-
USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
_________________________
No. 96-2251
MARGARITA SERAPION,
Plaintiff, Appellant,
v.
FRED H. MARTINEZ, ET AL.,
Defendants, Appellees.
_________________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Salvador E. Casellas, U.S. District Judge]
_________________________
Before
Selya, Circuit Judge,
Coffin and Cyr, Senior Circuit Judges.
_________________________
Judith Berkan, with whom Mary Jo Mendez and Rosalinda Pesquera
were on brief, for appellant.
Graciela J. Belaval, with whom Alvaro R. Calderon, Jr. and
Martinez, Odell & Calabria were on brief, for appellees.
_________________________
July 18, 1997
_________________________
SELYA, Circuit Judge . This appeal requires us to explore
a gray area in the emerging jurisprudence of Title VII, 42 U.S.C.
SS 2000e to 2000e-17 (1994). Having completed that task, we
conclude that while Title VII's employment-related shelter might in
certain circumstances extend to a person who is a partner in a law
firm, plaintiff-appellant Margarita Serapion, a partner in the now-
disbanded law firm of Martinez, Odell, Calabria & Sierra (the
Firm), is not entitled to such shelter here. Consequently, we
affirm the lower court's entry of summary judgment in the
defendants' favor.
In explaining our rationale, we take a slightly
unorthodox course. We begin with the facts, then shift to a
discussion of the statutory scheme, and then resume our historical
account by describing the course of the litigation. In succession,
we thereafter rehearse the summary judgment standard, limn the
doctrinal parameters of the requisite Title VII inquiry, address
the merits, iron out a procedural wrinkle, and at long last
conclude.
I. THE FACTUAL PREDICATE
Serapion earned a distinguished reputation as a certified
public accountant before deciding to switch careers. After
graduating from the University of Puerto Rico Law School with
honors in 1982, she joined the San Juan law firm of Colorado,
Martinez, Odell, Calabria & Sierra as an associate. She left in
1983 for a stint in government service but returned in 1985. In
the interim, Colorado had departed and the partnership had been
2
reconstituted. Approximately one year later, the appellant was
mitted a
non-proprietary" partner ad into the Firm as a "junior" partner (sometimes termed " ). While this status did not give her any
equity position, it did give her some profit distribution units
(PDUs) 1 and enabled her to participate in meetings of the Board of
Partners (a body which comprised all the partners, senior and
junior in the aggregate, roughly half the Firm's lawyers and
which had the ultimate responsibility for management and
policymaking).
In 1990, Serapion became what is variously described as
a "senior" or "proprietary" partner. Theretofore the Firm's four
name partners (all males) were the only other proprietary partners.
They enjoyed equality among themselves in respect to compensation,
PDUs, benefits, and equity, and they promised Serapion that she
would be elevated to an equal partnership in three years. In the
meantime, her status as a proprietary partner brought about several
changes in her working conditions: she received a 4% equity
interest in the Firm (ceded 1% by each name partner); she assumed
pro rata liability for the Firm's debts, losses, and other
obligations; and she became a voting member of the Executive
1Each partner received an allotment of PDUs, and the Firm's
profits were distributed periodically to the partners in proportion
to the number of PDUs which each partner held. These distributions
were over and above the recipients' base salaries. At all times
material hereto, the name partners held 100 PDUs apiece. The
junior partners held varying amounts, ranging from 20 to 45 PDUs
apiece.
3
Committee (a five-member group which was responsible for the Firm's
day-to-day management). When the appellant became a proprietary
partner, the Firm increased her allocation of PDUs to 75 units.
Concomitantly , she began reaping a correspondingly larger share of
the Firm's profits. Under the terms of the 1990 agreement, her
allotment of PDUs (and, therefore, her share of the profits) was to
continue to rise in increments until the end of 1992 when Serapion
would achieve full parity with the four name partners.
Despite these emoluments, Serapion was not on an equal
footing with the name partners. Each of them had a greater equity
interest (24% apiece) and a more munificent compensation package
(roughly one-third higher than hers in 1990, although the gap
gradually closed). The difference in compensation was largely, if
not entirely, a function of the disparate allocation of PDUs.
Still, although her allotment of PDUs was less than that of the
name partners, it was nonetheless significantly greater than that
of even the most well-endowed junior partner.
Serapion alleges that three of her partners (Fred H.
