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Smith v. Firestone Tire and Rubber Co.

decided: May 26, 1989.

LEROY SMITH, JR., PLAINTIFF-APPELLANT, CROSS-APPELLEE,
v.
FIRESTONE TIRE AND RUBBER COMPANY, DEFENDANT-APPELLEE, CROSS-APPELLANT



Appeals from the United States District Court for the Central District of Illinois, Springfield Division. No. 86 C 3304 -- Richard Mills, Judge.

Cummings, Cudahy, and Flaum, Circuit Judges.

Author: Cummings

CUMMINGS, Circuit Judge

Plaintiff filed this action under 42 U.S.C. ยง 1981 on October 21, 1986, alleging that his employer, defendant Firestone Tire and Rubber Company ("Firestone"), demoted him on the basis of his race on September 20, 1984. Defendant's motions for summary judgment on the grounds of expiration of the statute of limitations and the absence of any genuine issues of material fact as to whether defendant's decision to demote plaintiff was motivated by race were denied on January 8 and 13, 1988, respectively. The case was tried on March 29, 1988. On March 30, 1988, the jury informed the court that it was unable to reach a decision and was discharged. On March 31, 1988, Judge Mills granted defendant's motion for directed verdict on which he had earlier reserved ruling until deliberation of the jury and judgment was entered in favor of defendant. Plaintiff appeals the entry of directed verdict and defendant cross-appeals the denial of summary judgment based on the statute of limitations. We affirm.

I.

Statute of Limitations

Defendant contends that plaintiff's action, filed over twenty-five months from plaintiff's demotion, is barred by Illinois' two-year statute of limitations for personal injuries (Ill. Rev. Stat. ch. 110, para. 13-202 (1983)), rendered applicable to Section 1981 actions by Goodman v. Lukens Steel Co., 482 U.S. 656, 107 S. Ct. 2617, 96 L. Ed. 2d 572. Because Sections 1981 and 1983 do not contain a statute of limitations, courts applied various types of state statutes of limitations to the federal claims based on analogies to state causes of action, resulting in an undesirable lack of uniformity among jurisdictions. This inconsistency as to Section 1983 actions was resolved by Wilson v. Garcia, 471 U.S. 261, 85 L. Ed. 2d 254, 105 S. Ct. 1938, which held that for purposes of choosing the most appropriate state statute of limitations, Section 1983 claims are essentially claims for personal injury. Accordingly, the appropriate state statute of limitations for personal injury should be borrowed from the forum state. Goodman merely applied the holding of Wilson to Section 1981 claims. Goodman, 107 S. Ct. at 2621.

Defendant argues that Goodman should be applied retroactively to bar plaintiff's claim under the general rule that "cases should be decided in accordance with the law existing at the time of decision." Goodman, 107 S. Ct. at 2621. An exception to this general maxim exists where: (1) the decision at issue overrules clear precedent on which litigants may have relied or addresses an issue of first impression which was not foreshadowed; (2) retroactive application of the decision would retard the operation of a federal statute; and (3) retroactive application would result in substantial inequity. Chevron Oil Co. v. Huson, 404 U.S. 97, 106-107, 30 L. Ed. 2d 296, 92 S. Ct. 349 . We agree with the district court that such an exception to retroactive application is warranted here.

Prior to the decision in Goodman on June 19, 1987, precedent in this Circuit beginning with Waters v. Wisconsin Steel Works, 427 F.2d 476, 488 (7th Cir. 1970), certiorari denied, 400 U.S. 911, 91 S. Ct. 137, 27 L. Ed. 2d 151, established that the Illinois five-year statute of limitations for residual claims (Ill. Rev. Stat. ch. 110, para. 13-205 (1983)), applied to actions under Section 1981. This case is therefore distinguishable from Goodman in which the Court determined that there was no clear precedent within the Third Circuit on which plaintiffs could have relied in filing their suit and applied the statute of limitations retroactively to the claims of that class of plaintiffs. Plaintiff here, however, was clearly justified in relying on this Court's case law applying the five-year statute of limitations prior to Goodman.

Conceding that the five-year statute of limitations had been applied to Section 1981 actions in this Circuit prior to Goodman, defendant argues that plaintiff should have been forewarned as to the holding in Goodman by the Supreme Court's earlier decision in Wilson. By analogy to Section 1983 actions, defendant contends, plaintiff should have concluded that Section 1981 actions would likewise be subject to the two-year Illinois personal injury statute of limitations.

This Court rejected similar reasoning in Nazaire v. Trans World Airlines, Inc., 807 F.2d 1372, 1380 (7th Cir. 1986). There this Court refused to apply the Illinois two-year statute of limitations to a Section 1981 action in spite of Wilson since "'Section 1981 . . . is more fundamentally concerned with injury to the contractual or economic rights of minorities [than Section 1983], and as such should appropriately be governed by the longer contract statute of limitations.'" Nazaire, 807 F.2d at 1380, quoting Judge Garth's dissent in the Goodman court of appeals decision, 777 F.2d 113, 132 (3rd Cir. 1985). Accordingly, even after Wilson, this Circuit continued to apply the Illinois five-year statute of limitations to Section 1981 actions.

Even if plaintiff should have been on notice after Wilson but prior to Goodman that the statute of limitations in Section 1981 cases was an open question, his claim would nonetheless be timely filed under Anton v. Lehpamer, 787 F.2d 1141 (7th Cir. 1986), which established transitional statutes of limitations for Section 1983 decisions which accrued prior to Wilson. In Anton, this Court decided that Wilson should not be applied retroactively to Section 1983 causes of action that accrued prior to that decision on April 17, 1985. Instead, such plaintiffs should be given the first to expire of either the five-year residual statute of limitations on which they may have relied or the two-year personal injury statute of limitations from the date of the Wilson decision.*fn1 Therefore even if plaintiff is deemed to have been on notice that the Wilson decision was likely to be extended to Section 1981 claims, he still met the Anton time limitations for actions accruing before Wilson by commencing this action within two years of the Wilson decision.

The second factor of the Chevron test, whether retroactive application of the law will further or retard the operation of a federal statute, militates in favor of prospective application of Goodman as well. Both Goodman and Wilson serve the interests of safeguarding the rights of federal civil rights litigants, achieving uniformity and certainty and minimizing unnecessary collateral litigation. Wilson, 105 S. Ct. at 1947-1949; Goodman, 107 S. Ct. at 2622. Fully retroactive application of Goodman would clearly interfere with the rights of federal litigants who were injured prior to Goodman by shortening the limitations period from five to two years. Further, the interests of uniformity and certainty will be only minimally affected by prospective application of Goodman since only those actions which accrued prior to Goodman would be subject to a different limitations period. Although for a period of time there will be two effective limitations periods, thereby temporarily undermining the goal of uniformity, the delineation is clearly demarcated by the date of the Goodman decision, reducing the likelihood of unnecessary litigation.

The final Chevron factor requires us to examine the inequity that may be caused by retroactively applying a shorter limitations period than previously applied by this Circuit. The inequity in terminating this action by a two-year statute of limitations while this Court's precedent clearly allowed the plaintiff five years to commence this litigation is self-evident. This is certainly not a situation where plaintiff "slept on his rights" and equity warranted retroactive application to cut off his cause of action. Plaintiff commenced this action well within the five-year ...


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