The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
EASTERN DIVISION
No. 4:19-CV-40-BO
DANIEL BITTLE-LINDSEY, )
Plaintiff,
V. ORDER
SEEGARS FENCE COMPANY, INC. and
SEEGARS FENCE COMPANY, INC. OF _ )
NEWPORT, )
Defendants.
This cause comes before the Court on defendants’ motion for summary judgment. The
matters have been fully briefed and are ripe for ruling. A hearing was held on Tuesday, October
27, 2020 at 2:00 p.m. in Raleigh, North Carolina. For the reasons that follow, defendants’ motion
for summary judgment is GRANTED.
BACKGROUND
On March 18, 2019, plaintiff Daniel Bittle-Lindsey filed the instant employment action
alleging that he was subject to disparate treatment and retaliation related to his demotion and
ultimate termination of his employment in violation of the Americans with Disabilities Act
(ADA), as amended, 42 U.S.C. § 12101 ef seg. DE 1, 37-43. Plaintiff was employed by
defendant Seegars at its Newport branch in April 2015, and he told a co-worker that he was HIV-
positive shortly after beginning his employment. /d. §§ 22—23. On April 22, 2015, defendant
Seegars gave plaintiff a form stating that it had recently come to its attention that plaintiff had
informed an employee that he was HIV-positive and asking him to check “yes” or “no” for
whether he was HIV-positive. /d. § 24. Plaintiff checked the box indicated that he was HIV-
positive in front of a manager and a witness. /d. On the same date, defendant Seegars was placed
on leave, and defendant Seegars sent a letter to plaintiff's doctor expressing concern about
plaintiff's HIV-positive status and asking for the doctor’s input on plaintiff's ability to safely
perform his job duties. /d. {§ 25-26. Upon authorization by plaintiff, plaintiff's doctor provided
defendant Seegars with a letter on May 1, 2015 stating that plaintiff could safely “perform the
job duties as any other employee.” /d. 27.
On August 28, 2015, defendant Seegars allowed Bittle-Lindsey to return to work in a
demoted position without similar opportunity for advancement, with fewer hours, and with the
requirement that plaintiff always wear protective equipment. /d. § 29-30. The required protective
equipment included gloves, long-sleeve shirts, long pants, safety shoes with steel toes, and a face
shield when cutting metal straps or handling loose wire, even though plaintiff consistently
worked outside. /d. § 30. No other employee was required to wear this protective equipment. /d.
Plaintiff was also prohibited from entering the air-conditioned office to cool off or drink water, a
restriction that was not imposed on any other employee. /d. § 31. On August 31, 2015, plaintiff
notified defendant Seegars that he would not accept the demotion, and defendant Seegars
subsequently terminated plaintiff's employment. /d. {{§ 32-33.
In addition to bringing claims for disparate treatment and retaliation in violation of the
ADA, plaintiff alleges that defendant Newport, which hired him, is “a mere instrumentality of
Seegars Corporate and/or its common shareholders.” /d. § 35. Plaintiff asks this Court to
disregard defendant Newport’s corporate form and allow him to proceed against both defendants
by piercing the corporate veil. /d. § 36. On July 3, 2020, defendants filed the instant motion for
summary judgment, arguing that defendant Newport is entitled to summary judgment because it
did not employ fifteen or more employees during the relevant period and that defendant Seegars
is entitled to summary judgment because it would be improper to pierce the corporate veil and
allow a claim against defendants collectively. DE 25.
DISCUSSION
Defendants have moved for summary judgment in their favor on all claims. A motion for
summary judgment may not be granted unless there are no genuine issues of material fact for trial
and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The moving party
bears the initial burden of demonstrating the absence of a genuine issue of material fact. Ce/otex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). If that burden has been met, the non-moving party
must then come forward and establish the specific material facts in dispute to survive summary
judgment. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986). In
determining whether a genuine issue of material fact exists for trial, a trial court views the evidence
and the inferences in the light most favorable to the nonmoving party. Scott v. Harris, 550 U.S.
372, 378 (2007).
