Opposition Brief — Hayden v. La-Z-Boy Chair Co.

Supreme Court, U.S,

'

PELE}

i?

No. 93-1256

In The

Supreme Court of the United States

October Term, 1993

a +

J. WILLIAM HAYDEN,

Petitioner,

LA-Z-BOY CHAIR CO.,

Respondent.

— +

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Seventh Circuit

—— *

RESPONDENT'S BRIEF IN OPPOSITION

— ¢

LarrRY J. SAYLOR

(Counsel of Record)

Rocgue E. Lirrorp

RICHARD J. SERYAK

MILLer, CANFIELD, PADDOocK

AND STONE

150 W. Jefferson, Suite 2500

Detroit, Michigan 48226

(313) 963-6420

Attorneys for Respondent

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

Did the Court of Appeals correctly hold that petitioner,

who was the sole stockholder and full-time employee of

his own corporation, which in turn was an independent

contractor to respondent La-Z-Boy Chair Company, was

not covered by the Age Discrimination in Employment

Act, 29 U.S.C. § 621 et seq. (“ADEA”)?

TABLE OF

QUESTION PRESENTED

TABLE OF AUTHORITIES

OPINIONS BELOW

STATUTE...

STATEMENT OF THE CASI

A. Facts.

B. Proceedings Below

ARGUMENT .

CONCLUSION

CONTENTS

TABLE OF AUTHORITIES

Page(s)

C ASI

Amarnare v. Merrill Lynch, Pierce Fenner & Smith,

AT 611 I Supp 344 (S.D.NLY. 1984) 10

Beverly v. Douglas, 591 F. Supp. 1321 (S.D.N_Y

1984) 12

Carney v. Dexter Shoe Co., 701 F. Supp. 1093 (D.N.]

19RR) K

Dake v. Mutual of Omaha Ins. Co., 600 I Supp. 63

(N.D. Ohio 1984) os

Doe v. St. Joseph's Hospital of Fort Wayne, 788 F.2d

411 (7th Cir. 1986) 5, 10

E.E.O.C. v. Zippo Manufacturing Co., 713 F.2d 32

(3rd Cir. 1983) 7, I)

Eyerman v. Mary Kay Cosmetics, 967 F.2d 213 (6th

Cir. 1992) 2

Fountain v. Metcalf, Zimak ( P.A., 925 F.2d 1398

(llth Cir. 1991) 8 1)

Frishberg v. Esprit De Corp., 778 F. Supp. 793

(S.D.N.Y. 1991), aff'd mem., 969 F.2d 1942 (2d

Cir. 1992) g 11

Garrett v. Phillips Mills, Inc., 721 F.2d 979 (4th Cir

1983)

Gomez v. Alexian Brothers Hospital of San Jose, 698

F.2d 1019 (9th Cir. 1983) 9, 10

Hickey v. Arkla Industries, Inc., 699 F.2d 748 (5th

Cir. 1983) — Be: ee

TABLE OF AUTHORITIES — Continued

Paye(s)

Hickey v. Arkla Industries, Inc., 688 F.2d 1009 (5th

Cir. 1982), vacated, 699 F.2d 748 (5th Cir. 1983) fa

Hishon v. King & Spaulding, 467 U.S. 69 (1984) 10)

Levine v. Fairleigh Dickinson University, 646 F.2d

825 (3d Cir. 1981) 7

Mitchell v. Frank R. Howard Memorial Hospital, 853

F.2d 762 (9th Cir. 1988), cert. denied, 489 U.S

1O13 (1989)... . 6, 9, 10, 12

Mitchell v. Tenney, 650 F. Supp. 703 (N.D. IIL. 1986) 12

Ovcestman v. National Farmers Union Insurance Co.,

958 F.2d 303 (10th Cir. 1992). a

Pardazi v. Cullman Medical Center, 838 F.2d 1155

(lith Cir. 1988)..... LEN RA re 10

Sibley Memorial Hospital v. Wilson, 488 F.2d 1338

ee Cr Sh 6s sees ba ewds Penn Sas 5, 10

Wheeler v. Main Hurdman, 825 F.2d 257 (10th Cir.),

cert. denied, 484 U.S. 986 (1987) . 10, 11

STATUTES

29 U.S.C. § 621 et seq. ..... % - ip er .

Bk eae Sy | a ne ee 5

Ohio Rev. Code § 4112.02..... ca aos an wie eee aa a

SECONDARY SOURCES

ScHLEI & GROSSMAN, EMPLOYMENT DISCRIMINATION

Law 387 & n.52 (2d ed. Supp., ABA Sect. of

SO Ge GS, SU, TO ac ce cvccvctvvsedenensess 10

—— ee

No. 93-1256

*

In The

Supreme Court of the United States

October Term, 1993

.

