United States District Court, Northern District of Illinois, E.D
October 3, 1984
EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, PLAINTIFF,
MTC GEAR CORPORATION, AND PROFILE GEAR CORPORATION, DEFENDANTS.
The opinion of the court was delivered by: Aspen, District Judge:
MEMORANDUM OPINION AND ORDER
The Equal Employment Opportunity Commission ("EEOC") brought
this action against defendants MTC Gear Corporation ("MTC")
and Profile Gear Corporation ("Profile"), alleging that
defendants have maintained a discriminatory disability
benefits policy in violation of Title VII of the Civil Rights
Act of 1964. 42 U.S.C. § 2000e et seq. Profile has moved for
summary judgment under Fed.R.Civ.P. 56(c). For the reasons
stated below, we deny Profile's motion.
Facts and Procedural Posture
Profile's summary judgment motion raises two issues: (1)
whether the Supreme Court's decision in Newport News
Shipbuilding & Dry Dock Co. v. EEOC, 462 U.S. 669, 103 S.Ct.
2622, 77 L.Ed.2d 89 (1983), should be applied retroactively to
the discriminatory employment practices alleged in the
complaint; and (2) whether Profile can be held liable under
Title VII as a corporate "successor" to MTC.
For now we will only sketch the factual background. We will
develop more facts later as they become relevant to the legal
arguments. The complaint alleges that both Profile and MTC
manufacture gears and other parts for use in motor vehicles.
The parties do not dispute that on December 19, 1983, Profile,
a new corporation, bought substantially all of MTC's assets
from ITT Industrial Credit Company, a secured creditor of MTC.
The substance of the complaint alleges that since 1979 MTC
has violated Title VII by imposing special limitations on its
coverage of the medical expenses incurred by its male
employees, while imposing no such limitation on its coverage
of the medical expenses incurred by its female employees for
the medical expenses of their spouses. The complaint also
alleges that since its birth in January 1984, Profile has
continued MTC's discriminatory medical coverage policy. The
parties seem to agree that this policy falls within the
embrace of Newport News.*fn1 Below we will assume so, without
finally deciding the issue, which we leave for a later motion
for summary judgment.
The EEOC filed the complaint on May 23, 1984, following an
investigation which dates back to 1981. On July 6, 1984,
Profile filed its motion for summary judgment. No answer has
been filed, and to our knowledge discovery has not begun.
Although it is unusual for a defendant to move for summary
judgment before answering the complaint (such motions are
usually styled as ones to dismiss under Rule 12), we will
consider Profile's motion as one under Rule 56. See
Fed.R.Civ.P. 56(b) (defendant may, "at any time," move for
summary judgment); generally 10 C. Wright, A. Miller & M. Kane,
Federal Practice & Procedure, § 2718.
Retroactivity of Newport News
Before reaching the successorship issue, we must decide the
threshold issue of whether the Newport News decision should
apply retroactively to MTC's alleged disability policy.*fn2
"Generally, a decision which changes existing law or policy is
given retroactive effect unless retroactive application would
cause `manifest injustice.'"
NLRB v. Lyon & Ryan Ford, Inc., 647 F.2d 745, 757 (7th Cir.
1981), cert. denied, 454 U.S. 894, 102 S.Ct. 391, 70 L.Ed.2d
209 (1981), quoting Chevron Oil Co. v. Huson, 404 U.S. 97, 92
S.Ct. 349, 30 L.Ed.2d 296 (1971). The Supreme Court in Chevron
created a three-part test to determine whether a civil,
non-constitutional precedent should be applied prospectively
(1) Does the decision establish a new principle
of law, either by (a) overruling clear past
precedent on which litigants may have relied,
or (b) deciding an issue of first impression
whose resolution was not clearly
(2) Will retrospective application of the rule
further or retard its operation, considering
the history of the rule, and its purpose and
(3) Will retroactivity create substantial
inequities, i.e., injustice or hardship for
one of the parties?
404 U.S. at 106-07, 92 S.Ct. at 355; Lyon & Ryan Ford, 647 F.2d
at 757. All three parts of the Chevron test must be met to
preclude retroactivity; moreover, the Court must presume that a
decision will be applied retroactively, and the party opposing
retroactivity bears the burden of overcoming the presumption.
