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DENTY v. SMITHKLINE BEECHAM CORP.

November 6, 1995

GARLAND DENTY, Plaintiff
v.
SMITHKLINE BEECHAM CORP., Defendant



The opinion of the court was delivered by: POLLAK

 Pollak, J.

 November 6, 1995

 Plaintiff Garland Denty alleges that defendant SmithKline Beecham Corporation (SBC) denied him promotions due to his age, in violation of the Age Discrimination in Employment Act (ADEA), 29 U.S.C. §§ 621-634, and the Pennsylvania Human Relations Act (PHRA), 43 Pa. C.S.A. §§ 951-963. Plaintiff also alleges that the defendant violated the ADEA and the PHRA by "creating intolerable working conditions for Plaintiff because of his age and because he filed a complaint of discrimination." Complaint, P 33. SBC has moved for summary judgment on the failure-to-promote claims. Defendant's primary contention is that the extraterritorial application of the ADEA and the PHRA do not reach this case because the positions plaintiff sought were located outside the United States for an English company.

 I. Factual Background

 In 1984, Garland Denty was hired by Smith Kline French, a Pennsylvania corporation, as Director of Quality Assurance, a job he held until January 1989, when he was given the title Director of Manufacturing Operations/Technical Services, International. Denty performed these jobs at SmithKline's offices in Philadelphia. In April 1989, SmithKline merged with the Beecham Group plc., a British corporation. The resulting company was called SmithKline Beecham plc (SB plc). According to its 1994 annual report, filed with the SEC, SB plc is organized under the laws of England, and its headquarters are located in Brentford, Middlesex, England. Plaintiff's Ex. 21, at 1. The defendant, SBC, is the American branch of SB plc. It is a wholly-owned subsidiary of SB plc.

 A great deal of reorganization followed the merger, including the creation of certain new positions. According to plaintiff, in 1990, he was told that he would be promoted to Vice-President of Technical Services/Plant Operations. Later that year, however, plaintiff allegedly was informed that he would not be promoted to this position because of his age. At the time, plaintiff was 52 years old. Plaintiff claims that in 1992 he applied for four other positions at the vice-president level -- the exact job titles do not appear in plaintiff's complaint -- and that he was denied these positions on the basis of age. Plaintiff alleges that all these positions were filled by men younger than himself.

 The promotion decisions at issue in this case were made by SB plc executives in England, while Denty worked for SBC in Philadelphia. It is undisputed that all the positions Denty sought were based outside the United States. *fn1"

 II. Whether SBC Is the Proper Defendant

 Defendant argues that Denty has sued the wrong party. SBC has produced uncontradicted evidence that all the positions Denty sought were with SB plc, the English corporation which is the parent company of the defendant, SBC. Denty argues, however, that SBC has waived this argument by failing to plead it as an affirmative defense. Denty further argues that SBC is estopped from making this argument because, in its answer, SBC in effect admitted that it was the proper defendant. Denty has indicated that if SBC has not waived this argument, or if SBC is not estopped from making it, Denty would seek leave to amend his complaint to add SB plc as a defendant.

 Denty's waiver argument is based on his assertion that "the defense that plaintiff has sued the wrong party is an affirmative defense" that is waived if not pled in the answer. Plaintiff's Mem. at 26. Denty bases his estoppel argument primarily on a series of statements in defendant's answer, which acknowledge that following the merger of SmithKline Beckman and the Beechain Group, a reorganization occurred. In the answer, defendant stated that "SmithKline" -- defined earlier in the answer as SBC -- was responsible for the reorganization. According to Denty, the reorganization included filling the positions Denty sought and which he allegedly was denied because of his age. Thus, Denty argues, SBC has admitted that it -- not SB plc -- is the entity that made the allegedly discriminatory decisions. Moreover, Denty further asserts that throughout this litigation, which included proceedings before the Pennsylvania Human Relations Commission, the defendant never distinguished between SBC and SB plc, but instead responded to Denty's allegations as if it were the correct party. Having affirmatively "admitted" that it is the correct party, and having failed to distinguish itself from SB plc, Denty argues, the defendant cannot now assert that SB plc is the proper defendant.

