Smith v. Texaco, Inc.

• Decision Date: 07 March 2000
• Docket Number: No. 1:96-CV-749.,1:96-CV-749.
• Citation: 88 F.Supp.2d 663
• Parties: Matthews SMITH, et al., Plaintiffs, v. TEXACO, INC., et al., Defendants.
• Court: U.S. District Court — Eastern District of Texas

88 F.Supp.2d 663

Matthews SMITH, et al., Plaintiffs, v. TEXACO, INC., et al., Defendants.

No. 1:96-CV-749.

United States District Court, E.D. Texas, Beaumont Division.

March 7, 2000.

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James Erick Payne, Provost & Umphrey, Beaumont, TX, Reuben A. Guttman, Brian P. McCafferty, Charles V. Firth, Provost & Umphrey, Washington, DC, for plaintiffs.

J. Courtney Wilson, Scheuermann & Jones, New Orleans, LA, for intervenor-plaintiffs.

Stephen F. Fink and David M. Pryor, Thompson & Knight, Dallas, TX, Mike McQueeney and Joseph P. Moan, Texaco Group Inc., Paul W. Gertz, Germer & Gertz, Beaumont, TX, for defendants Texaco, Inc., Texaco Refining & Marketing, Inc., and Texas Refining nad Marketing Inc. (East).

Victor Scott Kneese, Bracewell & Patterson, Houston, TX, Robert J. Hambright, Orgain, Bell & Tucker, Beaumont, TX, for defendant Star Enterprise.

Neil Martin, Robert Ellison Meadows, Nancy J. Brown, Gardere Wynne Sewell & Riggs, Houston, TX, for Aramco Services Co.

Dewey J. Gonsoulin, Mehaffy & Weber, Beaumont, TX, for defendant Saudi Refining.

John Michael Dorman, Locke, Liddell & Sapp, Houston, TX, for defendant Shell Oil Co.

MEMORANDUM OPINION

COBB, District Judge.

I. BACKGROUND

This is a racial discrimination case, brought by six named plaintiffs on behalf of a class of approximately 200 salaried African-American persons employed by Star Enterprise [Star] between 1991 and the present time. The plaintiffs allege that Star subjects the class to systems and practices that discriminate against African-Americans in promotion, compensation and opportunities for career advancement. These practices allegedly apply company-wide throughout the United States, in its six locations in Port Arthur, Texas; Convent, Louisiana; Delaware City, Delaware; Houston, Texas; Atlanta, Georgia; and Richmond, Virginia.

Star is a joint venture formed in 1989 under New York partnership law by the defendants Texaco Refining and Marketing East, Inc. [TRMI East] and Saudi Refining, Inc. [Saudi]. Under the terms of the joint venture, Star is governed by a six-member management committee. Three of the members of the committee are appointed by TRMI East and three are appointed by Saudi. The joint venture agreement provides that decisions concerning Star's management and control require a majority vote of the management committee.

This relationship with Texaco is a significant issue in this lawsuit. In 1994, a class of Texaco employees sued their employer for violations of Section 1981 of the Civil Rights Act of 1971 and Title VII of the Civil Rights Act of 1964 (42 U.S.C. § 2000e, et seq.) [Title VII]. See generally Roberts v. Texaco, Inc., 979 F.Supp. 185 (S.D.N.Y.1997). That case received national attention because during its pendency senior Texaco officials, some of whom were on the management committee of Star, were taped allegedly making racially insensitive comments. Id. at 189-192; see, e.g., Frankel, Tale of the Tapes, THE AMERICAN LAWYER 65 (March 1997); Eichenwald, Texaco Executives, On Tape, Discussed an Impending Bias Suit, THE NEW YORK TIMES, November 4, 1996; Eichenwald, Investigation Finds no Evidence of Slur on Texaco Tapes, THE NEW YORK TIMES, November 11, 1996.

The plaintiffs in this case claim they believed they would be part of the Roberts class action. However, it was later learned the Star employees would not be part of the settlement the Texaco employees received from Texaco when the judge in Roberts certified a settlement class only. The Star employees then filed this suit alleging that discriminatory practices and policies determine promotions, advancement opportunities and compensation at Star.

The plaintiffs' complaint centers around two specific practices. First, the plaintiffs allege that the defendants use "facially-neutral" decision making systems, which in their application, have a disproportionate, adverse impact on African-Americans. See 42 U.S.C. § 2000e-2(k)(1)(A)(i). Second, the plaintiffs claim that despite the facial neutrality of these practices, they are not applied uniformly or consistently and are entirely subjective. These practices include: (1) Star's Performance Management Program [PMP] evaluation system-a system Star uses to evaluate all of its salaried employees and which affects employees' compensation and opportunities for advancement and development; (2) Star's Job Posting Program or lack thereof; and (3) Star's compensation/pay-grade system.