Martinez, Lawrence Odell, and Jose Luis Calabria) never intended
that a woman would achieve parity. These partners, she says,
connived to prevent her from reaping the fruits of her bargain,
eventually demanding that she sign an agreement which would have
significantly diminished her authority within the Firm. When
Serapion stood her ground, the trio caused the Firm to dissolve in
1992 (shortly before the expiration of the three-year phase-in
period) and simultaneously forged a new partnership called
4
"Martinez, Odell & Calabria." The nascent firm included the three
men, as well as most of the Firm's other lawyers. The founders did
not invite either Serapion or Sierra (the remaining proprietary
partner) to join.
II. THE STATUTORY SCHEME
We pause at this juncture to sketch the legal landscape.
Title VII is one of the brightest stars in the firmament of this
nation's antidiscrimination laws. Generally speaking, it bars
certain employment-related actions undertaken on the basis of
impermissible criteria (such as gender). See, e.g., Smith v. F.W.
Morse & Co., 76 F.3d 413, 420 (1st Cir. 1996). In relevant part,
Title VII provides:
It shall be an unlawful employment
practice for an employer
(1) to fail or refuse to hire or to
discharge any individual, or otherwise to
discriminate against any individual with
respect to his compensation, terms,
conditions, or privileges of employment,
because of such individual's race, color,
religion, sex, or national origin.
42 U.S.C. S 2000e-2(a)(1).
The Firm is plainly an employer for Title VII purposes.
After all, an employer is defined by statute as "a person engaged
in an industry affecting commerce," and the statute makes clear
that "a person" in this context can include a partnership. Id. at
S 2000e(a)-(b). The rub is whether Serapion is an employee.
Although the language we have quoted speaks of "any
individual," courts long ago concluded that Title VII is directed
at, and only protects, employees and potential employees. See,
5
e.g. , Vera-Lozano v. Inte rnational Broad., 50 F.3d 67, 69 (1st Cir.
1995); Broussard v. L. H. Bossier, Inc., 789 F.2d 1158, 1159 (5th
Cir. 1986); s ee generally Keyes v. Secretary of the Navy, 853 F.2d
1016, 1026 (1st Cir. 1988) (noting that "Title VII does not presume
to obliterate all manner of inequity"). We know, moreover, that a
single individual in a single occupational setting cannot be both
an employer and an employee for purposes of Title VII. See, e.g.,
Devine v. Stone, Leyton & Gershman, P.C., 100 F.3d 78, 80-81 (8th
Cir. 1996), cert. denied, 117 S. Ct. 1694 (1997); EEOC v. Dowd &
Dowd, Ltd., 736 F.2d 1177, 1178 (7th Cir. 1984); Johnson v. Cooper,
Deans & Cargill, 884 F. Supp. 43, 44 (D.N.H. 1994). Even so, the
parameters of the term "employee" have proven elusive. Title VII
defines an employee only as "an individual employed by an
employer," 42 U.S.C. S 2000e(f), a turn of phrase which chases its
own tail. See Broussard, 789 F.2d at 1160; see also Nationwide
Mut. Ins. Co. v. Darden, 503 U.S. 318, 323 (1992) (terming nearly
identical language in the ERISA statute, 29 U.S.C. S 1002(6),
"completely circular").
Given the unhelpful nature of the supplied definition, we
are compelled to look for assistance in other federal
antidiscrimination statutes that contain similar definitions of
"employee," such as the Age Discrimination in Employment Act
(ADEA), 29 U.S.C. SS 621-634 (1994), the Employee Retirement and
Income Security Act (ERISA), 29 U.S.C. SS 1001-1461 (1994), and the
Fair Labor Standards Act (FLSA), 29 U.S.C. SS 201-219 (1994). We
regard Title VII, ADEA, ERISA, and FLSA as standing in pari passu
6
and endorse the practice of treating judicial precedents
interpreting one such statute as instructive in decisions involving
another. See , e.g., Oscar Mayer & Co. v. Evans, 441 U.S. 750, 756
(1979); Lorillard v. Pons, 434 U.S. 575, 584 (1978); Wheeler v.
Hurdman, 825 F.2d 257, 263 (10th Cir. 1987); Hyland v. New Haven
Radiology Assocs., 794 F.2d 793, 796 (2d Cir. 1986).
Of course, we are not remitted solely to statutory
parallels. There is a developing jurisprudence under Title VII.