J). WILLIAM HAYDEN,

Petitioner,

LA-Z-BOY CHAIR CO.,,

Respondent

*

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Seventh Circuit

w

RESPONDENT'S BRIEF IN OPPOSITION

*

OPINIONS BELOW

[he opinion of the United States Court of Appeals for

the Seventh Circuit (Pet. App. Al-A12Z) is reported at 9

F.3d 617. The opinion of the United States District Court

for the Northern District of Indiana (id. at B1-B11) is

unreported

STATUTE

[The Age Discrimination in Employment Act

(“ADEA”), 29 U.S.C. § 621 et seq., provides

It shall be unlawful for an employer to fail or

refuse to hire or to discharge any individual or

otherwise discriminate against any individual with

respect to his compensation, terms, conditions, or

privileges of employment, because of such individ

ual’s aee

29 ULS.C. & 623(a)(1) (emphasis added.)

STATEMENT OF THE CASE

A. Facts

Although petitioner J. William Hayden (“Hayden”)

asserts that “an artificial label — independent contractor

... has been attached to him,” Petition at 11, the record

shows that he unequivocally conceded his independent

contractor status below. Indeed, for many years, he took

advantage of this status to reduce his tax liability, and

even interposed his own wholly-owned corporation

between himself and respondent La-Z-Boy Chair Com-

pany (“La-Z-Boy”).!

Hayden became a commissioned “independent sales

representative” for La-Z-Boy, a furniture manufacturer, in

1968. Starting in the 1970s, Hayden and La-Z-Boy entered

into a series of written one-year “Independent Sales Rep-

resentative Agreements.” Each Agreement provided that

the representative was “not an employee or agent” of La-

! La-Z-Boy Chair Company is a Michigan corporation with

no parent companies, subsidiaries or affiliates except wholly-

owned subsidiaries.

7-Boy, and that either party could terminate the relation

ship upon 30 days’ notice, with or without cause

La-Z-Boy had no requirement about the form Hay

den’s business as an independent sales representative

should take. In December 1984, Hayden incorporated “J

William Hayden, Inc.”, an Indiana corporation in which

he was the sole stockholder, and asked La-Z-Boy to con

tract with that corporation. La-Z-Boy complied, and in

1985 through 1990, the parties executed written Indepen

dent Sales Representative Agreements identifying the

parties as l.a-7-Boy and |. William Hayden, Inc

La-Z-Boy paid Hayden a straight commission, and

from 1985 forward, paid all commissions to J. William

Hayden, Inc. La-Z-Boy did not provide Hayden with ar

office, reismburse him or his corporation for any business

expenses, or provide Hayden with any benefits. La-Z-Boy

did not withhold any taxes or social security payments on

the commission payments it made to Hayden or his cor

poration. Nor did La-Z-Boy tell Hayden when to call on

customers, require him to submit call reports, or other

- - | _

wise manage the day-to-day operation of his business

Hayden testified in deposition that nis purpose for

+

incorporating J. William Hayden, Inc. was to reduce

L.

i

tax liability. After its creation, the corporation received al!

commission payments from La-Z-Bov and paid Hayden

, 4 a - + 1. i .

wages : Hayden Was the yporation s oniyv full-time

5 r

Hayden filed tax returns as a self-employed person from

the time he became a La-Z-Boy representative until the time he

ineorporated. From 1985 through 1990, he filed both a corporate

tax return and an individual tax return showing himself to be an

employee, although it occasionally hired a part-time sec-

retary and bookkeeper and in one or two years paid Mrs.

Hayden for unspecified services. J. William Hayden, Inc.

funded Hayden’s retirement plan, paid for his insurance,

retained and paid accountants and attorneys, and paid all

of Hayden’s telephone, travel, and entertainment

expenses.

La-Z-Boy placed Hayden on six-month periods of

probation in 1980, 1986, and 1990. In December 1990, it

decided not to renew the Independent Sales Representa-

tive Agreement because of long-term concerns over Hay-

den’s slow sales growth, poor dealer relations, poor

results in sleeper, sofa and recliner sofa sales, and missed

opportunities for developing additional business with his

accounts. See Pet. App. at A3 n.1. ‘

Hayden then applied for unemployment compensa-

tion benefits from the State of Indiana, certifying that he

was an employee of J. William Hayden, Inc. He received

the requested benefits for twenty-six weeks. Hayden

never made any unemployment compensation claim

asserting that he was an employee of La-Z-Boy Chair

Company.

