find he meets the hybrid standard for an employee under the ADEA. On its face, BFEM is a corporation rather than a partnership. This fundamental structural difference would seem to undermine the assertion that Jones enjoys the rights and perogatives of partnership. Unlike a partner, Jones received no profits (or dividends) from BFEM, only a salary and expenses as set forth in his employment contract. Plaintiff's March 11, 1987 Brief In Opposition, pp. 11-12. Each shareholder of BFEM was paid as an employee, each shareholder received W-2 forms and BFEM withheld federal, state and local taxes and FICA contributions from the shareholders, pay. Id. at 13. The professional corporation provided its attorneys with a place to work, furniture, equipment and the necessary secretarial and support staff. Id. Whereas a partnership is typically governed by the collective decisions of all the partners, BFEM was run by a Board of Directors, which never included Jones. Id. at 10-11. In addition, the day to day affairs of BFEM's Pittsburgh office was managed by a local executive or operating committee composed of certain corporate directors, officers and department heads. Id. at 11. Jones was not a member of this committee, nor was he an officer or department head. Id. All these facts indicate that BFEM was in control of Jones, work, that the economic reality was that of an employment situation, and that this was the intention of the parties.
That Jones was a shareholder does not itself mean that he is not an employee under the ADEA. Courts have applied the ADEA, FLSA and Title VII statutes to employees who were also major stockholders, directors or officers of corporations. Hyland, 794 F.2d 793, 796 (2nd Cir. 1986) (officer and director of radiology associates organized as a professional corporation was an "employee" under ADEA); see also Zimmerman v. North American Signal Co., 704 F.2d 347, 353 (7th Cir. 1983) (vice-president and one-third shareholder considered ADEA "employee"); E.E.O.C. v. First Catholic Slovak Ladies Association, 694 F.2d 1068, 1070 (6th Cir.) (officer-directors are "employees" under ADEA), cert. denied, 464 U.S. 819, 104 S. Ct. 80, 78 L. Ed. 2d 90 (1983); Novotny v. Great American Federal Savings & Loan Association, 584 F.2d 1235, 1261 (3rd Cir.) (secretary and treasurer is "employee" under Title VII), vacated on other grounds, 442 U.S. 366, 99 S. Ct. 2345, 60 L. Ed. 2d 957 (1979); Hoy v. Progress Pattern Co., 217 F.2d 701, 704 (6th Cir. 1954) (one-eighth shareholder, vice-president, director and chairman of board may be employee within purview of FSLA). The United States Supreme Court has held that "there is nothing inherently inconsistent between the coexistence of a proprietary and an employment relationship." Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28, 32, 81 S. Ct. 933, 936, 6 L. Ed. 2d 100, 102 (1961) (shareholders in knitwear cooperative were employees under FSLA). Thus, the fact that Jones was a shareholder of BFEM, particularly one who owned less than one percent of outstanding shares, does not disqualify him from being protected as an "employee" under the ADEA.
The facts indicate that Jones had little control over the management of BFEM and that BFEM had considerable control over Jones, work. The "economic reality" of Jones, employment situation was far different from that of a properly classified partner. We therefore find that Jones meets the Third Circuit's hybrid standard for an employee under the ADEA, and deny the defendants, motion for dismissal of the ADEA claims.
B. Young's Motion To Dismiss ADEA Claim
Defendant Nelson P. Young has also moved for dismissal of the ADEA claim against him in Count II. Jones replies that his complaint "is not charging Defendant Young with age discrimination, but . . . with being a member of an unlawful conspiracy." Plaintiff's March 11, 1987 Brief In Opposition, pp. 18-19. While Jones, second count, subtitled "Conspiracy and ADEA," reads ambiguously on this point, this Court will take him at his word and read his complaint to allege only conspiracy, and not ADEA, claims against Young and the other individual defendants. Because there is no ADEA claim standing against Young, but instead one for conspiracy to violate ADEA, there is no ADEA claim against Young to dismiss.
III. ERISA and Other Profit-Sharing and Trust Fund Claims
Count V of Jones, complaint alleges a number of improprieties by BFEM and Baskin, one of the individual defendants, with regard to the law firm profit-sharing and trust fund. These defendants have moved that the action be dismissed or stayed pending arbitration. We have read no legal argumention on these claims from the defendants, however, and therefore find no reason to dismiss. Furthermore, since the claims in Count V do not seem to concern "the interpretation or application of" the employment or shareholder agreements, or "any matter relating to a party's withdrawal, termination or expulsion" within the scope of either of the arbitration clauses, these claims are not subject to arbitration. Count V therefore remains.
IV. Dismissal of Claims in Count VI
The defendants have moved to dismiss the claims in Count VI. This count seeks relief for five different alleged harms to the plaintiff: (1) potential tax liability for inaccuracies in Jones, personal tax returns due to alleged tax fraud by BFEM and its predecessors; (2) compensation for undeclared and undistributed partnership profits by predecessors to BFEM; (3) compensation for alleged unauthorized charges against Jones, partnership capital account by BFEM predecessors; (4) potential liability under a guaranty and security agreement executed in 1984; and (5) failure of BFEM to pay Jones his proportionate share of fees earned while he was with the firm, but not received until after his discharge.
The first and fourth of the alleged harms listed above refer to potential, but as yet unrealized, injuries. As noted above in our ruling on the civil RICO claims, hypothetical tax prosecution or possible liability under a bank note does not present a ripe dispute for this court. See generally Thomas v. Union Carbide Agric. Products Co., 473 U.S. 568, 580-581, 105 S. Ct. 3325, 87 L. Ed. 2d 409, 419-420 (1985); 13A C. Wright, A. Miller & J. E. Cooper, Federal Practice and Procedure § 3532 (Supp. 1987). These two claims are therefore dismissed, without prejudice.