In it, we detect precedential value not only in cases which
actually involve partnerships, but also in decisions which have
determined the status of individuals by analogy to a partnership
paradigm (even though the individuals involved were principals of
entities other than partnerships). See, e.g., Devine, 100 F.3d at
80-81; Fountain v. Metcalf, Zima & Co., 925 F.2d 1398, 1399-1401
(11th Cir. 1991). We do not, however, hitch our wagon to cases
deciding whether a particular individual is an employee as opposed
to an independent contractor. That distinction is between those
who are part of an employer's business and those who are running
their own businesses, and the factors central to that inquiry are
inapposite here. See Wheeler, 825 F.2d at 271-72.
There are also a few cases which deal directly with
whether a partner in a professional practice should be regarded as
an employee for the purpose of Title VII (and, therefore, entitled
to its safeguards). The seminal case is Burke v. Friedman, 556
F.2d 867, 869-70 (7th Cir. 1977), in which the court held that
partners in an accounting firm were not employees vis-a-vis Title
7
VII. This interpretation received a modicum of support in Hishon
v. King & Spalding, 467 U.S. 69 (1984). Although the Hishon Court
answered a different question holding that Title VII precluded a
law firm from denying partnership consideration to an associate on
the basis of her gender, see id. at 76-78 Justice Powell
cautioned that the majority opinion did "not require that the
relationship among partners be characterized as an ``employment'
relationship to which Title VII would apply." Id. at 79 (Powell,
J., concurring). Since Hishon, several appellate courts have
followed Justice Powell's lead and declared, with varying nuances,
that partners are not protected as employees under federal
antidiscrimination laws. See Simpson v. Ernst & Young, 100 F.3d
436, 443 (6th Cir. 1996), cert. denied, 117 S. Ct. 1862 (1997);
Wheeler, 825 F.2d at 263; accord EEOC Decision No. 85-4, 2 Empl.
Prac. Guide (CCH) q 6846, at 7040-41 & n.4 (1985).
As we visualize it, the key inquiry is into the
attributes of the relationship between the partnership and those
whom it styles as partners. The method by which this inquiry is to
be conducted how a court determines whether an individual
labelled as a partner is to be treated as an employee for purposes
of Title VII is an unresolved issue which lies at the epicenter
of this appeal.
III. THE LITIGATION
When her three former partners folded the Firm and dashed
her expectations of proprietary parity, Serapion sued them and
their new firm (Martinez, Odell & Calabria) in Puerto Rico's
8
federal district court. She charged in her complaint that the
defendants had violated both Title VII and local law. After the
defendants' early attempt to obtain summary judgment misfired,2 the
parties engaged in pretrial discovery. Thereafter, the defendants
renewed their quest for brevis disposition. Their new motion
relied on alternative grounds. It averred that Serapion, as a
partner in the Firm, was not an employee (and, therefore, had no
recourse to Title VII). It also averred that Serapion had not
adduced any competent proof that gender-based discrimination caused
the Firm's disintegration (an event which the defendants attributed
to irreconcilable differences between two warring factions of
proprietary partners).
Judge Casellas granted the defendants' motion, holding
that Serapion was not an employee as that term had been developed
in federal jurisprudence and that she was thus ineligible for the
prophylaxis of Title VII. See Serapion v. Martinez, 942 F. Supp.
80, 84-85 (D.P.R. 1996). The court held alternatively that
Serapion had failed to make out a prima facie case of
discrimination under Title VII. See id. at 85-87. Finally, the
court refused to exercise supplemental jurisdiction over the
pendent claim and dismissed that claim without prejudice to its
pursuit in the courts of Puerto Rico. See id. at 88-89. This
appeal followed.
2When the defendants filed their initial motion for summary
judgment, Chief Judge Cerezo denied it. The case was subsequently
transferred to Judge Casellas' calendar as part of a redistribution
of cases ancillary to his assumption of judicial office.
9
IV. THE SUMMARY JUDGMENT STANDARD
While the origins of the summary judgment standard may
have been important in the distant past, modern federal practice
has reached a point at which the standard has achieved aphoristic
acceptance, rendering the attribution of specific authorship
superfluous. We thus present the standard without particularized
citation, referring readers interested in further exposition to the
long litany of decisions that have placed a gloss on the language
of Fed. R. Civ. P. 56(c). See McCarthy v. Northwest Airlines,
Inc. , 56 F.3d 313, 315 (1st Cir. 1995) (collecting cases); Coyne v.
Taber Partners I, 53 F.3d 454, 457 (1st Cir. 1995) (same).
