denying motion to dismiss under Rule 12(B), despite finding doubt as to the financial dependence factor, because the plaintiff had met its burden with respect to the "essential factor" of common ownership and two of the three other "important" factorsSummary of this case from Manning v. Erhardt + Leimer, Inc.
02 Civ. 06648 (GEL)
April 28, 2004
Mark W. Moody, New York, NY, for Plaintiff Jonelle Salemi
Steven Skulnik, Pavia Harcourt LLP, New York, N.Y. for Defendants Boccador, Inc., Rene Mancini, S.A., and Mohammed Abdari
OPINION AND ORDER
This lawsuit concerns alleged sexual harassment by defendant Mohammed Abdari ("Abdari") that plaintiff claims led to her constructive discharge from her position as a salesperson at defendant Boccador, Inc.'s Manhattan shoe store, which does business under the name Rene Mancini ("Boccador"). Plaintiff brings suit under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq.; the Civil Rights Act of 1991, 42 U.S.C. § 1981a; the New York State Executive Law § 290, et seq.; Title 8 of the New York Administrative Code § 8-101; and "principles of common law." Abdari is a salesperson and manager at Boccador's Manhattan store. Defendant Rene Mancini, S.A. ("Mancini") is Boccador's French parent company.
Defendants moved to dismiss before the Honorable Kimba Wood, to whom this case was originally assigned, for (1) insufficiency of service of process on defendant Mancini; (2) lack of in personam jurisdiction over defendant Mancini; (3) lack of subject matter jurisdiction; and (4) failure to state a claim on which relief could be granted. By Order dated September 29, 2003, Judge Wood denied the defendants' motion to dismiss for insufficient service of process and for lack of subject matter jurisdiction, and converted the motion to dismiss for failure to state a claim into a motion for summary judgment on whether defendants fall within the definition of "employers" for purposes of plaintiff's Title VII claim. Judge Wood allowed the parties to conduct limited discovery related to the personal jurisdiction and summary judgment motions, and conducted a hearing on the motions on November 20, 2003. Following that hearing, Judge Wood recused herself due to some previous commercial dealings with defendant Abdari as a customer at Boccador's Manhattan store, and the case was transferred to this Court on December 8, 2003, with both motions sub judice. For the reasons that follow, defendants' motions to dismiss for lack of personal jurisdiction and for summary judgment will be denied, except to the extent that the Title VII claim as to defendant Abdari will be dismissed.
Defendant Boccador is a New York corporation that operates a high-fashion women's retail shoe store in Manhattan under the name "Rene Mancini." Boccador is wholly owned by defendant Mancini, a French corporation that does not maintain its own offices or facilities in New York. Mancini owns and operates a women's shoe and accessory business through a set of entities variously formed as divisions, franchises, and wholly-owned subsidiaries (the "Rene Mancini Group"), which together conduct nearly all of the activities necessary to create, control, and sell the Rene Mancini trademark, including the manufacture, distribution, and sales of Rene Mancini-trademarked products. Through its manufacturing subsidiary, Mancini supplies all of the merchandise sold by Boccador, as well as all of the shopping bags, letterhead, business cards, sales forms, promotional materials, and social stationery used by Boccador to run its business. (See,e.g., Abdari Tr. at 29:6 — 30:24, 73:13, 84:16 (Ex. 10 to Plaintiff's Rule 56.1 Statement)). Mancini licenses the "Rene Mancini" name to Boccador and exercises extensive control over the operations of the Boccador store through a Boutique License Agreement, which governs such details as hours of operation, requires Mancini's prior approval for all advertising and promotional materials, and mandates detailed quarterly reporting on the store's activities. (See Ex. 5 to Plaintiff's Rule 56.1 Statement.) Non-party Francois Bellenguez ("Bellenguez") is the sole shareholder and president of Mancini, and also serves as Boccador's president and managing director.
The parties dispute the level of control that Mancini exercises over the operations of Boccador. While the undisputed evidence establishes that Bellenguez has tremendous involvement in and authority over both the operations of Boccador and the employment decisions with respect to Boccador's senior management, defendants assert that Bellenguez exercises this authority as president of Boccador, not as president of Mancini. Plaintiff argues that this distinction elevates form over substance and cannot suffice to insulate Mancini from this Court's jurisdiction or immunize defendants from liability under Title VII.
