Simpson v. Ernst & Young

• Decision Date: 03 May 1996
• Docket Number: No. 95-3209,95-3209
• Citation: 100 F.3d 436
• Parties: P. Larue SIMPSON, Plaintiff-Appellee, v. ERNST & YOUNG, Defendant-Appellant. Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 436

100 F.3d 436

P. Larue SIMPSON, Plaintiff-Appellee, v. ERNST & YOUNG, Defendant-Appellant.

No. 95-3209

United States Court of Appeals,

Sixth Circuit

Argued: May 3, 1996.

Decided: November 8, 1996

On Appeal from the United States District Court for the Southern District of Ohio

Janet G. Abaray (argued and briefed), Theodore N. Berry, Waite, Schneider, Bayless & Chesley, Cincinnati, OH, for Larue Simpson.

Michael S. Glassman, Dinsmore & Shohl, Cincinnati, OH, Thomas L. Riesenberg, Asst. Gen. Counsel (argued and briefed), Washington, DC, for Ernst & Yong.

Kathleen B. Burke (briefed), Jones Day, Reavis & Pogue, Cleveland, OH, Glen D. Nager, Jones, Day Reavis & Pogue, Washington DC, Stephen F. Smith, Sidley & Austin, Washington, DC, for Dickinson, Wright, Moon, Van Dusen & Freeman, Dykema Dykema Gossett P.L.L.C., Fullbright & Jaworski L.L.P., Gibson, Dunn & Crutcher, Jones, Day Reavis & Pogue, Mayer, Brown & Platt, O'Melveny & Myers, Paul, Hastings, Janofsky & Walker, Seyfarth, Shaw, Fairweather & Geraldson, Shearman & Sterling, Skadden, Arps, Slate, Meagher & Flom.

Before: KRUPANSKY, DAUGHTREY, and MOORE, Circuit Judges.

KRUPANSKY, J., delivered the opinion of the court, in which MOORE, J., joined. DAUGHTREY, J. (p. 445), delivered a separate concurring opinion.

KRUPANSKY, Circuit Judge.

This action concerns the 1990 discharge of an individual from a large accounting firm. Appellee Peyton Larue Simpson ("Simpson") sought federal judicial redress for his termination by appellant Ernst & Young ("Ernst & Young"), alleging federal claims for violations of the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. Section(s) 621 et seq., and the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. Section(s) 1001 et seq., and a supplemental state claim under the Ohio law that bars age discrimination, Ohio Rev. Code Section(s) 4101.17 (Anderson 1989).

Simpson filed this lawsuit on March 25, 1991 seeking damages pursuant to ADEA, 29 U.S.C. Section(s) 621 et seq., which protects employees who are forty years or older from age-based discrimination. He also sought damages pursuant to ERISA, 29 U.S.C. Section(s) 1001 et seq., charging that his termination was intended to deny him participation in certain Ernst & Young retirement plans and was imposed in retaliation for his persistent inquiries concerning his post-merger retirement benefits. Included in Simpson's complaint were causes of action for violation of the Ohio age discrimination statute, Ohio Revised Code Section(s) 4101.17 (Anderson 1989), and for unjust enrichment.

Following discovery, the parties filed cross-motions for summary judgment. Ernst & Young argued that Simpson was a partner rather than an employee of the firm; consequently, his action was not cognizable pursuant to ADEA and ERISA. The district judge to whom the case was initially assigned observed that "labeling plaintiff a `partner' does little to illuminate the actual nature of his employment relationship with Ernst & Young." He concluded in his well-reasoned opinion of March 26, 1993 that whether Simpson was "an employee within the meaning of the ADEA," turned on "plaintiff's actual role in the management, control, and ownership of Ernst & Young," all disputed issues of material fact to be decided by a jury. The district judge bifurcated the case for trial with its first phase limited to determining if Simpson was an Ernst & Young "partner" or "employee." On December 6, 1993, the parties consented to a trial and entry of final judgment of all issues in the case by a United States Magistrate Judge pursuant to 28 U.S.C. Section(s) 636(c).

Following the parties' consent order, a four-day jury trial before the court deadlocked, and resulted in a mistrial on December 20, 1993. The parties thereafter agreed to resubmit the case on cross-motions for summary judgment addressing the "partner versus employee" issue upon the testimony, exhibits, and record that had been developed during the jury trial. Upon the record in its entirety, the trial judge decided that Simpson was an "employee" for purposes of ADEA, ERISA, and Ohio Rev. Code Section(s) 4101.17. Simpson v. Ernst & Young, 850 F. Supp. 648 (S.D. Ohio 1994).