However, “[t]he mere existence of a scintilla of evidence” in support of the nonmoving
party’s position is not sufficient to defeat a motion for summary judgment. Anderson vy. Liberty
Lobby, Inc., 477 U.S. 242, 252 (1986). “A dispute is genuine if a reasonable jury could return a
verdict for the nonmoving party. .. . and [a] fact is material if it might affect the outcome of the
suit under the governing law.” Libertarian Party of Virginia v. Judd, 718 F.3d 308, 313 (4th Cir.
2013) (internal quotations and citations omitted). Speculative or conclusory allegations will not
suffice. Thompson v. Potomac Elec. Power Co., 312 F.3d 645, 649 (4th Cir. 2002). When deciding
cross-motions for summary judgment, a court considers each motion separately and resolves all
factual disputes and competing inferences in the light most favorable to the opposing party.
Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003).
The ADA prohibits employers from discriminating because of an employee’s disability
and retaliating against an employee based on an employee’s engagement in protected activity. See
generally 42 U.S.C. §§ 12112(a), 12203(a). The ADA defines “employer” as a person or entity
“engaged in an industry affecting commerce who has 15 or more employees for each working day
in each of 20 or more calendar weeks in the current or preceding calendar year.” 42 U.S.C. §
12111(5)(A). The fifteen-employee numerosity requirement is a threshold element of any
plaintiff's claim under the ADA. See Arbraugh v. Y & H Corp., 546 U.S. 500, 515 (2006).
In this case, plaintiff was employed from April to August 2015. Defendants state that
during the entire calendar year of 2015, defendant Newport employed fewer than fifteen
employees. DE 26 § 31. Plaintiff argues in its brief that because plaintiff has consistently alleged
that defendant employed at least fifteen employees and defendant has made contradictory
statements about its number of employees, a reasonable jury could find that defendant Newport
employed at least fifteen employees during 2015. However, during the hearing, plaintiff appeared
to have abandoned this argument, and instead admitted that the only way to receive relief in this
action is for the Court to decide to pierce the corporate veil and proceed against both defendants
jointly. Therefore, this Court determines that defendant Newport is entitled to summary judgment
in its favor on the issue of whether it employed fewer than fifteen employees throughout the
relevant period and turns to the issue of piercing the corporate veil.
A corporate business organization generally “affords [its] shareholder[s] a veil of
protection from the corporation's liabilities,” but a court can disregard the corporate form and
impose liability through the alter-ego theory under certain circumstances. Mayes v. Moore, 419 F.
Supp. 2d 775, 781 (M.D.N.C. 2006). A decision to pierce the corporate veil must be made
“reluctantly and cautiously,” but this option is available “when justice so requires.” Keffer v. □□□
Porter Co., 872 F.2d 60, 64 (4th Cir. 1989). In making this decision, this Court could apply either
federal common law or state law standards, “as no case law directly states this [C]ourt must apply
federal common law to this situation, and the Supreme Court, in other federal law, recognizes,
without criticism, that circuits split on whether to apply federal law or borrow state law in veil
piercing within a federal claim.” Mayes, 419 F. Supp. 2d at 782, n.5 (citing United States v.
Bestfoods, 524 U.S. 51, 63, n.9 (1998)). However, the basic veil-piercing principles are the same
under both federal common law and North Carolina law. Miceli v. KBRG of Statesville, LLC, No.
5:05CV265-V, 2010 U.S. Dist. LEXIS 91636, at *7, n.4 (W.D.N.C. Sept. 1, 2010) (citation
omitted); Mayes, 419 F. Supp. 2d at 780. Thus, because there is no conflict between federal and
state law here, there is no reason for the Court to definitively decide which law applies. /d. at 780,
n.5 (citing Mobil Oil Corp. v. Linear Films, Inc., 718 F. Supp, 260, 265—68 (D. Del. 1989).
To pierce the corporate veil, a plaintiff must show: (1) “control, not mere majority or
complete stock control, but complete domination, not only of finances, but of policy and business
practice .. . so that the corporate entity as to this transaction had at the time no separate mind, will
or existence of its own; (2) that defendant used such control “to commit fraud or wrong, to
perpetrate the violation of a statutory or other positive legal duty, or a dishonest and unjust act in
contravention of plaintiff's legal rights;” and (3) that the control and breach of duty proximately
caused the injury or unjust loss complained of. Krausz Indus. v. Smith-Blair, Inc., 188 F. Supp. 3d
545, 556 (E.D.N.C. 2016) (citing Glenn v. Wagner, 313 N.C. 450, 455 (1985)). The burden of
showing these elements rests on the party advocating for the disregard of the corporate fiction.
