Opinion
CV 03-965-HA.
July 15, 2004
J. William Savage, Rieke Savage, P.C., Portland, Oregon, Attorneys for Plaintiffs.
Chris Kitchel, Beverly C. Pearman, Stoel Rives L.L.P., Portland, Oregon, Attorneys for Defendants.
OPINION AND ORDER
Plaintiff brings one claim against defendant alleging wrongful termination due to age discrimination. Defendants filed a motion to dismiss based on plaintiff's failure to state a claim and lack of personal jurisdiction. Both parties have submitted materials addressing matters outside the pleadings. Defendants request the court to treat this motion as one for summary judgment. The court will treat defendants' motion as one for summary judgment. For the following reasons, defendants' motion for summary judgment is denied.
BACKGROUND
On January 18, 2002, Earl Royer (Plaintiff) filed an administrative claim with the Oregon Bureau of Labor and Industries against defendant for age discrimination. Plaintiff is a 58 yr old male who worked as a Senior Auditor in Internal Audit Services for CNF Transportation Inc., and began his employment with the company in July 1989. He was terminated on August 17, 2001.
Plaintiff claims that he was the most senior auditor in his department and, had his employment continued, he would have been eligible for full retirement benefits in 2008. Plaintiff asserts that he was led to believe he worked for and was employed by defendants and that defendants held out plaintiff as their employee and agent. Plaintiff's termination letter from his employer stated that the reason for plaintiff's termination was because of the "weak economy" [and] "to cut costs." Plaintiff believes his position was not eliminated and asserts that the company had one or more positions available and that they advertised to fill those positions after plaintiff's termination.
Defendants contend that plaintiff was never employed by CNF Transportation Inc. or CNF Inc. Rather, he was employed by their wholly-owned subsidiary CNF Sevice Company ("Service Co"). Defendant CNF Inc. was first known as Consolidated Freightways but changed its name to CNF Transportation Inc. in 1996. CNF Transportation Inc. then changed to its current name of CNF Inc. in 2001. CNF Inc. is incorporated in Delaware and headquartered in Palo Alto, California. It is the parent company of Service Co., a wholly owned subsidiary incorporated in Delaware and located in Portland, Oregon. Defendant claims that plaintiff first worked for Leland James Service Company ("LJSC") which was wholly owned by Consolidated Freightways. LJSC provided services for Consolidated Freightways before 1996. In 1996, Service Co. replaced LJSC in providing services for CNF Transportation Inc. Many LJSC employees were offered employment with Service Co. Defendants' position is that plaintiff worked for LJSC then Service Co. but never for CNF Transportation Inc. or CNF Inc. Defendants claim that Service Co. and CNF Inc. maintain a service agreement together and it is due to this agreement that Service Co. provides required services to CNF Inc. Defendants contend that any work performed by Service Co. employees cannot be contributed to CNF Inc. to establish personal jurisdiction and that they are not liable for its subsidiary's actions. Defendants assert that plaintiff fails to state a claim and that Oregon has no jurisdiction over its corporation since it conducts no business in Oregon.
STANDARDS
"Ordinarily, summary dispositions of Title VII cases is not favored, especially on a `potential inadequate factual presentation.'" McKenzie v. Davenport-Harris Funeral Home, 834 F.2d 930, 934 (11th Cir. 1987), quoting Trevino v. Celanese Corp., 701 F.2d 397, 407 (5th Cir. 1983). Summary judgment is required when the evidence, viewed in the light most favorable to the nonmoving party, shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The moving party bears the initial burden of establishing the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). That burden may be met by showing that there is an absence of evidence to support the nonmoving party's case. Id. at 325. Once the moving party has met its initial burden, Rule 56(e) requires the nonmoving party to go beyond the pleadings and identify facts which show a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
At the summary judgment stage, the court's function is not to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial. Id. at 249. The court must view the evidence in the light most favorable to the non-moving party. Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 531 (9th Cir. 2000). All reasonable doubt as to the existence of a genuine issue of fact should be resolved against the moving party. Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir. 2000). The inferences drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Texas Partners v. Conrock Co., 685 F.2d 1116, 1119 (9th Cir. 1982). Where different ultimate inferences may be drawn, summary judgment is inappropriate. Jewel Companies, Inc. v. Pay Less Drug Stores, N.W., Inc., 741 F.2d 1555, 1566 (9th Cir. 1984). However, if all reasonable inferences are drawn in favor of the non-moving party and the evidence is merely colorable or not significantly probative, summary judgment is appropriate. Anderson, 477 U.S. 242 at 249-50.
