§6.

8 ALTERNATIVE LEGAL APPROACHES TO ELIMINATE PRIVATE CLUB

DISCRIMINATION: STATE ACTION, TAX SUBSIDIES, AND SECTION 1981

Because Title II does not prohibit all private activity that is discriminatory, civil rights

advocates have devised additional legal arguments to challenge the legality of such

practices. Although these approaches have not been overwhelmingly successful, the

following subsections briefly summarize three major strategies deployed by advocates to

attack discriminatory membership practices: (1) attempting to uncover a significant nexus

to state action, (2) challenging the tax exempt status of discriminating private

organizations, and (3) using §1981 to circumvent Title II’s private club exemption.

§6.8.1 State Action and Private Clubs

Advocates have mounted several investigations of discriminating facilities to uncover

significant “state action” in the contacts between the defendants’ objectionable policies

and the government’s insistence on or acquiescence in these policies. The outcome of this

litigation has been as indeterminate as the state action concept itself. Increasingly subtle

forms of discrimination and ever more complex theories of state involvement have led to

divided courts and unsatisfactory results. From a doctrinal standpoint, the state action

cases are, as Professor Charles Black described them, “a conceptual disaster area.”1

1
Charles Black, The Supreme Court, 1966 Term — Foreword: “State Action,” Equal Protection, and
California’s Proposition 14, 81 Harv. L. Rev. 69, 95 (1967). Professor Laurence Tribe makes a heroic effort
to make order out of chaos by accepting that the state action cases make no sense. In this way, he explains,
it is possible “to construct an ‘anti-doctrine,’ an analytical framework which, in explaining why various
cases differ from one another, paradoxically provides a structure for the solution of state action problems.”
Laurence Tribe, American Constitutional Law §18-1 (2d ed. 1988).
Professor Tribe’s approach is itself complex, but at bottom, he views the basic flaw in the present approach
to be the single-minded search by courts for a government actor whenever the state action challenge is
raised. This is appropriate, but Professor Tribe warns that the characterization of an actor as private or
governmental properly depends upon external symbols no less than upon the government’s internal criteria
for identifying agents as its own. In addition, courts must ask the question “whether federal or state law can
validly distribute authority between governmental and private actors as it purports to do.” Id.
 The major post-Brown public accommodation cases presenting state action issues

illustrate Professor Black’s criticism and provide an appropriate prelude for an

examination of state action challenges to private clubs whose racially discriminatory

policies are beyond the scope of Title II.

In Burton v. Wilmington Parking Authority,2 the Court held that the leasing of

government-owned facilities to private operators is sufficient state involvement to require

the operation of the restaurant on a desegregated basis. The Court warned, however, that

this decision was based on the “facts and circumstances” of the record and that, in other

cases, “sifting and weighing of the circumstances” should determine the true significance

of “non-obvious involvement of the state in private actions.”

The restaurant’s policy was deemed state action because the parking authority had so

insulated itself into a position of interdependence with the coffee shop that they had to be

regarded as a joint venture between the public authority and private lessee. But in other

situations seemingly involving governmental connections as clear and critical as those in

Burton, the Court has refused to find discriminatory state action. The Court has declined

to recognize a constitutional violation when a state merely applies “race neutral” laws or

acts in a racially neutral manner even if that conduct has direct discriminatory

consequences.3

In the context of public accommodations, Palmer v. Thompson4 serves as such an

example. The Court upheld a decision of the City of Jackson, Mississippi, to close rather

2
365 U.S. 715 (1961).
3
See Evans v. Abney, 396 U.S. 435 (1970).
4
403 U.S. 217 (1971). This case grew out of a 1962 district court order to desegregate all public
recreational facilities of Jackson. Although the city complied with more facilities, the pools were not one of
them.
than desegregate five public swimming pools. Justice Black, writing for the majority,

conceded that closing public pools was state action but reasoned that there was no equal

protection problem because both blacks and whites were deprived of swimming facilities.

