Jean Anderson Hierarchy v. Allstate Life Ins. Co.

• Decision Date: 06 April 1998
• Docket Number: No. CIV.A. 97-5175.,CIV.A. 97-5175.
• Citation: 2 F.Supp.2d 688
• Parties: The JEAN ANDERSON HIERARCHY OF AGENTS and Jean Anderson v. ALLSTATE LIFE INSURANCE COMPANY, Allstate Group of Life Insurance Companies, Lincoln Benefit Life Company, Sears, Roebuck and Co. and Surety Life Insurance Company
• Court: U.S. District Court — Eastern District of Pennsylvania

2 F.Supp.2d 688

The JEAN ANDERSON HIERARCHY OF AGENTS and Jean Anderson v. ALLSTATE LIFE INSURANCE COMPANY, Allstate Group of Life Insurance Companies, Lincoln Benefit Life Company, Sears, Roebuck and Co. and Surety Life Insurance Company

No. CIV.A. 97-5175.

United States District Court, E.D. Pennsylvania.

April 6, 1998.

COPYRIGHT MATERIAL OMITTED

Fredric S. Karpf, Thomas G. Russomano, The Margolis Law Group, P.C., Verona, NJ, for Plaintiffs.

Frank A. Gerolamo, Gregory S. Capps, German, Gallagher and Murtagh, Philadelphia, PA, for Defendants.

MEMORANDUM AND ORDER

JOYNER, District Judge.

By way of the motion now before the Court, Defendants move to dismiss Plaintiffs' Complaint pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons which follow, the motion shall be granted in part and denied in part.

Background

In 1990, plaintiff Jean Anderson entered into an Executive Sales Director ("ESD") contract with defendant Surety Life Insurance Company, a wholly owned subsidiary of defendant Allstate, whereby Anderson was authorized to sell Surety's insurance products and staff an agency to sell those products in the Pennsylvania and New Jersey markets. (Pl's complaint, ¶ 11). At about this same time, Surety hired Walter Anderson, plaintiff's husband, as its regional director for the Pennsylvania and New Jersey markets. (Pl's Complaint, ¶ 10). Plaintiff contends that based upon her ESD contract with Surety, she began recruiting agents to staff the Jean Anderson Hierarchy of Agents ("Hierarchy") to market Surety's products, eventually recruiting some 428 agents. (Complaint, ¶ s12-13). Plaintiff contends that she was an outstanding Executive Sales Director for Surety and that the company recognized her as such by, inter alia, naming her the ESD of the Year, appointing her to the executive council, and rewarding her with numerous company-sponsored trips to Mexico, Switzerland and Indonesia. (Complaint, ¶ s 13-14).

Despite plaintiff's outstanding performance however, Surety refused to pay plaintiff her full and override commissions and earned persistency bonuses ostensibly because her husband was a Regional Director. (Complaint ¶ 15). In August, 1996, Surety terminated both Walter and Jean Anderson. Plaintiffs believe that the terminations were retaliatory for Walter Anderson's advising Surety of inherent defects in certain of its insurance products "and as a coercive measure to suppress exposure of the foregoing defects..." (Complaint, ¶ s 17-21). Following Walter Anderson's assignment of all of his rights, title and interest in and to any and all commissions, bonuses, awards, and other compensation due him from Surety, Plaintiffs brought this suit in August, 1997 for breach of contract, breach of implied covenants of good faith and fair dealings in the ESD and Agent's contracts, negligence, conversion, intentional infliction of emotional distress and for violations of the anti-discrimination provisions of 29 U.S.C. § 206(d)(1) and 42 U.S.C. § 2000e.

Standards Governing 12(b)(6) Motions

It has long been held that the issue of the sufficiency of a pleading may be raised by the filing of a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6). In resolving a Rule 12(b)(6) motion, the courts are to primarily consider the allegations in the complaint, although matters of public record, orders, items appearing in the record of the case and exhibits attached to the complaint may also be taken into account. Chester County Intermediate Unit v. Pennsylvania Blue Shield, 896 F.2d 808, 812 (3rd Cir.1990). In so doing, the court must accept as true the facts alleged in the complaint, together with all reasonable inferences that can be drawn therefrom and construe them in the light most favorable to the plaintiff. Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3rd Cir.1990); Hough/Loew Associates, Inc. v. CLX Realty Co., 760 F.Supp. 1141 (E.D.Pa.1991). The court's inquiry is directed to whether the allegations constitute a statement of a claim under Rule 8(a) and whether the plaintiff has a right to any relief based upon the facts pled. Dismissal under Rule 12(b)(6) for failure to state a claim is therefore limited to those instances where it is certain that no relief could be granted under any set of facts that could be proved. Ransom v. Marrazzo, 848 F.2d 398, 401 (3rd Cir.1988); Angelastro v. Prudential-Bache Securities, Inc., 764 F.2d 939, 944 (3rd Cir. 1985), cert. denied, 474 U.S. 935, 106 S.Ct. 267, 88 L.Ed.2d 274 (1985).

