Caruso v. Peat, Marwick, Mitchell & Co.

• Decision Date: 14 July 1987
• Docket Number: No. 86 Civ. 3408 (JMW).,86 Civ. 3408 (JMW).
• Citation: 664 F. Supp. 144
• Parties: Conrad S. CARUSO, Plaintiff, v. PEAT, MARWICK, MITCHELL & CO., Defendant.
• Court: U.S. District Court — Southern District of New York

664 F. Supp. 144

Conrad S. CARUSO, Plaintiff, v. PEAT, MARWICK, MITCHELL & CO., Defendant.

No. 86 Civ. 3408 (JMW).

United States District Court, S.D. New York.

July 14, 1987.

Judith P. Vladeck, Joseph J. Garcia and Laura S. Schnell, Vladeck, Waldman, Elias, & Engelhard, P.C., New York City, for plaintiff.

Robert L. Williams, Susan Anspach and Deborah Reik, E.E.O.C., New York City, for amicus curiae.

Thomas J. Kavaler, Samuel Estreicher and Neil W. Silberblatt, Cahill, Gordon & Reindel, New York City, for defendant.

OPINION

WALKER, District Judge:

INTRODUCTION

Plaintiff Conrad S. Caruso ("Caruso") has brought the instant age discrimination action against Defendant Peat, Marwick, Mitchell & Co. ("Peat Marwick"), his former employer. Defendant moves to dismiss, alleging that Caruso's status as a partner bars his invocation as an "employee" of the federal Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 621, et seq.¹ For the reasons set forth below, defendant's motion to dismiss is denied.

STATEMENT OF FACTS

Defendant Peat Marwick is a major American accounting and consulting firm, employing several thousand professionals and consultants in more than 100 offices. About 1,350 of these accountants and consultants are employed as partners.

Peat Marwick is controlled by a 21-member board of directors. Among its policy-making duties, the board determines those Peat Marwick employees who the firm will nominate as partners. This board's policy decisions are implemented by a six-tier management hierarchy, ranging from the Chief Executive Officer, who reports directly to the board, to Partners in Charge, who are responsible for routine administrative decisions at each Peat Marwick office. About 300 of the firm's 1,350 partners hold some form of management position. The firm's New York office, where plaintiff worked, employed 128 partners. Thirty-six of these partners held management positions. Plaintiff did not hold one of these positions.

Plaintiff Caruso's career with Peat Marwick began in May 1969, when the Management Consulting Department of defendant's New York office hired him as a senior consultant. In 1970, Peat Marwick promoted Caruso to the position of manager. Caruso was promoted to partner in 1980.² Plaintiff's duties and responsibilities changed little after each promotion, including his promotion to partner. As a partner, plaintiff was allowed to make some discretionary decisions on behalf of his clients, but more typically plaintiff would ask a member of defendant's management, such as the Partner in Charge, to ratify or reject his recommendations.

During his tenure as a Peat Marwick partner, plaintiff was required to submit time sheets every two weeks, showing the number of hours he had worked for various accounts. Plaintiff received five weeks of vacation each year—one more week than he had received prior to his appointment as a partner. Each year, plaintiff was subject to a formal job performance evaluation given by the Partner in Charge of the New York office.

Plaintiff could not make any personnel decisions on his own initiative. In fact, plaintiff's only formal authority with respect to employment decisions was the power to block a partnership appointment. Plaintiff's principal means of input on personnel issues was to recommend changes to the Partner in Charge. Plaintiff made such recommendations prior to his promotion from manager to partner at Peat Marwick, and the weight given his recommendations apparently changed little after his promotion to partner. Plaintiff and other non-management partners could not question a management request that one of their colleagues resign.

Peat Marwick partners do not hold any ownership interest in the firm. Partners receive a base salary of about $25,000, with additional compensation derived from firm profits and determined by the number of "units" assigned to each partner. Depending on their status with the firm, Peat Marwick partners hold between 175 units and 3,300 units. The number of units held by a partner also determines his voting power on those issues that the Board of Directors submit for a vote of the entire partnership.

During his partnership tenure with Peat Marwick, plaintiff held no more than 350 units. Virtually all of the 300 Peat Marwick partners employed in management positions held at least 1,500 units.

In December 1985, the Partner in Charge of Peat Marwick's New York office asked Caruso to resign from the firm. Defendant alleges that Caruso was asked to resign because he did not bring a sufficient number of new clients to the firm. When plaintiff was asked to resign in 1985, he was 50 years old.

Plaintiff agreed to resign, and left Peat Marwick by December 31, 1985. After this date, plaintiff received occasional work as an independent consultant for the firm.