Plaintiff Salemi was employed at Boccador as a salesperson from early 2000 until her alleged constructive discharge in August 2001. Defendant Abdari was employed at Boccador for the entirety of this period as well, first as a salesperson and, following his promotion in late May 2001, as store manager. Salemi alleges that, during the approximately eighteen months of her employment at Boccador, she was subjected to a continuous and escalating campaign of sexual harassment by Abdari, which included repeated sexual comments, unwanted sexual touching and gestures, threats of physical violence, and requests for sexual acts in exchange for pay raises. (See Compl. ¶¶ 25-28, 31-46, 48-53.) Salemi alleges that, during the first year or so of her employment, then-manager Antonio Amato was aware of the ongoing harassment by Abdari and responded to the behavior by occasionally sending Abdari out of the store after an incident and by instituting rules prohibiting Abdari from being in the same parts of the store as Salemi and from exercising supervisory control over her work. (Id. at ¶¶ 29-30.) In late May 2001, Bellenguez terminated Amato and promoted Abdari to the position of manager of Boccador. Salemi alleges that after Abdari was promoted, the harassment became more threatening and more explicitly tied to her employment. (Id. at ¶¶ 48-53.)
I. Personal Jurisdiction
Defendants have moved pursuant to Federal Rule of Civil Procedure 12(b)(2) to dismiss for lack of in personam jurisdiction over Mancini, a French corporation that defendants contend has insufficient contacts with New York to be subject to personal jurisdiction here. The plaintiff bears the burden of establishing that the Court has jurisdiction over the defendant. See, e.g.,Metropolitan Life Ins. Co. v. Robertson-Ceco. Corp., 84 F.3d 560, 566 (2d Cir. 1996). Where, as here, the parties have conducted some discovery that bears on the jurisdictional issue, and defendants contest the plaintiff's factual assertions regarding jurisdiction, "a hearing is required, at which the plaintiff must prove the existence of jurisdiction by a preponderance of the evidence." Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990). The jurisdiction hearing in this matter was held before Judge Wood on November 20, 2003.
Because Title VII does not explicitly provide for nationwide service of process, plaintiff's burden at the Hearing was to establish by a preponderance of the evidence that Mancini is subject to personal jurisdiction under New York law. PDK Labs v. Friedlander, 103 F.3d 1105 (2d Cir. 1997). It is clear from the hearing testimony, and from documentary evidence submitted in advance of the hearing, that Mancini is not subject to the jurisdiction of New York courts based on its own direct business activities — for example, it does not maintain an office or employees in New York and does not own real property here. Rather, plaintiff contends that this Court may exercise personal jurisdiction over Mancini because of the activities and presence in the forum of its wholly-owned subsidiary, Boccador.
A New York subsidiary can confer jurisdiction over a foreign parent where the subsidiary is so dominated by the parent as to be, in practice, a "mere department" of the parent rather than a truly independent entity.See Public Administrator v. Royal Bank of Canada, 19 N.Y.2d 127 (1967); Taca Int'l Airlines, S.A. v. Rolls-Royce of England, Ltd., 15 N.Y.2d 97, 101-102 (1965). The Second Circuit has developed a four-factor test for determining whether a particular subsidiary-parent relationship meets this domination standard under New York law: (1) whether the two entities share common ownership; (2) the extent of the subsidiary's financial dependence on the parent; (3) the degree of parental interference in the selection and assignment of the subsidiary's executive personnel and the failure to observe corporate formalities; and (4) the degree of control exercised by the parent over the subsidiary's marketing and operational policies. Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120-22 (2d Cir. 1984).
The parties do not contest that Boccador and Mancini share a common ownership, which Beech Aircraft terms the "essential factor" in the jurisdictional analysis. As to the other three "important" factors, the only one that appears in any doubt is the financial dependence of Boccador on Mancini. However, in light of the evidence presented on the other factors, the dispute over this factor does not alone suffice to deny personal jurisdiction over Mancini.