Summary judgment is a means of determining whether a
trial is actually required. It is appropriately granted when the
record shows that no genuine issue of material fact exists and that
the moving party is entitled to judgment as a matter of law. Thus,
in order to defeat a properly crafted summary judgment motion, the
party opposing it must demonstrate that a trialworthy issue looms
as to a fact which could potentially affect the outcome of the
suit.
A trial or appellate court considering the merits of a
summary judgment initiative must peruse the record in the light
most favorable to the nonmovant. While this equation must take
into account all properly documented facts, the court may ignore
unsupported conclusions, rank speculation, and opprobrious
epithets. If the evidence, so viewed, reveals a genuine dispute
over a material fact that is, if a reasonable factfinder,
10
examining the evidence and drawing all reasonable inferences in the
required manner, could resolve a factual controversy which is
critical to the outcome of the case in favor of the nonmoving party
then summary judgment will not lie.
Where, as here, the district court enters summary
judgment, we review its ruling de novo.
V. THE DOCTRINAL PARAMETERS
Putting this appeal into proper perspective requires us
to articulate the doctrinal parameters which inform an inquiry into
a partner's status vis-a-vis Title VII. We divide our discussion
into two segments.
A.
Partnerships are mutable structures, and partners come in
varying shapes and sizes. Consequently, attempting to delineate
the circumstances in which a particular partner should be regarded
as an employee for Title VII purposes is tricky business. Although
one court has hinted at the desirability of a per se rule, saying
in effect that all members of professional services corporations
were employees for purposes of the antidiscrimination laws (there,
the ADEA), no matter how significant a role they played in managing
the affairs of the corporation, see Hyland, 794 F.2d at 797-98,3 we
reject the notion that labels can conclusively resolve status
inquiries. We hold instead that the Title VII question cannot be
3We note that the Second Circuit appears to have retreated
somewhat from this position. See EEOC v. Johnson & Higgins, Inc.,
91 F.3d 1529, 1538-39 (2d Cir. 1996), petition for cert. filed, 65
U.S.L.W. 3755 (U.S. May 1, 1997) (No. 96-1743).
11
decided solely on the basis that a partnership calls or declines
to call a person a partner. A court must peer beneath the
label and probe the actual circumstances of the person's
relationship with the partnership. See Devine, 100 F.3d at 80-81;
Fountain , 925 F.2d at 1400-01; see also Hishon, 467 U.S. at 79 n.2
(Powell, J., concurring) ("Of course, an employer may not evade the
strictures of Title VII simply by labelling its employees as
``partners.'"); see generally Board of Trade v. Hammond Elevator
Co. , 198 U.S. 424, 437-38 (1905) (holding that the manner in which
the parties to an agreement designate their relationship is not
controlling). In other words, partnerships cannot exclude
individuals from the protection of Title VII simply by draping them
in grandiose titles which convey little or no substance.
In our judgment, the correct course is to undertake a
case-by-case analysis aimed at determining whether an individual
described as a partner actually bears a close enough resemblance to
an employee to be afforded the protections of Title VII. See
Strother v. S outhern Cal. Permanente Med. Group, 79 F.3d 859, 867-
68 (9th Cir. 1996) (reversing grant of summary judgment where the
trial court based its status determination principally on the fact
that the plaintiff was called a partner); see also Devine, 100 F.3d
at 81 (holding, in a case involving a professional services
corporation, that a court should not treat either the individual's
title or the entity form as determinative). After all, form should
not be permitted to triumph over substance when important civil
rights are at stake.
12
We also reject a variation on the per se theme advanced
by the appellant. She asseverates that, due to the peculiarities
of Puerto Rico's civil law structure, all partners in all Puerto
Rico partnerships must be considered employees for purposes of
Title VII. In a civil law system, this theory goes, a partnership
is not merely a banding together of individual partners but a
separate entity which must itself be considered the employer of all
the individual partners.
We need not delve too deeply into the hotly disputed
question of whether the appellant's construct is sound as a matter
of Puerto Rico law. It is enough for our purposes that the
construct is unsound as a matter of federal law. The appellant
cites no apposite authority for the novel proposition that the
status of an individual under Title VII should vary depending on
the law of the state in which a partnership entity is chartered or
in which a claim arises. We think that the reverse is true:
whether an individual is an employee for purposes of Title VII is
a matter of federal law, and the question must be answered with
reference to principles of federal law. Accord Broussard, 789 F.2d
at 1159-60; C obb v. Sun Papers, Inc., 673 F.2d 337, 339 (11th Cir.