Although this opinion has been widely criticized, it foreshadowed the civil rights

decisions of the past two decades, which emphasize neutral impact as an affirmative

defense to equal protection claims.5

Within an array of less than precise and consistent standards, the Court addressed the

issue of state action specifically in the context of a private club. In Moose Lodge No. 107

v. Irvis,6 the majority in a six-to-three decision concluded that the licensing of Moose

Lodge by the Pennsylvania Liquor Control Board did not create a “symbiotic

relationship” between state and private entity as in Burton, so as to hold the Lodge’s

policy of refusing service to black guest of members unconstitutional.

Irvis, a respected state legislator, did not dispute the right of private clubs to choose

members on a racially exclusive basis, but relying on Burton, he argued that the licensing

process involving extensive regulation and control by the Liquor Control Board

constituted adequate state involvement to render his exclusion illegal. Speaking for the

Court, Rehnquist said that the mere receipt of a state service could not be enough to

constitute state action.

In a sharply worded dissent, Justice Douglas found that the complete and pervasive

nature of the state regulation, coupled with the limited number of liquor licenses

available, created state action. Justices Brennan and Douglas, in a separate dissent, agreed
5
In dissent, Justice Douglas observed that “abolition of a designated public service becomes a device for
perpetuating a segregated way of life.” Justice White, joined in his dissent by Justices Brennan and
Marshall, stressed the state action involved in closing public pools: “The fact is that closing the pools is an
expression of official policy that Negroes are unfit to associate with whites.”
6
407 U.S. 163 (1972).
that the pervasive state regulation “intertwines the state with the operation of the Lodge

bar in a significant way [and] lend[s] [the State’s] authority to the sordid business of

racial discrimination.” Justice Marshall joined both dissents.7

With the Supreme Court conveying so many signals in state action challenges to

discriminatory practices in private facilities receiving government subsidies, lower courts

have found themselves reaching different results on fairly similar factual situations. Yet,

for the most part, state action has proven an uncertain means to breaking down such

discrimination barriers.

§6.8.2 Private Clubs and Public Tax Subsidies

The cases proceeding from Burton and Moose Lodge trace a wavering line between

what constitutes a “private club,” and what “state action” creates liability under Title II.

Rather than directly attacking discriminatory membership policies, proponents of open

membership have attempted to pry open club doors by eliminating tax benefits conferred

upon these organizations.

The most frequently cited of these cases is McGlotten v. Connally. 8 In McGlotten, a

black male who was denied membership in Local Lodge 142 of the Benevolent and

Protective Order of the Elks (BPOE) sought a permanent injunction of federal tax

7
Several weeks after the Supreme Court’s Moose Lodge decision, the Pennsylvania Supreme Court, acting
on the appeal of an order by the state’s Human Relations Commission, held that the Lodge was a place of
public accommodation for guests subject to the state’s anti-discrimination law. Commonwealth v. Loyal
Order of Moose Lodge 107, 448 Pa. 451, 294 A.2d 594 (1972). The court explained that its law exempted
private club membership and guests on a racial basis, but that the lodge for years had opened its dining
room and bar facilities to public organizations for banquets and dinners on a nondiscriminatory basis, and
had thereby diminished its status as a purely private club. An appeal to the Supreme Court was dismissed
for lack of a substantial federal question. Loyal Order of Moose Lodge No. 107 v. Pennsylvania Human
Relations Commn., 409 U.S. 1052 (1972).

8
338 F. Supp. 448 (D.C. Cir. 1972).
benefits under the Internal Revenue Code to BPOE and other social clubs with racially

discriminatory membership policies. Under the IRC, the Elks were exempt from the

payment of income taxes and contributions made to the organization were tax deductible.

