Batchelder v. Realty Resources Hospitality

• Decision Date: 30 January 2007
• Citation: 2007 ME 17,914 A.2d 1116
• Parties: Deborah J. BATCHELDER v. REALTY RESOURCES HOSPITALITY, LLC et al.
• Court: Maine Supreme Court

914 A.2d 1116

2007 ME 17

Deborah J. BATCHELDER v. REALTY RESOURCES HOSPITALITY, LLC et al.

Supreme Judicial Court of Maine.

Argued: October 13, 2006.

Decided: January 30, 2007.

Arthur J. Greif (orally), Julie D. Farr, Gilbert & Greif, P.A., Bangor, for plaintiff.

James D. Poliquin (orally), Norman, Hanson & DeTroy, LLC, Portland, for defendants.

Panel: SAUFLEY, C.J., and CLIFFORD, DANA, ALEXANDER, CALKINS, LEVY, and SILVER, JJ.

CLIFFORD, J.

[¶ 1] Seventeen Realty Resources Hospitality, LLC entities (collectively, Realty Resources) and Restaurant Employee Leasing Co., LLC (Relco) appeal from the judgment of the Superior Court (Penobscot County, Hjelm, J.) entered after a jury verdict and awarding compensatory damages to Deborah J. Batchelder on Batchelder's complaint for violation of the Maine Whistleblowers' Protection Act (WPA), 26 M.R.S. §§ 831-840 (2006), and the Maine Human Rights Act (MHRA), 5 M.R.S. §§ 4551-4634 (2006). Realty Resources and Relco contend that the court improperly applied the integrated enterprise theory to hold them liable to Batchelder for damages. Batchelder cross-appeals from the same judgment, and contends that the court erred in applying a clear and convincing standard of proof to her statutory punitive damages claim. We affirm the judgment.

I. BACKGROUND

[¶ 2] Batchelder was terminated from her position as a waitress at Denny's restaurant in Bangor in December of 2001, after making several complaints to management about various company practices. In March of 2002, Batchelder filed a complaint against Relco with the Maine Human Rights Commission, from which she obtained a right-to-sue letter pursuant to 5 M.R.S. § 4612(6).¹ Batchelder later filed a complaint in the Superior Court against Realty Resources Hospitality, LLC, operating in seventeen locations throughout New England, fifteen of which were doing business as Denny's restaurant, as well as Relco, alleging that her employment at Denny's was terminated in violation of the WPA² and the MHRA. Batchelder alleged that all the named defendants (collectively, Denny's) constituted a single entity, and that, based on an integrated enterprise theory, that entity was her employer and it was therefore liable for her damages.

[¶ 3] A jury trial was held in December of 2005. Viewed in the light most favorable to Batchelder, as the prevailing party, see Poland v. Webb, 1998 ME 104, ¶ 10, 711 A.2d 1278, 1280, the following facts relevant to the integrated enterprise question of fact were established at trial. At the time of Batchelder's employment with Denny's, Joseph Cloutier owned one hundred percent of all eighteen defendant LLCs, and served as president of each. Fourteen of the defendants—all the Realty Resources Hospitalities entities—own and operate Denny's restaurants in various locations (the fifteenth Realty Resources closed). The remaining two Realty Resources are holding companies, Realty Resources, LLC, for the Denny's locations in Maine, and Realty Resources New England, LLC, for the Denny's locations in Massachusetts and New Hampshire. Except for the two holding companies, each Realty Resources owns its own land or leasehold interest, equipment, and franchise rights. Each Realty Resources also employs its own managers and assistant managers.

[¶ 4] The eighteenth defendant, Relco, is an employee leasing company that leases hourly employees to each Denny's location, including all the wait staff. Relco owns no restaurants and has no assets, and is instead an entity established to pay hourly wages in a centralized manner. Relco has no control over hiring and firing, budgets, or food safety. From 2001 to 2003, these fourteen Realty Resources restaurants filed only three aggregated tax returns.

[¶ 5] The jury returned a verdict in which it found in Batchelder's favor on her whistleblowers' claim, and that Denny's did constitute an integrated enterprise. It awarded Batchelder $50,000 in compensatory damages for which all eighteen defendants were jointly and severally liable. The jury, having been instructed that it could award punitive damages only if it found that Denny's acted with malice or reckless indifference by clear and convincing evidence, awarded no punitive damages to Batchelder. Denny's appealed and Batchelder cross-appealed.

