Classical Nostalgia: Racism, Contract Ideology, and Formalist Legal Reasoning in Patterson v. McLean Credit Union

Introduction

Racial prejudice and the economic violence of classical liberal philosophy have long existed in symbiosis. Liberal theory provides a set of tools of op- pression with which to perpetuate the exclusion and exploitation of an eco- nomic underclass; racism serves to delineate a significant portion of that class. To adherents of a liberal cosmic order, liberty entails permission to act up to the point where one’s action harms another. So long as power elites succeed in defining such harm to suit their own interests, liberal theory maintains the distribution of power. Contract, defined as a discrete transaction between parties presumed to hold equal knowledge and power, is the fundamental expression of liberal legal theory. This private law foundation maintains a pervasive influence upon the economic landscape of legal culture, extending so far as to shape even the contours of civil rights jurisprudence by obscuring the race-based elements of economic conflict behind the talisman of the neutral exercise of free will.

In Patterson v. McLean Credit Union, Justice Kennedy, writing for a majority of the Supreme Court, found that racial harassment occurring after the formation of a contract is not actionable under section 1981. Justice Kennedy reasoned that such racial harassment did not infringe upon the statutorily protected right to “make and enforce contracts.”‘ While most professional attention has focused upon whether section 1981 reaches private discrimination, it is the private law model itself which serves to thwart the achievement of non-discriminatory relations in contract. When Justice Kennedy states that racial harassment relating to the condition of employment “is not actionable under § 1981” because the statute “covers only conduct at the initial formation of the contract,” he espouses a formalistic conception of contracting. This model posits an atomistic world of independent parties meeting at a singular moment in time, at which point the voluntarily assumed obligation attaches. Nothing else is relevant. By disregarding the behavior and position of the parties, the majority’s view harkens back to the classical liberal world of the pursuit of self-interest.

The legal world has not, however, remained frozen in the late nineteenth-century world of classical legal thought – at least not entirely. Justice Kennedy’s contract model fails to account for government regulation of consumer and workplace relations, the inquiries of modem legal theory, and development in contract law, all of which have disturbed the tidy home of liberal contract theory. These developments have challenged power distributionsthat favored stronger parties. From “good faith” and “unconscionability” under the Uniform Commercial Code, to the Occupational Safety and Health Act and the Federal Trade Commission Act, II substantive contract law reflects a rejection of significant portions of the classical contract model. This rejection largely results from the analyses of power disparities developed by Legal Realism in the 1930s, as well as the societal dynamics which created the welfare state. Such criticism continues through the private law inquiries of Critical Legal Studies (CLS) and contract relationalism.

In short, the Patterson majority’s analysis of section 1981 represents a fossilized conception of the nature of contractual relationships, replete with antiquated visions of textualism and a presumed equality of bargaining power. Such a vision presupposes a simplistic, binary model of social interaction, smacking of late nineteenth-century notions of formal equality, and grounded in a ruthless laissez-faire philosophy. Viewed from this perspective, Patterson marks a return to the formalist reasoning of the classical period that threatens to reinvigorate the partnership of economic violence and racial subjugation characteristic of that era.

This Article will examine the power dynamics underlying the majority’s analysis in Patterson. Although Congress recently overturned the specific holding of Patterson,” the analysis utilized in the majority opinion reflects a conservative jurisprudential trend. The immediate concern is not the Court’s interpretation of section 1981, which now covers post-contract formation activity, but the mode of legal reasoning employed by the Patterson majority. In addition to presenting an analysis of the Court’s reformulation of a nineteenth-century judicial method, this Article attempts to lay some of the conceptual foundations for a proper interpretation of the section 1981 ban on racial discrimination in contracting. By deconstructing the formalist presupposition of a bright line dividing civil rights law from other bodies of law, the analysis will connect formalism in economic relations to the legal doctrine of formal equality to show how they combine to oppress minorities through economic violence.

In Part I, I begin with a conceptual journey through Patterson v. McLean Credit Union, emphasizing the Court’s use of formalism and classical contract methods to restrict the scope of section 1981. Part II explores the historical antecedents of the method of judicial reasoning utilized in Pattersonby exam- ining the conditions under which the freedmen were obliged to contract in the

Reconstruction era and the late nineteenth century. The rise of classical contract theory during this period was part of the larger ascendancy of High Formalism, writ large as freedom of contract, triumphant individualism, and formal equality. The Article then traces two strands of the incorporation of civil rights norms into private law. In Part III, I examine the Supreme Court precedents that apply a statutory imposition of a broad mandate of nondiscrimination in the economic realm. This Part focuses on sections 1981 and 1982, both of which derive from the 1866 Civil Rights Act, to show that this mandate precludes the kind of formalism adopted by the majority in Patterson.

Finally, in Part IV, I examine internal critiques of contract theory that have emerged in twentieth-century legal scholarship. Legal Realism and Crit- ical Legal Studies reject the formalist presupposition of a strict boundary that cordons private law from other legal areas and interpret contract law as a means to perpetuate power disparities. Relationalism attempts to reconstruct the rights and obligations under a contract to include norms that reflect underlying social values. Rejecting the formalist presumption that only “objectively” determinable criteria may be used to give content to a contract’s terms, relationalism attempts to incorporate multiple perspectives, including that of the less powerful party to the contract, into shaping the underlying norms that should govern a contractual relationship. Brenda Patterson did not enter into a contract that bound her to an employment relationship which entailed harassment on account of her race. The Patterson majority’s great flaw is that it failed to take this perspective into account when determining the scope of section 1981.

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