WASHINGTON -- Companies with Jewish owners, officers or employees have a right to sue for damages under federal civil rights law when other businesses discriminate against them out of religious prejudice, a federal appeals court ruled yesterday.
When other businesses refuse to deal with a firm because of the religious faith of its owners or staff, that action causes injury to the firm, the U.S. Circuit Court of Appeals here said in its unanimous ruling.
A company need not have been set up especially to further minorities' interests to be protected by federal civil rights law, according to the court's ruling. The company itself has its own interest in not being the target of religious, race, sex or ethnic bias, the circuit court found.
But, in another part of the ruling, the circuit court split 2-1 in concluding that civil rights law does not apply to every kind of business dealing that may be thwarted by religious or other discrimination. The court said that it is not a violation of civil rights law to terminate an existing contract because of bias against a firm's owners or staff.
Civil rights law, it said, protects the right of everyone to enter equally into contracts. But, according to the court, the Supreme Court has said the law only involves the actual arrangement of contracts at the outset, not conduct which occurs after the contract has gone into effect.
Thus, a termination is outside the protection of the law against bias, it ruled.
The decision came in the case of a Washington firm, Computer VTC Security International Inc., which had a contract for more than four years to supply computer software to Group Health Association Inc., a health maintenance organization here.
Computer Security's only shareholders are its president, Alan F. Gersman, and his wife.
Mr. Gersman contended in Computer Security's lawsuit against GHA that there was no problem in the two firms' dealings until 1986, when Mohammed Ghafori became the manager of information systems for GHA.
One of Mr. Ghafori's assistants was said to have asked Mr. Gersman if he was Jewish. When told that he was, Mr. Ghafori decided to end the contractual relationship.
Computer Security and Mr. Gersman sued under federal civil rights law and under District of Columbia human rights law.
A federal judge who heard the case ruled that neither the firm nor Mr. Gersman personally had a right to sue under either law.
Yesterday, the Circuit Court said the firm could sue on its own behalf because it claimed to be a victim itself of alleged discrimination based on religion. But, Mr. German himself could not sue, because he had not shown he was harmed by the bias, the court said.
The court then went on to rule that the kind of business action -- contract termination -- was not covered by either the federal or the district law.