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SMITH v. JONES WAREHOUSE

United States District Court, Northern District of Illinois, E.D


August 27, 1984

CLAUDE SMITH, PLAINTIFF,
v.
JONES WAREHOUSE, INC., ET AL., DEFENDANTS.

The opinion of the court was delivered by: Shadur, District Judge.

MEMORANDUM OPINION AND ORDER

Claude Smith ("Smith") charges his former employer Jones Warehouse, Inc. ("Jones") with employment discrimination in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e to 2000e-17.*fn1 Jones has moved for dismissal under Fed.R.Civ.P. ("Rule") 12(b)(1) and 12(b)(6) on the ground Jones does not meet the definition of an "employer" to which Title VII § 701(b), 42 U.S.C. § 2000e(b) applies.*fn2 Both sides have submitted evidence in support of their positions. For the reasons stated in this memorandum opinion and order Jones's motion is denied.

"Employer" in Title VII terms means only (42 U.S.C. § 2000e(b)) "a person engaged in an industry affecting commerce who has fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year." Both sides agree if Jones is evaluated without reference to any related entities it is not an "employer," because it always had less than 15 employees. However Smith argues Jones and its parent company, called Frank E. Greene & Son, Inc. ("Greene") during the relevant calendar years, should be considered as a single entity for Title VII purposes. If such an aggregation of employees is warranted, both sides agree the resulting Jones-Greene entity had at least 15 employees at all relevant times.

Jones originally claimed employers may be aggregated only if their separate existence is a "sham." It proved the companies were in fact separate legal entities and thus showed there was no "sham." But "sham" is not the test. For National Labor Relations Board purposes, existence of a joint employment relationship depends on four criteria: interrelation of operations, common management, centralized control of labor relations and common ownership. See Radio & Television Broadcast Technicians Local Union 1264 v. Broadcast Service of Mobile, Inc., 380 U.S. 255, 256, 85 S.Ct. 876, 877, 13 L.Ed.2d 789 (1965) (per curiam). Baker v. Stuart Broadcasting Co., 560 F.2d 389, 392 (8th Cir. 1977) first applied that same standard to Title VII. It has been applied consistently ever since. See Armbruster v. Quinn, 711 F.2d 1332, 1337-38 (6th Cir. 1983), and cases cited therein.

Both sides now have proffered evidence (documents, affidavits and a deposition transcript) on those four factors. In evaluating that evidence, this Court draws all reasonable inferences in favor of Smith as the non-moving party:

    1. To the extent Jones's motion is properly
  characterized as a Rule 12(b)(6) motion for
  failure to state a claim (see n. 2), the last
  sentence of Rule 12(b) requires it to be treated
  as one for summary judgment under Rule 56.*fn3

    2. Even if Jones's motion were properly viewed
  as pertaining to subject matter jurisdiction
  under Rule 12(b)(1), this Court would tentatively
  draw such inferences in favor of the exercise of
  jurisdiction, reserving until trial the question
  whether Smith has justified application of Title
  VII by a preponderance of the evidence.

Each of the four factors weighs at least to some extent in favor of viewing Jones and Greene as a single entity:

    1. There was a fair amount of interrelation
  between the operations of Jones and Greene. They
  were located in a single building, which Greene
  owned and part of which Jones leased from Greene.
  Greene was an important customer of Jones, which
  stored and delivered Greene's merchandise for a
  fee. Greene sold clerical and accounting services
  to Jones.

    2. Jones and Greene had common management at
  the upper levels. Both their slates of corporate
  officers and their boards of directors were
  identical.

    3. Centralized control of labor relations is
  the most important of the four factors.
  General Drivers, Warehousemen and Helpers, Local
  Union No. 89 v. Public Service Co. of Indiana,
  705 F.2d 238, 242 (7th Cir. 1983). Control of labor
  relations by Jones and Greene, if not wholly
  centralized, was certainly interrelated:

      (a) Most of Jones's employees were unionized.
    Its two who were not unionized operated under
    the same personnel guidelines and policies as
    Greene's employees (all of whom were
    non-union). Those guidelines were issued by
    Greene's parent company. Jones's two
    non-unionized employees were paid by Greene and
    received W-2 forms listing Greene as their
    employer. Jones reimbursed Greene for the
    salaries of those two employees.

      (b) On one occasion a Jones employee received
    a letter of termination on Greene stationery,
    sent by the president of both Jones and Greene.
    He acted in his capacity as Greene president
    because the employee had made a bad impression
    on Greene's customers while delivering
    merchandise.

      (c) Occasionally a Greene employee
    substituted for one of Jones's non-unionized
    employees.

      (d) Jones's lower level managers occasionally
    sought assistance from Greene. For example,
    Greene hired counsel for Jones in this
    litigation.

    4. Common ownership is present, as Greene owned
  all of Jones's outstanding stock.

All four factors taken together present at least "a prima facie case" for disregarding the legal separateness of Jones and Greene. See Armbruster, 711 F.2d at 1335, quoting from Welsh v. Gibbs, 631 F.2d 436, 438-39 (6th Cir. 1980), cert. denied, 450 U.S. 981, 101 S.Ct. 1517, 67 L.Ed.2d 816 (1981). Even without the benefit of all reasonable inferences, Smith is entitled not to have his case dismissed at this early stage of the proceedings.

Jones's motion to dismiss under Rule 12(b)(1) and 12(b)(6) is denied. Jones is ordered to answer Complaint Count II on or before September 7, 1984.


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