Stevens v. McLouth Steel Products Corp.

• Decision Date: 09 November 1989
• Docket Number: Docket No. 83356
• Parties: Donald P. STEVENS, Plaintiff-Appellee, v. McLOUTH STEEL PRODUCTS CORPORATION, Defendant-Appellant.
• Court: Michigan Supreme Court

Page 95

446 N.W.2d 95

433 Mich. 365

Donald P. STEVENS, Plaintiff-Appellee, v. McLOUTH STEEL PRODUCTS CORPORATION, Defendant-Appellant.

Docket No. 83356.

Supreme Court of Michigan.

Argued June 6, 1989.

Decided Sept. 20, 1989.

Rehearing Denied Nov. 9, 1989.

[433 Mich. 366] Reosti & Hayes, P.C. by Ronald J. Reosti, and Mark Granzotto, Detroit, for plaintiff-appellee.

Butzel, Long, Gust, Klein & Van Zile by Gregory V. Murray, David H. Oermann, and Kevin F. O'Shea, Detroit, for defendant-appellant.

OPINION

GRIFFIN, Justice.

This lawsuit, brought under the Michigan Elliott-Larsen Civil Rights Act, ¹ requires us to decide whether the defendant, a successor corporation which purchased only part of the assets of a failing predecessor corporation, can be held liable for an act of alleged age discrimination committed by the predecessor prior to the acquisition. Under the circumstances of this case, where the successor corporation had no notice of the discrimination claim prior to the acquisition date, we hold that successor liability does not attach. Finding that the trial court properly granted summary disposition for defendant, we reverse the decision of the Court of Appeals.

I

Plaintiff was hired by McLouth Steel corporation (MSC) as an industrial engineer in May of 1971, at age forty-six. He was elevated to the position of supervisor in 1974. During the ensuing years, plaintiff recruited, trained, and supervised other industrial engineers who were added to the MSC staff, including William Powell, an industrial engineer who was eighteen years younger than plaintiff.

In 1979, MSC hired Theodore Gabocy as manager of industrial engineering. According to plaintiff, Gabocy stripped plaintiff of his supervisory duties, although plaintiff continued to receive the same salary and his position remained on a par with the other engineers.

Suffering the same fate as many other companies during the recession of the early 1980s, MSC filed a petition in bankruptcy under Chapter 11 on December 8, 1981. Nearly two hundred white-collar workers, not including plaintiff, were laid off. An operating agreement was approved by the federal bankruptcy court on March 29, 1982, and MSC began the immediate liquidation of its assets, with a target shutdown date of May 31, 1982. On April 15, 1982, plaintiff and Powell were laid off. Plaintiff was then fifty-seven years of age.

On May 14, 1982, the operating agreement was amended to extend the closing date to August 15, 1982. The extension permitted, in pertinent part, the retention of personnel "previously identified by McLouth as being necessary to its continued operations," including personnel identified as "necessary to implement their shutdown and baseline plans which were submitted pursuant to the Operating Agreement."

During the summer of 1982, Tang Industries, Inc., initiated negotiations to purchase the steel-making assets of MSC. Tang formed a transition company called NEWCO in mid-August 1982 to handle the takeover. In the meantime, the shutdown date for MSC was again extended. The negotiations culminated in a purchase agreement between NEWCO and MSC, which was signed on September 29, 1982. Three months later, the bankruptcy court approved the sale of MSC's steel-manufacturing assets to NEWCO. Shortly thereafter, NEWCO changed its name to McLouth Steel Products Corporation (MSPC), the present defendant. MSC did not cease to exist after this partial assets acquisition, but was reorganized as a nonmanufacturing concern known as MLX. To this day, MLX remains a viable business. Indeed, plaintiff received $7,500 worth of MLX stock as the settlement of his present claim against MSC.

During the negotiations with Tang in August 1982, MSC personnel manager Daniel Daywalt, who subsequently became vice-president in charge of human resources for MSPC, rehired William Powell to assist Tang with its cost analysis in connection with its contemplated takeover of MSC. It is this event which forms the basis for the instant lawsuit. Plaintiff claims that MSPC is liable under a successorship theory for age discrimination committed when MSC rehired William Powell, but did not rehire the plaintiff. The plaintiff admits that he never applied for a job with MSPC.