Discussion

A. Dismissal of Allstate Defendants, Lincoln Benefit Life Company and Sears, Roebuck and Company.

Defendants first move to dismiss the Fourth, Fifth and Tenth Counts of the complaint against Allstate Life Insurance Company, Allstate Group of Life Insurance Companies, Lincoln Benefit Life Company and Sears, Roebuck and Company on the grounds that the complaint contains no factual allegations against them. In response, plaintiffs contend that their complaint clearly apprises each of these defendants of the causes of action against them as they allege that Surety shares a corporate relationship with each.

As a general rule, a parent corporation, like any stockholder, is not normally liable for the wrongful acts or contractual obligations of a subsidiary even if or simply because the parent wholly owns the subsidiary. Bell Atlantic v. Hitachi Data Systems, 849 F.Supp. 702, 707 (N.D.Cal.1994); United National Records, Inc. v. MCA, Inc., 616 F.Supp. 1429, 1432 (N.D.Ill.1985); Nobers v. Crucible, Inc., 602 F.Supp. 703, 706 (W.D.Pa. 1985). However, where a shareholder or parent so dominates the activities of a corporation that it is necessary to treat the dominated corporation as an agent or "alter ego" of the principal, liability may be imposed. Esmark, Inc. v. N.L.R.B., 887 F.2d 739, 753 (7th Cir.1989); Selser v. Pacific Motor Trucking Co., 770 F.2d 551, 554 (5th Cir. 1985). See Also: Publicker Industries, Inc. v. Roman Ceramics Corp., 603 F.2d 1065, 1069 (3rd Cir.1979).

Relevant factors to consider in determining whether the corporate "veil" should be pierced include:

Failure to observe corporate formalities, non-payment of dividends, the insolvency of the debtor corporation at the time, siphoning of funds of the corporation by the dominant stockholder, non-functioning of other officers or directors, absence of corporate records, and the fact that the corporation is merely a facade for the operations of the dominant stockholder or stockholders .... Gross undercapitalization is also a factor.

Nobers v. Crucible, supra, citing American Bell, Inc. v. Federation of Telephone Workers of Pennsylvania, 736 F.2d 879, 886 (3rd Cir.1984) and United States v. Pisani, 646 F.2d 83, 88 (3rd Cir.1981). See Also: Parker v. Bell Asbestos Mines, Ltd., 607 F.Supp. 1397, 1399-1400 (E.D.Pa.1985).

In this case, while demanding judgment against all defendants jointly and severally for discrimination in Counts Four and Five and for intentional infliction of emotional distress in Count Ten, plaintiffs' only allegations against Allstate, Lincoln Benefit and Sears are as to the corporate relationships between those defendants and Surety. Specifically, Surety and Lincoln Benefit are alleged to be sister corporations (sharing the same officers and Board of Directors) and wholly owned subsidiaries of Allstate while Allstate is alleged to have been a subsidiary of Sears until 1992. (Complaint, ¶ s3-9). No other facts nor any acts of wrongdoing are alleged against Allstate, Lincoln Benefit or Sears and it thus appears that plaintiffs seek only to hold these defendants liable for the alleged actions of Surety. Thus, since there are no factual averments upon which this Court could find that Surety was so dominated by the activities of the other defendant corporations that it may be held to be their agent or "alter ego," there is no basis upon which Allstate, Lincoln Benefit or Sears can be held liable for Surety's acts. We thus find dismissal of plaintiffs' complaint as against these defendants to be proper and defendants' motion to dismiss as to Allstate, Lincoln Benefit and Sears shall be granted. See: McCarthy v. KFC Corp., 607 F.Supp. 343, 346 (W.D.Ky.1985); Gutierrez v. Vergari, 499 F.Supp. 1040, 1052 (S.D.N.Y.1980).

B. Dismissal of Counts Four and Five as to all Defendants.

Defendants next move to dismiss Counts Four and Five, which purport to state causes of action for violations of the Fair Labor Standards Act/Equal Pay Act ("FLSA/EPA"), 29 U.S.C. § 206(d)(1) and Title VII, 42 U.S.C. § 2000e-2(a) for the reason that these statutes apply only to employees —not independent contractors such as plaintiffs.

Defendants are correct in their assertion that the Court's jurisdiction under these statutes may be invoked only in actions involving an employer and an employee. Wright v. State Farm Mutual Automobile Insurance Co., 911 F.Supp. 1364, 1371 (D.Kan.1995); Lazarz v. Brush Wellman, Inc., 857 F.Supp. 417, 422 (E.D.Pa.1994); Russell v. Belmont College, 554 F.Supp. 667, 674 (M.D.Tenn.1982). An "employer" for purposes of the Fair Labor Standards Act/ Equal Pay Act is defined as including "any person acting directly or indirectly in the interest of an employer in relation to an employee and includes a public agency, but does not include any labor organization (other than when acting as an employer) or anyone acting in the capacity of officer or agent of such labor organization." 29 U.S.C. § 203(d). An "employee" under the FLSA/EPA, with certain limited exceptions not applicable here, "means any individual employed by an employer." 29 U.S.C. § 203(e)(1).

Similarly, under Title VII, "[t]he term `employer' means a person engaged in an industry affecting commerce who has fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year and any agent of such a person..." 42 U.S.C. § 2000e(b). As...