The court found for the plaintiff arguing that granting tax benefits to the Elks

represented government approval and encouragement of private discrimination that was

also contrary to the strong national policy against providing federal financial support to

those practicing discrimination.9 Distinguishing Moose Lodge (see §6.8.1), the court

noted that because a “symbiotic relationship” is created by tax exemptions, which did not

exist for state liquor licenses in Moose Lodge, the state could not “effectively abdicate”

its duty to uphold the Fourteenth Amendment.10

9
The McGlotten court further recognized the following: “We have no illusion that our holding today will
put an end to racial discrimination or significantly dismantle the social and economic barriers that may be
more subtle, but are surely no less destructive. Individuals may retain their own beliefs, however odious or
offensive. But the Supreme Court had declared that the Constitution forbids the Government from
supporting and encouraging such beliefs. By eliminating one more “nonobvious involvement of the State in
private conduct,” we obey the Court’s command to quarantine racism.”
10
McGlotten, citing Burton v. Wilmington Parking Auth., 365 U.S. 715, 888-889 (1961). For a highly
critical analysis of the McGlotten decision, see Boris Bittker & Kaufman, Taxes and Civil Rights:
“Constitutionalizing” the Internal Revenue Code, 82 Yale L.J. 51 (1972). Basically, the authors, while
sympathetic to the goal of eliminating governmental involvement in private discrimination, feel that the
court failed to fully comprehend the complexities of the tax structure. In addition to serious technical
failings, the authors fear that the McGlotten decision represents poor policy. They concede that the
objectives and membership qualifications of many groups and clubs are invidious but warn that “a
governmental program to discover and eradicate them necessarily imposes social costs; a society that tries
to punish every instance of man’s inhumanity to man may lose its humanity while crusading against the
enemy. The ‘right of free association’ and ‘the right of privacy’ . . . are labels recognizing the social value
of membership organizations and the dangers inherent in governmental controls. Like free speech and the
privilege against self-incrimination, however, the rights of free association and privacy cannot be reserved
for the noblest among us.
“If full sway is given to the McGlotten theory the tax allowances are equivalent to direct grants of public
funds and hence impose constitutional obligations on the recipient, no one will be immune. As we have
pointed out, the Internal Revenue Code is a pudding with plums for everyone. In theory, the ‘tax subsidy’
theory does not constrict the right of free association or the right to privacy, because the tax allowances can
be renounced by the recipient or eliminated by Congress. But the former remedy, by distinguishing among
associations by reference to their ideologies, would make some pay a high price for their enjoyment of the
rights in question. On the other hand, the congressional remedy of repeal, resting on the dubious premise
that there is a ‘constitutionally neutral’ definition of taxable income, would be costly to all associations.
“The McGlotten court sought to minimize these consequences by picking and choosing among tax
subsidies. But its distinctions, in our opinion, are unworkable and, as adumbrated by the court, impose or
withhold constitutional obligations in a puzzling fashion.”
 Although several courts have applied something like the “encouragement” test,11 the

question of whether state tax exemptions “encourage” discrimination, thereby creating a

symbiotic relationship with private actors, has not been conclusively determined.12

It is not certain whether the Supreme Court would have distinguished the liquor

license involved in the Moose Lodge case from the tax exemptions involved here, but

perhaps there is a clue in Bob Jones University v. Simon.13 The Internal Revenue Service

announced in 1970 that it would no longer allow tax-exempt status under §501(c)(3) to

private schools maintaining racially discriminatory admissions policies, and would no

longer treat contributions to such schools as tax deductible.

Bob Jones University is devoted to the teaching and propagation of fundamentalist

religious beliefs that include a ban on interracial relationships. In 1971, the school

