Da Silva v. Kinsho Intern. Corp.

• Decision Date: 04 January 2000
• Docket Number: No. 97 Civ. 5030(RMB).,97 Civ. 5030(RMB).
• Citation: 210 F.Supp.2d 241
• Parties: Celia DA SILVA, Plaintiff, v. KINSHO INTERNATIONAL CORPORATION and Haruo Maruyama, Defendants.
• Court: U.S. District Court — Southern District of New York

Page 241

210 F.Supp.2d 241

Celia DA SILVA, Plaintiff, v. KINSHO INTERNATIONAL CORPORATION and Haruo Maruyama, Defendants.

No. 97 Civ. 5030(RMB).

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

January 4, 2000.

David Norton Mair, Kaiser Saurborn & Mair, P.C., New York City, for Celia Da Silva.

Jeffrey D. Buss, Smith, Buss & Jacobs, New york City, for Kinsho Intern. Corp., Harou Maruyama.

DECISION AND ORDER

BERMAN, District Judge.

The Plaintiff in this action alleged that she was terminated from her (twelve year) employment with Defendants because she was not Japanese or of Japanese descent. Following a hearing on December 13, 1999, the Court determined that Defendant corporation was not an "employer" within the meaning of Title VII of the Civil Rights Act of 1964 (because it had less than fifteen employees) and that it was appropriate for the Court to exercise supplemental jurisdiction over the remaining state law claims and try the case. This Decision and Order reflects and elaborates upon the Court's determinations.

Background

Celia Da Silva ("Plaintiff") filed this action on July 9, 1997, against her former employer Kinsho International Corporation ("Kinsho Int'l") and its Treasurer, Haruo Maruyama ("Maruyama")(collectively, the "Defendants"), asserting claims of racial and national origin discrimination pursuant to Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. ("Title VII"); the New York State Human Rights Law, N.Y. Exec. L. § 296 ("HRL"); and Chapter I, Title 8 of the Administrative Code of the City of New York ("NYCHRL"). Plaintiff alleged that her employment was terminated by Defendants because she was not Japanese or of Japanese descent.¹ On February 17, 1998, Defendants filed a motion to dismiss "pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction." (Defendants' Memorandum of Law in Support of Motion dated February 17, 1998 at 1).

Title VII defines "employer" as an entity employing fifteen or more employees for at least twenty weeks. 42 U.S.C. § 2000e(b). Defendants asserted in their motion papers that Kinsho Int'l was not an employer under Title VII because it had less than fifteen employees. While conceding that Kinsho Int'l never employed fifteen or more people, Plaintiff argued that defendant Kinsho Int'l and its parent, Kinsho Mataichi Corp. ("Kinsho Mataichi"), constituted a "single employer" and, therefore, taken together, employed the requisite number of people under Title VII.

In a Memorandum Opinion and Order dated August 31, 1998 (the "Order"), after reviewing the appropriate test under Cook v. Arrowsmith Shelburne, Inc., 69 F.3d 1235 (2d Cir.1995) to determine single employer status, Judge Martin denied Defendants' motion to dismiss because he found there was "a factual dispute that must be resolved at trial."² (Order at 3). On December 12, 1998, the case was reassigned from Judge Martin to this Court and trial was scheduled to begin on December 13, 1999.

The parties agreed that the issue of whether Kinsho Int'l qualified as an "employer" under Title VII should be determined by the Court prior to trial. As a result, on the morning of December 13, 1999, the Court, sitting without a jury, held a hearing to resolve this issue. At the hearing, the Court heard testimony from the following witnesses: (i) Plaintiff Celia Da Silva; (ii) Kimie Ito, a former long-time employee of defendant Kinsho Int'l; (iii) Vern Lee Jarosak, an executive of defendant Kinsho Int'l; and (iv) individual defendant Haruo Maruyama. The Court also examined certain stipulations and exhibits submitted by the parties, as well as deposition testimony. At the conclusion of the hearing, the Court reserved judgment on the issue of whether defendant Kinsho Int'l was an "employer" under Title VII.

On the afternoon of December 13, 1999, the trial commenced. The parties completed jury selection and presented their opening statements to the jury that day. After excusing the jury, the Court ruled that defendant Kinsho Int'l and Kinsho Mataichi did not constitute a "single employer" and, therefore, that defendant Kinsho Int'l could not be considered an "employer" under Title VII. Accordingly, the Court dismissed the Plaintiff's Title VII claims against defendant Kinsho Int'l, and retained supplemental jurisdiction over both Defendants with respect to Plaintiff's HRL and NYCHRL claims. Over the next day and a half, the trial was continued to its conclusion; the jury received the case and began deliberating on December 15, 1999.³ Shortly thereafter, on December 16, 1999, the jury returned a unanimous verdict for Defendants.

The Court has refrained from entering a judgment on the verdict pending the instant ruling on the "jurisdictional" question.