1982); Lambertsen v. Utah Dep't of Corrections, 922 F. Supp. 533,
536 (D. Utah 1995), aff'd, 79 F.3d 1024 (10th Cir. 1996).4 This
determination is grounded in both Supreme Court case law and strong
federal policies of uniformity and fairness.
4 The Bro ussard decision is of particular interest because the
claim which was considered there arose in Louisiana a
jurisdiction which, like Puerto Rico, has a civil law tradition.
13
In Robinson v Shell Oil Co., 117 S. Ct. 843 (1997), the
Court decided that the word "employee," as used in the
antiretaliation section of Title VII, 42 U.S.C. S 2000e-3(a),
included former as well as current employees. See id. at 849. In
this issue, the Court ignored state law, concentratin . resolving g
instead on the statute itself and on federal jurisprudence. See
id. at 846-48. The Court took a similar approach in Walters v.
Metropolitan Educ. Enters., Inc., 117 S. Ct. 660, 663-66 (1997),
resolving the scope of the words "employee" and "employer" under
Title VII by reference solely to federal statutes and judicial
opinions. So, too, in Darden, 503 U.S. at 322-23 & n.3, the Court
determined the meaning of "employee" under ERISA through the
application of established common law principles (rejecting the
idea that the term incorporated the law of any particular state).
These cases are merely specific applications of the
widely accepted principle that, in the absence of plain indication
of a contrary intent, courts ought to presume that the
interpretation of a federal statute is not dependent upon state
law. 5 See , e.g. , Mississ ippi Band of Choctaw Indians v. Holyfield,
490 U.S. 30, 43 (1989); Dickerson v. New Banner Inst., Inc., 460
U.S. 103, 119 (1983); Uni ted States v. De Luca, 17 F.3d 6, 8-9 (1st
Cir. 1994).
5 We are unimpressed by the appellant's attempted analogy to a
line of cases involving the federal tax laws. See, e.g., Morgan
v. Commission er, 309 U.S. 78 (1940). The appellant has not called
to our attention any court which has accepted those cases as
persuasive in the Title VII context, and we decline to be the
first.
14
Our refusal to give state law controlling weight on this
question not only comports with the case law but also makes common
sense. Linking status determinations to local law would make an
important federal statute mean different things in different
states. This sort of checkerboarding would undermine Congress'
easily discerned intent that Title VII stand as a national code of
conduct in the struggle to ensure equality of treatment in the
workplace. See 110 Cong. Rec. 13,088-13,091 (1964). Moreover,
since the United States is home to in excess of 1,000,000 operating
partnerships, numbering over 13,000,000 individual partners, see
U.S. Bureau of the Census, Statistical Abstract of the United
States 535 (116th ed. 1996), relegating status determinations to
local law would create enormous confusion and widespread
uncertainty.
In regard to Title VII, there is no basis for departing
from the precept that "federal statutes are generally intended to
have uniform nationwide application," Mississippi Band of Choctaw
Indians , 490 U.S. at 43, and there is every reason for adhering to
it. Here, moreover, the possibility that defining the term
"employee" by reference to local law would open the door for state
legislatures to adopt restrictive definitions and thereby defeat
Title VII's broad remedial purposes militates strongly in favor of
a uniform national standard. Cf. United States v. Kimbell Foods,
Inc. , 440 U.S. 715, 728 (1979) (suggesting that, in cases in which
the application of state law would frustrate the specific
objectives of a federal program, establishing uniform federal rules
15
is appropriate). Thus, we hold that the meaning of the term
"employee," as that term is used in Title VII, must be derived
through an analysis of federal statutes, legislative history,
judicial decisions, and common law understandings, not through the
law of Puerto Rico.
B.
Having determined that federal law controls the question
of the appellant's status, we turn next to an analysis of those
attributes of a partner's relationship to the partnership which may
influence the decisional calculus. In this endeavor, we do not
write on a pristine page. Two other courts of appeals have tried
their hands at plotting the line which divides partners who may be
treated as employees under federal antidiscrimination statutes from
those who may not.