Almost immediately after his resignation from Peat Marwick, plaintiff filed an age discrimination suit with both the New York State Division of Human Rights, and with the Equal Employment Opportunity Commission. Peat Marwick discontinued Caruso's employment as an outside consultant on May 9, 1986.

On May 21, 1986, Caruso filed the instant amended complaint, alleging principally that defendant's decision to ask for his resignation constituted unlawful age discrimination. Plaintiff's amended complaint also alleges that Peat Marwick unlawfully discontinued plaintiff's outside consulting work in retaliation for plaintiff's age discrimination action against the firm.

DISCUSSION

1. A "Partner's" Ability to Bring an ADEA Action.

A plaintiff may bring a federal age discrimination action under the ADEA only where he is an employee suing his former or current employer. 29 U.S.C. § 623(a); Hyland v. New Haven Radiology Associates, P.C., 794 F.2d 793, 796 (2d Cir.1986). It is well settled that an individual who has acted as a central corporate decisionmaker or controlling owner does not fall within the ADEA definition of "employee," and thus cannot bring an action against the company he once managed or owned. See, e.g., Hyland v. New Haven Radiology Associates, P.C., supra, 794 F.2d at 797; McGraw v. Warren County Oil Co., 707 F.2d 990, 991 (8th Cir.1983) (corporate directors are not "employees," as the term is used in the ADEA). On the other hand, the mere fact that an employee holds a job carrying an impressive title does not mean that this employee loses the protection of the ADEA. See, e.g., Whittlesey v. Union Carbide Corp., 742 F.2d 724, 726-27 (2d Cir.1984) (chief labor counsel, whose duties were primarily those of "an attorney doing legal work," qualifies as an employee who may bring an ADEA action); Stanojev v. Ebasco Services, Inc., 643 F.2d 914 (2d Cir.1981) (corporate vice president may bring an ADEA action).

Defendant argues for a per se rule that an individual denoted as a "partner" falls outside the ADEA definition of employee. In other words, defendant contends that since Peat Marwick employed Caruso under the title of "partner," Caruso cannot sue his former employer for age discrimination.

Recent decisions are inconsistent with defendant's argument for a per se rule holding that the ADEA cannot apply to individuals employed under the title of partner. For example, in Hyland v. New Haven Radiology Associates, P.C., supra, 794 F.2d at 797-78, the Second Circuit Court of Appeals reversed the dismissal of a plaintiff's age discrimination claim, holding that the employer's classification of plaintiff as a partner was not controlling. The Hyland Court began its analysis with the proposition: "It is generally accepted that the benefits of the antidiscrimination statutes ... do not extend to those properly classified as partners." Id. at 797. However, the Court continued that an employer's mere classification of an individual as a partner is not dispositive, and that courts instead must look to that individual's actual duties and status. Id. at 797-98. The Court concluded that even though the Hyland plaintiff had held a 20% ownership interest in the defendant corporation, he could nonetheless bring suit as an employee under the ADEA, since "there was nothing inconsistent between his proprietary interest ... and the corporate employment relationship he held." Id. at 798. See also E.E.O.C. v. Peat, Marwick, Mitchell and Co., 589 F.Supp. 534, 539 (E.D.Mo. 1984), aff'd, 775 F.2d 928 (8th Cir.1985), cert. denied, ___ U.S. ___, 106 S.Ct. 1263, 89 L.Ed.2d 572 (1986) (authorizing EEOC bringing ADEA action to issue subpeona, since "it is possible that respondent may label some of its members as `partners' when, in fact, those members may not fit within the traditional definition of the term"); Peterson v. Eppler, 67 N.Y.S.2d 498 (Sup.Ct.N.Y.Co.1946) (describing "junior partner" who received a fixed salary as an employee, rather than a partner).

Rejection of the per se partnership exemption urged by defendant receives further support from Justice Lewis Powell's concurrence in Hishon v. King & Spalding, 467 U.S. 69, 79, 104 S.Ct. 2229, 2235, 81 L.Ed.2d 59 (1984). In joining the majority holding that a law firm associate could bring a sex discrimination action under Title VII, 42 U.S.C. § 2000e-2(a),³ Justice Powell's concurrence urged that anti-discrimination statutes should not apply "to the management of a law firm by its partners." Id. at 79, 104 S.Ct. at 2236. However, Justice Powell also cautioned: "Of course, an employer may not evade the strictures of Title VII simply by labelling its employees as `partners.'" Id. at n. 2.⁴

Justice Powell's concurrence highlights the obvious weakness in defendant's argument for a per se rule exempting individuals classified as partners from ADEA protection. Such a rule would allow employers to strip employees of their ADEA rights simply by denoting all employees as "partners," without giving these employees any actual decisionmaking authority or job security. Also, adoption of the per se rule advocated by defendant...