It is uncontroverted that the plaintiff has never filed age discrimination charges with either the federal Equal Employment Opportunity Commission or the Michigan Civil Rights Commission. Moreover, the plaintiff admits that, prior to the acquisition, he never gave notice of any age discrimination claim to MSPC or MSC. ²

Plaintiff initiated the present cause of action against MSPC and MSC in September 1984, nearly two years after the corporate acquisition. In his complaint, plaintiff alleged claims of wrongful discharge on the basis of his termination of employment on April 15, 1982, breach of contract, age discrimination arising out of the failure to promote plaintiff in 1979, and the failure to rehire plaintiff in August 1982 after his layoff. MSC was dismissed from the suit in 1985 following its settlement with plaintiff. ³ 3] In 1986, in response to MSPC's motion for summary disposition, plaintiff stipulated dismissal with prejudice of his breach of contract claim and his discrimination claim premised upon his failure to be promoted in 1979 and his discharge in April 1982. The scope of plaintiff's lawsuit was consequently narrowed to his assertion that MSPC is liable on a successor liability theory for the alleged age discrimination committed by MSC in August of 1982 when it rehired William Powell, but did not rehire plaintiff.

Defendant moved for summary disposition, pursuant to MCR 2.116(C)(10), on the remaining claim, and the trial court granted defendant's motion. The trial court found that MSPC had no successor liability because it had no notice of the discrimination claim and, in any event, plaintiff had not made out a prima facie showing of age discrimination.

The Court of Appeals reversed, finding that there were outstanding questions of material fact regarding both the issue of successor liability and the merits of plaintiff's age discrimination claim. We granted leave to appeal.

II

MCR 2.116(C)(10) requires that there be a trial unless "there is no genuine issue as to any material fact." A court must be satisfied, after reviewing the pleadings and other material supporting the motion, that " 'it is impossible for the claim or defense to be supported at trial because of some deficiency which cannot be overcome.' " Rizzo v. Kretschmer, 389 Mich. 363, 372, 207 N.W.2d 316 (1973). A court is compelled to " 'give the benefit of any reasonable doubt to the opposing party.' " Id. With this standard in mind, we will examine the threshold issue of notice.

From the outset, MSPC has asserted a successorship defense. Pointing out the undisputed fact that it never received notice of any age discrimination charges or claim by the plaintiff until he filed his complaint, MSPC asserts that it cannot be held liable for MSC's alleged discrimination which occurred prior to the acquisition.

The well-established general rule is that when one corporation sells its assets to another, the purchaser is not, absent some exception, responsible for the debts and liabilities of the selling corporation. See, generally, anno.: 49 ALR3d 881; 15 Fletcher, Private Corporations, Sec. 7122, p 190, n 1. This Court has rarely had the opportunity to explore and consider the doctrine of successor liability and has done so only in the context of a common-law tort action, Chase v. Michigan Telephone Co., 121 Mich. 631, 80 N.W. 717 (1899); Denolf v. Frank L. Jursik Co., 54 Mich.App. 584, 589, 221 N.W.2d 458 (1974), modified on other grounds, 395 Mich. 661, 238 N.W.2d 1 (1976), and a products liability suit, Turner v. Bituminous Casualty Co., 397 Mich. 406, 244 N.W.2d 873 (1976). We have never had occasion to address the unique concerns arising out of a successor corporation's liability for alleged employment discrimination. The federal courts, by contrast, have considered the issue on numerous occasions.

In the seminal case of EEOC v. MacMillan Bloedel Containers, Inc., 503 F.2d 1086 (CA 6, 1974), the Sixth Circuit became the first court to address the issue of successor liability in an employment discrimination action filed under Title VII of the Civil Rights Act of 1964, 42 U.S.C. Sec. 2000e et seq. The court held that the statute in question mandated application of the successorship doctrine developed in unfair labor practice cases ⁴ to Title VII discrimination cases:

"We hold only that Title VII per se does not prohibit the application of the successor doctrine, but rather mandates its application. Title VII was designed to eliminate discrimination in employment and the courts were given broad equitable powers to eradicate the present and future effects of past discrimination.

* * * * * *

"Failure to hold a successor employer liable for the discriminatory practices of its predecessor could emasculate the relief provisions of Title VII by leaving the discriminatee without a remedy or with an incomplete remedy. In the case where the predecessor company no longer had any assets, monetary relief would be precluded. Such a result could encourage evasion in the guise of corporate transfers of ownership. Similarly, where relief involved seniority, reinstatement or hiring, only a successor could provide it.

"It is to be emphasized that the equities of the matter favor successor liability because it is the successor who has benefited from the discriminatory employment practices of its predecessor." MacMillan, supra, pp. 1091-1092.

The Sixth Circuit emphasized that the nature and extent of liability must be determined upon the facts and circumstances of each case. Id., p. 1092. The court concluded that evaluation of successor liability should be conducted by balancing nine factors:

"1) whether the successor company had notice of the charge, 2) the...