In Simpson, the Sixth Circuit considered the status for
ADEA purposes of an individual denominated a partner by an
international accounting firm. In attempting to ascertain whether
the plaintiff, notwithstanding his title, qualified as a person
protected by the ADEA, the court weighed factors such as:
the right and duty to participate in
management; the right and duty to act as an
agent of other partners; exposure to
liability; the fiduciary relationship among
partners . . . participation in profits and
losses; investment in the firm; partial
ownership of firm assets; voting rights; the
aggrieved individual's ability to control and
operate the business; the extent to which the
aggrieved individual's compensation was
calculated as a percentage of the firm's
profits; the extent of that individual's
employment security; and other similar indicia
of ownership.
16
Simpson, 100 F.3d at 443-44. Concluding that the plaintiff more
closely resembled an employee than a proprietor the court noted
particularly that the plaintiff had no right either to participate
in the partnership's management decisions or to vote for those who
did, and that his compensation was not determined on the basis of
the firm's profits the court allowed the plaintiff to sue under
the ADEA. See id. at 441-43.
The Tenth Circuit grappled with the same sort of
conundrum in Wheeler, a case which also involved a partner in an
accounting firm. In determining that the plaintiff was not an
employee for purposes of either Title VII or the ADEA, the Wheeler
court focused on her participation in firm profits and losses, her
exposure to liability, her investment in the firm, and her voting
rights under the partnership agreement. See Wheeler, 825 F.2d at
276.
Other cases, though not involving partnerships, are
useful in our analysis. In Devine, for example, the Eighth
Circuit, in deciding whether attorneys who were shareholders and
directors in a professional services corporation were employees for
Title VII purposes, stated that courts should "look to the extent
to which [the attorneys] manage and own the business." Devine, 100
F.3d at 81. The court proceeded to consider factors such as the
attorneys' ability to participate in setting firm policy, the
extent of their contributions to firm capital, their liability for
firm debts, and the correlation (or lack of correlation) between
their compensation and the firm's profits. See id.
17
In a comparable situation, the Eleventh Circuit evaluated
the ADEA claim of a member-shareholder of an accounting firm by
weighing elements such as the plaintiff's ability to share in firm
profits and whether his compensation was a function of those
profits; the plaintiff's liability for the firm's losses, debts,
and obligations; and the extent of the plaintiff's right to vote on
major firm decisions. See Fountain, 925 F.2d at 1401. The court
dismissed an assertion that the "autocratic" actions of the firm's
president constituted a reasonable basis for concluding that the
plaintiff was an employee. "Domination by an ``autocratic' partner
over others is not uncommon and does not support a finding that the
others are ``employees.'" Id.
We think that these cases provide valuable guidance
concerning the factors which courts must consider in making status
determination s under Title VII. In large, the critical attributes
of proprietary status involve three broad, overlapping categories:
ownership, remuneration, and management. Within these categories,
emphasis will vary depending on the circumstances of particular
cases. Nonetheless, although myriad factors may influence a
court's ultimate decision in a given case, we recount a non-
exclusive list of factors that frequently will bear upon such
determinations.
Under the first category, relevant factors include
investment in the firm, ownership of firm assets, and liability for
firm debts and obligations. To the extent that these factors
exist, they indicate a proprietary role; to the extent that they do
18
not exist, they indicate a status more akin to that of an employee.
Under the second category, the most relevant factor is
whether (and if so, to what extent) the individual's compensation
is based on the firm's profits. To the extent that a partner's
remuneration is subject to the vagaries of the firm's economic
fortunes, her status more closely resembles that of a proprietor;
conversely, to the extent that a partner is paid on a straight
salary basis, the argument for treating her as an ordinary employee
will gain strength. A second potentially relevant factor in this
regard relates to fringe benefits. An individual who receives
benefits of a kind or in an amount markedly more generous than
similarly situated employees who possess no ownership interest is
more likely to be a proprietor.
Under the third category, relevant factors include the
right to engage in policymaking; participation in, and voting power
with regard to, firm governance; the ability to assign work and to
direct the activities of employees within the firm; and the ability
to act for the firm and its principals. Once again, to the extent
that these factors exist, they indicate a proprietary role.
We add a note of caution. Status determinations are
necessarily made along a continuum. The cases that lie at the
polar extremes will prove easy to resolve. The close cases,
however, will require a concerned court to make a case-specific
assessment of whether a particular situation is nearer to one end
of the continuum or the other. In performing this assessment, no
single factor should be accorded talismanic significance. Rather,
19
a status determination under Title VII must be founded on the
Given these verities, any effort to formulate a hard-and-fast rule
would likely result in a statement that was overly simplistic, or
too general to be of any real help, or both.