In reviewing this resolution of the ADEA and ERISA claims, this court initially notes that the distinction between a "partner" and an "employee" under both ADEA and ERISA is a preliminary jurisdictional issue. See Waxman v. Luna, 881 F.2d 237, 240 (6th Cir. 1989). In the absence of a conflict of material fact, it is appropriate for the court to resolve the issue as a matter of law. Lilley v. BTM Corp., 958 F.2d 746, 750 at n. 1 (6th Cir.), cert. denied, 506 U.S. 940 (1992). In the instant case, the parties stipulated that no conflict of material fact existed as to this issue and submitted it to the court on cross motions for summary judgment to be decided as a matter of law. This court reviews that court's determination de novo. Waxman, 881 F.2d at 240.

Following the resolution of the "partner versus employee" issue, the trial court convened a jury to consider the merits of plaintiff's ADEA claim. On May 12, 1994, the jury returned a verdict wherein it concluded that age had been a "determining factor" in Simpson's discharge and that Ernst & Young's ADEA violation was "willful." The jury awarded plaintiff past earnings, past benefits, future earnings, and future benefits. Although the trial court denied plaintiff prejudgment interest on his federal ADEA claim (because a prevailing plaintiff may not recover both liquidated damages and prejudgment interest under the ADEA), on October 28, 1994, it permitted him to recover prejudgment interest on past earnings and benefits pursuant to the Ohio age discrimination law. Ohio Rev. Code Section(s) 4101.17 (Anderson 1989). Earlier, on September 23, 1994, the trial court had addressed plaintiff's ERISA claim and resolved that Simpson's discharge was in retaliation for persistent requests for information concerning his retirement benefits under the merger. The court awarded Simpson ERISA damages which were set off against the ADEA claim. Defendant moved unsuccessfully for judgment notwithstanding the verdict of the jury and a new trial on January 18, 1995, but filed this timely appeal.

The trial court's summary judgment ruling is reviewed de novo. Barnhart v. Pickrel, Schaeffer & Ebeling Co., 12 F.3d 1382, 1388 (6th Cir. 1993). The jury verdicts returned in these proceedings are reviewed pursuant to the "sufficient evidence" rule. See Agristor Leasing v. A.O. Smith Harvestore Prods., Inc., 869 F.2d 264, 269 (6th Cir. 1989). The legal issues inherent to the ERISA claim are reviewed de novo, and its factual issues are reviewed for clear error. Schwartz v. Gregori, 45 F.3d 1017, 1021 (6th Cir.), cert. denied, 116 S. Ct. 77 (1995). Resolutions concerning prejudgment interest and front pay are reviewed for abuse of discretion. Shore v. Federal Express Corp., 42 F.3d 373, 380 (6th Cir. 1994).

A brief summary of the facts that gave rise to this controversy reflects that on October 1, 1989, the accounting firm of Arthur Young & Co. ("Arthur Young") merged with Ernst & Whinney to form a mega-firm known as Ernst & Young. The proposed merger was presented to participating personnel of Certified Public Accountants (CPAs) and non-CPAs, i.e. lawyers, computer analysts, and individuals with advanced academic degrees in business administration in both firms via various pre-merger documents asserting that (1) there would be no major head count or staff reductions as a result of the merger, (2) the merger would result in equitable or better retirement benefits for all concerned, and (3) both predecessor firms anticipated that the merger would result in an increase in cash earnings and significant growth opportunities for all concerned. Upon these representations of the merger promoters, effected personnel were requested to execute commitments styled Agreement of the PartiesU.S. ("U.S. Agreement"), which defined the terms and conditions of their participation in the newly-created firm of Ernst & Young. The U.S. Agreement characterized CPAs as Capital Account Parties and non-CPAs as Investment Account Parties. The CPAs were each required to execute second documents styled Ernst & Young Partnership Agreement ("Partnership Agreement").

Contrary to the circulated pre-merger commitments, an Ernst & Young Management Committee, a council that had been formed in accordance with the complicated documentation of the combined U.S. Agreement and Partnership Agreement, secretly voted within days of the completed merger to eliminate "excess staff capacity" by 5%, and proceeded within the next two months to systematically discharge older partners. (Ex. 30; Tr. 5/24/94 at 1078; Tr. 12/8/93 at 249; Exs. 31-37). Simpson, who was a signatory to both the U.S. Agreement and the Partnership Agreement, was among those individuals requested to resign.

Plaintiff was born on September 27, 1943. Beginning in 1972, he worked for KMG/Main Hurdman ("KMG/MH"), an accounting firm where he had become the managing partner. In December 1986, Arthur Young acquired KMG/MH. He became the Cincinnati Managing Partner for Arthur Young. Following the 1989 merger with Ernst & Whinney, Gerald Hill ("Hill") replaced Simpson as the Cincinnati Managing Partner of Ernst & Young. Simpson was named to the lesser position of Cincinnati Director of Entrepreneurial Services.

It should be noted that, at the time of the merger, the combined firms had a projected unfunded retirement obligation which exceeded $290 million. By eliminating older partners before their interest in this pension vested, the newly-formed firm could avoid substantial unfunded accrued contingent retirement liabilities.

Preliminary to the announcement of its systematic discharge of older partners, the Management Committee had covertly directed the preparation of a comparative study captioned "Comparison of...