Dec 9, 2019 - Franchise, Dealer & Antitrust Decisions in One Sentence by |

Court Dismisses Franchisee’s Racial Discrimination Claim for Termination

In case where plaintiffs-franchisees Nabil Gazaha and NAYAA, LLC (referred to individually and collectively as “Gazaha”) sued defendant KFC Corporation (“KFC”) setting forth claims for common law breach contract resulting from KFC’s termination of a franchise agreement and for race discrimination in violation of 42 U.S.C. § 1981, federal court in Virginia found, inter alia, that Gazaha failed as a matter of law to present evidence sufficient to establish a prima facie case of discrimination, or alternatively, any evidence of pretext necessary to rebut KFC’s asserted non-discriminatory reason for terminating the franchise agreement. KFC’s Motion for Summary Judgment on Defendants’ Counterclaims was GRANTED.

[Excerpt Regarding Racial Discrimination from case]

2016 WL 1245010

United States District Court, E.D. Virginia,

Alexandria Division.

KFC CORPORATION, Plaintiff,

v.

Nabil GAZAHA, et al., Defendants.

Civil Action No. 1:15-cv-1077 (AJT/JFA)

Signed 03/24/2016

With respect to Gazaha’s claim in Count II for intentional race discrimination and unlawful termination in violation of 42 U.S.C. § 1981, the Court finds that he has likewise failed to adduce evidence sufficient to allow a reasonable trier of fact to find in his favor. 42 U.S.C. § 1981(b) forbids racial discrimination in the making and enforcing of contracts. Section 1981 claims are properly analyzed under the Title VII framework. Thompson v. Potomac Elec. Power Co., 312 F.3d 645, 649 n.1 (4th Cir. 2002). Accordingly, the complaining party must come forward with “direct evidence” of racial discrimination or satisfy the McDonnell Douglas burden-shifting scheme. Davis v. Am. Soc. of Civil Eng’rs, 330 F. Supp. 2d 647, 654-55 (E.D. Va. 2004) (citing McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973)). “Direct evidence” of discrimination under McDonnell Douglas is defined as “conduct or statements that both (1) reflect directly the alleged discriminatory attitude, and (2) bear directly on the contested … decision.” Laing v. Fed. Express Corp., 703 F.3d 713, 717 (4th Cir. 2013) (internal quotations omitted). Such a showing of direct evidence “essentially requires an admission by the decision-maker that his actions were based on the prohibited animus.” Radue v. Kimberly-Clark Corp., 219 F.3d 612, 616 (7th Cir. 2000).

If there is no direct evidence of racial discrimination, then the complaining party must proceed under the McDonnell Douglas framework. First, the complaining party must establish a prima facie case of racial discrimination. In the context of Section 1981 claims concerning franchise terminations, the complaining party under McDonnell Douglas must show:

(1) that [they] are members of a protected class; (2) that the allegedly discriminatory conduct concerned one or more of the activities enumerated in the statute … and (3) that the [franchisor] treated the [franchisee] less favorably with regard to the allegedly discriminatory act than [the franchisor] treated other similarly situated persons who were outside the [franchisor’s] protected class.

Dunkin’ Donuts Franchised Restaurants LLC v. Sandip, Inc., 712 F. Supp. 2d 1325, 1328 (N.D. Ga. 2010); see also Holland v. Washington Homes, Inc., 487 F.3d 208, 214 (4th Cir. 2007) (applying similar test under McDonnell Douglas in context of employment discrimination).

Finally, if the complaining party establishes a prima facie case under McDonnell Douglas, then the defending party may articulate “a legitimate, nondiscriminatory reason for its adverse employment action.” Holland, 487 F.3d at 214 (internal quotations and citations omitted). “This burden … is a burden of production, not persuasion.” Id. If the defending party articulates such a non-discriminatory reason, the burden once again shifts and the claimant must “prove that [the other party]’s proffered reason was mere pretext and that race was the real reason for … termination.” Hawkins v. PepsiCo, Inc., 203 F.3d 274, 278 (4th Cir. 2000) (citing St. Mary’s Honor Ctr. v. Hicks, 509 U.S. 502, 507-08 (1993)).

Gazaha offers only two pieces of evidence with regard to discrimination and neither of them is “direct.” First, Gazaha points to statements by Keilson and an unnamed KFC employee about his neighborhood not being “safe.” Second, he points to statistical evidence purporting to show that KFC terminates African-American-owned franchises at higher rates than Caucasian-owned franchises. [Doc. No. 72 at 14-16]. None of this evidence, separately or collectively, is sufficient to avoid summary judgment.

First, the alleged comments, even when taken in the light most favorable to Gazaha, are largely about the Baltimore neighborhood where the Outlet is located. That is, the allegedly racist comments made by Keilson and the unnamed KFC employee amount to statements that the neighborhood surrounding the restaurant is unsafe, that they did not want to leave a car there for fear of it being targeted for vandalism or robbery, and that did not want to visit the Outlet at night. Gazaha also claims that the offending parties made a reference to “you people,” and a comment that the health inspection issue is “black and white.” [Doc. No. 76 at 2-3]. The probative value of these isolated, casual comments is from zero to exceedingly marginal. More important is that none was made by anyone in a position of authority at KFC with the ability to terminate the Agreement.

Second, the statistical data, even data showing racial disparities, cannot by itself support a Title VII/Section 1981 claim for racial discrimination. Diamond v. T. Rowe Price Assoc., Inc., 852 F. Supp. 372, 408 (D. Md. 1994) (“In the Fourth Circuit … statistical evidence alone is insufficient to raise an inference of discriminatory intent in a disparate treatment case”); see also id. n.172 (citing cases); McKleskey v. Kemp, 481 U.S. 279, 297 (1987). Here, Gazaha has presented nothing other than statistical data as to the termination rates of KFC franchises. Without additional evidence that any of these terminations was racially motivated or evidence demonstrating that Gazaha himself was targeted for franchise termination because of his race, the statistical evidence, standing alone, is insufficient to create a triable issue of fact.

Gazaha further argues that termination of the Agreement was improper because the FSCC inspections were faulty and that the decision to terminate the Agreement was otherwise substantively incorrect. But in order to raise an inference of discrimination, a complaining party must argue something more than that the employment decision at issue was wrongly decided. Indeed, this argument is, as recognized by the Fourth Circuit, wholly “unexceptional.” Laing, 703 F.3d at 713 (“all [the complaining party] has proven is the unexceptional fact that she disagrees with the outcome of [the] investigation. But such disagreement does not prove … the burden shifting framework”).

Finally, even assuming arguendo that Gazaha could make out a prima facie case for race discrimination in violation of Section 1981, KFC offers a legitimate, nondiscriminatory business reason for terminating the Agreement: that Gazaha failed four consecutive health inspections. Although Gazaha disputes that these failed inspections justified the termination of the franchise, he offers no evidence that would raise an inference that KFC’s reasons for termination were a pretext for racial discrimination. Accordingly, Gazaha’s claims are, as a matter of law, insufficient to satisfy the McDonnell Douglas burden-shifting regime.

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