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BERKOWITZ v. ALLIED STORES OF PENN-OHIO

June 16, 1982

Howard BERKOWITZ
v.
ALLIED STORES OF PENN-OHIO, INC. t/a Pomeroy's and Allied Stores Corporation



The opinion of the court was delivered by: BRODERICK

MEMORANDUM

This is an age discrimination action in which the plaintiff, Howard Berkowitz ("Berkowitz") contends that the defendants, his former employers, discharged him because of his age in violation of the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 621 et seq. Trial was held before this Court, sitting without a jury on May 11, 12, 13, 14 and 17, 1982. For the reasons hereinafter set forth, the Court finds that the age of Mr. Berkowitz was not a determinative factor in the decision of the defendants to discharge him.

 The ADEA defines an "employer" as "(a) person engaged in industry affecting commerce who has twenty or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year.... The term also means (1) any agent of such a person...." 29 U.S.C. § 630(b) (1974). The evidence presented at trial and contained in the record indicates that Allied Stores is a substantial business enterprise, the parent company of several subsidiaries who operate many retail stores in many states throughout the nation. Allied Stores has employed more than twenty persons throughout the 1970s to the present time. However, Allied contends that it was not plaintiff's employer but that Mr. Berkowitz was employed only by Allied Stores of Penn-Ohio, Inc. t/a Pomeroy's ("Allied of Penn-Ohio"), the wholly owned subsidiary of Allied Stores which operates the Pomeroy's stores as well as other retail outlets. As heretofore noted, defendant further contends that Allied Stores lacks minimum contact with Pennsylvania and that this Court may therefore not exercise personal jurisdiction over Allied.

 The parties have stipulated that Pomeroy's employed Mr. Berkowitz at the time of his discharge in 1978. At that time, and throughout the 1970s, Allied Stores was the parent corporation of Allied of Penn-Ohio, a wholly-owned subsidiary corporation. Were Allied only a parent corporation that took no active role in the business decisions of its subsidiary, it would, as a corporate entity distinct from Allied of Penn-Ohio, not be considered an employer of the plaintiff. See Publicker Industries v. Roman Ceramics, 603 F.2d 1065, 1069 (3rd Cir. 1979); Zubik v. Zubik, 384 F.2d 267, 272 (3rd Cir. 1967), cert. denied, 390 U.S. 988, 88 S. Ct. 1183, 19 L. Ed. 2d 1291 (1968); Fanfan v. Berwind Corporation, 362 F. Supp. 793 (E.D.Pa.1973).

 Here, however, Allied Stores was more than a passive parent. Allied Stores, acting through its agents, was regularly and intimately involved with the business decisions of Allied of Penn-Ohio, especially decisions concerning managing personnel. Mr. Joseph Lesser, a vice-president of Allied Stores and a senior vice-president of Allied of Penn-Ohio visited Pennsylvania on an average of once per month to supervise the Pomeroy's operation and to hold business meetings with Pomeroy's executives. He was, pursuant to Allied Stores' policy, consulted by the managing director of Pomeroy's before any Pomeroy's executive was discharged. Mr. Lesser's approval was also required to appoint and to discharge the managing director of Pomeroy's. Mr. Lesser frequently consulted with Pomeroy's managing director by telephone concerning all major policy decisions.

 Defendant Allied Stores contends that Mr. Lesser's activities did not provide the minimum contacts necessary to confer personal jurisdiction over Allied Stores. Allied Stores contends that Mr. Lesser conducted his activities in his capacity as senior vice-president of Allied of Penn-Ohio, not in his capacity as vice-president of Allied Stores. However, Mr. Lesser testified that, at the time plaintiff was employed by Pomeroy's, and for some time thereafter, he had not been informed as to who was the chief executive officer of Allied of Penn-Ohio. Neither did he know the membership of the board of directors of Allied of Penn-Ohio, though Mr. Lesser was and is himself a member of that Board. Mr. Lesser further testified that he has never visited the corporate headquarters of Allied Penn-Ohio in Harrisburg, Pennsylvania, though he has frequently been to Harrisburg to supervise a member store of the Allied Penn-Ohio chain.

