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Drebing v. Provo Group

October 11, 2007

DANIELLE DREBING, PLAINTIFF,
v.
THE PROVO GROUP, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Elaine E. Bucklo United States District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Danielle Drebing ("Drebing")*fn1 brought a claim under Title VII of the Civil Rights Act of 1964 alleging that defendants The Provo Group, Inc. ("The Provo Group"), TPG Management, Inc. ("TPG Management"), and Evergreen Plaza Associates I, L.P. ("Evergreen Plaza")*fn2 terminated her and created a hostile work environment because she is a woman and was pregnant. The Provo Group and TPG Management seek summary judgment, contending that they did not have enough employees during the relevant time period to trigger Title VII, and in the alternative argue that Drebing was terminated for insubordination. Evergreen Plaza has filed its own motion for summary judgment, arguing that Drebing did not name Evergreen Plaza in her EEOC charge, Drebing's claims are time- barred, Drebing was not its employee, and that she was not terminated because of her pregnancy or her sex. For the following reasons, I grant Evergreen Plaza's motion for summary judgment, but deny The Provo Group and TPG Management's motion.

I.

Summary judgment is appropriate where the record and affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Steen v. Myers, 486 F.3d 1017, 1021 (7th Cir. 2007) (citing FED. R. CIV. P. 56(c)). If the moving party meets this burden, the non-moving party must go beyond the pleadings and set forth specific facts showing that there is a genuine issue for trial. Ptasznik v. St. Joseph Hosp., 464 F.3d 691, 694 (7th Cir. 2006) (citing FED. R. CIV. P. 56(e); Becker v. Tenenbaum-Hill Assocs., Inc., 914 F.2d 107, 110 (7th Cir. 1990)). The existence of merely a scintilla of evidence in support of the non-moving party's position is insufficient; there must be evidence on which the jury could reasonably find for the non-moving party. Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). I must construe all facts in the light most favorable to Drebing and draw all reasonable and justifiable inferences in her favor. Anderson, 477 U.S. at 255.

II.

To determine the relevant facts I must first resolve The Provo Group and TPG Management's motion to strike the report of Jerold N. Graff ("Graff"), a certified public accountant who submitted an expert report on Drebing's behalf. Graff's report indicates that he is a CPA and has an MBA in business administration. He has worked for several accounting firms and has testified before state and federal courts and the Illinois Commerce Commission.*fn3 Graff's report explains, in his opinion, that The Provo Group and "affiliated companies" employed at least 15 persons for at least twenty calendar weeks each in 2003, 2004 and 2005, and explains what records he reviewed and how he reached his opinion both as to the number of employees and as to how certain companies were "affiliated."

The Provo Group and TPG Management contend that Graff's report is inadmissible because (1) it opines on an ultimate legal issue in the case, whether the employees of certain companies can be aggregated to satisfy the requirements of 42 U.S.C. § 2000e(b), and adopts the wrong legal analysis in doing so; (2) Graff is not qualified to provide his opinions; and (3) the report does not explain Graff's rationale or methodology. I conclude that Graff's report is admissible.

A.

The admissibility of expert testimony is governed by Federal Rule of Evidence 702, which provides:

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

FED. R. EVID. 702. For expert testimony to be admissible under Rule 702, the movant must establish that the proposed testimony is reliable and would assist the trier of fact in understanding the evidence or determining a fact at issue in the case. See Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 589-91 (1993). The primary purpose of Rule 702 is to avoid confusion and prevent the inclusion of unreliable expert testimony. See id. at 592; Loeffel Steel Prod., Inc v. Delta Brands, Inc., 372 F. Supp 2d. 1104, 1110 (N.D. Ill. 2005). Nevertheless, "The rejection of expert testimony is the exception rather than the rule, and the trial court's role as gatekeeper is not intended to serve as a replacement for the adversary system." Spearman Indus. v. St. Paul Fire & Marine Ins. Co., 128 F. Supp 2d. 1148, 1150 (N.D. Ill. 2001) (quotation omitted). Cross examination and the presentation of contrary evidence are the "traditional and appropriate means" of attacking expert testimony. Daubert, 509 U.S. at 596 (citing Rock v. Arkansas, 483 U.S. 44, 61 (1987)). Drebing bears the burden of establishing the admissibility of Graff's expert opinion by a preponderance of the evidence. See, e.g., TRW Title Ins. Co. v. Sec. Union Title Ins. Co., 890 F. Supp. 756, 758 (N.D. Ill. 1995).

B.