Unlike the state action standards under the equal protection clause, application of which depends upon a
review of appropriate facts, the article concludes that the tax subsidy theory — even “as watered down” by
McGlotten — “turns on technical niceties of tax law that are unrelated to the impact of the organization’s
behavior on the persons excluded by its membership rules or other restrictive practices. It would, therefore,
be a mistake to use this theory to ‘constitutionalize’ the Internal Revenue Code.” 82 Yale L. Rev. at 86-87.
11
Pitts v. Wisconsin Dept. of Revenue, 333 F. Supp. 662 (E.D. Wis. 1971) (finding that a property tax
exemption to a segregated fraternal order was significant state action in violation of the Fourteenth
Amendment); see also New York City Jaycees, Inc. v. United States Jaycees, Inc., 377 F. Supp. 481
(S.D.N.Y. 1974) (granting a preliminary injunction against the expulsion of the local chapter for admitting
women, finding state action in the control exercised over the Jaycees through the federal funding process);
but see Junior Chamber of Commerce of Rochester, Inc. v. Jaycees, 495 F.2d 883 (10th Cir. 1974) (holding
that the federal organization could expel the local chapter for admitting women, because the expulsion
policies did not relate directly to the group’s administration of federal funds in a variety of national
programs).
12
But see Cornelius v. Benevolent Protective Order of the Elks, 382 F. Supp. 1182 (D. Conn. 1974)
(dismissing prayer for revocation of state tax exemptions, and redistribution of $11 million from the Elks
and Moose Lodges to the class of black men the plaintiff claimed to represent).
An alternate means of attacking discrimination in private organizations is suggested in Hawthorne v.
Kenbridge Recreation Assn, Inc., 341 F. Supp. 1382 (E.D. Va. 1972) (holding that a rural recreational
association that received a direct federal loan must consider membership applications without regard to
race, creed, or national origin), citing Title VI of the Civil Rights Act of 1964, 42 U.S.C. §2000(d) and 7
U.S.C. §1926 (permitting loans to nonprofit corporations for recreational development by rural residents).
The court determined that Congress intended to support public not private, groups for uses that would not
further racial segregation.

13
416 U.S. 725 (1974).
informed the IRS that it had no intention of admitting blacks and filed suit to enjoin

revocation of its tax-exempt status. The Supreme Court affirmed that the IRS decision is

not enjoinable under the Code unless it is clear that under no circumstances could the

government ultimately prevail. Noting the decisions in cases like McGlotten v. Connally

and Green v. Connally, the Court concluded that no such finding was possible in this

case.14

The denial of tax exempt status will not end discriminatory practices, but it does

make such policies more apparent and costly. Even though the Court has not set clear

parameters for removing tax exemption status for discriminatory practices of private

organizations, these cases and IRS regulations send a message that such exclusion will

not, at the very least, benefit from federal subsidization.

Interestingly enough, in Parents Involved in Community Schools v. Seattle School

District15, the Court struck down voluntary school integration plans in Seattle, Washington

and Louisville, Kentucky because the majority found that the challenged plans were not

narrowly tailored. The dissent emphasized that racial diversity is a compelling interest and

that school districts may use race-conscious means to achieve it. Justice Kennedy agreed with

this point, yet he faulted the Louisville plan because it did not sufficiently explain why and

how race was used in student assignments, and the Seattle plan because it defined diversity

solely in terms of black and white students. In conclusion, five divided opinions were written

revealing the Court’s understanding of Brown v. Board of Education16.

14
In 1982, Bob Jones University and Goldsboro Christian Schools, Inc., both sought a refund of
unemployment taxes paid, and the Internal Revenue Service counterclaimed for back taxes. In an opinion
that addressed both cases, the Supreme Court found that both schools had been denied tax-exempt status,
and it declared them liable for these ordinary taxes. Bob Jones Univ. v. United States Goldsboro Christian
Sch., Inc. v. United States, 461 U.S. 574 (1983).
15
127 S.Ct. 2738 (June 28, 2007)
16
347 U.S. 483 (1954).
 §6.8.3 Private Facilities and Section 1981

Title 42 U.S.C. §1981 provides in part that: “[a]ll persons within the jurisdiction of

the United States shall have the same right in every State . . . to make and enforce

contracts . . . as is enjoyed by white citizens. . . .”

On its face, §1981 would seem available to all victims of racial discrimination in

groups or accommodations upon a showing that, but for race, they would have been

admitted. While specifically excluding from its decision some of the most interesting

aspects of §1981’s scope, the Supreme Court in Runyon v. McCrary17 did utilize the

provision to narrow somewhat the ambit of what had been considered private

discrimination shielded from law.

