantial additional evidence at trial, that a jury would be confused by the separate causes of action, and that judicial economy would not be served by retaining the pendent claims. Under these guiding principles and upon review of the record, we conclude that the district court did not abuse its discretion by dismissing the pendent state law claims.

Clarke next contends that the district court erred by dismissing his action. The district court dismissed Clarke's action upon finding that Clarke's claim for racial discrimination was not protected by 42 U.S.C. § 1981 as construed by the Supreme Court in Patterson v. McLean Credit Union, 109 S. Ct. 2363 (1989), and that in the alternative, Clarke's action was barred by the applicable statute of limitation. Clarke argues that the Supreme Court's decision in Patterson v. McLean Credit Union does not affect his claims of racially motivated impairment of contract under section 1981. Clarke also asserts that the district court applied an incorrect statute of limitations to his action, and that even if it did not, that the appellees waived the affirmative defense of statute of limitations.

We review the dismissal of a complaint without leave to amend de novo. Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990).

Section 1981 protects the rights of all persons, regardless of race, "to make and enforce contracts." 42 U.S.C. § 1981 (1988). In Patterson v. McLean Credit Union, the Supreme Court redefined the scope of section 1981, finding that it protects just two rights: (1) the right to make contracts, and (2) the right to enforce contracts. Patterson, 109 S. Ct. at 2372. The right to make contracts "extends only to the formation of a contract, but not to problems that may arise later from the conditions of continuing employment." Id. (emphasis added). Postformation conduct, such as the imposition of discriminatory conditions, does not implicate the right to make a contract and is thus not protected by the statute. Id. at 2372-73. Section 1981's guarantee of the right to enforce contracts serves to:

prohibit [ ] discrimination that infects the legal process in ways that prevent one from enforcing contract rights [and] also covers wholly private efforts to impede access to the courts or obstruct non-judicial methods of adjudicating disputes about the force of binding obligations, as well as discrimination by private entities, such as labor unions, in enforcing the terms of a contract.

Id. at 2373. However, the right to enforce contracts does not extend beyond "conduct by an employer which impairs an employee's ability to enforce through legal process his or her established contract rights." Id.

Here, Clarke claims intentional discrimination on the basis of race as a result of eleven incidents. Clarke's first cause of action involves his reassignment from a sales area which included the northwestern suburbs of Chicago, a middle-class, predominantly white community, to the south side of Chicago, a predominantly black community. Clarke alleges that the reassignment was racially motivated. Clarke's second cause of action involves the decision to close down the Great Lakes Territory and reassign Clarke to an area encompassing a predominantly black community in New York City. Clarke alleges that these decisions were racially motivated. Clarke's third cause of action involves the appellees' alleged refusal to allow Clarke to transfer to one of two other open positions, again allegedly on the ground of race. Clarke's fourth cause of action involves appellees' allegedly racially motivated giving of inaccurate and incomplete information regarding relocation assistance available to Loma Linda Foods employees. Clarke's fifth cause of action involves appellees' allegedly racially motivated decision to require Clarke to be present at his new position in New York City by June 3, 1985, on the threat of termination. Clarke's sixth through tenth causes of action repeat the allegations of the first five and assert additionally that these racially motivated actions impaired Clarke's right to make and enforce sales contracts in his work as a sales representative for Loma Linda Foods. Clarke's eleventh cause of action involves appellees' retrieval of the company car and product samples that were in Clarke's possession after he had been terminated. Clarke alleges that these actions were racially motivated and impaired his right to make and enforce sales contracts in his work as a sales representative for Loma Linda Foods.

We conclude that the conduct about which Clarke complains is not protected by section 1981. Clarke does not contend that Loma Linda Foods or the other named defendants prevented him from entering into a contract; indeed, it is clear from the face of Clarke's complaint that he was an employee of Loma Linda Foods. Rather, his complaints concerning the reassignment, transfer, refusal to allow him to transfer to a different territory, provision of inaccurate information concerning transfer, and the "constructive termination" all involve postformation conduct. As such, these complaints are not protected by section 1981. Id. at 2372-72; Overby v. Chevron USA, Inc., 884 F.2d 470, 473 (9th Cir. 1989).

Nor does Clarke allege that appellees have impaired his ability to enforce his contract through the legal process or through any non-judicial method of adjudication. Clarke's contentions that appellees refused to allow him to transfer to one of two other open positions and provided him with inaccurate and incomplete information regarding relocation assistance available to Loma Linda Foods employees do not implicate his right of access to the courts. The Court in Patterson v. McLean Credit Union expressly held that alleged racial harassment that amounts to a breach of contract does not impair an employee's right to enforce his contract under section 1981. Patterson, 109 S. Ct. at 2376. Clarke does not charge that the appellees impeded his efforts to file any claims against them. Instead, as was the case in Overby, Clarke was free to and did pursue his claims of racial discrimination with the diligence he deemed appropriate. Overby, 884 F.2d at 473. Hence, we conclude that Clarke's complaints do not involve his right to enforce his employment contract under section 1981.

Clarke attempts to escape the strictures of Patterson v. McLean Credit Union, however, by alleging that the allegedly racially motivated actions taken by the appellees deprived him of his right to make and enforce sales contracts in his work as a sales representative for Loma Linda Foods. We reject this contention. Clarke was not a party to the contracts he made as a sales representative for Loma Linda Foods and therefore cannot claim that his rights to make these contracts were impaired by appellees' alleged discriminatory acts.

Accordingly, we affirm the district court's dismissal of Clarke's second amended complaint on the ground that it does not state a claim under section 1981 as construed by the Supreme Court in Patterson v. McLean Credit Union.²  We do not reach the issue of whether the district court properly dismissed Clarke's second amended complaint on the alternate ground of statute of limitations.

Clarke next contends the district court erred by denying his motion for default judgment under Fed. R. Civ. P. 55(b) (2). The district court denied Clarke's motion for default judgment on the ground that Clarke had not secured an entry of default as required by Fed. R. Civ. P. 55(a). The district court also stated that Local Rule 14.12 required a party moving for a default judgment to state in declaration when and against whom the Clerk's default was entered. Clarke maintains that his motion for default judgment sought not only a default judgment but also the prerequisite entry of default as well.

We disagree. In Draper v. Coombs, 792 F.2d 915 (9th Cir. 1986), we considered a similar situation in which an answer, though late, was filed on the same day as the plaintiff's motion for a default judgment. We held that because the plaintiff had not made a showing of prejudice as a result of the "failure to comply strictly" with the time requirements of the Federal Rules of Civil Procedure, we could not conclude that the district court had abused its discretion by denying the motion. Id. at 924-25. Here, Loma Linda Foods timely responded to Clarke's second amended complaint by filing a motion to dismiss on October 4, 1989. See Fed. R. Civ. P. 6(e). The other named defendants joined in Loma Linda Foods' motion to dismiss on October 9, 1989. Clarke filed his motion for default judgment on October 17, 1989. Clarke has made no showing of prejudice. Under these circumstances, we cannot conclude that the district court abused its discretion by denying the motion for a default judgment.

Finally, Clarke contends that the district court erred by denying his motion for sanctions against the defendants for failure to prepare for trial. We reject this contention. We review the denial of a motion to impose sanctions for an abuse of discretion. Mackey v. Pioneer Nat. Bank, 867 F.2d 520, 526 (9th Cir. 1989). On the record before us, we find that the district court did not abuse its discretion in denying the motion for sanctions.

AFFIRMED.