To determine whether personal jurisdiction exists, the court may consider the pleadings and evidence presented through affidavits, and may also order limited discovery to develop jurisdictional facts. Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001); Data Disc, Inc. v. Systems Technology Associates, 557 F.2d 1280, 1285 (9th Cir. 1977). Plaintiff bears the burden of establishing that this court has personal jurisdiction over CNF Inc. See Fireman's Fund Ins. Co. v. Nat'l Bank of Coop., 103 F.3d 888, 893 (9th Cir. 1996) (nonmoving party has burden of establishing personal jurisdiction).
Personal jurisdiction over a non-resident defendant is tested under a two-prong analysis: the exercise of jurisdiction must (1) satisfy the requirements of the long arm statute of the state in which the district court sits; and (2) comport with principles of federal due process. Terracom v. Valley Nat. Bank, 49 F.3d 555, 559 (9th Cir. 1995); Ziegler v. Indian River Courts, 64 F.3d 470, 473 (9th Cir. 1995).
The due process clause of the United States Constitution protects persons from being subject to the binding judgments of a forum with which they have "established no meaningful `contacts, ties, or relations.'" Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72 (1985) (citing Int'l Shoe Co. v. State of Washington, 326 U.S. 310, 319 (1945)). Jurisdiction is proper only when the defendant's conduct and connection with the forum state are such that the defendant should reasonably anticipate being brought into court in the forum state. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
Personal jurisdiction may be either "general" or "specific." Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990). For a defendant to be subject to general personal jurisdiction, defendant must have such "continuous and systematic contacts with the forum that the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice." Reebok Intern. Ltd. v. McLaughlin, 49 F.3d 1387, 1391 (9th Cir. 1995).
Where the defendant's contacts with the forum are not continuous and systematic, the forum may exercise only specific personal jurisdiction. Specific personal jurisdiction is determined by the following three-prong test:
(1) The nonresident defendant must purposefully direct activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;
(2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and
(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1485 (9th Cir. 1993).
The standard for establishing general jurisdiction is "fairly high," Brand v. Menlove Dodge, 796 F.2d 1070, 1073 (9th Cir. 1986), and requires that the defendant's contacts be of the sort that approximate physical presence. See Gates Lear Jet Corp. v. Jensen, 743 F.2d 1325, 1331 (9th Cir. 1984). A defendant whose contacts with a state are "substantial" or "continuous and systematic" can be haled into court in that state in any action, even if the suit is unrelated to those contacts. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415, 80 L.Ed.2d 404, 104 S.Ct. 1868 (1984). Factors to be taken into consideration are whether the defendant makes sales, solicits or engages in business in the state, serves the state's markets, designates an agent for service of process, holds a license, or is incorporated there. See Hirsch v. Blue Cross, Blue Shield of Kansas City, 800 F.2d 1474, 1478 (9th Cir. 1986).
DISCUSSION
Plaintiff contends that he is an employee of CNF Inc. because CNF's relationship with Service Co. is interrelated and the two operate in such a highly integrated fashion that they effectually operate as a single employer where plaintiff is concerned. Defendants argue that they conduct no business in Oregon and that their contacts in Oregon are insufficient to support the exercise of personal jurisdiction. According to defendants' own 10-K Annual Report, they have an administration and technical center in Portland, Oregon [AdTech Center] which they use and share with their subsidiaries in conducting their business. Their computer facilities are located here and they maintain a number of employees at that location separate from their service agreement with Service Co. They maintain a mailing address here and do mail-outs from that address to their shareholders. They direct interested parties from their web site to their Portland address and hold themselves out to the public as doing business in Portland, Oregon. Accordingly, plaintiff has presented sufficient evidence showing that CNF's contacts with Oregon are continuous and systematic. This court has general jurisdiction over CNF Inc. There is no need to go into the specific personal jurisdiction test. For plaintiff to survive summary judgment, the remaining question to be answered is did CNF Inc. and Service Co. operate as a single employer such that plaintiff can be considered an employee of CNF Inc.?
Single Employer Criteria
Prohibition against age discrimination contained in ADEA is similar in text, tone, and purpose to prohibition against discrimination contained in Title VII and courts routinely look to law developed under Title VII to guide inquiry under ADEA. Barber v. CSX Distribution Servs., 68 F.3d 694, 698 (3rd Cir. 1995).