In Runyon, the parents of black children made applications for admission to private

schools in response to brochures mailed to “resident” and advertisements directed to the

general public. Suits were filed under §1981 after the applications were denied because of

the children’s race. Based on the authority of Jones v. Alfred H. Mayer, Co., 18 Justice

Stewart found that the plaintiff’s rights under §1981 were violated by the private school’s

racially based restrictions. Application of §1981 did not violate defendant’s rights of

privacy because these rights are subject to reasonable government regulation, and the

Constitution places no value on discrimination.19

17
427 U.S. 160 (1976).
18
392 U.S. 409 (1968).
19
“The prohibition of racial discrimination that interferes with the making and enforcement of contracts for
private educational services furthers goals closely analogous to those served by §1982’s guarantee that ‘a
dollar in the hands of a Negro will purchase the same thing as a dollar in the hands of a white man.’ ”
Runyon v. McCrary, 427 U.S. at 179, citing Jones v. Alfred H. Mayer, Co., 392 U.S. at 443 (1968).
As to freedom of association, the First Amendment right to “engage in association for the advancement of
beliefs and ideas. . . .” recognized in NAACP v. Alabama, 357 U.S. 449 (1958), enables the white parents to
 Justice Stewart indicated that Runyon only presented the question of racial

discrimination in schools, not by social organizations. The case, he said, did not raise the

issue of whether the “private club” exemption of §201(e) operates to narrow §1981. But

he suggested that personal contractual relationships that are based on the close

association of parties, or that are the foundation of a close association, reflect a “purpose

of exclusiveness” other than racial discrimination. These purposes “would invoke

associational rights long respected.”

Challenging a bona fide private club under §1981 proved more difficult for Judge

Alvin B. Rubin in Perkins v. New Orleans Athletic Club. 20 Thomas P. Perkins, a black

Harvard College student, was denied admission to the club in spite of his membership in

the Harvard Club of Boston, which had an agreement of reciprocity with the Club in New

Orleans.21

send their children to schools that promote the belief that racial segregation is desirable, but the right does
not include the practice of excluding racial minorities, because, as indicated in Norwood v. Harrison, 413
U.S. 455, 469 (1973), “the Constitution . . . places no value on discrimination.” Invidious private
discrimination may be protected, but it has never been accorded affirmative constitutional protections.
As to parental rights, the First Amendment recognizes the parents’ right to send their children to a private
school, Meyer v. Nebraska, 262 U.S. 390 (1923); Pierce v. Society of Sisters, 268 U.S. 510 (1925), and
application of §1981 does not infringe on these rights.
As to rights of privacy, application of §1981 will implicate parental interests similar to those protected in
Roe v. Wade, 410 U.S. 113 (1973), and Griswold v. Connecticut, 381 U.S. 479 (1965), but while parents
have a constitutional right to select private schools that offer specialized instruction, they have no
constitutional right to provide their children with private school education unfettered by reasonable
government regulation. Wisconsin v. Yoder, 406 U.S. 205 (1972).
20
429 F. Supp. 661 (E.D. La. 1976).
21
Plaintiff was on a summer visit with his family, who resided in New Orleans. He had presented his
credentials at the New Orleans club’s reception desk and was admitted by the clerk; he entered the lounge
area, at which point the members present left the room en masse, complaining to the desk clerk because the
visitor was black. On instructions from the manager, the clerk requested plaintiff to leave, because he was
black. Plaintiff departed. Subsequently, the club canceled all of its reciprocal agreements with other private
clubs.
 The district court ruled on plaintiff’s claim that denial of admission was a violation of

Title II of the Civil Rights Act of 1964. Although the club’s exclusivity on nonracial

grounds made it a private club that would ordinarily be exempt under §201(e), the club

was subject to Title II based on its sponsorship of public activities, such as renting

ballrooms and selling food. Finally, the court found that the athletic club fell within the

narrow category of private organizations that are outside the reach of §1981. Judge

Rubin, generally liberal in civil rights matters, distinguished Runyon on the basis that,

unlike the schools in that case, the athletic club did not serve a vital community role and

could be categorized as a closed, exclusive, independent organization.

