focused on eliminating discrimination with regard to the new contract; the old contract is not a point of concern.
In a demotion case, however, the source of discrimination is entirely different. Bush claims that Edison discriminated when it removed him from his position as mechanic and placed him as a clerk in the billing department. The essence of his § 1981 claim is that Edison discriminated on the basis of race when it refused to maintain the contract under which Bush was employed as a mechanic. Thus, the objectionable conduct giving rise to the claim of discrimination is not the creation of a new contract, but the termination of the existing contract. However, the termination of an existing contract constitutes postformation conduct, which is excluded from § 1981 liability. While a new contractual relationship may have arisen after the demotion, this new contract is not the source of the § 1981 claim. Therefore, Bush's demotion claim rests on conduct which is not actionable after Patterson.3
Bush argues that even if we find Patterson applicable to the alleged facts, we should not dismiss his § 1981 claims. Bush contends that we should deny Edison's motion because Patterson cannot be applied retroactively. We reject this argument.
"As a rule, judicial decisions apply 'retroactively.'" Solem v. Stumes, 465 U.S. 638, 104 S. Ct. 1338, 1341, 105 L. Ed. 2d 132 (1984) (citation omitted). However, there are exceptions to this general rule. The analysis of whether a particular decision should be applied retroactively is governed by three factors specified in Chevron Oil Company v. Huson, 404 U.S. 97, 92 S. Ct. 349, 355, 30 L. Ed. 2d 296 (1971). First, the decision at issue must overrule clear past precedent or establish a new principle of law. Second, we must determine whether retroactive operation would further the purpose and effect of the law in question, or whether retroactivity would retard these goals. Finally, we must determine whether retroactive application would produce equitable or inequitable results.
Although Patterson did not explicitly overrule any prior precedent, it clearly narrowed the range of conduct that is actionable under § 1981. Moreover, it eliminated a § 1981 cause of action for conduct that had been previously recognized as actionable by the Seventh Circuit. See e.g., Williamson v. Handy Button Machine Co., 817 F.2d 1290 (7th Cir. 1987). Therefore, we find that the first Chevron factor does not favor applying Patterson retroactively.
However, we find that the second Chevron factor supports retroactivity. Bush argues that applying Patterson to this case would undermine the congressional policy to eradicate discrimination in employment. But this argument is more of an attack on the substantive content of the Patterson opinion than an argument concerning retroactive application. Moreover, retroactive application would not hamper this congressional policy. As the Court explained in Patterson, the conduct removed from § 1981 liability is separately actionable under Title VII. Thus, an employment discrimination plaintiff still has a vehicle through which this policy may be furthered.
Finally, we find that the equities of this case do not mandate non-retroactivity. Undoubtedly, Patterson removes a remedy which existed at the time Bush initiated this action. However, any inequity arising from these circumstances would be outweighed by the inequity of imposing liability on Edison for conduct which the Supreme Court has found to be outside the scope of the statute. Furthermore, because Bush has a remedy under Title VII for the challenged conduct, concerns of inequity are reduced.
Balancing the three Chevron factors, we find that the presumption in favor of retroactivity has not been rebutted. The fact that Patterson overruled prior precedent is outweighed by the absence of inequity and damage to congressional policy. Accordingly, we find that Patterson should be applied retroactively, and that the decision reaches Bush's claims. See e.g., Brackshaw v. Miles, 723 F. Supp. 60 (N.D.Ill. 1989) (Patterson should be applied retroactively); Carroll v. General Acc. Ins. Co. of America, 891 F.2d 1174, 1176 (5th Cir. 1990) (same); Jordan v. U.S. West Direct Co., 716 F. Supp. 1366, 1368 (D.Colo. 1989) (same). Accordingly, we grant Edison's motion to dismiss the § 1981 claims.
B. The Rehabilitation Act Claim.
Edison moves to dismiss Bush's claim under the Rehabilitation Act, 29 U.S.C. § 794, on the ground that it is time barred. According to Edison, the applicable statute of limitations is two years. Under a two year limitations period, the claim would be barred because Bush filed the action approximately two years and three months after the latest possible date a violation could have occurred.
However, Bush maintains that the applicable statute of limitations provides for a five year limitations period, and that we should deny Edison's motion.
