Franchise Story 1: 7th Circuit Allows Race-Based Discrimination-in-Franchising Case to Proceed

A panel of the Seventh Circuit has unanimously ruled that an Arab and Muslim franchisee who refused to serve pork products in his store could proceed with his 42 U.S.C. §§ 1981 & 1982 claims against Dunkin Donuts. The case is Elkhatib v Dunkin Donuts, No. 04-4190 (7th Cir July 10, 2007).

Elkhatib claims that Dunkin Donuts refused to allow him to renew his franchisee agreements or relocate when it learned that he was not selling Dunkin Donuts' breakfast sandwiches. The Court determined that Dunkin Donuts' citation of Elkatib's failure to carry the products was pretext, concluding "there is significant evidence that the carrying of breakfast sandwiches was not an issue of importance to Dunkin Donuts." Slip. Op. at 10.

What may be more interesting to the readers of Religion Clause is how the two courts dealt with (or not) the religious element of his claim. In granting Dunkin Donuts' motion for summary judgment, the trial court sua sponte construed Elkhatib’s claim to be one of religious discrimination rather than racial discrimination, based on the court’s determination that the restrictions on handling pork are associated with religion, not race:

Elkhatib alleges discrimination based on race. See Compl., ¶ 9 (“Plaintiff, as an Arab is forbidden from dealing, buying or selling pork products, because of his race's traditions and religious practices”). Elkhatib cites St. Francis Coll. v. Al-Khazraji, 481 U.S. 604, 613 (1987) for the proposition that Arabs may sue for racial discrimination under § 1981. In that case, plaintiff Al-Khazraji sued a university that denied him tenure on the alleged grounds of racial discrimination. The Supreme Court held that “[i]f Respondent on remand can prove that he was subjected to intentional discrimination based on the fact that he was born an Arab, rather than solely on the place or nation of his origin, or religion, he will have made out a case under § 1981.” Id. at 613. Al-Khazraji based his claim solely on racial grounds. However, the court construes Elkhatib's claim to be one of religious discrimination rather than racial discrimination. The dietary restrictions Elkhatib points to are associated with religion rather than race. Islamic and Jewish law both prohibit the handling and consumption of pork. . . . Claims of religious discrimination are not cognizable under § 1981 and § 1982. Elkhatib v. Dunkin' Donuts, Inc. 2004 WL 2600119, *3 (N.D.Ill. 2004) (notes and religious citations removed). [Ed Note: Links Repaired].

On appeal, neither party argued this point. Slip. Op. at 3. Apparently, the Defendant only pressed its contention that that the district court properly held in the alternative that Elkhatib had failed to meet his burden in demonstrating racial discrimination. Id. And Plaintiff, of course, rested on its position that Elkhatib was subject to racial discrimination.

Somewhat surprisingly, the Seventh Circuit accepted this characterization without comment (and without examining the district court's contention) and treated the claim as a race-based one.

Thanks to How Appealling for the lead.