Martinez v. Oakland Scavenger Co.

• Citation: 680 F. Supp. 1377
• Decision Date: 28 December 1987
• Docket Number: No. C-75-0060-CAL.,C-75-0060-CAL.
• Court: U.S. District Court — Northern District of California
• Parties: Perfecto MARTINEZ, et al., Plaintiffs, v. OAKLAND SCAVENGER COMPANY, et al., Defendants. Joaquin Morales BONILLA, et al., Plaintiffs-in-Intervention, v. OAKLAND SCAVENGER COMPANY, et al., Defendants.

680 F. Supp. 1377

Perfecto MARTINEZ, et al., Plaintiffs, v. OAKLAND SCAVENGER COMPANY, et al., Defendants.

Joaquin Morales BONILLA, et al., Plaintiffs-in-Intervention, v. OAKLAND SCAVENGER COMPANY, et al., Defendants.

No. C-75-0060-CAL.

United States District Court, N.D. California.

December 28, 1987.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Gunheim & Yturbide, B.V. Yturbide, San Francisco, Cal., for intervenors.

Krause, Baskin, Shell, Grant & Ballentine, Larkspur, Cal., Associated Counsel for intervenors.

Brundage, Beeson, Tayer & Kovach, San Francisco, Cal., for defendant Teamsters Local 70.

Carol A. Malenka, Stephen McKae, Hardin, Cook, Loper, Engel & Bergez, Oakland, Cal., for Oakland Scavenger Co.

OPINION AND ORDER

LEGGE, District Judge.

Plaintiffs charge defendants Oakland Scavenger Company and Teamsters Local 70 with employment discrimination in violation of Title VII (42 U.S.C. § 2000e et seq.) and 42 U.S.C. § 1981.

The charges focus on tensions among racial and ethnic minorities in achieving the "American Dream" of business success. The company was begun by persons of Italian ancestry doing work which the rest of society did not want, collecting garbage. By virtue of hard work and good management, the enterprise expanded and prospered. The ethnic group which created and developed it became successful. But as the enterprise grew, it required additional manpower. So the Italians who controlled it have hired other ethnic minorities at the bottom of the economic ladder, Blacks and Hispanics. As these new minorities have become larger within the company, they too have sought the benefits of the better jobs and of the success of the enterprise. Because these benefits have been denied to them, they turn to the courts.

One might question the wisdom of laws compelling one minority group to share the fruits of its years of hard work with other minorities. But Congress resolved that question when it passed Title VII. Congress' wisdom is that America is best served by equality of employment opportunity, regardless of what group got there first. And the court of appeals for this circuit has already decided that that principle must be applied to this enterprise. Bonilla v. Oakland Scavenger Co., 697 F.2d 1297 (9th Cir.1982) cert. denied, 467 U.S. 1251, 104 S.Ct. 3533, 82 L.Ed.2d 838 (1984).

It is therefore the responsibility of this court to apply that principle to the facts which were disclosed at trial. Those facts compel this court to conclude that the new minorities must now share in the employment opportunities which the old has created.

I. HISTORY OF THE CASE

This action began in 1975, when a group of Black and Hispanic employees filed an individual and class action suit alleging discrimination. The initial group of plaintiffs settled their claims. Sixteen Hispanic and Black employees were then allowed to intervene as plaintiffs.

The district judge to whom this case was originally assigned dismissed the action under Fed.R.Civ.P. 12(b)(6). In the order of dismissal, the district judge found that plaintiffs had failed to state a claim either under 42 U.S.C. § 1981 or under Title VII. See id., 697 F.2d at 1299 n. 4. The dismissal focused on the fact that employment benefits were tied to stock ownership in the company. The district court concluded that the private sale of stock in the company by one employee to another employee was a "truly private" activity beyond the reach of Section 1981. The district court also held that no claim was stated under Title VII, because the company's shareholders had Fifth Amendment property rights to employ and compensate themselves as they saw fit. Plaintiffs appealed, and the Ninth Circuit reversed and remanded in Bonilla v. Oakland Scavenger Co., supra.

The Ninth Circuit disagreed with the district court on both grounds for its decision. Applying the usual Title VII analysis, the court of appeals held that plaintiffs had properly alleged intentional discrimination, under a disparate treatment theory and under Section 1981. Id. at 1301. The district court was directed to follow the method of proof set out in Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981), and other disparate treatment cases. Id. at 1301-02.