The Rehabilitation Act, 29 U.S.C. § 794, contains no limitations provision. When Congress has not established a time limitation for a federal cause of action, the settled practice has been to adopt, as federal law, the analogous statute of limitations from the state in which the federal court sits. Wilson v. Garcia, 471 U.S. 261, 105 S. Ct. 1938, 1942, 85 L. Ed. 2d 254 (1985); Andrews v. Consolidated Rail Corp., 831 F.2d 678, 683 (7th Cir. 1987).
Neither the Supreme Court nor the Seventh Circuit has determined a specific state statute of limitations that is analogous to the Rehabilitation Act. However, both courts have held that discrimination claims are most analogous to personal injury claims under state law, and have applied the corresponding state statute of limitations for personal injuries. See e.g., Goodman v. Lukens Steel Co., 482 U.S. 656, 107 S. Ct. 2617, 2621, 96 L. Ed. 2d 572 (1987); Wilson v. Garcia, 105 S. Ct. at 1947; Kalimara v. Illinois Dept. of Corrections, 879 F.2d 276 (7th Cir. 1989). Because the Rehabilitation Act is a statute which proscribes discrimination, we find that the applicable statute of limitations should be the Illinois statute of limitations for personal injury actions. This statute, Ill.Rev.Stat., ch. 110, para. 13-202, provides a two year limitations period.
We find no merit in Bush's contention that a five year statute of limitations should be applied. Bush contends that we should apply the Illinois statute of limitations for contracts, which provides for a five year period. Bush argues that this statute is analogous because his claim arises out of an employment relationship, which is contractual. However, in determining the appropriate limitations period, the inquiry centers on the nature of the remedy sought, rather than the factual basis for the plaintiff's claim. The Rehabilitation Act protects those who have suffered discrimination because of a physical handicap. A contractual relationship between the plaintiff and defendant is not an element of the claim. Therefore, we find that the statute of limitations for contract actions is not analogous to the Rehabilitation Act. See, Andrews v. Consolidated Rail Corp., 831 F.2d 678, 683 (7th Cir. 1987) (Court applied an Indiana statute of limitations that explicitly excluded contract actions to Rehabilitation Act claim).
Bush argues that if we determine that a two year statute of limitations is applicable to Rehabilitation Act claims, we should not apply this rule retroactively to bar his claim. We disagree. As we observed earlier, the three factor analysis of Chevron Oil Co. v. Huson, 92 S. Ct. 349, governs the retroactivity inquiry. In Goodman v. Lukens Steel, 107 S. Ct. at 2617, the Supreme Court discussed the application of Chevron to a decision involving a statute of limitations. The Court explained that a decision specifying the applicable statute of limitations should not be applied retroactively if the decision overrules clear precedent on which the plaintiff was entitled to rely, if "the new limitations period had been occasioned by a change in the substantive law the purpose of which would not be served by retroactivity," and if retroactive application would be inequitable. Id.
The Chevron Oil factors do not militate against retroactive application in the present case. First, there was no clearly established precedent on which Bush was entitled to rely. At the time he filed his claim, neither the Seventh Circuit nor the Supreme Court had specified the applicable limitations period. In similar circumstances, the Supreme Court has not hesitated to apply its decision retroactively. In Goodman, 107 S. Ct. 2622, prior to the Court's decision, there was no clear statute of limitations for § 1981 claims. The Court rejected the plaintiff's plea for non-retroactivity, stating that "there had been no authoritative specification of which statute of limitations applied to an employee's § 1981 claim, and hence no clear precedent on which petitioners could have relied. . . ." Id.5 Applying the Court's reasoning in Goodman to this case, we find that the first Chevron factor supports retroactivity.
The second and third Chevron factors also favor retroactivity. The limitations period that we apply to Bush's claim was not "occasioned by a change in the substantive law the purpose of which would not be served by retroactivity." Id. 107 S. Ct. at 2621. Finally, the equities of the case do not favor Bush; he is charged with knowledge of the unsettled nature of the law at the time he filed the complaint. Id. at 2622.
Because none of the Chevron factors hinder retroactive application of our decision, we apply the two year statute of limitations to Bush's claim. Because he filed his action more than two years after he was terminated, his claim is time barred. Accordingly, we grant Edison's motion to dismiss this claim.
For the reasons given above, we grant Edison's motion to dismiss the § 1981 claim and the Rehabilitation Act claim. Any amendment to the complaint is to be filed on or before March 16, 1990. It is so ordered.
Dated February 22, 1990