Defendants' main argument in opposition to Graff's report is that Graff's testimony improperly opines on an ultimate legal issue in the case and conflicts with the relevant legal standard. Whether Drebing can establish Title VII's employee numerosity requirement is an issue in this case. Only employers who have "fifteen or more employees for each working day in each of twenty or more calendar weeks" during the year of or the year immediately preceding the discrimination about which a plaintiff complains are "employers" covered by the requirements of Title VII. 28 U.S.C. § 2000e(b). The Seventh Circuit has explained that there are certain circumstances under which a court may aggregate the number of employees in affiliated corporations in order to apply the 15 employee requirement. See Papa v. Katy Indus., Inc., 166 F.3d 937, 940-942 (7th Cir. 1999). These exceptions include when (1) the "traditional conditions" are present for piercing the corporate veil, id. at 940-941 (citations omitted); (2) a corporate entity has divided itself into a number of entities with fewer than the statutory minimum number of employees "for the express purpose of avoiding liability under the discrimination laws," id. at 941; and (3) where a parent corporation directs the "discriminatory act, practice, or policy of which the employee of its subsidiary was complaining," in which case the parent corporation is the violator as long as the aggregate number of employees of the subsidiary and the parent meet the statutory requirement. Id.

Defendants first argue that Graff's report improperly opines about whether the requirements for one of these exceptions is met, and therefore improperly opines about an ultimate legal issue. As Drebing argues, however, under Federal Rule of Evidence 704 expert testimony is not objectionable simply because it "embraces an ultimate issue to be decided by the trier of fact." Drebing contends that Graff's testimony embraces the issue of whether defendants meet one of the exceptions articulated in Papa, but is directed more broadly at the factual question of whether defendants were Drebing's employers under the "payroll method" set forth in Walters v. Metro. Educ. Enters., Inc., 519 U.S. 202, 206-07 (1999) (holding that an employer has an employment relationship with a particular individual on a particular day if the individual appears on the employer's payroll for that day, not if the individual actually performs work for the employer that day). I agree. While Graff may not provide expert testimony about whether, ultimately, defendants meet any of the exceptions set forth in Papa, it is appropriate for him to provide forensic accounting analysis of whether Drebing is an employee of defendants and, in that examination, whether as a factual matter the defendant entities are somehow intertwined. This is what his report does. His opinions are relevant for determining the ultimate issue, which is whether defendants meet the criteria set forth in Papa for aggregating the number of employees of defendants in certain circumstances.*fn4

Second, defendants contend that even if Graff's report does not improperly opine about an ultimate issue of law, it adopts an improper analysis of whether the defendants are "affiliated" that is contrary to the law as set forth in Papa. Again, I disagree. Graff's report explains how he reached the conclusion that certain entities were "affiliated;" as the report explains, Graff analyzed financial statements, annual meeting minutes, corporate resolutions, and other corporate documents in order to determine that Bruce Provo ("Provo") and The Provo Group controlled the other eleven companies identified in his report (which include the other corporate defendants in this case). Defendants note that "control" is not one of the three exceptions to the 15-employee rule identified in Papa, and contend that Graff's report is therefore irrelevant. If anything, the fact that Graff does not ultimately opine on any of the three exceptions set forth in Papa demonstrates why his report does not improperly opine on an ultimate issue. That Graff determines that The Provo Group and Provo "control" the other defendants is an element for the determination of whether any of the Papa exceptions do apply; it is relevant to determine if veil-piercing is appropriate, if defendants have deliberately separated themselves into separate entities, and whether a parent corporation made the allegedly discriminatory decisions. Papa, 166 F.3d at 940-41. It is not the entire inquiry, but it is relevant. Therefore, this is not a basis to exclude Graff's report.*fn5

C.

Defendants' other objections are easy to resolve. Defendants contend that Graff is not qualified as an expert because he has never provided an expert opinion about aggregation issues or about the inquiry under Papa. I agree with Drebing that this is irrelevant. His report indicates, and defendants chose not to depose Graff to present evidence to the contrary, that he is a well-qualified CPA who has provided expert testimony about other forensic accounting issues. He is qualified to review corporate records and financial documents and draw conclusions about corporate governance from them. It does not matter that he has never specifically opined about the types of issues present in this case.

Second, defendants contend that Graff only provides a "bottom-line" conclusion and does not identify his entire rationale. Graff's report belies this conclusion. He specifically discusses each document he examined and explains how, in his opinion, the document demonstrates that The Provo Group or Provo exercised control over a particular entity. While defendants may challenge Graff's explanations, it is not true that Graff does not explain his rationales.