In the absence of special circumstances, a parent corporation is not liable for the Title VII violations of its wholly owned subsidiary. Assoc. of Mexican-American Educators v. California, 231 F.3d 572, 582 (9th Cir. 2000); see also Watson v. Gulf Western Industries, 650 F.2d 990, 993 (9th Cir. 1981). Plaintiff asserts that there are special circumstances here, particularly that CNF Inc. and Service Co. operated in such a highly integrated fashion that they are and should be considered a single employer. For guidance in testing the degree of interrelationship, courts look to the four-part test formulated by the National Labor Relations Board (NLRB) and approved by the U.S. Supreme Court in Radio Union v. Broadcast Service, 380 U.S. 255 (1965). This test, adopted by the Ninth Circuit in NLRB v. Don Burgess Constr. Corp., 596 F.2d 378, 384 (9th Cir. 1979), aids in determining whether two or more business entities should be considered a single employer. The four factors examined are: (1) interrelation of operations, (2) common management, (3) centralized control of labor relations, and (4) common ownership. Id at 384. Several other circuits are in accord and have adopted the single employer test. Among the factors these courts look at are whether two enterprises have substantially identical management, common offices, interchange of employees, customer supervision, common bank accounts, payroll and ownership. See, e.g., McKenzie v. Davenport-Harris Funeral Home, 834 F.2d 930, 934 (11th Cir. 1987); Armbruster v. Quinn, 711 F.2d 1332, 1337 (6th Cir. 1983); EEOC v. American National Bank, 652 F.2d 1176, 1185 (4th Cir. 1981); Mas Marques v. Digital Equipment Corp., 637 F.2d 24, 27 (1st Cir. 1980); Dumas v. Town of Mt. Vernon, 612 F.2d 974, 980 (5th Cir. 1980); Baker v. Stuart Broadcasting Co., 560 F.2d 389, 392 (8th Cir. 1977). The Board [NLRB] has stressed the first three of these factors, as well as the presence of control of labor relations. Don Burgess Constr. Corp., 596 F.2d at 384. However, none of the factors is controlling, nor need all criteria be present. Id. Single employer status ultimately depends on "all the circumstances of the case". Id. If a degree of interrelatedness is present, courts will consider the departure from the "normal" separate existence between entities an adequate reason to view the subsidiary's conduct as that of both. Armbruster, 711 F.2d at 1337. The appropriate standard here is whether CNF Inc. exercises a degree of control that exceeds the control normally exercised by a parent corporation.
1. Interrelated Operations
Evidence of interrelated operations can include, common offices, long distance shipping, bank accounts, payroll, shared facilities. See NLRB v. Transcontinental Theatres Co., 568 F.2d 125, 129 (9th Cir. 1978). Plaintiff contends that interrelated operations between CNF Inc. and Service Co. exist here because plaintiff was an internal auditor for CNF Transportation Inc. and was held out by defendant as such. Moreover, plaintiff's business cards identified him as a senior internal auditor for CNF Transportation Inc., and he asserts he filled an essential role to defendant's overall operations.
Defendants respond that the agreement between CNF Inc. and Service Co. authorized plaintiff to perform these functions in the name of CNF Inc. Also, CNF Inc. and Service Co. have separate human resources department, separate bank accounts, separate accounting, separate board of directors that hold separate meetings. Thus, this evidence favors defendant's position and fails to sufficiently establish interrelated operations between the two companies. However, plaintiff has proven interrelated operations in other ways. CNF Inc. uses the Portland, Oregon facility and describes it in their 10K Annual Report as their own AD Tech Center for their administration and tech services. They share these services with their subsidiaries [namely Service Co.]. Sharing facilities is evidence of interrelated operations between the two companies. Under section 3.3 of the service agreement, CNF Inc. is required to reimburse Service Co. for reasonable expenses incurred by Service Co. while providing services for CNF Inc. However, it is undisputed that CNF Inc. directly reimbursed the employees of Service Co and not the management of Service Co. See Reply in Support of Motion to Dismiss at 3. This evidence reveals that CNF Inc. has treated Service Co's employees as if they were their own and is an element of interrelated operations between the two companies.
Also, plaintiff's credit card issued to him was in the name of CNF Inc. not Service Co. Billing statements for the credit card were addressed to plaintiff in the name of the CNF Inc. not Service Co. Phone records in plaintiff's department were maintained in the name of CNF Inc. not Service Co. Based on this evidence, plaintiff has offered enough evidence to be entitled to the inference that CNF Inc. and Service Co. have interrelated operations.
2. Common Management
Under common management, courts look to see if the two companies share officers. See Baker, 560 F.2d at 392 (common management found where parent and subsidiary had same officers and directors, same president). The fact that the directors of the subsidiary are all employees of the parent does not establish that the parent controls the subsidiary. Morgan v. Safeway Stores, Inc., 884 F.2d 1211, 1214 (9th Cir. 1989); see also Johnson v. Flowers Indus., Inc., 814 F.2d 978, 982 (4th Cir. 1987), (parent not considered employer merely because it chose subsidiary's directors as officers). Thus, if plaintiff offers evidence solely on common management, plaintiff would fail to present sufficient evidence to create a genuine issue of material fact in this case. See Morgan, supra. Evidence of common management must be weighed together with the other parts.