For example, although in response to direct questions about degree of control both Bellenguez and Abdari attempted to minimize Bellenguez's role in the operation of Boccador and magnify Abdari's, the documentary evidence combined with the greater weight of the testimonial evidence indicates that Mancini exercises near-total control over the marketing and operational policies of Boccador, both through the terms of the Boutique Licensing Agreement and through Bellenguez's direct involvement. (See, e.g., Boutique Licensing Agmt. at ¶¶ 1(a), 2(c), 6 (Ex. 5 to Plaintiff's Rule 56.1 Statement); Rene Mancini Group website (Ex. 3 to Plaintiff's Rule 56.1 Statement); D-00039, D-00040, D-00042, D-00043 (Ex. 7 to Plaintiff's Rule 56.1 Statement); Abdari Tr. at 41:22 — 42:23.) Furthermore, Bellenguez appears to exercise complete control over the hiring and firing of Boccador's general manager — the company's only executive other than Bellenguez himself. (See Abdari Tr. at 41:10 — 41:21; Bellenguez Tr. at 143:5.) While defendants argue that Bellenguez makes these decisions as president of Boccador and not as president and owner of Mancini, nothing in the record, other than self-serving and unsupported statements by Bellenguez himself (see, e.g., Bellenguez Tr. at 116:13-14), indicates that Bellenguez distinguished between these roles in exercising his authority at Boccador, that employees of Boccador or Mancini perceived any distinction between these roles, or that the asserted distinction had any practical significance in the operation of the Rene Mancini Group businesses during the relevant time period. (See, e.g., D-00062, D00072, D-00087, D-00116; Hearing Tr. at 40:12 — 41:16; Abdari Tr. at 83-84.) Under the standard outlined in Beech Aircraft, plaintiff has established by a preponderance of the evidence that Mancini is subject to jurisdiction in New York based on the presence and activities of its subsidiary Boccador, and accordingly the defendants' motion to dismiss is denied.
Plaintiff also argues that Mancini may be subject to the jurisdiction of New York courts under an agency theory. Where a foreign parent creates a New York subsidiary solely to act as its agent for sales and distribution purposes, and the subsidiary merely carries out the activities that the parent could do through its own officials were they present in New York, the parent may not rely solely on the corporate formalities to insulate itself from suit in New York. Sunrise Toyota, Ltd, v. Toyota Motor Co., 55 F.R.D. 519, 530 (S.D.N.Y. 1972). In this case, the same facts that satisfy the Beech Aircraft standard would also suffice to subject Mancini to jurisdiction in New York under the agency theory outlined in Sunrise Toyota.
II. The Fifteen-Employee Threshold
Defendants also move for summary judgment on the plaintiff's Title VII claims, on the grounds that only Boccador was plaintiff's employer and Boccador did not, and does not now, have the requisite fifteen employees to qualify as an "employer" under Title VII. 28 U.S.C. § 2000e(b). The parties have stipulated, however, that Title VII's threshold would be satisfied if Boccador's employees were aggregated with those of its parent Mancini. Plaintiff argues that such aggregation is appropriate here, because the record contains sufficient evidence for a jury to conclude that Mancini and Boccador should be treated as an integrated enterprise for purposes of this case, and thus summary judgment should be denied.
"To prevail in an employment action against a defendant who is not the plaintiff's direct employer, the plaintiff must establish that the defendant is part of an `integrated enterprise' with the employer, thus making one liable for the illegal acts of the other." Parker v. Columbia Pictures Inds., 204 F.3d 326, 341 (2d Cir. 2000) (citations omitted). In Title VII actions, the Second Circuit has applied a four-part test for integration originally developed in the context of labor actions. See Cook v. Arrowsmith Shelburne, Inc., 69 F.3d 1235, 1240-42 (2d Cir. 1995). The Cook analysis looks to "(1) interrelation of operations, (2) centralized control of labor relations, (3) common management, and (4) common ownership or financial control," id. at 1240, with control over labor relations considered the key factor. To meet the standard, a plaintiff need not show that the parent exercises "total control or ultimate authority over hiring decisions," so long as she shows that there is "an amount of participation [by the parent] that is sufficient and necessary to the total employment process." Id. at 1241 (internal quotations and citations omitted).
Whether a parent and subsidiary meet the standard for integration under Title VII is ultimately an issue of fact for the jury. See, e.g., Knowlton v. Teltrust Phones, Inc., 189 F.3d 1177 (10th Cir. 1999). Under these circumstances, summary judgment is appropriate only when there are no genuine issues of material fact in dispute and when, viewing the evidence in a light most favorable to the nonmoving party, no reasonable trier of fact could disagree as to the outcome of the case. See Nabisco, Inc. v. Warner-Lambert Co., 220 F.3d 43, 45 (2d Cir. 2000). The court "is not to weigh the evidence but is instead required to view the evidence in the light most favorable to the party opposing summary judgment, to draw all reasonable inferences in favor of that party, and to eschew credibility assessments."Weyant v. Okst, 101 F.3d 845, 854 (2d Cir. 1996). Summary judgment is then appropriate if the evidence in the record "show[s] 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).
