Gilliland v. Sanico Clanton, LLC (CONSENT)

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF ALABAMA

NORTHERN DIVISION

HEATHER GILLILAND, )

)

Plaintiff, )

)

v. ) CASE NO. 2:18-CV-952-SMD

)

SANICO CLANTON, LLC, et al., )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

Before the Court is Plaintiff’s Supplemental Memorandum of Law on the Court’s

Jurisdiction to Hear Plaintiff’s Title VII Claims (Doc. 22) and Defendant’s Response to

Plaintiff’s Supplemental Memorandum of Law on the Court’s Jurisdiction to Hear

Plaintiff’s Title VII Claims (Doc. 23). Previously, the Defendant moved for dismissal.

(Doc. 7). This Court converted the motion to one for summary judgment and denied it,

finding that the pleadings did not clearly establish this Court’s subject-matter jurisdiction,

and ordered the parties to report back after conducting limited jurisdictional discovery.

(Doc. 21). After review, the undersigned construes the Defendant’s Response as a renewed

motion for partial summary judgment on Plaintiff’s Title VII claims, and finds that the

motion is due to be granted.1

I. BACKGROUND

1 The issues addressed in this memorandum opinion do not affect Plaintiff’s claims brought under 42 U.S.C.A. §

1981, and those claims are unaffected by this partial summary judgment order.

On November 8, 2018, Plaintiff filed a Complaint (Doc. 1) against Defendants

alleging three counts of retaliation and discrimination under Title VII of the Civil Rights

Act of 1964, as amended, 42 U.S.C. § 2000e et seq., and two counts of retaliation and

discrimination under 42 U.S.C. § 1981. Id. at 1. Plaintiff’s claims arise from events that

occurred while Plaintiff was employed as a garment folder at Defendant Sanico Clanton,

LLC’s (“Sanico”) facility. Id. at 6. Plaintiff alleges Defendants, in aggregate, constitute a

single “employer” under the “integrated enterprise” test and, hence, are subject to Title VII

and its 15-employee threshold. See Lyes v. City of Riviera Beach, Fla., 166 F.3d 1332,

1341 (11th Cir. 1999) (en banc) (adopting the NLRB’s “single-employer” factor test for

purposes of determining when to aggregate multiple entities for purposes of counting

employees, which includes analysis of (1) the interrelation of operations, (2) centralized

control of labor relations, (3) common management, and (4) common ownership or

financial control). On December 6, 2018, Defendants filed a Motion to Dismiss Plaintiff’s

Complaint pursuant to Rule 12(b)(1), arguing that the Court lacks subject matter

jurisdiction over Plaintiff’s claims because Defendants are three separate entities—not an

integrated enterprise—and the one company Plaintiff worked for, Sanico, does not meet

the statutory definition of “employer” under Title VII. (Doc. 7) at 5-11; see also Fed. R.

Civ. P. 12(b)(1); 42 U.S.C. § 2000e(b).

On January 2, 2019, Plaintiff filed a Brief in Opposition (Doc. 16) to Defendants’

Motion to Dismiss, arguing that Defendants’ Motion was improperly brought under Rule

12(b)(1) because “the threshold number of employees for application of Title VII is an

element of a plaintiff’s claim for relief, not a jurisdictional issue.” (Doc. 16) at 5 (quoting

Arbaugh v. Y&H Corp., 456 U.S. 500, 516 (2006)). On January 9, 2019, Defendants filed

a Motion to Convert (Doc. 17) their Motion to Dismiss into a Motion for Summary

Judgment, conceding that “the question of whether [Sanico] is an ‘employer’ for purposes

of Title VII is a question related to the merits of Plaintiff’s claims.” (Doc. 17) at 2.

Defendants reiterated their argument that the Defendant entities do not meet the definition

of a single “employer” under the “integrated enterprise” test. Id. at 9-13 (citing Lyes, 166

F.3d at 1341).