Plaintiffs conclude that by using these discriminatory practices and policies, the defendants have engaged in a pattern and practice of intentional discrimination against the class in violation of the Civil Rights Act of 1871, as amended in 1991, 42 U.S.C. § 1981 [Section 1981], and Title VII.

A. Parties to the Suit

There are multiple defendants in this case due to the corporate complexities of these defendants. Besides Star, TRMI (East), and Saudi, the plaintiffs have also named Aramco Services Company [ASC], Texaco Refining & Marketing, Inc. [TRMI], Texaco and Shell Oil Co. as defendants.

Since Saudi and TRMI (East) are equal partners in Star, they are liable for Star's actions. See generally N.Y. PARTNERSHIP LAW (McKinney 1997). ASC and TRMI are signatories to the joint venture agreement which established Star. They therefore share potential liability with their wholly owned subsidiaries' joint venturers, SRI and TRMI (East). TRMI (East) is a wholly owned subsidiary of TRMI, which is in turn, a wholly owned subsidiary of Texaco Inc., Texaco controls TRMI and TRMI controls TRMI (East). Plaintiffs allege that TRMI (East) serves as the agent of both TRMI and Texaco. Saudi is a wholly owned subsidiary of ASC. Plaintiffs allege that ASC controls Saudi and that Saudi serves as ASC's agent.

Plaintiffs have alleged that Star's racially discriminatory policies originated with Texaco. Texaco has the power to control Star's employment practices through its indirect 50% ownership of Star. It is also alleged that Texaco uses Star as a training ground for Texaco employees and that most of Star's assets came from Texaco. Thus, the plaintiffs conclude that the Texaco entities (Texaco, TRMI and TRMI (East)) are liable for the actions of Star since it acts as an agent or representative of the Texaco entities.

Throughout the various hearings and motions in this case, it has become very clear that there is a seamless transfer of employees and records between Star and Texaco. See, e.g., Memorandum Opinion on TRO, Jan. 2, 1997 [doc # 26]. Texaco shares all employee performance and appraisal records with Star to determine seniority when employees choose to switch employment from Star to Texaco or vice versa. According to testimony at the class certification hearing, this occurs with some regularity, but not necessarily on a scheduled basis.

Moreover, almost all of the plaintiffs in this case began their employment with Texaco or one of its various subsidiaries. In 1989, when Star was formed many of them were merely "reassigned" from Texaco to Star. Thus, it is quite possible that the plaintiffs will be able to establish that Star acts as an agent for Texaco and its subsidiaries.

Finally, when this case was originally filed it appeared that Star would be dissolved and its assets transferred to three new partnerships. See Marketing, refining pact signed/Texaco, Aramco, Shell teaming up, HOUSTON CHRONICLE, May 28, 1998 (describing the potential deal). The three new partnerships were to be each co-owned by Saudi, Shell and Texaco. The name of this new entity is Motiva. These defendants would be liable as successors in interests if plaintiffs claims prove to be true.

B. The Class Allegations

As stated earlier, the plaintiffs allege that the defendants have engaged in a pattern and practice of racial discrimination in employment. The plaintiffs claim, among other things, that the defendants have discriminated against qualified African-American employees in the following ways: (1) denying those employees the opportunity for promotion and refusing to promote qualified African-Americans; (2) denying those employees comparable salaries, raises and other compensation given to Caucasian employees; (3) concealing information from African-American employees about promotion opportunities and available positions in other departments within the companies; (4) misrepresenting facts to African-American employees regarding the availability of promotions and certain positions; (5) not allowing African-Americans to acquire the experience, opportunities and training necessary to obtain the qualifications to be promoted; and (6) retaliating against employees who assert their civil rights through intimidation, diminishment of work responsibilities, and termination of employment. (Plaintiffs' Sixth Amended Complaint ¶ 28).

Plaintiffs allege that Star follows promotion practices based on subjective rather than objective job-related criteria. According to plaintiffs, these subjective criteria are not uniformly applied to African-American and Caucasian employees. At the heart of these allegations is Star's use of the PMP evaluations. PMPs provide the basis for determining in which pay grade an individual employee will be placed.

The written portion of the PMP is called the Performance and Development Review [PDR]. Under the PDR, Star evaluates employees by considering numerous subjective factors.¹ Plaintiffs claim that there are inadequate written policies and procedures at Star concerning the evaluation and promotion of employees. It is alleged that the criteria used in the PMP process changes frequently and subjects employees to varying standards. Moreover, it became evident at the certification hearing that the appeal process in the PMP is not very effective. Plaintiffs claim that the whole process is used as a pretext for denying qualified African-American employees promotions and pay raises which they deserve. At...