Finally, defendants argue that Graff has not identified the generally recognized practices or standards he uses to reach his conclusions. Defendants repeat numerous times that Graff has not identified any violation of corporate standards or accounting practices, but he need not do so because his opinion is not that defendants have violated some accounting practice or corporate standard. His opinion is that, in his words, defendants are "affiliated" and that The Provo Group and Provo exercise some degree of control over the identified entities. It is true that Graff's report nowhere identifies the particular standards or practices that he is applying, although in his affidavit attached to Drebing's response to defendants' motion to strike Graff avers that in his professional work he regularly review the types of financial records addressed in his report and that "[t]he accounting expertise and analysis that I applied to the preparation of the report is the same type of expertise and analysis that I have regularly done in my accounting practice since 1957." Graff's explanation in his report about what aspects of the financial records he reviewed and his bases for reaching his conclusions about whether The Provo Group and Provo controlled certain entities demonstrates that his conclusions are based on reliable principles and methods. Defendants' specific disputes with Graff's analysis are appropriate subject matter for cross-examination or for argument why Papa does not apply in this case, but they do not render Graff's expert report inadmissible.

D.

For the above reasons defendants' motion to bar Graff's expert report is denied, and I will consider the conclusions of Graff's expert report in determining the relevant facts and in resolving the motions for summary judgment now before me.

III.

Taking the facts in the light most favorable to Drebing, the following are the relevant facts:*fn6

A. Overview of Entities at Issue in the Litigation

There are several entities at issue in this litigation, all with a connection to Provo or The Provo Group.*fn7 Drebing testified in her deposition that Provo told her that he deliberately structured his businesses to keep them small. In addition, Bruce Provo wrote an email to a then-employee stating, "There are so many things I don't have to do as an employer our size[,] like pay maternity benefits or even keep the job available. Why wouldn't I pay maternity benefits if I don't have to and most companies . . . our size don't if I didn't want to keep Mothers?"

1. The Provo Group

The Provo Group was established in 1985, and its business in 2004-05 consisted of real estate advisory and development services as well as accounting, rental management, and other services. In 2004-05 it had 16 shareholders and offices in Kansas City and Chicago. The Provo Group has no accountants or bookkeepers. Certain of The Provo Group's financial statements state that The Provo Group "outsources" its accounting needs to TPG Systems. Before the incorporation of TPG Systems in 1995, TPG did its own accounting-work in house through Provo.

Bruce Provo is the president of The Provo Group and one of its three directors. The Provo Group contends that in 2004-05 it employed Provo, Caroline Provo and Melissa Evans ("Evans"), but Drebing has pointed to employee earnings records, apparently from The Provo Group, that identify six other employees, including Drebing.*fn8

2. Evergreen Plaza

Evergreen Plaza consists of 13 partners who own the Evergreen Plaza Shopping Center (the "shopping center") in Evergreen Park, Illinois. Bruce Provo is the general manager of Evergreen Plaza. The sole general partner is TPG Financial. The shopping center has existed since 1952 with substantially the same ownership, although Evergreen Plaza was not formed until late 2005.

A property management company managed the shopping center until 2005, when Evergreen Plaza and TPG Management entered into a Management Agreement (the "Evergreen Management Agreement"). A copy of that agreement is attached as Exhibit O to The Provo Group and TPG Management's motion for summary judgment. The parties agree this agreement remained in effect until December of 2005. Under Paragraph 4 of the agreement:

[TPG Management] will cause to be hired, paid and supervised (as either employees of [Evergreen Plaza] or as independent contractors for [Evergreen Plaza]; or direct employees of [TPG Management]; but in any event at [Evergreen Plaza's] expense) all persons necessary to provide on-site management; office personnel; maintenance and security for the Center. Such personnel will be responsible for normal and routine on-site management, maintenance and security activities usual to the operation of a shopping center of a type comparable to the Center and will be under the guidance and overall supervisory management of TPG Financial, Inc. The General Partner ("General Partner") and not of [Evergreen Plaza] (who shall have no right to directly supervise such employees or independent contractors). Any net increase in either the number of employees or compensation from year-to-year will be approved in connection with the annual operating budget by constituent Partners representing 60% of the partnership interests of [Evergreen Plaza].

The parties agree that the Evergreen Management Agreement mirrored Evergreen Plaza's agreement with the previous property manager, Rubloff, Inc. ("Rubloff"), and that under the agreement with Rubloff "anybody in the office was a Rubloff employee and was reimbursed by the partnership." The parties agree that the Evergreen Management Agreement requires TPG ...


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