Viewing the evidence in the light most favorable to the plaintiff, and based on the same factual record discussed above on the jurisdictional issue, at a minimum there is sufficient evidence to defeat a motion for summary judgment on the factors of interrelation of operations, common ownership and common management. The fourth factor, centralized control of labor relations, presents somewhat greater difficulty for the plaintiff. Defendants correctly argue that the level of control exercised by Mancini over employment matters at Boccador is less than that described in many of the cases that have allowed integration under Title VII. (D. Mem. at 3-4.) Even viewing the evidence in the light most favorable to the plaintiff, the manager of Boccador appears to have had the authority, free from interference by Bellenguez or Mancini, to hire and fire the Boccador sales employees. Plaintiff has offered no evidence to counter the testimony of Abdari and Bellenguez that Abdari hired and fired numerous salespeople without consulting Bellenguez and that Abdari set the weekly schedule for employees without the involvement of Bellenguez. In a typical Title VII case alleging discrimination in hiring, firing, or advancement of employees, this uncontroverted evidence might suffice to defeat any claim of integration and award summary judgment to defendants.
However, this lawsuit does not allege that defendants failed to hire plaintiff because of her gender or gave male employees opportunities for advancement denied to female employees, or that plaintiff was fired to favor a male employee. Rather, the gravamen of plaintiff's complaint goes to the conditions of her employment — that a fellow employee engaged in a sustained campaign of aggravated sexual harassment, that the extent and nature of the behavior was known to the manager of Boccador and he did nothing or took ineffective measures to address it, that ultimately the harasser was promoted to the position of manager, and that this new authority enabled the escalation of the harassment and its explicit tie to plaintiff's compensation and continued employment, leading her to believe she had no choice but to resign. Under the particular facts of this case, the relevant employment decisions for purposes of integrating Mancini and Boccador are not simply the hiring or firing of plaintiff, but rather are those decisions that construct the conditions of employment for employees at the plaintiff's level, including not only the hiring and firing of employees at the salesperson level, but also the hiring and firing of the manager of Boccador and the setting of overall policies for employee conduct and discipline. See Knowlton, 189 F.3d at 1184 n. 7 (in sexual harassment case, relevant employment decisions are those taken with respect to the harasser and his behavior); Laurin v. Pokoik, Slip Op., 2004 WL 513999, at *6 (S.D.N.Y. March 15, 2004) (in case involving sexual harassment, relevant evidence includes who has control over conditions of employment); Takacs v. Hahn Automotive Corp., 1999 WL 33117265, at *4-5 (S.D. Ohio Jan. 4, 1999) (`"integrated enterprise' analysis ultimately focuses upon whether the parent corporation was the final decision-maker with regard to the employment issue underlying the litigation.") (citing Cook).
Viewed through that lens, plaintiff has put forth sufficient evidence to create a factual dispute over the question of Mancini's control of the decisions related to the conditions of employment for salespeople at Boccador. A reasonable jury could conclude that Bellenguez had complete control over the hiring and firing of Boccador's manager, who was the direct supervisor of the sales staff (Abdari Tr. at 41:10 — 41:21; Bellenguez Tr. at 143:5); that he could direct the firing of a Boccador salesperson if he wished, and would do so if he thought there was a problem (Abdari Tr. at 82:3-16; Bellenguez Tr. at 144:25 — 145:3); that he made the decisions on pay raises and commissions for Boccador employees (D-00043, D-00048; Abdari Tr. at 82:22-25; Hearing Tr. at 42:11 — 43:5); that he controlled many of Boccador's employment policies, even those as quotidian as dress code (Hearing Tr. at 39:13-18); and that he exercised all of this authority on behalf of Mancini. If a jury reached those conclusions, it could then find that Mancini and Boccador should be integrated for purposes of identifying plaintiff's "employer" under Title VII, thus meeting the fifteen-employee threshold required by the statute. In short, defendants have failed to satisfy the standard for summary judgment on the issue of whether Mancini may be held liable under Title VII for the actions alleged in plaintiff's complaint and their motion is denied.
Finally, defendants also move to dismiss the complaint as to defendant Abdari, on the grounds that an individual is not an "employer" under Title VII Plaintiff does not seriously contest this argument, and indeed there is no room for dispute. Tomka v. Seiler Corp., 66 F.3d 1295 (2d Cir. 1995), establishes a clear rule that Title VII does not apply to fellow employees, even those with supervisory control. Accordingly, the Title VII cause of action is dismissed as against Abdari. Plaintiff has asserted that Abdari is an appropriate defendant as to the other causes of action in the complaint, and defendants have not disputed this claim; therefore, the non-Title VII causes of action remain viable against Abdari.
For the foregoing reasons, defendants' motions to dismiss for lack of personal jurisdiction over Mancini and for summary judgment are denied; defendants' motion to dismiss the Title VII claim against defendant Abdari is granted. The parties are directed to appear before the Court for a status conference in Courtroom 443 of the United States Courthouse at 40 Foley Square on May 12, 2004, at 3:30 p.m.