The second and third injuries listed above concern undeclared and undistributed partnership profits by BFEM predecessor partnerships and alleged unauthorized charges against Jones, partnership capital account by BFEM predecessor partnerships. Neither of these claims are derived from "a common nucleus of operative fact" surrounding either the ADEA or ERISA claims, the two federal claims for which there is jurisdiction in this case. See United Mine Workers of America v. Gibbs, 383 U.S. 715, 725, 86 S. Ct. 1130, 1138, 16 L. Ed. 2d 218 (1966). Their only relation to these federal questions seems to be that they involve Jones and BFEM; therefore they are not claims such that one "would ordinarily be expected to try them all in one judicial proceeding." Id. This court is thus without judicial power to exercise pendant jurisdiction over these non-federal claims. We therefore grant the defendants, motion to dismiss the claims in Count VI relating to unreported and undistributed partnership profits and to the unauthorized charges against Jones, capital account, without prejudice.
The fifth injury alleged in Count VI involves legal fees earned but not yet received by BFEM when Jones was discharged. Because this claim alleges actual pecuniary injury and is derived from the facts surrounding Jones, discharge, we deny the motion to dismiss this claim.
V. Arbitrable Claims
The defendants have moved to stay this action pending arbitration. Both the employment and shareholder agreements between Jones and BFEM contain arbitration clauses requiring arbitration of:
Any dispute between the parties on the interpretation or application of this Agreement, or on any matter relating a party's withdrawal, termination or expulsion for any reason whatsoever, in any respect whatsoever . . . .
The Federal Arbitration Act requires federal courts to enforce contractual agreements to arbitrate disputes. 9 U.S.C. § 1 et seq. In determining which of Jones, claims should be stayed pending arbitration in accordance with the Federal Arbitration Act, we must first determine which claims fall within the scope of the two arbitration clauses. We must also consider which types of claims are exempted from the mandates of the Federal Arbitration Act.
Count I alleges that BFEM discriminated on the basis of age, in violation of the ADEA, when it discharged Jones. Count II alleges a conspiracy to violate the ADEA by BFEM and the former and present BFEM attorney defendants. These allegations obviously fall within the category of disputes subject to arbitration under the employment agreement. However, the United States Supreme Court has ruled that "an employee may not prospectively waive any statutory claim he may have with respect to discrimination claims." Alexander v. Gardner-Denver, 415 U.S. 36, 39, 39 L. Ed. 2d 147, 94 S. Ct. 1011 (1974) (Title VII case); see U.S.E.E.O.C. v. County of Calumet, 686 F.2d 1249, 1256 (7th Cir. 1982) ("The decision in Alexander extends to the ADEA."); Horne v. New England Patriots Football Club, 489 F. Supp. 465, 470-471 (D.Mass. 1980) (employee need not arbitrate ADEA claim). The motion to stay the ADEA and conspiracy to violate ADEA claims pending arbitration is therefore denied.
The claims against BFEM in Count III and against BFEM, the BFEM attorneys and Young in Count IV all pertain to breaches of the employment and shareholder agreements, and are plainly within the ambit of the arbitration clauses. The motions to stay the claims in Count III and IV pending arbitration are therefore granted.
Count V contains allegations of improprieties with regard to the profit-sharing plan and trust fund. While the court has not been given a complete copy of either the employment or shareholder agreements, there is no reason to suspect that these are disputes over the interpretation or application of the agreements, or Jones, termination. The motion to stay the claims in Count V pending arbitration is denied.
All but one of the claims in Count VI were dismissed earlier in this order. The one remaining claim in Count VI concerned Jones, proportionate share of legal fees earned while Jones worked for BFEM, but not received by the firm until after his discharge. This is a dispute concerning an interpretation of the employment and/or shareholder agreements, and relates to Jones, discharge as well, and is arbitrable. The surviving claim in Count VI, regarding Jones, share of legal fees earned prior to his discharge, is stayed pending arbitration.
Since this Court has concluded that all claims involving SAI must be dismissed, it follows that it should be removed as a party defendant in this case.
AND NOW, this 24th Day of September, 1987, for the reasons set forth in the accompanying Memorandum Opinion,
IT IS HEREBY ORDERED that:
(1) All claims plead based on alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) are DISMISSED as to all defendants;
(2) Defendants, Motion to Dismiss claims in Count I based on alleged violations of the Age Discrimination in Employment Act (ADEA) are DENIED;
(3) Defendants, Motions to Dismiss ADEA claims in Count II are DENIED since ADEA claims were not plead in Count II;
(4) Defendants, Motions to Dismiss as to Counts III, IV and V are DENIED;
(5) Defendants, Motions to Dismiss as to Count VI are GRANTED and said claims are DISMISSED, except as to the claim in Count VI for compensation for legal fees earned before but paid after Plaintiff's discharge, for which Defendants, Motions to Dismiss are DENIED;
(6) Defendants, Motions to Stay as to Counts I, II and V are DENIED;
(7) Defendants' Motions to Stay as to Counts III, IV and the surviving claim in Count VI for compensation for legal fees earned before but paid after Plaintiff's discharge are GRANTED and all proceedings in this case as to said Counts are STAYED pending arbitration of the matters plead in said Counts;
(8) Those portions of the complaint pertaining to Defendant SAI are dismissed and it shall no longer remain as a party defendant.
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