On January 21, 2019, Plaintiff filed a Response (Doc. 20) to Defendants’ Motion to

Convert (Doc. 17) arguing that, because the evidentiary record is undeveloped, it “cannot

present facts essential to justify its opposition” to Defendants’ motion if converted to a

motion for summary judgment. (Doc. 20) at 4 (quoting Fed. R. Civ. P. 56(d)). Plaintiff

asked the Court to deny without prejudice Defendants’ Motion and to allow discovery to

proceed. Id. at 5.

On August 5, 2019, this Court issued an order finding that Defendants were indeed

making a factual challenge to this Court’s jurisdiction that required further development.

However, the undersigned found that determination of this Court’s subject-matter

jurisdiction “will, at the same time, effectively decide the merits of Plaintiff’s claims.”

(Doc. 21) at 5. Additionally, the undersigned found: “Where the jurisdictional issues are

intertwined with the substantive merits, ‘the jurisdictional issues should be referred to the

merits, for it is impossible to decide one without the other.’” Id. Accordingly, this Court

denied Defendants’ Motion for Summary Judgment without prejudice and ordered the

parties to conduct limited discovery. Id.

The undersigned directed the parties to conduct limited discovery to enable analysis

of the four criteria that dictate whether the business should be viewed as an integrated

enterprise under the Lyes analysis. The parties have done so and have included relevant

findings in their memoranda. The undersigned will construe the Defendants’ filing (Doc.

23) as a renewed motion for summary judgment and the Plaintiff’s filing as the opposition

thereto (Doc. 22). After review, and with the benefit of discovery, the Defendant’s

summary judgment motion is due to be granted with respect to Plaintiff’s Title VII claims.

II. MOTION FOR SUMMARY JUDGMENT

A. Standard of Review

Rule 56 requires that summary judgment be granted “if the movant shows that there

is no genuine dispute as to any material fact and the movant is entitled to judgment as a

matter of law.” Fed. R. Civ. P. 56(a). “The moving party bears ‘the initial responsibility

of informing the . . . court of the basis for its motion, and identifying those portions of the

pleadings, depositions, answers to interrogatories, and admissions on file, together with the

affidavits, if any, which it believes demonstrate the absence of a genuine issue of material

fact.’” Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259 (11th Cir. 2004) (quoting

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal quotations omitted)). Where

the moving party makes such a showing, the burden shifts to the non-movant, who must

go beyond the pleadings and present affirmative evidence to show that a genuine issue of

material fact does exist. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986). The

applicable substantive law identifies which facts are material. Id. at 248. A fact is not

material if a dispute over that fact will not affect the outcome of the suit under the

governing law. Id. An issue is genuine when the evidence is such that a reasonable jury

could return a verdict for the non-moving party. Id. at 249-50.

In resolving a motion for summary judgment, the Court must view all evidence and

draw all reasonable inferences in the light most favorable to the non-moving party. Patton

v. Triad Guar. Ins. Corp., 277 F.3d 1294, 1296 (11th Cir. 2002). But, the Court is bound

only to draw those inferences that are reasonable. “Where the record taken as a whole

could not lead a rational trier of fact to find for the non-moving party, there is no genuine

issue for trial.” Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997) (quoting

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). The

nonmovant must establish, with appropriate evidence beyond the pleadings, that a genuine

dispute material to his case exists. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th

Cir.1991); Celotex, 477 U.S. at 324 (holding that the nonmoving party is required to go

beyond the pleadings and, by her own affidavits or by the record on file, designate specific

facts showing there is a genuine issue).

B. Discussion

After conducting their limited discovery, the parties seem to have little dispute over

the facts governing this dispute. From both memoranda and respective exhibits, the

undersigned can deduce the following about Sancio’s business structure: Sanico is a small

chain of businesses that rents various types of industrial cleaning supplies. (Doc. 23-1) at

3. Sanico has three locations in Gulfport, Mississippi; Lake, Mississippi; and Clanton,

Alabama. Id. The three entities are incorporated separately, but are owned by the same

individual, John Sandras. Id. at 2-4. The locations are managed separately and maintain

separate bank accounts, employees, customers, managers, and insurance carriers. Id. The

managers at each branch make the bulk of the business decisions, such as hiring/firing,

hours, and compensation (although Sandras retains ultimate firing authority by virtue of

ownership). Id. The branches do not share inventory or expenses, nor do they transfer their

assets and debts between each other. Id. at 5. However, they utilize the same employment

policies. Id. at 4. In addition to their common ownership by Sandras, the companies share

a common website. Id. at 5.