B. Proceedings Below

In his complaint, petitioner, an individual, alleged

that La-Z-Boy violated ADEA when it decided not to

officer and employee of J. William Hayden,Inc. Hayden's per-

sonal tax returns reflect that his “wages” were paid by his

corporation. Hayden has never filed a tax return showing him-

self to be an employee of La-Z-Boy Chair Company.

renew the Independent Sales Representative Agreement

between La-Z-Boy and J. William Hayden, Inc.

Following the completion of discovery, the district

court granted summary judgment dismissing Hayden's

ADEA claim on two grounds. First, the district court

concluded that Hayden, who conceded that he was not an

“employee” of La-Z-Boy, was not covered by ADEA. Pet.

App. at B7. Second, the district court held that “Hayden’s

proffered evidence of age discrimination fails to create a

genuine issue of material fact.” Pet. App. at B7-Bs.*

The Court of Appeals affirmed. Hayden acknowl-

edged, and the Court of Appeals noted, the line of cases

holding that ADEA applies only to employees and appli-

cants for employment, and does not apply to independent

contractors. See Pet. App. at A4-A6. Hayden sought to

distinguish these cases, relying on cases applying ‘Title

VII of the Civil Rights Act of 1964, 42 U.S.C.

§ 2000e-2(a)(1), “where an employer ‘discriminatorily

interferes with an individual’s employment opportunities

with another employer.’ ” Pet. App. at A6, quoting Doe v.

St. Joseph's Hospital of Fort Wayne, 765 F.2d 411, 423 (7th

Cir. 1986), and Sibley Memorial Hospital v. Wilson, 488 F.2d

1338, 1341 (D.C. Cir. 1973) (emphasis added). The only

“employment” Hayden identified, however, was with his

3 In addition to the ADEA claim, Hayden also alleged pen-

dent state law claims of tortious interference with business

relations, tortious interference with prospective advantage, and

intentional infliction of mental and emotional suffering. After

dismissing Hayden’s ADEA cfaim, the district court declined to

exercise pendent jurisdiction.

own corporation, of which he was the sole stockholder

and sole full-time employee. See Pet. App. at A4-A6, B7.

The Court of Appeals found it unnecessary to decide

whether ADEA would apply if a defendant “employer”

discriminatorily interfered with a plaintiff's employment

with a third party. Instead, it agreed with the district

court and the Ninth Circuit in Mitchell v. Frank R. Howard

Memorial Hospital, 853 F.2d 762 (9th Cir. 1988), cert. denied,

489 U.S. 1013 (1989), that a defendant's alleged interfer-

ence with plaintiff's “employment” by his own wholly-

owned corporation is not protected by either ADEA or

Title VII. Pet. App. at A5-A9.

Finally, the Court of Appeals held that Hayden had

failed to preserve any argument that he had “indirect

employment” relationships with either La-Z-Boy or the

furniture dealers on whom he called — indeed he “speci-

fically disavowed making any arguments to the district

court on the basis of [any] alleged ‘indirect employment’

relationships,” Pet. App. at A9-A10. The court further

concluded, however, that even if these arguments had

been preserved, they were without merit. Id. at A9-A12.4

¢

ARGUMENT

Petitioner asks this Court to grant review in order to

hold that ADEA applies whenever a statutory

4 The Court of Appeals did not reach the district court's

alternative holding that Hayden had failed to create a genuine

issue of material fact on the issue of age discrimination. Pet.

App. at A3.

“employer” takes an action which has an impact on the

“compensation” of any “individual,” regardless of

whether that individual has an “employment” relation-

ship with anyone. This argument was not preserved

below. Rather, petitioner argued that he was covered by

ADEA because La-Z-Boy’s nonrenewal of the Indepen-

dent Sales Representative Agreement allegedly interfered

with his “employment” by his own wholly-owned corpo-

ration.

Even if petitioner’s argument had been preserved,

however, it could be adopted only by ignoring legislative

history and overruling an unbroken line of decisions.

Directly in point, in E.E.O.C. v. Zippo Manufacturing Co.,

713 F.2d 32 (3rd Cir. 1983), the Third Circuit held that

Zippo’s district sales managers, some of whom were

incorporated and some of whom were not, were indepen-

dent contractors and therefore excluded from the scope of

ADEA. The court reasoned:

[T]he legislative history.of [ADEA], 1967 U.S.

Code Cong. & Ad. News 2214-27, evinces the

clear intent to prohibit “age discrimination by

employers against employees and applicants for

employment.” Levine v. Fairleigh Dickinson Uni-

versity, 646 F.2d 825, 828 (3d Cir. 1981). There-

fore, if appellants were not Zippo employees, ADEA

is not applicable to their cause and their allegation ~-

that Zippo violated ADEA in terminating them

because they reached the age of 65 must be

rejected.

