Robert A. Mariotti, Sr. v. Mariotti Bldg Products , 714 F.3d 761 ( 2013 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 11-3148
_____________
ROBERT A. MARIOTTI, SR.,
Appellant
v.
MARIOTTI BUILDING PRODUCTS, INC.
_____________
On Appeal from the United States District Court
for the Middle District of Pennsylvania
District Court No. 3-11-cv-00737
District Judge: The Honorable A. Richard Caputo
Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
March 18, 2013
Before: SMITH, GREENAWAY, JR., and VAN
ANTWERPEN,
Circuit Judges
(Filed: April 29, 2013)
1
Clifford B. Cohn
Suite 925
620 Chestnut Street
Public Ledger Building
Philadelphia, PA 19106
Jeffrey J. Malak
Chariton, Schwager & Malak
138 South Main Street
P.O. Box 910
Wilkes-Barre, PA 18703
Thomas H. Roberts
Thomas H. Roberts & Associates
105 South First Street
Richmond, VA 23219
Counsel for Appellant
Daniel T. Brier
Donna A. Walsh
Myers, Brier & Kelly
425 Spruce Street
Suite 200
Scranton, PA 18503
Counsel for Appellee
_____________________
OPINION
_____________________
SMITH, Circuit Judge.
2
In Clackamas Gastroenterology Associates, P.C. v.
Wells, 538 U.S. 440 (2003), the Supreme Court set out a test
for determining whether a shareholder-director of a
professional corporation is an “employee” for purposes of the
Americans with Disabilities Act (ADA). Id. at 449-50. This
appeal allows us to consider whether that test applies to
business entities that are not professional corporations in a
Title VII employment action. We hold that it does.
I.
Mariotti Building Products, Inc., is a “closely held
family business.” Louis S. “Babe” Mariotti started the family
business in 1947, operating “a small lumber yard.” In the
1960s, Babe‟s sons, Plaintiff Robert A. Mariotti, Sr.
(Plaintiff), and his two brothers, Eugene L. Mariotti, Sr. and
Louis C. Mariotti “joined the business.” Babe and his sons
continued to develop the business, eventually incorporating it
as Mariotti Building Products, Inc. (MBP). The business
“experienced substantial growth” over the years with “annual
sales skyrocketing from less than $250,000 to over $60
Million.” MBP, according to the amended complaint, is
“recognized as the area‟s best source for building
materials[.]” Plaintiff averred that he was “responsible for
developing and growing a number of areas” of MBP‟s
business, “principally manag[ing] the manufactured housing
sales division of the company together with customer credit,
bill paying, and purchasing and inbound transportation of
product lines[.]” Plaintiff further averred that the divisions he
managed “earned profit” of more than $15 million in the six
years preceding termination of his employment, and that that
3
amount exceeded the profit of the divisions managed by his
brother Eugene.
As “one of the founders of MBP,” Plaintiff was an
officer of the corporation, serving as both vice-president and
secretary. He also served as a member of the board of
directors, and was a shareholder pursuant to a written
agreement executed by the parties on July 23, 2007. Plaintiff
averred that he and his brothers “were not at-will employees”
of MBP because they were employed pursuant to an
agreement that provided for termination “only for cause.”
Plaintiff alleged that he had a “spiritual awakening” in
1995. His newfound spirituality, he claimed, resulted in “a
systematic pattern of antagonism” toward him. It took the
form of “negative, hostile and/or humiliating statements”
about him and his religious affiliation. MBP‟s officers,
directors, and some employees were the source of this
harassment. In 2005, the harassment increased.
Babe Mariotti, the family patriarch, died either at the
end of 2008 or in the first days of January 2009. On January
4, 2009, while the family was making arrangements for the
funeral, Eugene Mariotti, derided Plaintiff and his faith. At
the funeral on January 6, Plaintiff delivered a eulogy, which
included comments about his own faith, and his “father‟s
good example.” The eulogy upset members of the family.
On January 8, the shareholders of the closely held family
business convened a meeting in Plaintiff‟s absence and
decided to terminate his employment.