GAVCO, Inc. v. Chem-Trend, Inc., 81 F. Supp. 2d 633, 643 (W.D.N.C. 1999) (citing De Witt Truck
Brokers, Inc. v. W. Ray Flemming Fruit Co., 540 F.2d 681, 683 (4th Cir. 1976)).
In considering whether to pierce the corporate veil and disregard the corporate form, the
Fourth Circuit considers multiple factors to determine whether entities truly function as separate
corporations, or whether they exist merely as alter egos of one another. Vitol, S.A. v. Primerose
Shipping Co., 708 F.3d 527, 544 (4th Cir. 2013). These factors include gross undercapitalization;
insolvency; siphoning of funds; failure to observe corporate formalities and maintain proper
corporate records; non-functioning of officers; control by a dominant stockholder; injustice or
fundamental unfairness; intermingling of funds; overlap in ownership, officers, directors, and other
personnel; common office space; the degrees of discretion shown by the allegedly-dominated
corporation; and whether the deals of the entities are at arm’s-length. /d. In applying the alter-ego
doctrine, courts are concerned with reality and not form. DeWitt, 540 F.2d at 685. Courts do not
focus on the presence or absence of a single factor, but instead apply the doctrine flexibly to avoid
injustice. Saniri vy. Christenbury Eye Ctr., P.A., No. 3:17-cv-00474-FDW-DSC, 2017 U.S. Dist.
LEXIS 199765, at *9 (W.D.N.C. Dec. 5, 2017) (citation omitted).
Here, even assuming that defendant Seegars has complete domination over defendant
Newport, such that defendant Newport has no separate existence, plaintiff fails to show the
existence of the second requirement. In order to meet the second requirement, plaintiff must either
show fraud or show that the actions served “an ulterior purpose to benefit the person in control in
a way not possible or legal without misuse of the controlled corporation.” Dassault Falcon Jet
Corp. v. Oberflex, Inc., 909 F. Supp. 345, 350 (M.D.N.C. 1995). A putative employer's legal
violation is not enough to meet this requirement. Saniri, 2017 U.S. Dist. LEXIS 199765 at *8
(finding that a Title VII violation was not sufficient to warrant piercing the corporate veil). Instead,
the plaintiff must show that there was some abuse of the corporate form and that it is necessary to
pierce the corporate veil to prevent injustice or fundamental unfairness. /d. (citations omitted).
Acts that have previously been found to meet that requirement include: (1) operating the subsidiary
so it had no assets to pay future debts, (2) unilaterally voiding contracts of the controlled
corporation to the detriment of creditors, (3) operating a subsidiary so that a finance company
could evade the usury laws, (4) failing to obtain required workers’ compensation coverage for
employees, and (5) depleting corporate assets to pay personal debts. Dassault Falcon, 909 F. Supp.
at 350 (citations omitted).
Although plaintiff has the burden of showing that piercing of the corporate veil is
necessary, plaintiff neglects to argue that defendants used control to affect a fraud or wrong or that
such control and breach proximately caused plaintiff's harm, and this Court is unable to find that
these elements have been met based on the facts presented. Plaintiff argues that the three executives
of defendant Seegars are officers of every single branch entity, including defendant Newport, in
either a president or vice president role, although they functionally act as consultants. These
officers are paid by defendant Seegars, and they do not receive a payment from defendant Newport
for their officer roles in the branch. Furthermore, plaintiff states that defendant Newport’s
corporate meetings from 2015-19 were attended by the same four individuals, all of whom signed
as a director and shareholder of defendant Newport, although plaintiff alleges that none of these
individuals were a director or shareholder of defendant Newport, at least in 2015 and 2016.