713 F.2d at 35 (emphasis added).

In Garrett v. Phillips Mills, Inc., 721 F.2d 979 (4th Cir.

1983), the Fourth Circuit rejected an ADEA claim asserted

by an independent sales representative because “[a] plain

reading of the ADEA indicates that an ‘individual’ only

has a cause of action under this provision if he is an

‘employee’ at the time of his termination.” 721 F.2d at

980.

In Hickey v. Arkla Industries, Inc., 699 F.2d 748 (5th Cir.

1983), the plaintiff established a corporation, “Perry

Hickey Enterprises” as the vehicle for his sales of Arkla

products.° The Fifth Circuit concluded that he was not

covered by ADEA:

There is no legislative history to support

Hickey’s contention that employee status is not

required for coverage under the ADEA. More-

over, his argument defies a plain reading of the

statute. Whether it would be desirable to

include independent contractors within ADEA

coverage is clearly a matter for Congress, and

emphatically not for the courts, to decide.

699 F.2d at 753 (emphasis added). In accord are Oestman

v. National Farmers Union Insurance Co., 958 F.2d 303 (10th

Cir. 1992) (insurance agent was independent contractor

not covered by ADEA); Frishberg v. Esprit De Corp., 778 F.

Supp. 793 (S.D.N.Y. 1991), aff'd mem., 969 F.2d 1942 (2d

Cir. 1992) (self-incorporated sales representative was an

independent contractor and not an employee protected

under ADEA); Carney v. Dexter Shoe Co., 701 F. Supp. 1093

(D.N.J. 1988) (sales representative); Dake v. Mutual of

Omaha Ins. Co., 600 F. Supp. 63 (N.D. Ohio 1984) (insur-

ance agent). Also see Fountain v. Metcalf, Zimak Co., P.A.,

> See Hickey v. Arkla Industries, Inc., 688 F.2d 1009 (5th Cir.

1982), vacated, 699 F.2d 748 (5th Cir. 1983).

925 F.2d 1398 (11th Cir. 1991) (partner in accounting firm

not covered by ADEA).

Hayden conceded below that an ADEA plaintiff must

have some relevant “employment” relationship, but

relied on Title VII cases holding that an “employer” may

be liable for discriminatorily interfering with the plain-

tiff’s “employment” -with a third party. The Court of

Appeals did not resolve this issue. Assuming without

deciding that an “employer” could be liable under ADEA

for interfering with the plaintiff's employment with a

third party, the Court of Appeals correctly held that the

relationship between an individual and his wholly-

owned corporation is not “employment” protected by

either statute. Pet. App. at A6-A10. Mitchell v. Frank R

Howard Memorial Hospital, 853 F.2d 762 (9th Cir. 1988),

cert. denied, 489 U.S. 1013 (1989), is squarely on point. In

Mitchell, a radiologist asserted a Title VII claim against a

hospital which terminated an exclusive contract with his

professional corporation. The Ninth Circuit held:

Dr. Mitchell argues that the Hospital interfered

with his employment relationship with the pro-

fessional corporation of which he is the sole

shareholder. We reject this argument because we

believe that the relationship between an individ-

ual and his wholly owned professional corpora-

tion is not an employment relationship that

Congress intended to protect under Title VII.

853 F.2d at 762, quoted in Pet. App. at A8-A9.

The Ninth Circuit in Mitchell distinguished one of its

own earlier decisions, Gomez v. Alexian Brothers Hospital of

——S—eeeaaa 2... ee

10

San Jose, 698 F.2d 1019 (9th Cir. 1983), upon which Hay-

den strongly relies. The distinction is directly relevant to

this case:

Gomez . .. , upon which Dr. Mitchell relies, is

clearly distinguishable. Gomez involved a corpo-

ration that employed a number of doctors who

rendered medical services as part of the corpo-

ration’s group medical practice. Id. at 1020. In

contrast, Dr. Mitchell is both the sole share-

holder and the sole employee of his professional

corporation.

Mitchell, 853 F.2d at 762.

~ As the Court of Appeals concluded, the other Title

VII cases on which Hayden relies are distinguishable on

the same basis. See, e.g., Pardazi v. Cullman Medical Center,

838 F.2d 1155 (11th Cir. 1988) (interference with plaintiff's

prospective employment by a professional corporation in

which another physician was the principal); Amarnare v.