4
Two days later on January 10, 2009, Plaintiff received
written notice of the termination of his employment. The
notice recited that the shareholders had met to discuss his
future status as an employee and that the vote to terminate his
employment had been unanimous and was effective
immediately. The letter explained that various benefits would
cease, including the use of a company car, health insurance
coverage, a cellular telephone, access to company credit
cards, and the availability of an office. Finally, the letter
explained that “[y]our share of any draws from the
corporation or other entities will continue to be distributed to
you.”1
Despite his termination in January of 2009, Plaintiff
continued to serve as a member of MBP‟s board of directors
“until August 6, 2009, when the shareholders did not re-elect
him as a director” of the closely held family corporation. On
October 22, 2009, Plaintiff filed a timely charge of religious
discrimination in violation of Title VII of the Civil Rights Act
of 1964, as amended. 42 U.S.C. § 2000e-2(a)(1). Thereafter,
Plaintiff filed suit against MBP, asserting Title VII claims of
religious discrimination and a hostile work environment. He
also asserted several state law claims. MBP moved to dismiss
the complaint under Federal Rule of Civil Procedure 12(b)(6),
arguing that Plaintiff was not an “employee” for purposes of
Title VII and could not invoke its protections. An amended
1
In a closely held corporation, a “draw” is a withdrawal of
money from the business to the business owner. The
American Heritage Dictionary of Business Terms (2010),
available at http://business.yourdictionary.com/draw.
5
complaint followed, and was met with a second motion to
dismiss asserting the same argument.
In a Memorandum dated July 8, 2011, the District
Court granted the motion to dismiss the Title VII claims and
declined to exercise supplemental jurisdiction over the state
law claims. The Court concluded that Plaintiff was “not an
„employee‟ under Title VII.” Mariotti v. Mariotti Bldg.
Prods., Inc., No. 3:11-CV-737, 2011 WL 2670570, at *4
(M.D. Pa. July 8, 2011). Alternatively, the Court determined
that “[e]ven if [Plaintiff] was an employee under Title VII, he
has failed to state a hostile work environment claim.” Id. A
timely notice of appeal followed.2
II.
Under Rule 12(b)(6), a motion to dismiss may be
granted only if, accepting all well-pleaded allegations in the
complaint as true and viewing them in the light most
favorable to the plaintiff, a court concludes that “the
allegations in a complaint, however true, could not raise a
claim of entitlement to relief[.]” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 558 (2007). We exercise plenary review over
an order granting a Rule 12(b)(6) motion. W. Penn Allegheny
Health Sys., Inc. v. UPMC, 627 F.3d 85, 97 (3d Cir. 2010).
Whether the District Court applied the correct legal standard
in deciding that Plaintiff was not an employee for purposes of
Title VII presents a legal question. Accordingly, we exercise
2
The District Court exercised jurisdiction under 28 U.S.C.
§§ 1331, 1367. We have appellate jurisdiction under 28
U.S.C. § 1291.
6
plenary review. Lanning v. Se. Pa. Transp. Auth., 181 F.3d
478, 484-85 (3d Cir. 1999).
III.
In Clackamas, the Supreme Court considered whether
the shareholder-directors of a professional corporation should
be counted as employees in determining whether the business
entity met the threshold number of employees, and thereby
qualified as an employer under the ADA. 538 U.S. at 442.
Noting that the ADA purported to define the term
“employee,” the Court began its analysis by declaring that the
statute “simply states that an „employee‟ is „an individual
employed by an employer.‟” Id. at 444 (quoting 42 U.S.C.
§ 12111(4)). This definition, in the Court‟s view, “surely
qualifies as a mere „nominal definition‟ that is „completely
circular and explains nothing.‟”3 Id. (quoting Nationwide
Mut. Ins. Co. v. Darden, 503 U.S. 318, 323 (1992)).
Consistent with precedent, the Supreme Court looked to the
“„conventional master-servant relationship as understood by
common-law agency doctrine‟” in deciding what Congress
intended the term “employee” to mean. Id. at 445 (quoting
Darden, 503 U.S. at 322-23).