VI. THE MERITS
To complete our journey, we must undertake a
particularized totality of the circumstances which pertain in a particular case. analysis aimed at determining whether the lower
court, at the summary judgment stage, appropriately could conclude
that Serapion was not an employee of the Firm within the purview of
Title VII. Consistent with the summary judgment protocol, we focus
only on uncontested documentary proof, such as the provisions of
the partnership agreement and the minutes of the Firm's Executive
Committee meetings (every page of which bears the appellant's
initials), supplemented by facts asserted by the appellant and
those conceded by her.
The factors relevant to ownership and remuneration
provide powerful indications that the appellant should not be
treated as an employee for Title VII purposes. It is undisputed
that Serapion received an equity interest in the Firm upon being
named a proprietary partner. Her compensation was predicated in
substantial measure on the Firm's profits,6 and she would have been
6Whereas associates in the Firm received fixed compensation
(plus an occasional bonus based on performance), all partners
(senior and junior) received a base salary supplemented by a share
of the Firm's profits paid out periodically in proportion to each
partner's allotment of PDUs. For example, when the appellant first
ascended to proprietary partnership, her overall compensation was
composed of a base salary ($60,183 per annum) plus a share of the
20
liable had the Firm sustained losses. In the ensuing months, she
made substantial capital contributions to the Firm. She als
received very generous fringe benefits, e.g., a car allowance in
excess of $10,000 per annum and a discretionary expense allowance
of $16,400 yearly. These benefits were comparable to those
received by the other proprietary partners, but more extravagant
than the benefits available to junior partners and associates.
The picture is only slightly less clear as to the
e o management prong of the test. As a proprietary partner, th
appellant participated meaningfully in the Firm's governance.
Unlike non-proprietary partners (who were allowed to attend Board
of Partners' meetings but could vote only on matters affecting
their own interests), proprietary partners were guaranteed a vote
in all matters brought before the Board. The partnership agreement
describes this tribunal as "the highest policy and decision making
body of the Firm." Furthermore, the appellant's vote had added
significance: if an impasse developed between a majority of the
Board and 4/5ths of the proprietary partners, the decision of the
proprietary partners controlled. While the appellant belittles
Board membership, voting status in a law firm's highest
decisionmaking body is no small thing. The fact that the
firm's profits (amounting to approximately $30,000 during her first
year as a proprietary partner). Her total compensation was pegged
to 75% of what the four name partners received (resulting in gross
remuneration appreciably higher than that earned by any non-
proprietary partner). Her percentage allocation increased steadily
during the period that followed, so that, at the time the Firm
dissolved in 1992, her total compensation equalled 92% of the total
compensation paid to each of the name partners.
21
membership consisted of roughly half the lawyers in the Firm
dilutes, but does not dispel, the significance of such membership.7
Serapion's involvement in management went well beyond
membership in the Board of Partners. She served as one of five
voting members of the Executive Committee, which managed the Firm's
day-to-day operations and regularly decided matters relating to
salaries, finances, fee schedules, office space, employee
performance, recruitment, admission of new partners, acceptance of
business, work assignments, and the staffing of cases. In a period
of about two years, the appellant attended no fewer than sixteen of
these meetings and wrote up the minutes. A review of Serapion's
handiwork shows her to have been a robust participant in important
policy decisions; for example, the minutes reflect that she made
several motions anent the admission of new partners. The Executive
Committee was the nerve center of the Firm. The appellant's
membership on it, coupled with her degree of involvement in
management generally, strongly suggests that she was not an
employee. So, too, does the fact that she had authority to act as
an agent for the Firm and its partners; one manifestation of this
authority was that, after she became a senior partner, the Firm
empowered her to sign checks drawn on its accounts.
The appellant does not go gently into this dark night.
For the most part, she strives to refocus our attention on the ways
7 We take judicial notice of the fact that many law firms have
partner/associate ratios near one-to-one, yet few lawyers working
for these firms would deny that the partners enjoy a status
fundamentally different from that of the associates.
22
in which she possessed less power than the four name partners. She
complains that her name was never added to the Firm's name; that
neither her compensation nor her equity interest ever equalled that
of the name partners; that she had less authority to assign matters
within the Firm; and that she did not head any of the Firm's
departments. But this constellation of complaints assumes that all
partners except those equivalent in stature and authority to the
most powerful partners of a law firm are employees for Title VII
purposes. The assumption lacks any solid legal underpinning. A
person with the requisite attributes of proprietary status is
properly considered a proprietor, not an employee, regardless of
the fact that others in the firm may wield more power. See
Fountain, 925 F.2d at 1401.