  The defenses of estoppel and waiver generally are granted only when prejudice can be shown. Thus, although the defense of failure to sue the proper party is indeed considered to be an affirmative defense which must be pled in the defendant's answer, see Bokunewicz v. Purolator Products, Inc., 907 F.2d 1396, 1402 (3d Cir. 1990), the defense is not waived unless prejudice to the plaintiff can be shown. In Bokunewicz, the Third Circuit stated that "failure to [plead the argument that the defendant was the wrong party] is a waiver of the defense unless leave of court is granted to amend under Fed. R. Civ. P. 15." Id. (quoting and adopting district court opinion) (emphasis added). Under Rule 15, "leave shall be given when justice so requires." Fed. R. Civ. P. 15(a). According to the 1937 Advisory Committee Notes, leave to amend can be granted "when the adverse party has not been misled and prejudiced." See also Wright Miller, Federal Practice Procedure § 1278 ("The substance of many unpleaded affirmative defenses may be asserted by pretrial motions, particularly in the absence of prejudice.") Prejudice similarly is an essential element of estoppel. See Walter v. Netherlands Mead N.V., 514 F.2d 1130, 1140-41 (3d Cir. 1975).

 Plaintiff has shown no evidence that he was prejudiced by defendant's alleged failure to alert him to its argument that SBC is not the proper defendant in this case. The only prejudice plaintiff has asserted would arise if the court allows defendant to argue that SB plc is the proper defendant without giving plaintiff the opportunity to add SB plc as a defendant. See Plaintiff's Mem. at 29. This I do not propose to do. Rather, plaintiff should be given leave to add SB plc as a defendant. Because I conclude below, however, that the ADEA does not apply to the plaintiff's failure-to-promote claim, the formality of an amended complaint will be unnecessary.

 III. The Extraterritorial Application of the ADEA

 The ADEA makes it "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 individual's age." 29 U.S.C. § 623(a). Until 1984, it appeared that the ADEA had no extraterritorial reach. All seven of the federal courts of appeals that examined the ADEA as it stood in 1984 have concluded that it did not protect American citizens working abroad for a foreign subsidiary of an American corporation. See Lopez v. Pan Am World Services, Inc., 813 F.2d 1118 (11th Cir. 1987); S.F. De Yoreo v. Bell Helicopter Textron, Inc., 785 F.2d 1282 (5th Cir. 1986); Ralis v. RFE/RL, Inc., 248 U.S. App. D.C. 208, 770 F.2d 1121 (D.C. Cir. 1985); Pfeiffer v. Wm. Wrigley Junior Co., 755 F.2d 554 (7th Cir. 1985); Zahourek v. Arthur Young Co., 750 F.2d 827 (10th Cir. 1984); Thomas v. Brown & Root, Inc., 745 F.2d 279 (4th Cir. 1984); Cleary v. U.S. Lines, Inc., 728 F.2d 607 (3d Cir. 1984). These courts applied the well-established presumption against extraterritorial application of federal law. See EEOC v. Arabian American Oil Co., 499 U.S. 244, 248, 113 L. Ed. 2d 274, 111 S. Ct. 1227 (1991) ("It is a longstanding principle of American law that 'legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.'") (quoting Foley Brothers, Inc. v. Filardo, 336 U.S. 281, 285, 93 L. Ed. 680, 69 S. Ct. 575 (1949)). This presumption reflects the principle of international comity, under which the United States should avoid interference with the laws of another sovereign over conduct occurring within its territory. Before 1984, no extraterritorial application of the ADEA would be read into the statute because it did not explicitly provide that it applied to any conduct outside the boundaries of the United States.

 In 1984, Congress amended the ADEA to give it a limited extraterritorial reach. As the Supreme Court stated, "The expressed purpose of these changes was 'to make provisions of the Act apply to citizens of the United States employed in foreign countries by U.S. corporations or their subsidiaries.'" Arabian, supra, at 259 (quoting S.Rep. No. 467, 98th Cong., 2, reprinted in 1984 U.S.C.C.A.N. 2974, 2975)). This purpose was effected through changes to two provisions. First, Congress amended the definition of "employee" to provide: "The term 'employee' includes any individual who is a citizen of the United States employed by an employer in a workplace in a foreign country." 29 U.S.C. § 630(f). ...


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