The Court observed that “the common law‟s definition
of the master-servant relationship,” focusing as it does on the
“master‟s control over the servant,” provided “helpful
guidance.” Id. at 448. It concluded that “the common-law
element of control is the principal guidepost that should be
followed” in deciding whether an individual is an employee.
3
We would go so far as to characterize it as tautological.
7
Id. After considering the guidelines of the Equal
Employment Opportunity Commission (EEOC) applicable to
determining whether “partners, officers, members of boards
of directors, and major shareholders qualify as employees[,]”
id., the Court declared that six factors in the EEOC guidelines
were “relevant to the inquiry whether a shareholder-director
is an employee,” id. at 449. The six EEOC factors identified
by the Court were:
[1.] Whether the organization can hire or fire
the individual or set the rules and regulations of
the individual‟s work
[2.] Whether and, if so, to what extent the
organization supervises the individual‟s work
[3.] Whether the individual reports to
someone higher in the organization
[4.] Whether and, if so, to what extent the
individual is able to influence the organization
[5.] Whether the parties intended that the
individual be an employee, as expressed in
written agreements or contracts
[6.] Whether the individual shares in the
profits, losses, and liabilities of the
organization.
8
Id. at 449-50 (quoting EEOC Compl. Man. § 605:0009
(2000)).
The Supreme Court instructed that “[a]s the EEOC‟s
standard reflects, an employer is the person, or group of
persons, who owns and manages the enterprise.” Id. at 450.
The Court cautioned against using an individual‟s title as the
determinative factor and noted that the mere existence of an
employment agreement is likewise not dispositive. Id.
Rather, “the answer to whether a shareholder-director is an
employee depends on all the incidents of the relationship . . .
with no one factor being decisive.” Id. at 451 (internal
quotation marks and citations omitted).
Plaintiff contends that Clackamas should not be
applied in this case. He is correct that there are several
differences between Clackamas and this case. None of those
differences, however, provides a sound basis for disregarding
the Supreme Court‟s guidance in Clackamas.
First, Plaintiff argues Clackamas concerned the ADA,
not Title VII. This distinction is without significance. The
Supreme Court granted certiorari in Clackamas to address the
conflict among the courts in determining whether an
individual qualifies as an employee under the ADA, as well
as under other antidiscrimination statutes, including Title VII
and the Age Discrimination in Employment Act (ADEA).
538 U.S. at 444 n.3. Because Title VII‟s definition of
employee is the same as the ADA‟s definition, see 42 U.S.C.
§§ 2000e(f), 12111(4), and because the EEOC‟s guidelines,
on which the Clackamas Court relied, apply to coverage
under Title VII, the ADEA, the ADA, and the Equal Pay Act,
9
see Clackamas, 538 U.S. at 449 n.7, we conclude that the
analysis set out in Clackamas applies to Title VII as well. See
De Jesus v. LTT Card Servs., Inc., 474 F.3d 16, 24 (1st Cir.
2007).
Second, we recognize that Clackamas concerned
whether an individual was an employee for purposes of
determining if the employee threshold had been met, thereby
subjecting the business entity to the ADA‟s prohibitions
against discrimination. 538 U.S. at 442. As Plaintiff
correctly notes, there is no dispute in this case that MBP,
which has more than 15 employees, qualifies as an employer
covered by Title VII. Nonetheless, Clackamas remains
applicable here because neither the ADA nor Title VII define
the term “employee” solely for purposes of deciding which
business entities may be subject to the proscriptions against
employment discrimination.4 Rather, the definitions in the
ADA and Title VII also apply to the statutory provisions
establishing enforcement mechanisms that may be exercised
by the EEOC or the aggrieved employee. 42 U.S.C.
§§ 2000e-5, 12117. Thus, the definitions of “employer” and
“employee” set forth in both the ADA and Title VII are
relevant in resolving (1) whether an entity qualifies as an
“employer” under Title VII, and (2) whether an individual is
4
See 42 U.S.C. § 2000e (providing that the definitions are for
the purposes of “this subchapter,” which is Subchapter VI,
regarding equal employment opportunities); see also 42
U.S.C. § 12111 (specifying that its definitions are for
purposes of Subchapter I of the ADA pertaining to
employment).