The Ninth Circuit also considered plaintiffs' disparate impact allegations, and concluded that various features of the company's shareholder rights were conditions of employment which are subject to the mandates of Title VII. Id. at 1302. The court explicitly rejected the company's attempt to justify the challenged employment practices as being merely the permissible consequences of owning stock. In finding that Title VII is applicable, the Ninth Circuit necessarily rejected the argument that the company's shareholders had a Fifth Amendment property right to be free from Title VII's requirements. The court also rejected nepotism as a possible defense. Id. at 1303-04.

Finally, the appellate court instructed the district court to address plaintiffs' charges against Teamsters Local 70 for allegedly breaching its duty of fair representation. Id. at 1304. The court said that a union can be liable under Title VII and Section 1981 if it acquiesces or joins in the employer's discrimination.

Following remand, this court defined and ordered a conditional plaintiff's class, consisting of ".... All Black and all Hispanic surnamed persons who on or after January 10, 1972, have been employees of defendant Oakland Scavenger Company." After hearing the evidence at trial, this court modifies that class definition as discussed in section X below.

The parties stipulated that the issues of liability would be prepared and tried before the issues of remedies. Following pretrial procedures, the liability portion of the case was then tried before this court sitting without a jury. The trial lasted over a period of three months, and the court heard approximately forty witnesses and admitted several hundred pages of exhibits into evidence. Post-trial briefs were then filed, and the case was argued and submitted.

The court has considered the record, the exhibits, the testimony of the witnesses, the arguments of counsel, and the applicable authorities. The court now issues this opinion, which also constitutes the findings of fact and conclusions of law as provided in Fed.R.Civ.P. 52(a). The factual statements made in this opinion are the facts that are found by this court, using the appropriate burdens of persuasion and burdens of going forward with the evidence that are discussed below.

II. THE COMPANY

Oakland Scavenger Company was founded in 1909 by independent garbage collectors in Oakland, California. The present company was incorporated in 1920. Shortly thereafter, the company was enlarged by the joining of virtually all garbage collectors in Oakland and Berkeley. All of the initial owners were of Italian ancestry, and the Italian heritage has continued.

Initially, all who worked for the company became equal partners or shareholders. All received the same compensation, regardless of their jobs. As a condition to having an ownership interest, all shareholders worked actively in the company, work which involved collecting garbage, soliciting business, collecting accounts, managing the business, and other scavenger-related work.

By 1943, the company had 208 shareholders. Shares were not publicly traded. One became a shareholder by working for the company and purchasing the ownership share of a retiring shareholder. Shares were sold only with the approval of the board of directors. In practice, shares were sold only to relatives or to other members of the Italian-American community. And relatives or Italian-Americans who began work for the company and continued to work successfully, could usually look forward to the opportunity of share ownership at some time.

The company in essence operated as an expanded "partnership" of its workers. As it grew, the company gradually evolved from that partnership concept into its present organizational structure, which is a hybrid of a partnership and a modern corporation.

By the end of World War II, the company and its business had expanded. The company started to employ outsiders, i.e. non-relatives and non-Italians, to work on the garbage trucks. The new employees began as helpers. Helpers who were relatives of shareholders might later acquire the opportunity to purchase shares. Non-Italian helpers, largely Blacks and Hispanics, did not have the opportunity to become shareholders. And as discussed below, the better jobs in the company were tied to share ownership.

In 1967 Teamsters Local No. 70 first organized the company's employees. The bargaining unit was initially comprised only of employees who were not shareholders, but subsequently shareholders were brought into the bargaining unit and became members of Local 70. The first collective bargaining agreement was signed in 1967 and the agreement, with modifications, has been renewed ever three years since then.

III. THE COMPANY'S WORK FORCE

Since 1972, the date relevant to this lawsuit, the company's work force has been organized essentially as follows.

Shareholders

The quasi-corporate structure of the company has not diminished the central position that its "shareholders," "owners," or "partners" have continued to occupy in its work force. The company is owned by its shareholders, all of whom must work full-time for the company. Shareholders do manual labor. But they also have active roles in the management of the company, and only shareholders can serve as officers, managers (with limited exceptions), and on the board of directors. Shareholders have also enjoyed other job-related privileges and have certain duties not shared by other employees, as discussed below.

The number of shareholders has been restricted in recent years. Company policy¹ now provides that the company will itself purchase the...