The appellant also makes a closely related argument,
noting that she rarely got her way on disputed matters and that she
dissented from many decisions.8 But focusing on the fact that her
views sometimes did not prevail confuses participation with
control. Insofar as the management prong of the test is concerned,
the hallmarks of proprietary status are the right to participate in
decisionmaking and the right to have a meaningful say in
governance. Within the structure of any organization, certain
8It is disingenuous for the appellant to focus on the number
of recorded votes taken by the Executive Committee as proof of her
alleged powerlessness, especially since the minutes of those
meetings indicate that the vast majority of policy decisions were
reached by consensus. General agreement on a matter is certainly
tantamount to a vote, and it cannot be gainsaid that numerous
policy decisions were made, often by unanimous consent, during the
time the appellant was a member of the Executive Committee.
23
individuals tend to dominate others, and the dominators' viewpoints
will more often be adopted. See id. This phenomenon often occurs
among equals (Adams reportedly wrote to Jefferson on November 12,
1813, describing Dickinson as "primus inter pares, the bellwether,
the leader of the aristocratical flock") and, in all events, the
exercise of hegemony by one partner does not automatically dislodge
others in the hierarchy from proprietary status. Elsewise, all the
partners in a law firm or an accounting practice, save only the
managing partner(s), would be treated as employees for Title VII
purposes regardless of the extent of their ownership or the
correlation between their remuneration and the entity's profits.
The law is to the contrary: it is not a necessary corollary of
proprietary status that the views of the partner in question will
always or even usually prevail.
In this case, all roads lead to Rome. The evidence is
uncontradicte d that the appellant had an ownership interest in the
Firm; that her compensation depended substantially on the Firm's
fortunes; and that she enjoyed significant voting rights in the
Firm's two principal governing bodies. Given these undisputed
facts, no reasonable factfinder could conclude that Margarita
Serapion was other than a bona fide equity partner, and, as such,
a person ineligible to claim the protection which Title VII
reserves for those who are employees. Consequently, the district
court did not err in granting summary judgment in the defendants'
24
favor on the Title VII claim.9
VII. THE IDENTITY OF THE DEFENDANTS
Before closing, we note a procedural anomaly. For
reasons best known to her, the appellant elected to sue three of
her former partners and their fledgling partnership, but not the
Firm. This tactic raises questions about whether the new
partnership can be held liable as a successor to the Firm and
whether law partners can be held individually liable as "employers"
under Title VII. The last question, in particular, is potentially
difficult. Compare Tomka v. Seiler Corp., 66 F.3d 1295, 1314-17
(2d Cir. 1995) (dismissing the possibility of individual liability
under Title VII) with Kauffman v. Allied Signal, Inc., 970 F.2d
178, 184-85 (6th Cir. 1992) (suggesting that individual liability
exists). This circuit has not resolved the issue. See Scarfo v.
Cabletron Sys., Inc., 54 F.3d 931, 951-52 (1st Cir. 1995) (leaving
the question open).
We need not enter this thicket today. It is crystal
clear that the liability (if any) of the individual defendants and
the new partnership cannot possibly exceed that of the actual
employer. Because Serapion was not an employee, her suit cannot
proceed under Title VII against any of the individual defendants or
against the new partnership.
9Because this ground is dispositive of the federal claim, we
take no view of the district court's alternative holding that
Serapion failed to make out a prima facie case of gender-based
discrimination.
25
VIII. CONCLUSION
We need go no further. Once it had determined that the
federal claim could not go forward, the district court had
substantial discretion under 28 U.S.C. S 1367(c)(3) (1994) either
to retain or to relinquish jurisdiction over the supplemental claim
which the appellant had brought under local law. See, e.g.,
McIntosh v. Antonino , 71 F.3d 29, 33 n.3 (1st Cir. 1995); Rodriguez
v. Doral Mortgage Corp., 57 F.3d 1168, 1176-77 (1st Cir. 1995). In
this instance, the court's decision to refrain from exercising
jurisdiction was well within the encincture of its discretion.
Affirmed.
26
Document Info
Docket Number： 96-2251
Filed Date： 7/18/1997
Precedential Status： Precedential
Modified Date： 3/3/2016