10
an “employee” who “may invoke [Title VII‟s] . . . protections
against discrimination[.]” Clackamas, 538 U.S. at 446 n.6.
As a consequence, even though Clackamas considered the
question of whether certain individuals were employees of a
covered entity, its test informs our determination as to
whether Plaintiff is entitled to invoke Title VII‟s protections.
Third, we consider Plaintiff‟s contention that the
Clackamas test applies only to professional corporations.
Because MBP is not a professional corporation, Plaintiff
asserts that the District Court erred by applying the
Clackamas test.
We are not persuaded. As the First Circuit noted in De
Jesus, the EEOC Compliance Manual, on which the
Clackamas Court relied, did “not restrict itself to professional
corporations; indeed, it explicitly covers major shareholders.”
474 F.3d at 24. For that reason, the First Circuit concluded
that Clackamas “applies to close corporations as well as to
professional corporations.” Id. Similarly, in Smith v.
Castaways Family Diner, 453 F.3d 971 (7th Cir. 2006), the
Seventh Circuit reiterated “that the Clackamas test is not
confined to shareholder-directors” of a professional
corporation, but “may be applied” to other business entities as
envisioned by the EEOC manual that the Court embraced. Id.at 977 (citing Solon v. Kaplan, 398 F.3d 629, 633 (7th Cir.
2005)). The Court proceeded to apply Clackamas in deciding
whether the sole proprietor‟s mother and husband, both of
whom managed the business, qualified as employees, thereby
subjecting the diner to Title VII coverage.
11
We agree with our sister Courts of Appeals that
Clackamas‟s application is not limited to professional
corporations. The EEOC Manual on which the Court relied
in Clackamas considered multiple business enterprises. 538
U.S at 449. Furthermore, the Supreme Court‟s analysis
pointed out that the form of the business entity was not the
key element, emphasizing that the determination of one‟s
status cannot be decided simply on the basis of titles, such as
an individual‟s status as a partner, director, or officer, or the
existence of documentary evidence. Id. at 449-450. “Rather,
. . . the answer to whether [an individual] is an employee
depends on all of the incidents of the relationship with no one
factor being decisive.” Id. at 451 (internal quotation marks,
ellipsis and citations omitted). We therefore conclude that the
nature of the business entity is simply an attribute of the
employment relationship that must be considered in applying
the Clackamas test to determine whether an individual is an
employee or an employer. For that reason, MBP‟s status as a
closely held family business informs our analysis.
Consistent with Clackamas, our analysis focuses on
the element of control and the six factors discussed in that
precedent. 538 U.S. at 448-50. As the Seventh Circuit
explained in Castaways Family Diner, the six factors address
not only the extent of an individual‟s control, but also “the
source of an individual‟s authority” to control. 453 F.3d at
983. Castaways Family Diner recognized that in Clackamas
the Supreme Court did not mention the source of an
individual‟s authority as a factor in the analysis. Id. at 984.
Nonetheless, the Seventh Circuit believed that the Supreme
Court “hinted” as much “in at least one of the test‟s six
factors,” i.e. the factor regarding “„[w]hether the organization
12
can hire or fire the individual or set the rules and regulations
of the individual‟s work.‟” Id. (quoting Clackamas, 538 U.S.
at 449 (emphasis added)). It further noted that the
significance of the source of an individual‟s
authority is implicit in the framing of the test as
one for partners, major shareholders, directors,
and the like. . . . [as] those are the types of
individuals whose status within an enterprise
potentially gives them authority that is not
dependent on the acquiescence of others.
Clackamas itself speaks not only of the control
that an employer exercises but his right to exert
such control.
Id. at 984-85 (citing Clackamas, 538 U.S. at 448). We agree
with the Seventh Circuit. As additional support for our view,
we note that the fourth factor set forth in Clackamas, which
scrutinizes the individual‟s ability to “influence the
organization,” implicitly examines the source of the
individual‟s authority. Clackamas, 538 U.S. at 450.
Accordingly, we adopt the approach of the Seventh
Circuit in Castaways Family Diner. In determining whether
Plaintiff‟s amended complaint states a claim for relief under
Title VII, we “must take into account not only the authority
[he] wields within the enterprise but also the source of that
authority.” Castaways Family Diner, 453 F.3d at 984.