Lyon & Ryan Ford, 647 F.2d at 757; Valencia v. Anderson
Bros. Ford, 617 F.2d 1278
, 1288-89 (7th Cir. 1980), rev'd on
other grounds, 452 U.S. 205
, 101 S.Ct. 2266, 68 L.Ed.2d 783
(1981); Kumrow v. Teamsters General Local No. 200, 579 F. Supp. 393
395 (E.D.Wis. 1983). We hold that Profile has failed to
meet its burden of satisfying the requirements of Chevron, and
therefore Newport News may apply retroactively to this case.
Profile argues that Newport News "overruled clear past
precedent on which" the defendants "may have relied." On May 9,
1983, the Seventh Circuit decided EEOC v. Joslyn Mfg. and
Supply Co., 706 F.2d 1469 (1983), which reached a conclusion
opposite to the one in Newport News. The Supreme Court handed
down Newport News just forty-two days later, on June 20, 1983,
prompting the Seventh Circuit to vacate its earlier holding.
724 F.2d 52 (Dec. 13, 1983). Thus, if Joslyn can be considered
"clear past precedent," it achieved that status for only
forty-two days. The EEOC argues that Joslyn was not "clear past
precedent" because the Court itself knew that the Circuits were
split on the issue and the Supreme Court's decision was
imminent. 706 F.2d at 1476. We need not decide whether Joslyn
was clear past precedent, because even assuming that it is,
Profile has failed to prove that it is one "on which the
litigants may have relied." Profile concedes it did not exist
when Joslyn was decided, so it clearly could not have relied on
that case. And Profile has presented no evidence that MTC "may
have relied" on Joslyn during the opinion's brief, forty-two
day lifetime. The complaint alleges that MTC's policies have
continued with no gap from 1979 — well before Joslyn — until
now. No evidence suggests that during the forty-two days MTC
reassessed its policy and decided to keep it in reliance on
Joslyn. Even if such evidence did exist, it would not affect
liability in general, but could only shave a bit from possible
damages arising from that time period. Moreover, if such
evidence did exist, we do not believe that Profile could meet
the third, or "hardship," part of the Chevron test, since its
reliance could only have lasted forty-two days, involving no
change in policies or operations.
We agree with the EEOC that between 1979 and May 1983, there
was no clear past judicial precedent on the disability
benefits issue. Compare Newport News Shipbuilding & Dry Dock
Co. v. EEOC, 667 F.2d 448 (4th Cir. 1982), aff'd en banc,
682 F.2d 113 (1982) (finding Title VII violation), with EEOC v.
Lockheed Missiles and Space Co., 680 F.2d 1243 (9th Cir. 1982)
(finding no Title VII violation), vacated, ___ U.S. ___, 103
S.Ct. 3530, 77 L.Ed.2d 1383 (1983). Moreover, in 1979, EEOC
guidelines declared that the pregnancy-related coverage at
issue was unlawful under the 1978 Amendments to Title VII. See
Newport News, 462 U.S. at ___, nn. 8, 9, 103 S.Ct. at 2625-26.
In sum, then, Profile has failed to meet its burden of showing
that the first Chevron requirement is satisfied for the period
before Joslyn was decided, as well as for the short gap between
Joslyn and Newport News. Thus, Newport News may apply
retroactively to cover the full time period of the Title VII
violation alleged in the complaint.*fn3 See also EEOC v.
Atlanta Gas Light Co., No. C81-1090A (N.D.Ga. Dec. 14, 1983)
(holding that Newport News applies retroactively).
The Succession Issue
On the issue of whether Profile is MTC's "successor," we
must deny summary judgment unless the record shows that "there
is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law."
Fed.R.Civ.P. 56(c). As the movant, Profile bears the burden of
showing that no genuine issue of material fact exists.
Korf v. Ball State University, 726 F.2d 1222, 1226 (7th Cir.
1984). We must consider the evidence, and the reasonable
inferences drawn from the evidence, in the light most favorable
to the EEOC, the party opposing summary judgment. Big O Tire
Dealers, Inc. v. Big O Warehouse, et al., 741 F.2d 160, 163,
(7th Cir. 1984). If Profile fails to meet its "strict burden of
proof," we must deny summary judgment. Id. But if Profile does
meet its initial burden, we must see whether the EEOC has met
its resulting burden of establishing a genuine issue as to that
fact. To meet this burden, the EEOC must rely on more than the
bare pleadings or bald assertions. Fed.R.Civ.P. 56(e); Big
O, 741 F.2d at 163-164, slip op. at 6-7; Posey v. Skyline
Corp., 702 F.2d 102, 105 (7th Cir. 1983), cert. denied, ___
U.S. ___, 104 S.Ct. 392, 78 L.Ed.2d 336 (1983). With these
standards in mind, we turn to Profile's motion.