 The Court finds that Mr. Lesser's activities concerning the operation and personnel policies of Pomeroy's were conducted in his capacity as a vice-president of Allied Stores, not as an executive for Allied of Penn-Ohio. The record in this case indicates that Allied of Penn-Ohio existed only on the organization charts and ledgers of the two companies. In actuality, Allied Stores, the parent company, directly supervised and controlled the major decisions concerning the operation of the Pomeroy's stores.

 Under such circumstances, an active parent company supervising and controlling the operation of the stores of a wholly owned subsidiary must be considered an "employer" within the meaning of the ADEA, 29 U.S.C. § 630(b), according to any of the accepted tests for parent corporation responsibility. In determining whether a parent corporation should be considered amenable to suit, Courts have generally applied one of three tests: (1) the "integrated enterprise" test; (2) the "alter ego" test or the (3) "mere instrumentality" test.

 The integrated enterprise test, which has been specifically applied to ADEA cases, states that "the appropriate standard for determining whether nominally separate corporations are to be considered a single employer is whether they comprise an integrated enterprise." Marshall v. Arlene Knitwear, Inc., 454 F. Supp. 715 (E.D.N.Y.1978). Accord, Linskey v. Heidelberg Eastern, Inc., 470 F. Supp. 1181, 1184 (E.D.N.Y.1979); Woodford v. Kinney Shoe Corporation, 369 F. Supp. 911 (N.D.Ga.1973). The "integrated enterprise" test for determining whether a parent corporation is an employer was first developed in labor relations cases. See Radio & Television Broadcast Technicians Local Union 1264 v. Broadcast Service of Mobile, Inc., 380 U.S. 255, 85 S. Ct. 876, 13 L. Ed. 2d 789 (1965). It was later applied to cases involving Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e. See, e.g., Williams v. New Orleans Steamship Association, 341 F. Supp. 613, 615 (E.D.La.1972).

 A test of corporate identity applied in Title VII cases is equally appropriate to a suit brought pursuant to the ADEA. The U. S. Supreme Court has held that the ADEA and Title VII should be construed similarly in light of their common language and purpose. See Oscar Mayer and Co. v. Evans, 441 U.S. 750, 756, 99 S. Ct. 2066, 2071, 60 L. Ed. 2d 609 (1979). In applying the integrated enterprise test, the Court assesses the (1) interrelation of operations, (2) common management, (3) centralized control of labor relations, and (4) common ownership or financial control existing between the parent corporation and the subsidiary.

 Under the alter ego test, a court may disregard a parent corporation's separate existence when one corporation is merely the alter ego of another and where such disregard of the corporate form is necessary to "prevent fraud, illegality, or injustice, or when recognition of the corporate entity would defeat public policy or shield someone from liability for a crime." Publicker Industries v. Roman Ceramics, 603 F.2d 1065 (3rd Cir. 1979), quoting Zubik v. Zubik, 384 F.2d 267, 272 (3rd Cir. 1967).

 Under the mere instrumentality theory, a parent corporation may be held liable for the acts of a subsidiary if the subsidiary is a mere instrumentality of the parent. To satisfy this test, three elements must be present. The plaintiff must show that (1) the parent controls the subsidiary to such a degree that the subsidiary is a mere instrumentality; (2) the parent is perpetuating a fraud or wrong through its subsidiary (e.g., violation of a statute); and (3) an unjust loss or injury to the claimant will result if the parent is allowed to be shielded by its separate corporate existence. Fanfan v. Berwind Corporation, 362 F. Supp. 793, 795 (E.D.Pa.1973). See also Whayne v. Transportation Management Service, 252 F. Supp. 573 (1966) aff'd 397 F.2d 287 (3rd Cir. 1968), cert. den., 393 U.S. 978, 89 S. Ct. 445, 21 L. Ed. 2d 438.


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