Since deciding Lyes en banc, the Eleventh Circuit has decided few other cases that

undertake the four-factor analysis in appreciable detail, and the parties instead rely on a

series of fact-specific orders by the district courts. Therefore, the undersigned will address

the Lyes factors as articulated.

First, the Court considers the interrelation of Defendants’ operation. Weighing in

favor of interrelation are the facts that the stores utilize the same employment practices and

share a common website and branding. See, e.g., E.E.O.C. v. Dolphin Cruise Line, Inc.,

945 F. Supp. 1550, 1553-54 (S.D. Fla. 1996) (finding that companies using each other’s

logos/letterheads was one factor favoring interrelation). Weighing against interrelation,

however, is the fact that the stores do not share inventory, employees, customers, bank

accounts, or financial obligations. (Docs. 7-1, 23-1). Plaintiff cites Teague v. Beauty &

More, Inc. to suggest that a finding of interrelation is appropriate here. 2019 WL 361151

(M.D. Ala. January 10, 2019), adopted by Teague v. Beauty & More, Inc., 2019 WL 361289

(M.D. Ala. January 29, 2019) (Watkins, J.). Teague, however, is distinguishable. In that

case, several stores, located in nearby geographic proximity, shared contractors, payrolls,

accounting companies, and employees. See also Thornton v. Mercantile Stores Co., Inc.,

13 F. Supp. 2d 1282, 1291 (M.D. Ala. 1998) (relied upon by Teague and undertaking a

detailed factual analysis to find interrelation when a parent and a subsidiary extensively

shared resources and duties such as risk management, payroll, insurance services, and

employees). Although the Sanico branches do share some operational aspects, the degree

of interrelation falls far short of that found in Teague and Thornton, and accordingly, the

first factor of the Lyes test weighs against a finding of an integrated enterprise. See also

Anderson v. Surgery Ctr. of Cullman, Inc., 2017 WL 6596611 at *4 (N.D. Ala. 2017)

(“There is no evidence in the record of any of the seven indicia of interrelatedness:

combined (1) accounting records; (2) bank accounts; (3) lines of credit; (4) payroll

preparation; (5) switchboards; (6) telephone numbers; and (7) offices.”)

Second, the Court considers centralized control of labor relations. Some courts

accord this factor greater weight than others. Thornton at 1291 (“The second factor –

whether there is centralized control of labor relations – is usually accorded greater weight

than others.”). As to this factor, Teague is similar, but not dispositive. Here, evidence

demonstrates that, although Sanico’s personnel decisions are normally made at the local

level by its branch managers, decisions are ultimately subject to the control of owner John

Sandras. (Doc. 23-1) at 3-4. This is partially akin to the scenario in Teague, where the

shareholders frequently visited branches of the company and controlled the hiring of store

managers, leading that court to find that labor relations were subject to centralized control.

Teague at *2.

However, the Teague rationale is less straightforward than meets the eye. In Cruz-

Lovo v. Ryder Sys., Inc., the Southern District of Florida found that the labor relations prong

weighed in favor of the defendant when there was no evidence of any centralized control

of labor relations. 298 F. Supp. 2d 1248, 1254 (S.D. Fla. 2003). That court also noted: “‘To

satisfy the control prong, a parent must control the day-to-day employment decisions of

the subsidiary.’” Id. (citing Frank v. U.S. West, Inc., 3 F.3d 1357, 1363 (10th Cir. 1993)).