The Seventh Circuit has not defined the standards for
holding a successor liable for the Title VII violations of its
predecessor. Indeed, it has never addressed whether a
successor doctrine should apply to Title VII at all. The Sixth
Circuit addressed this issue first, holding that a successor
doctrine applies to Title VII cases. MacMillan v. Bloedel
Containers, Inc., 503 F.2d 1086 (6th Cir. 1974). The court
considered the development of Supreme Court successorship
doctrine under the National Labor Relations Act ("NLRA"),*fn4
concluding that "the emphasis that both [the NLRA and Title
VII] place on extending protection to and providing relief for
the victims of prohibited practices" justified holding a
corporate successor liable for the Title VII violations of its
forebear. 503 F.2d at 1091. The Court then borrowed "a
multiplicity of factors" from the labor context, which it held
should be applied on a case-by-case basis to determine whether
a corporate successor should be held liable:
(1) whether the successor company had notice of
(2) the ability of the predecessor to provide
(3) whether there has been a substantial
continuity of business operations;
(4) whether the new employer uses the same plant;
(5) whether he uses the same or substantially the
same work force;
(6) whether he uses the same or substantially the
same supervisory personnel;
(7) whether the same jobs exist under
substantially the same working conditions;
(8) whether he uses the same machinery, equipment
and methods of production; and
(9) whether he produces the same product.
Id. at 1094 (citations omitted). Two other circuits have
adopted the MacMillan approach.Trujillo v. Longhorn Mfg. Co.,
Inc., 694 F.2d 221 (10th Cir. 1982); Slack v. Havens,
522 F.2d 1091 (9th Cir. 1975); see also Forde v. Kee Lox Mfg. Co., Inc.,
584 F.2d 4, 6 (2d Cir. 1978) (citing MacMillan with approval,
but not explicitly applying all nine factors). We agree with
the Tenth Circuit that the "reasoning of the Sixth Circuit is
convincing," Trujillo, 694 F.2d at 225, and accordingly we
adopt the MacMillan approach in this case.
The nine-part MacMillan test is obviously fact based. Profile
has not persuaded us that no genuine issue of material fact
exists with respect to the nine-part test. We need only point
to a few of the MacMillan factors. With regard to the first, or
"notice," factor, Profile has submitted an affidavit of its
President, Alex Vucitech, stating that he had no notice of the
EEOC charges filed against MTC. But Mr. Vucitech was admittedly
also President of MTC when those charges were filed. We believe
this fact creates strong inference — which we must consider in
the light most favorable to the EEOC — that Vucitech did
know of the EEOC charge against MTC, and thus a genuine issue
of fact exists on the notice issue.
Moving to the second factor, the record is unclear as to
whether MTC, the predecessor, can provide any relief. The
complaint alleges that MTC sold all of its assets to Profile,
which suggests it is no longer in business. This factor would
seem to point against summary judgment for Profile.
Similarly, as to the other factors, either genuine issues
exist or they weigh against Profile. Profile apparently uses
the same plant as MTC, and now produces the same product.*fn5
There are disputes in affidavits about the continuity of the
work force, the supervisory personnel and the capital
equipment.*fn6 In short, this case is replete with genuine
issues of material fact.
And this is no surprise. The EEOC filed the case only four
months ago. It asserts that discovery has not yet begun. While
the MacMillan factors should be readily ascertained through
discovery, it would be a rare case that could resolve the issue
without discovery. See Forde v. Kee Lox Mfg. Co., Inc.,
584 F.2d 4, 5 (2d Cir. 1978) (parties agreed about material facts).
Indeed, the cases cited earlier all disposed of the issue after
much more extensive factual development. Trujillo, 694 F.2d at
225 (deciding MacMillan issue after full trial); Slack,
522 F.2d at 1094-1095 (case also went to trial); see also
MacMillan, 503 F.2d at 1094 (reversing district court's
granting of summary judgment because affidavits raised genuine
issues of fact).
Because genuine issues of material fact exist, we must deny
Profile's motion for summary judgment. This holding does not
imply that summary judgment will be inappropriate later in the
case; it is only improper now. The parties should now proceed
expeditiously through discovery,*fn7 cooperating fully with
an eye toward a possible summary judgment motion (or
cross-motions) after the evidence is gathered in discovery.
Profile's motion for summary judgment is denied. It is so