Defendant Seegars drafted the meeting minutes using the same template used by every other
Seegars branch entity for its annual meeting. Plaintiff further alleges that even where defendant
Seegars claims that branch entities retain complete autonomy and authority as to all of their
operations, branch entities like defendant Newport mirror the actions and recommendations of
defendant Seegars almost unfailingly. Finally, plaintiff argues that the branch entities do not
operate at arm’s-length, instead having defendant Seegars offer an extensive array of services to
the branch entities without making a profit of its own, and that the branch entities have an
agreement not to compete with each other.
Even considering these facts in the light most favorable to plaintiff, plaintiff has not plead
sufficient factual allegations supporting a claim that this Court should pierce the corporate veil and
hold defendant Seegars liable for the actions of defendant Newport or aggregate the number of
defendants’ employees. See Bridge v. New Holland Logansport, Inc., 815 F.3d 356 (7th Cir. 2016)
(declining to pierce the corporate veil where the companies shared similar names, directors, a
website, and board members; held each other out as the same company; and centralized several
services, such as employee performance review, the personnel manual, and the computer program
for tracking inventories); see Burnette v. Austin Med, Inc., No. 1¢ev52, 2011 U.S. Dist. LEXIS
43027, at *14(W.D.N.C. Apr. 14, 2011) (declining to pierce the corporate veil when the complaint
lacked allegations that defendant was undercapitalized, co-mingled assets, or took any other
actions disregarding the corporate form). It is undisputed that defendant Newport is fully
capitalized as an independent business that generates a healthy profit, and it is agreed that
defendant Newport pays dividends to its owners, which are distributed proportionately based on
ownership shares. It is not disputed that defendant Newport pays relatively minimal fees to
defendant Seegars for its services, which relates to whether defendant Seegars siphons defendant
Newport's funds; that there is no overlap in personnel between the defendants, as defendant
Newport’s employees have never directly or indirectly worked for defendant Seegars; ancl that
defendants do not share office space, with defendant Newport renting its own space from an entity
unaffiliated with defendant Seegars. Furthermore, there is no intermingling of funds, and only
Clinton Rouse can authorize expenditures for defendant Newport. Clinton Rouse owns fifty
percent of Newport and exercises unilateral control of the corporation’s day-to-day operations,
even though three minority shareholders of defendant Newport are also shareholders of defendant
Seegars. Defendants argue that defendant Newport is free to market, brand, advertise, and
otherwise promote its services without coordinating with or seeking or receiving any authorization
from defendant Seegars, and that defendant Seegars has no involvement in the management,
control, or oversight of Newport’s employees. Based on these facts and the lack of sufficient
allegations that defendant Newport was undercapitalized, that defendant Seegars co-mingled
assets, or that the defendant otherwise disregarded the corporate form, plaintiff has failed to show
that piercing the corporate veil is necessary to prevent fraud or injustice. Therefore, the Court
grants defendants’ motion for summary judgment.
This conclusion is further supported by the fact that courts have previously found that
franchisors could not be held liable for the actions of franchisees simply because the franchisor
sets rules, shares names with, and provides marketing and other services for franchisees. The Tenth
Circuit declined to hold McDonald’s responsible for a violation of Title VII of the Civil Rights
Act of 1967, 42 U.S.C.S. §§ 2000e to 2000e-17, by one of its franchisees because McDonald’s
lacked control over labor relations with the franchisee’s employees and financial control over the
franchisee. Evans vy. McDonald's Corp., 936 F.2d 1087, 1090 (10th Cir. 1991). The Court found
there was insufficient control to consider McDonald’s an employer of its franchisee’s employees
under Title VII even when McDonald’s stringently controlled the manner of its franchisee’s
operations, conducted frequent inspections, and provided training for franchise employees. /d.
Title VII defines “employer” similarly to the ADA, requiring fifteen or more employees for each
working day in each of two or more calendar weeks. 42 U.S.C.S. § 2000e. Therefore, allowing
plaintiff to pierce the corporate veil in this case would be inconsistent with prior rulings dealing
with similar situations,
CONCLUSION
For the foregoing reasons, defendants’ motion for summary judgment [DE 24] is
GRANTED. Summary judgment on all claims is entered in favor of the defendants.
SO ORDERED, this day of December, 2020.
TERRENCE W. BOYLE
CHIEF UNITED STATES DISTRICT JUDGE
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