II. DISCUSSION

A. Integrated Enterprise Theory

[¶ 6] Denny's contends that the court erred when it instructed the jury as to the integrated enterprise theory.³ The court gave the following instruction to the jury regarding the theory:

The plaintiff alleges that the defendants are an integrated enterprise, which means that they would be treated as a single employer. The plaintiff bears the burden of proving this allegation by a preponderance of the evidence. In determining whether the defendants are an integrated enterprise, you should consider the relationship among the defendants, including the extent to which there is, number one, the interrelation of operations, including such things as shared employees, services, records, office space and equipment, [commingled] finances, and common handling of tasks such as payroll, books, and tax returns. Number two, common management, such as where an individual or group of individuals controls all the businesses and serves as an officer or director for each of them. Number three, centralized control of labor relations such as where a single entity maintains personnel records for each of the companies, where the companies have a shared personnel department, or where the same persons make employment decisions for all entities, and the entities share a universal personnel handbook, and number four, common ownership. You should consider these factors in determining whether the plaintiff has proven that the defendants are an integrated enterprise. Of these factors, however, the most important consideration is whether the businesses have centralized control of labor relations.

We review the trial court's jury instructions for prejudicial error to determine whether the court correctly and fairly informed the jury as to all necessary aspects of the applicable law. Lee v. Scotia Prince Cruises Ltd., 2003 ME 78, ¶ 15, 828 A.2d 210, 214.

[¶ 7] The court's jury instruction on an integrated enterprise was based on the theory as set forth in Romano v. U-Haul Int'l, 233 F.3d 655 (1st Cir.2000). In Romano, the United States Court of Appeals for the First Circuit set out the four-factor integrated enterprise test, originally developed pursuant to the National Labor Relations Act, 29 U.S.C.S. § 164 (LexisNexis 1993 & Supp. 2006), and which is used to determine if "interrelated companies should be treated as one entity." Romano, 233 F.3d at 662. The test involves an analysis of four factors: "(1) interrelation of operations; (2) common management; (3) centralized control of labor relations; and (4) common ownership." Id. Among these factors, "control of employment decisions is a primary consideration in evaluating employer status," but "only to the extent that the parent exerts an amount of participation [that] is sufficient and necessary to the total employment process, even absent total control or ultimate authority over hiring decisions." Id. at 666 (quotation marks omitted) (alteration in original).

[¶ 8] The integrated enterprise theory has been adopted and/or applied by a number of other jurisdictions, including the majority of the federal circuits. See, e.g., Knowlton v. Teltrust Phones, Inc., 189 F.3d 1177, 1184 (10th Cir.1999); Swallows v. Barnes & Noble Book Stores, Inc., 128 F.3d 990, 993-94 (6th Cir.1997); Cook v. Arrowsmith Shelburne, Inc., 69 F.3d 1235, 1240-41 (2d Cir.1995); McKenzie v. Davenport-Harris Funeral Home, 834 F.2d 930, 933 (11th Cir.1987); Childs v. Local 18, Int'l Bhd. of Elec. Workers, 719 F.2d 1379, 1382 (9th Cir.1983); Trevino v. Celanese Corp., 701 F.2d 397, 403-04 (5th Cir. 1983). It has never, however, been adopted as the law of Maine.

[¶ 9] Denny's does not dispute that Maine should adopt an integrated enterprise theory; rather, it challenges: (1) the application of the integrated enterprise theory to this case as a matter of law, (2) the four-factor test used by the court in applying the theory, and (3) the application of the theory to this case as a matter of fact. It also contends that the court's jury instruction is not harmless error because the excessive number of defendants held to be liable had an influence on the size of the jury's award of damages.

[¶ 10] Denny's, however, failed to make the argument before the trial court that it now makes on appeal, that the integrated enterprise theory should be used only as a jurisdictional test not applicable to these particular defendants. Denny's now contends that the test of the integrated enterprise theory should have been based on Papa v. Katy Indus., Inc., 166 F.3d 937 (7th Cir.1999),⁴ rather than on Romano. "The purpose of objections to instructions is to assist the trial court in developing the most accurate and concise statement of the law possible for instructing the jury . . . ." Clewley v. Whitney, 2002 ME 61, ¶ 10, 794 A.2d 87, 90. Thus, "[i]n order to properly preserve a challenge to a jury instruction, a party must not only object but must state distinctly the ground for the objection." Morey v. Stratton, 2000 ME 147, ¶ 9, 756 A.2d 496, 499 (quotation marks omitted). Further, "[a] failure to direct the court's attention to the challenged language of a jury instruction or to offer a more acceptable version may render the objection inadequate to preserve the issue for appeal." Id. (quotation marks omitted).

[¶ 11] Because Denny's' arguments are not preserved, we review the integrated enterprise instruction only for obvious error. See Estate of Bragdon, 2005 ME 85, ¶ 4, 875 A.2d 697, 699; Morey, 2000 ME 147, ¶ 10, 756 A.2d at 499. We do not now decide whether to adopt the integrated enterprise theory in Maine, nor do we decide what formulation of the theory...