Discussion

Single Employer Status

"The law allows a corporation to organize so as to isolate liabilities among separate entities." Murray v. Miner, 74 F.3d 402, 404 (2d Cir.1996) (citation omitted). See also Balut v. Loral Electronic Systems, 988 F.Supp. 339, 344 (S.D.N.Y. 1997), aff'd, 166 F.3d 1199, 1998 WL 887194 (2d Cir.1998). Under the doctrine of limited liability, "a parent is liable for the acts of its subsidiary only under `extraordinary circumstances.'" Balut, 988 F.Supp. at 344 (quoting Murray, 74 F.3d at 404). See also Herman v. Blockbuster Entertainment Group, 18 F.Supp.2d 304, 308 (S.D.N.Y.1998), aff'd, 182 F.3d 899, 1999 WL 385765 (2d Cir.1999), cert. denied, 528 U.S. 1020, 120 S.Ct. 529, 145 L.Ed.2d 409 (1999)("[a]s a general matter, `a corporate entity is liable for the acts of a separate, related entity only under extraordinary circumstances'") (citation omitted). Therefore, there is a "strong presumption that a parent is not the employer of its subsidiary's employees." Balut, 988 F.Supp. at 344 (citation omitted)(emphasis added).

In Garcia v. Elf Atochem North America, 28 F.3d 446, 450 (5^th Cir.1994), abrogated on other grounds by, 523 U.S. 75, 118 S.Ct. 998, 140 L.Ed.2d 201 (1998), the Court of Appeals for the Fifth Circuit held that:

[A] parent and subsidiary cannot be found to represent a `single, integrated enterprise' in the absence of evidence of `(1) interrelation of operations, (2) centralized control of labor relations, (3) common management, and (4) common ownership or financial control.'

Id. (citation omitted). This four-part test has also been adopted by the Sixth and Eighth Circuits. See Armbruster v. Quinn, 711 F.2d 1332 (6^th Cir.1983); Baker v. Stuart Broadcasting Co., 560 F.2d 389, 392 (8^th Cir.1977). The Court of Appeals for the Second Circuit has stated:

We believe that the appropriate test under Title VII for determining when parent companies may be considered employers of a subsidiary's employees is the four-part test adopted by the Fifth, Sixth, and Eighth circuits.

Cook v. Arrowsmith Shelburne, Inc., 69 F.3d 1235, 1241 (2d Cir.1995).

Courts applying this four-part test "`have focused on the second factor: centralized control of labor relations.'" Id. at 1240 (quoting Trevino v. Celanese Corp., 701 F.2d 397, 404 (5<sup>th</sup> Cir.1983)). This second factor has been distilled further to the following inquiry: "`[w]hat entity made the final decisions regarding employment matters related to the person claiming discrimination?'" Cook, 69 F.3d at 1240 (quoting Trevino, 701 F.2d at 404).

"[T]he Court must focus its inquiry on the parent's actual involvement in the particular circumstances giving rise to the litigation . . ." Herman, 18 F.Supp.2d 304, 311 (S.D.N.Y.1998). In holding that plaintiff's former employer and its major shareholder did not constitute a single employer for Title VII purposes, the Herman court determined that "Plaintiffs offer no evidence that Blockbuster played any role in the employment decisions and alleged discriminatory conduct particularly effecting them." Id. at 312. See also Duffy v. Drake Beam Morin, Harcourt General, Inc., 1998 WL 252063 at *5 (S.D.N.Y. May 19, 1998)(no centralized control over labor relations where, despite the fact that parent generally required its wholly-owned subsidiary "to obtain its approval before making significant changes in operations, there is no evidence that such approval was either sought or obtained with respect to any of [subsidiary's] actions at issue").

This Court agrees that a parent company should not lightly be held responsible for the acts of its subsidiaries absent proof that the parent was involved in the particular circumstances giving rise to the litigation. See Herman, 18 F.Supp.2d at 311; Duffy, 1998 WL 252063 at *5. Here, as previously noted by Judge Martin, there were conflicting assertions as to the parent's involvement in Plaintiff's termination from employment which gave rise to the need for a hearing. The determination of Kinsho Mataichi's "actual involvement in the particular circumstances giving rise to the litigation" turns largely on the weight of the evidence, including the credibility of witnesses, adduced at the hearing.

The Court's findings based upon the hearing include the following: Defendant Haruo Maruyama testified credibly that the decision to terminate Plaintiff's employment was made locally by himself and Takeshi Akazawa, the President of defendant Kinsho Int'l; Kinsho Int'l did not request permission from its parent Kinsho Mataichi, before terminating Plaintiff. (Transcript of Hearing at 85). Indeed, Maruyama explained that Kinsho Int'l was autonomous from its parent, Kinsho Mataichi, with respect to the hiring, firing and salary increases of all "local" support level employees such as Plaintiff.⁴ (Id. at 87).

Maruyama's testimony is corroborated by that of Vern Lee Jarosak, an executive at defendant Kinsho Int'l. Jarosak testified credibly that the decision to terminate Plaintiff's employment was a joint local decision between himself, Maruyama and Akazawa. (Id. at 70). Jarosak further testified that, to his knowledge, Kinsho Mataichi does not approve the hiring or firing of support-level employees. (Id....