The preceding cases suggest that established private clubs, based largely on racial

exclusiveness, are permitted to practice discrimination with impunity. Private schools,

however, may have difficulty barring blacks if they seek students from the public at large,

as most new private schools must do.

In the Civil Rights Act of 1991,22 Congress declared that it fully intends for §1981 to

reach nongovernmental as well as governmental discrimination. The Act added a new

subsection (c) that flatly declares “[R]ights protected by this section are protected against

impairment by nongovernmental discrimination and impairment under color of State

law.”23 This new section in the 1991 Act was enacted under Congress’s Thirteenth

Amendment powers, and specifically responded to the Court’s decision in Patterson v.

McLean Credit Union.24 Although Congress expressly intended the 1991 Act to expand

the scope of civil rights statutes in order to provide adequate protection for victims of

discrimination, its success is uncertain. Section 1981 has been applied in a variety of
22
Pub. L. No. 102-166, 105 Stat. 1071 (1991).
23
42 U.S.C. §1981; see Wicks v. Mississippi State Employment Serv., 41 F.3d 991 (5th Cir. 1995).
24
491 U.S. 164 (1989) (applying §1981 to a private discrimination issue based primarily on stare decisis).
contexts;25 however, proving intentional discrimination remains a high bar for any victim

of discrimination.26

Without attempting to give this area of race law a priority it may not deserve, it

should be profitable to review the scope of private discrimination still permitted by the

law, trying at the same time to understand how conduct which Congress and the courts

have found deeply hurtful and humiliating to blacks can be equated with concepts of

liberty, privacy, and freedom of association. That they were, and are, conveys a message

with too much clarity to ignore.

The 40-year history of efforts to implement the public accommodations provisions of

Title II and to supplement the judicially revived language in §1981 were not — as was

generally believed during the course of those efforts — a necessary struggle. Rather, the

decisions in the Jackson, Mississippi swimming-pool closing case, Palmer, the insulation

from state action concepts of the private club in Moose Lodge No. 107, and the deemed

nonapplicability of §1981 to a major, private club in Perkins all represent devices to

retain remnants of racial exclusivity.

Today, lower status whites, while without the law’s protection, can — and often do —

discriminate against black patrons. Middle and upper class whites sometimes rely on the

25
See, e.g., Rivers v. Roadway Express, Inc., 511 U.S. 298 (1994) (holding that §1981 is not limited to
employment; it covers all contracts); Homan v. Resading, 963 F. Supp. 485 (E.D. Penn. 1997) (plaintiffs,
interracial couple, stated a §1982 claim based on city’s enforcement of ordinances against them that were
not enforced against white property owners in a similar manner; survived motion to dismiss); Bermudez
Zenon v. Restaurant Compostela, Inc., 790 F. Supp. 41 (D.P.R. 1992); Cook v. Twin Oaks Country Club,
122 F. Supp. 1064 (W.D. Mo. 2000); Crawford v. Willow Oaks Country Club, Inc., 66 F. Supp. 2d 767
(E.D. Va. 1999) (holding that private membership club exemptions of Title VII and Title II did not apply to
§1981 in the context of employment discrimination).
26
See National Assn. of Govt. Employees v. City Pub. Serv. Bd., 40 F.3d 698 (5th Cir. 1994) (proof of
intentional discrimination is an essential element of §1981).
racially insulating potential of “privacy,” but generally find that economic status is

sufficient to insure that no more than a few “token” blacks gain access to facilities that

retain the prestige of color exclusivity. This is all very sad and not less so because it is far

from clear that the current trend is not a retreat toward more segregation, even though

current barriers rely more on economic than openly racial factors. The remedies, aimed at

controlling what is assumed a nonconforming, biased few, are thus rendered relatively

ineffective because they ignore the temptations and tendencies to exclude or otherwise

discriminate that are obviously deeply ingrained, widespread, and incapable of easy

analysis on grounds of racial animus or economic advantage. The study of discrimination

by new car dealers against black and white female buyers summarized in the next section,

and the discussion of mortgage discrimination, exemplify the depth of the phenomenon.