Specifically, we must consider whether Plaintiff “exercises
the authority by right, or whether he exercises it by delegation
at the pleasure of others who ultimately do possess the right
to control the enterprise.” Id.13
Our review of the allegations of Plaintiff‟s amended
complaint confirms that Plaintiff‟s status as a shareholder, a
director, and a corporate officer gave him both substantial
authority at MBP and the right to control the enterprise. He
was entitled to participate in the management, development,
and governance of MBP. By sitting on the board of directors
and serving as a corporate officer, Plaintiff had the ability to
participate in the fundamental decisions of the business. We
cannot ignore Plaintiff‟s allegation, which we must accept as
true, that after his termination in January of 2009, he
continued to serve as a director of the closely held family
corporation until August 6, 2009. Furthermore, the
termination letter he received did not mention the cessation of
any salary. Instead, it stated that “[y]our shares of any draws
from the corporation or other entities will continue to be
distributed to you.” We conclude that Plaintiff‟s amended
complaint fails to allege that he is “the kind of person that the
common law would consider” an employee. Clackamas, 538
U.S. at 445 n.5. He has not alleged a claim that entitles him
to relief.5
5
The Clackamas test is a fact intensive one; therefore, cases
requiring application of the test may generally require
resolution at the summary judgment stage, rather than at the
motion to dismiss stage. See Decotiis v. Whittemore, 635
F.3d 22, 35 n.15 (1st Cir. 2011) (noting in other context that
courts hesitate to dispose of fact-intensive inquiry at motion
to dismiss stage); Todd v. Exxon Corp., 275 F.3d 191, 199-
200 (2d Cir. 2001) (same). Similarly, we note that most of
the decisions of our sister Courts of Appeals, in applying the
Clackamas factors, dealt with motions for summary
14
We recognize that Plaintiff‟s amended complaint
alleges that he did not have exclusive control of MBP.
Exclusive control, however, is merely one attribute of the
employment relationship. Its absence does not compel a
conclusion that an individual who lacks it is an employee
entitled to invoke Title VII‟s protections. Such a conclusion
would ignore that the EEOC guidelines, which the Court
embraced in Clackamas, pertained to business entities that do
not vest exclusive control in any one individual. Id. at 448
(noting the guidelines applied to “partners, officers, members
of boards of directors, and major shareholders” (emphasis
added))
The allegations in the amended complaint make plain
that Plaintiff was entitled to participate in the development
judgment, rather than motions to dismiss. E.g., Fichman v.
Media Ctr., 512 F.3d 1157, 1158 (9th Cir. 2008); De Jesus v.
LTT Card Servs., Inc., 474 F.3d 16, 18 (1st Cir. 2007); Smith
v. Castaways Family Diner, 453 F.3d 971, 972 (7th Cir.
2006); Solon v. Kaplan, 398 F.3d 629, 630 (7th Cir. 2005).
Clackamas itself was an appeal from a grant of summary
judgment. 538 U.S. at 442.
The fact that we are affirming the District Court‟s
dismissal of the complaint based on application of the
Clackamas test does not alter the fact-intensive nature of the
analysis nor does it indicate that the motion to dismiss stage
will usually be the appropriate juncture for application of the
test. Rather, on the clear facts and circumstances of this
specific case, we find that the District Court‟s determination
was the proper one.
15
and governance of the business His averment that he
continued to serve after his termination on January 9, 2009 as
a member of the board of directors confirms that he remained
entitled by virtue of his position “to a say in the fundamental
decisions” of the closely held family corporation for months
after his termination. Castaways Family Diner, 453 F.3d at
983. For that reason, we conclude that the District Court did
not err in its determination that the allegations in Plaintiff‟s
complaint did not establish that he was an employee under
Title VII. He is not entitled, therefore, to invoke its
protections.
We will affirm the judgment of the District Court.6
6
Because we conclude that Plaintiff is not entitled to invoke
the protections of Title VII, there is no need to consider
whether his amended complaint sufficiently alleged a hostile
environment claim.
16