Frank v. U.S. West, Inc., 92-1120

CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)
Writing for the CourtBALDOCK
Citation3 F.3d 1357
Parties62 Fair Empl.Prac.Cas. 1282, 62 Empl. Prac. Dec. P 42,522, 26 Fed.R.Serv.3d 954 Robert H. E. FRANK, Jerry D. Mooberry, Tyrone G. Moreno, Plaintiffs-Appellants, v. U.S. WEST, INC., Defendant-Appellee.
Docket NumberNo. 92-1120,92-1120
Decision Date24 August 1993

Barry D. Roseman, Denver, CO (Walter L. Gerash of Gerash, Robinson & Miranda, with him on the brief), for plaintiffs-appellants.

Rodney L. Smith of Eiberger, Stacy, Smith & Martin, Denver, CO, for defendant-appellee.

Before BALDOCK, WOOD * and EBEL, Circuit Judges.

BALDOCK, Circuit Judge.

Plaintiffs appeal the district court's grant of summary judgment for Defendant on their age discrimination, national origin discrimination and state law claims, claiming the district court erred in finding that Defendant was not Plaintiffs' employer as a matter of law. Plaintiffs further allege that the district court abused its discretion by denying Plaintiffs and Defendant's Stipulated Motion to Drop and Add Parties and by denying Plaintiffs' Motion for Leave to Supplement Amended Complaint. We have jurisdiction under 28 U.S.C. Sec. 1291.

I. Facts

Defendant U.S. West, Inc., a Colorado corporation, is the sole shareholder in numerous subsidiaries, including Northwestern Bell Telephone Company ("Northwestern Bell"), Mountain States Telephone and Telegraph Company ("Mountain Bell"), and Pacific Northwest Bell ("PNB"). These three U.S. West, Inc. subsidiaries, known as operating companies, provide regional telecommunication services throughout the western United States. At the time Plaintiffs' claims arose and at the time their case was pending in the district court, the operating companies provided services under the trade name "U.S. West Communications" and sometimes acted as an integrated single entity. 1

Defendant and Northwestern Bell have no common officers or directors. Northwestern Bell has over 14,000 employees and is adequately capitalized, having assets in excess of five billion dollars. Northwestern Bell, separately from Defendant, produces its own revenues, funds its own operating expenses, and maintains its own customers. Although Defendant has established certain broad, written personnel policies for all twenty-two of its subsidiaries, each subsidiary is responsible for implementing and administering the policies, and Defendant does not participate in the routine personnel decisions such as hiring, transferring, promoting, discharging and disciplining Northwestern Bell employees.

Plaintiff Jerry D. Mooberry, who is over age forty, served as Director of New Products Stimulation for Northwestern Bell. He supervised Plaintiffs Robert H.E. Frank, who is also over age forty, and Tyrone G. Moreno, who is Native American, both of whom are also Northwestern Bell employees. All three were involved in a project to develop telecommunication products and services, which were known as Digital Network Architecture/Digital Integrated Services ("DNA/DIS"), to facilitate transmission of computerized information over telephone lines. On this project, Plaintiff Mooberry's immediate supervisor was John Hale of PNB, whose immediate supervisor was from Mountain Bell, and the chain of command continued through a Northwestern Bell employee, another Mountain Bell employee, and finally to Thomas Madison and Richard D. McCormick, vice-president and president of Defendant U.S. West, Inc. While working on the DNA/DIS project, Plaintiffs encountered problems with employees of the other subsidiaries. These employees, who had previously developed a telecommunications system to which DNA/DIS would be a competitor, allegedly attempted to undermine Plaintiffs and their product development efforts with defamatory comments against Plaintiffs personally and with comments and actions designed to interfere with Plaintiffs' career opportunities.

In September 1988, Plaintiff Frank informed Richard D. McCormick, president of Defendant U.S. West, Inc., of the conflict by letter. Acting on Mr. McCormick's behalf, Mr. James H. Stever responded to Plaintiff Frank's concerns by letter. Mr. Stever acknowledged that there was a problem but encouraged Plaintiff Frank to communicate with "others within [his] direct organization who may be closer to the problem." Later, Mr. McCormick met with Plaintiffs to discuss their complaints.

On August 8, 1989, Plaintiffs filed their initial complaint, and on October 1, 1989, they filed an Amended Complaint, each time naming Defendant U.S. West, Inc. as the only defendant. In their complaints, Plaintiffs alleged that they were denied bonuses, promotions and other career opportunities, and were subjected to defamatory comments in violation of Title VII of the Civil Rights Act of 1964 ("Title VII"), 42 U.S.C. Secs. 2000e-2000e-17, the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. Secs. 621-634, and various state laws. At the time the complaint was filed, Plaintiffs Frank and Moreno were citizens of Nebraska, and Plaintiff Mooberry was a citizen of Iowa.

