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Fighting unfair trade practices against minority-owned businesses (as published in Connecticut Post and New Haven Register on August 23, 2020)

In an ideal world, no business would be disadvantaged because its owners and/or employees are minorities, women or members of another historically marginalized group.

We do not live in an ideal world.

Given systemic racism, gender and other inequities, minority-owned businesses face obstacles to success that others do not, simply because of the identity of their owners. The Connecticut Unfair Trade Practices Act may provide a means of fighting back.

A Minority Business Enterprise in Connecticut must have at least 50 percent ownership by one or more minority person(s) who exercise operational authority over daily affairs, have the power to direct management and policies, and receive the beneficial interests of the business. A minority is defined as a person(s) who is Black, Hispanic, Asian, American Indian, has origins in the Iberian Peninsula, a woman, or an individual with a disability. While the formal definition of MBE includes these enumerated groups, the law protects other disadvantaged groups, such as the LBGTQIA+ community.

CUTPA prohibits unfair practices in trade or commerce. A practice is unfair if it: (1) offends public policy as it has been established by statutes, the common law, or other established concept of unfairness; (2) is immoral, unethical, oppressive, or unscrupulous; and/or (3) causes substantial injury to consumers, competitors or other business persons. All three criteria of this test, commonly referred to as the “Cigarette Rule,” do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three. A prevailing party under CUTPA may secure injunctive relief to eliminate a discriminatory practice and recover both punitive damages and attorney fees.

Although CUTPA is the most litigated statute in Connecticut, with thousands of decisions, there are very few cases dealing with discriminatory business practices. This is because most discrimination cases arise in the employment context and CUTPA does not apply to the relationship between employers and employees.

CUTPA does, however, apply to dealings between businesses, including competitors and those in a contractual relationship. One business may decide not to do business with a minority firm because of racial or other discriminatory animus. Not only might such conduct be immoral, unethical, oppressive or unscrupulous under the second prong of the Cigarette Rule, it may also violate statutes or regulations that could establish a violation of public policy under the first prong.

By way of example: part of the Civil Rights Act of 1866 guarantees “all persons … the same right … to make and enforce contracts … as is enjoyed by white citizens.” The definition of “persons” includes business entities. This provision prohibits discrimination on the basis of race in connection with, among other things, the making and enforcement of contracts. Similarly, the Equal Protection clause of the 14th Amendment to the Constitution directs that all persons similarly situated should be treated alike and prohibits selective treatment based on race, religion, intent to inhibit or punish the exercise of constitutional rights, or malicious or bad faith intent to injure the plaintiff. The public policy against unequal treatment may provide fertile ground to establish a violation of public policy under CUTPA, particularly when state action is involved.

Proving discriminatory conduct and that it has caused harm always presents challenges, as an offending business is likely to claim some other business reason as a pretext for its conduct. It is surprising, nonetheless, how frequently parties blindly include evidence of discrimination in emails, text messages and other communications. Plaintiffs can also look to utilize statistical information showing disparate treatment to meet their burden of proof.

Discriminatory business practices call for countervailing action. CUTPA may provide a means to right these wrongs.

Atty. David A. Slossberg leads the business litigation practice at Hurwitz, Sagarin, Slossberg & Knuff. He is an editor of the definitive treatise on unfair trade practices in Connecticut. He can be reached at [email protected].