Merrill Lynch, Pierce Fenner & Smith, Inc., 611 F. Supp. 344

(S.D.N.Y. 1984) (interference with plaintiff's employment

with a third party). The patients by which the plaintiff

private-duty nurse in Sibley and physician in Doe were

© The majority of the courts that have considered the issue,

unlike Gomez, hold that Title VII has no application to individ-

uals who are not employees of the “employer.” Cases are col-

lected in Scuer & GrossMAN, EMpLOYMENT DiscRIMINATION Law 387

& n.52 (2d ed. Supp., ABA Sect. of Labor & Empl. Law, 1989).

Also see Hishon v. King & Spaulding, 467 U.S. 69 (1984) (Powell,

J., concurring) (relationship between law partners not an

employment relationship within meaning of Title VII); Wheeler

v. Main Hurdman, 825 F.2d 257 (10th Cir.), cert. denied, 484 U.S.

986 (1987) (partner in accounting firm not an employee and not

covered by Title VII, the Equal Pay Act, or ADEA).

11

allegedly employed were likewise third parties, not cor-

porations owned by the plaintiffs.

As the Court of Appeals correctly held:

We agree with the Ninth Circuit that Title

VII does not protect an individual’s “employ-

ment relationship” with his wholly owned cor-

poration. To hold otherwise would mean that an

independent contractor with no relevant

employment relationships with the defendant

(or anyone else) could bring himself within the

protection of the ADEA simply by incorporat-

ing.

Pet. App. at A9. Like Mitchell, the other cases directly on

point, Zippo, Hickey, and Frishberg, hold that a plaintiff

cannot bring himself within ADEA simply by incorporat-

ing. Also see Fountain, 925 F.2d 1398 (partner in account-

ing firm, as part owner, not covered by ADEA); Wheeler v.

Main Hurdman, 825 F.2d 257 (10th Cir.), cert. denied, 484

U.S. 986 (1987) (partner in accounting firm not covered by

ADEA, Title VII, or Equal Pay Act).

Finally, Hayden again attempts to resurrect the argu-

ment that he had an “indirect employment” relationship

with either La-Z-Boy or the furniture dealers on which he

called. Petition at 11. The Court of Appeals correctly held

that Hayden failed to preserve any “indirect employ-

ment” argument, Pet. App. at A9-A10, and that in any

event this argument is without merit. Jd. at A10-A12. For

example, the facts in Zippo bear a striking resemblance to

the facts of this case. 713 F.2d at 35. The Zippo court,

applying the “hybrid ‘right to control /economic realities’

test applied in Title VII cases,” held that the district

12

managers were independent contractors as a matter of

law. 713 F.2d at 37. In accord are Eyerman v. Mary Kay

Cosmetics, 967 F.2d 213, 218 (6th Cir. 1992) (dismissing a

handicap discrimination claim’ because commissioned

national sales director was an independent contractor);

Hickey, 699 F.2d at 748 (self-incorporated sales representa-

tive was independent contractor).®

Nor (even if it had been preserved) would Hayden's

theory that La-Z-Boy interfered with his relationship with

furniture dealers bring him within ADEA. The “interfer-

ence” is simply refusal to allow Hayden to sell La-Z-Boy

products. As the Court of Appeals noted, “Hayden con-

ceded in his deposition that he had no actual or prospec-

tive contractual relationship with these furniture dealers

and that he remains free to sell these same dealers any

(non-La-Z-Boy) furniture or other products.” Pet. App. at

Al2. In Mitchell, the Ninth Circuit rejected a Title VII

plaintiff's virtually identical claim, holding that the “tra-

ditional physician/patient relationship is not one of

employer/employee.” 853 F.2d at 767. In accord is Beverly

v. Douglas, 591 F. Supp. 1321, 1328 (S.D.N.Y. 1984). The

7 Eyerman’s claim was brought under Ohio Rev. Code

§ 4112.02, which contains language similar to Title VII. See 967

F.2d at 217.

8 Mitchell v. Tenney, 650 F. Supp. 703 (N.D. Ill. 1986), cited

by Hayden, is readily distinguishable from the present case

because the defendant, among other things, provided the plain-

tiff with medical insurance and a place of business and closely

regulated his working hours. See Pet. App. at A11-A12.

13

Court of Appeals correctly rejected Hayden’s argument,

and its ruling need not be further reviewed.

*

CONCLUSION

For the foregoing reasons, the Petition for a Writ of

Certiorari should be denied.

Respectfully submitted,

LARRY |. SAYLOR

(Counsel of Record)

Rocgurt E. Lirrorp

RICHARD |. SERYAK

Miter, CANFIELD, PADDOCK

AND STONI

150 W. Jefferson, Suite 2500

Detroit, Michigan 48226

(313) 963-6420

Attorneys for Respondent

Dated: March 1, 1994