On January 23, 1990, the parties submitted a stipulated motion to the district court to add Northwestern Bell, an Iowa corporation, as a defendant. This motion also attempted to stipulate that the court had diversity jurisdiction over the state law claims. On January 30, 1990, the district court denied the motion because complete diversity did not exist--i.e., proposed defendant Northwestern Bell and Plaintiff Mooberry were both Iowa citizens--and jurisdiction could not be conferred by consent of the parties. On July 20, 1990, Defendant filed a motion for summary judgment, asserting that it was not a proper defendant in Plaintiffs' employment discrimination suit because it was not Plaintiffs' employer. Plaintiffs moved to supplement their amended complaint on September 21, 1990, again proposing to add Northwestern Bell as a defendant and also asserting that Defendant retaliated against Plaintiffs for filing the Title VII and ADEA actions. The district court denied this motion on March 26, 1992, because it was filed four and a half months after the court's May 4, 1990 deadline for amending the pleadings. Also on March 26, 1992, the district court granted Defendant's motion for summary judgment, finding that Defendant was not Plaintiffs' employer for purposes of the Title VII and ADEA suits and that Defendant was not liable for the acts of its subsidiary, Northwestern Bell, for the state claims.

II. Summary Judgment

Applying the same standard as the district court, we review the court's grant of summary judgment de novo. Evans v. McDonald's Corp., 936 F.2d 1087, 1089 (10th Cir.1991). Summary judgment is appropriate if "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Factual disputes about immaterial matters are irrelevant to a summary judgment determination. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). We view the evidence in a light most favorable to the nonmovant. Id. at 255, 106 S.Ct. at 2513-14. However, it is not enough that the nonmovant's evidence be "merely colorable" or anything short of "significantly probative;" id. at 249-50, 106 S.Ct. at 2511, the nonmovant must come forward with specific facts showing a genuine issue for trial, Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1357, 89 L.Ed.2d 538 (1986).

A. Federal Employment Discrimination Claims

To establish a prima facie case for their Title VII and ADEA claims, Plaintiffs were required to prove, inter alia, that Defendant was their employer. 42 U.S.C. Sec. 2000e-2; 28 U.S.C. Sec. 623. Whether Defendant was Plaintiffs' employer depends upon whether Defendant is liable for the acts of its subsidiary, Northwestern Bell.

The law allows businesses to incorporate to limit liability and isolate liabilities among separate entities. See Cascade Energy & Metals Corp. v. Banks, 896 F.2d 1557, 1576 (10th Cir.), cert. denied, 498 U.S. 849, 111 S.Ct. 138, 112 L.Ed.2d 105 (1990). One way liability is limited in corporations is that shareholders generally are not liable for the acts of the corporation. NLRB v. Deena Artware, Inc., 361 U.S. 398, 402-03, 80 S.Ct. 441, 443-44, 4 L.Ed.2d 400 (1960). The doctrine of limited liability creates a strong presumption that a parent company is not the employer of its subsidiary's employees, and the courts have found otherwise only in extraordinary circumstances. Johnson v. Flowers Indus., Inc., 814 F.2d 978, 980-81 (4th Cir.1987).

Depending on the facts of the case before them, the courts have applied four different tests to determine whether a parent corporation is liable for the acts of its subsidiary. 2 While we decline to adopt any one of these tests as the exclusive test for use in all employment discrimination cases, we today apply the integrated enterprise test because Plaintiffs and Defendant concede that this test best applies to the facts of this case. Under the integrated enterprise test, the following four factors are considered: (1) interrelation of operations, (2) centralized control of labor relations, (3) common management, and (4) common ownership or financial control. Evans v. McDonald's Corp., 936 F.2d 1087, 1089 (10th Cir.1991). We apply these factors and conclude that, as a matter of law, Defendant is not liable as an employer for the acts of Northwestern Bell because Plaintiffs have failed to present evidence that the two companies were integrated.

1. Interrelation of Operations

Plaintiffs presented no evidence that Northwestern Bell's operations were interrelated with those of Defendant, but instead asserted that interrelated operations could be inferred from the interrelation of operations between Northwestern Bell, Mountain Bell and PNB. The interrelated nature of the three subsidiaries is, however, irrelevant to the interrelation of operations inquiry. S...

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