Gregory L. Quesnel is currently President and Chief Executive Officer of CNF Inc. and the Chairman of the Board for Service Co. He was formerly the Chief Financial Officer, Chief Operating Officer and Executive Vice President for CNF Inc. and Senior Vice President and President for Service Co. He held those positions simultaneously. Chutta Ratnathicam is currently the Senior Vice President and Chief Financial Officer for CNF Inc. and President for Service Co. Merlin Swackhammer has held an officer position simultaneously in both companies. He is now the Vice President and Chief Information Officer for Service Co. only. Mark Thickpenny is currently the Treasurer for both companies.
The 1996 service agreement between the two companies was signed by Eberhard G.H. Schmoller and Charles Dragon. At the time of its signing, Schmoller was Senior Vice President and General Counsel of CNF Transportation Inc. and Secretary of Service Co. simultaneously. Dragon was Vice President of Administration for Service Co. He later became the Vice President of Administration for CNF Inc., thus holding both positions simultaneously while the service agreement was in effect. Based on the evidence presented, plaintiff has proven its burden in showing that there is common management between CNF Inc. and Service Co.
3. Centralized Control Of Labor Relations
It is well settled that the control required to meet the test of centralized control of labor relations is not potential control, but rather actual and active control of day-to-day labor practices. See Transcontinental Theatres Co., supra; see also Sakrete of Northern California, Inc., 137 N.L.R.B. 1220, aff'd 332 F.2d 902 (9th Cir. 1962). The evidence points to the two companies having separate human resource departments, separate bank accounts, separate accounting, separate board of directors that hold separate meetings. However, plaintiff asserts that Marv Brinkerhoff, the person above plaintiff's immediate manager, represented himself as the Director of Internal Audit Services for CNF Inc., not Service Co.; that Brinkerhoff then reported departmental activities and findings directly to the Board of Directors of CNF Inc.; and that the risk based auditing style used by Service Co. was approved by the Board of CNF Inc. This is evidence that CNF Inc. had a hand in day-to-day labor practices of Service Co. By contrast, through an affidavit by Brinkerhoff, defendants assert that Brinkerhoff has worked for Service Co. since 1996 and not CNF Inc. and correctly reported his findings to the directors of CNF Inc. as required under the service agreement. This shows that Brinkerhoff's actions were justified and that the directors of CNF Inc., although informed, had no control over the day-to-day labor practices of Service Co. specifically employment decision. CNF Inc. uses the service agreement to deflect any notion that they are highly integrated with Service Co. on many levels. Even with the service agreement in place, the strong presence of CNF Inc. in the affairs of Service Co. tends to undermine what little autonomy the agreement already reflects. The delineation between the two entities is blurred. However, without more evidence from plaintiff on the Brinkerhoff matter or other assertions that CNF Inc. is concerned in or directs the labor matters of Service Co., plaintiff fails to prove this element and cannot be entitled to the inference that CNF Inc. has centralized control of labor over Service Co.
4. Common Ownership
Service Co. is wholly owned by CNF Inc; therefore common ownership had been demonstrated. Ownership alone is not enough to establish CNF Inc.'s liability, but it is nevertheless relevant. See Frank v. U.S. West, Inc., 3 F.3d 1357, 1364 (10th Cir. 1993) (common ownership, standing alone, can never be sufficient to establish parent liability); but see McKenzie, 834 F.2d at 933 (common ownership found where one family founded and owned two corporations and owned the smaller corporation through a majority share of stock).
"Ordinarily, summary dispositions of Title VII cases is not favored, especially on a `potential inadequate factual presentation.'" Id. at 934, quoting Trevino v. Celanese Corp., 701 F.2d 397, 407 (5th Cir. 1983). On the issue of the single employer status, plaintiff has presented sufficient evidence to meet its burden on three of the NLRB four part test. Namely, that CNF Inc. and Service Co. have interrelated operations, common management and common ownership. Plaintiff has not proven that CNF Inc. has centralized control of labor relations over Service Co. None of the factors is controlling, nor need all criteria be present. Don Burgess Constr. Corp., 596 F.2d at 384. Single employer status ultimately depends on "all the circumstances of the case." Id. It would be improper to make credibility choices between competing views of the evidence in summary judgment proceedings. However, all justifiable inferences are to be drawn in plaintiff's favor. See McKenzie, 834 F.2d at 933 (summary judgment was inappropriate because evidence presented by McKenzie was substantial and is to be believed by law; all justifiable inferences are to be drawn in her favor). Considering all four factors together, there exists a genuine issue of material fact for plaintiff to survive summary judgment.
CONCLUSION
For the foregoing reasons defendants' Motion for Summary Judgment (doc. #7) for failure to state a claim and lack of personal jurisdiction is denied.
IT IS SO ORDERED.