Likewise, in analyzing labor relations, the Anderson Court noted: “‘The control required

to meet the test of centralized control of labor relations is not potential control, but rather

actual and active control of day-to-day labor practices.’” Anderson, 2017 WL 6596611 at

*5 (N.D. Ala. 2017) (citing Fike v. Gold Kist, Inc., 514 F. Supp. 722, 727 (N.D. Ala. 1981)).

These facts fall somewhere between the extremes of Teague and Cruz-

Lovo/Anderson. Sandras appears to exercise less control than that of the Teague

shareholders, but his control is also not entirely nonexistent as contemplated in Cruz-Lovo.

Both Cruz-Lovo and Anderson, however, make clear that centralized control of labor is

more than a pro forma requirement; instead, the employer must demonstrate some exercise

of actual control. Because the bulk of Sanico’s personnel decisions are made locally, but

are subject to a minimal degree of ultimate oversight by Sandras, the undersigned finds

that the second factor – centralized control of labor relations – does not clearly break for

or against a finding of an integrated enterprise.

Third, the Court considers common management. “This factor looks to whether the

various entities share common officers and common directors. However, ‘[w]hat is more

important is whether any common officers translates into common management of the day-

to-day activities of each entity.’” Anderson, at *4 (N.D. Ala. 2017) (internal citations

omitted).

Previous courts have also been willing to find common management when senior

officials in one company hold senior management positions within the other. See, e.g.,

Thornton v. Mercantile Stores Co., Inc., 13 F. Supp. 2d 1282, 1294 (N.D. Ala. 1998). In

contrast, separate boards of directors and officers with little or no overlap will counsel

against finding common management. Fike v. Gold Kist, Inc., 514 F. Supp. 722, 727 (N.D.

Ala. 1981). See also Frank v. U.S. West, Inc., 3 F.3d 1357, 1364 (10th Cir. 1993)

(“Defendant and Northwestern Bell have no common officers and have only one common

manager, an officer of Defendant who manages the marketing operations for all three

subsidiaries. . . . One common manager is insufficient to establish a disputed material fact

under this prong of the integrated enterprise test.”).

Here, common management is minimal. Unrebutted evidence by Sandras indicates

that branch managers control the day-to-day activities of the branches. As Sandras attested,

he has authority over each branch manager, but he does not oversee daily operations,

compensation matters, or routine hiring/firing decisions. (Doc. 23-1). Instead, those

decisions are made by branch managers who operate independently of each other. Thus,

the undersigned finds that this factor weighs against a finding of an integrated enterprise.

Finally, the Court considers common ownership or financial control. This factor is

much easier to analyze: Sandras admits to being a common owner of all three Sanico

branches, and therefore, this factor weighs in favor of finding an integrated enterprise.

(Doc. 7-1).

In the aggregate, the Lyes factor analysis counsels against finding an integrated

enterprise for purposes of aggregation under Title VII. The first factor, interrelatedness of

operations, breaks in Sanico’s favor. The second factor, centrality of labor relations, which

could be weighed more heavily than the others, does not weigh in either side’s favor. The

third factor, common management, also breaks in Sancio’s favor. The fourth and final

factor, common ownership, is the only one of the four to break in Plaintiff’s favor.

Accordingly, the Court concludes that Sanico does not qualify as an integrated

enterprise, and therefore, aggregating them for purposes of qualifying as an “employer”

under Title VII is inappropriate. Because of this, Plaintiff’s Title VII claims necessarily

fail.

III. CONCLUSION

For the foregoing reasons, it is

ORDERED that Defendants’ Response to Plaintiff’s Supplemental Memorandum

of Law on the Court’s Jurisdiction to Hear Plaintiff’s Title VII Claims (Doc. 23), which

the Court construes as a Renewed Motion for Partial Summary Judgement, is GRANTED.

Plaintiff’s claims arising under Title VII of the Civil Rights Act are dismissed with

prejudice.

Done this 4th day of November, 2019.

/s/ Stephen M. Doyle

UNITED STATES MAGISTRATE JUDGE