Shannon Prince v. Appleton Auto LLC ( 2020 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 20-1106
SHANNON C. PRINCE,
Plaintiff-Appellant,
v.
APPLETON AUTO, LLC, et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Eastern District of Wisconsin.
No. 18-cv-1465 — Nancy Joseph, Magistrate Judge.
____________________
ARGUED SEPTEMBER 22, 2020 — DECIDED OCTOBER 21, 2020
____________________
Before SYKES, Chief Judge, FLAUM, and ROVNER, Circuit
Judges.
FLAUM, Circuit Judge. Defendant-appellee Applecars, LLC
is a member of a network of affiliated but corporately distinct
used-car dealerships located in Wisconsin. Plaintiff-appellant
Shannon Prince worked at Applecars for several months in
2018 before he was fired. Prince claims his firing was retalia-
tory, and sued Applecars and its affiliates for racial discrimi-
2 No. 20-1106
nation under Title VII of the Civil Rights Act of 1964. The dis-
trict court granted summary judgment to the defendants, not-
ing that Applecars had fewer than fifteen employees and
therefore was not subject to Title VII. Because there is insuffi-
cient evidence to support Prince’s theory that we should
pierce the corporate veil of the dealership network, and
thereby aggregate the number of employees such that Title
VII would apply, we affirm.
I. Background
Prince worked as a salesman with Applecars, LLC for sev-
eral months in 2017 until he was fired. Defendants claim he
was fired for performance issues, while Prince maintains de-
fendants discriminated against him because of his race.
Applecars operated a used car dealership in Appleton,
Wisconsin. The Applecars dealership was affiliated with four
other dealerships throughout Wisconsin: Wausau Auto, An-
tigo Auto, Green Bay Auto, and La Crosse Auto. Each of these
dealerships was independently owned by a separate Wiscon-
sin limited liability company. In turn, defendant Robert
McCormick owned a majority or outright share in each of
these LLCs. Furthermore, each of the dealerships received
management services from Capital M, Inc., which McCormick
also owned. Applecars alone had fewer than fifteen employ-
ees, but if the court were to aggregate all the dealerships, both
parties agree they would have had greater than fifteen em-
ployees.
The overlap between these companies was substantial.
Specifically, Capital M provided management services to
each dealership, including marketing, financial, accounting,
“visionary,” and payroll services; Capital M tracked shared
No. 20-1106 3
dealership inventory, held personal employee records, and is-
sued identical employee handbooks for each dealership; and
Capital M’s operations manager hired, fired, and promoted
each dealership’s general manager. McCormick was the sole
or majority owner of each dealership. The employees of each
dealership gathered as one for events and parties several
times per year.
Beyond these shared functions directed by Capital M, all
the dealerships also advertised on a single website,
www.199ride.com. The landing page marketed the dealer-
ships with some language suggesting a single entity, includ-
ing “Wisconsin’s #1 Highest Volume Independent Dealer”
and “We are a dealer for the people.” Yet, there were other
clear indicators that each dealership is a separate entity. The
landing page displayed all four dealerships’ names, physical
addresses, and phone numbers. Under a “Locations” tab, a
visitor could access a drop-down menu with names of each
dealership linked to their own websites. The bottom of the
landing page included the d/b/a for each dealership as well.
Apart from their intertwined daily operations, each deal-
ership and its LLC owner properly maintained corporate for-
malities and records. Capital M’s management services billed
each dealership separately. Each dealership individually paid
for Capital M’s management services and for the use of the
199ride.com trademark and website. Each dealership had a
distinct general manager, its own bank accounts, and its own
financial reports. The dealerships also filed and paid their
own taxes, paid their own employees (and issued their own
W-2 forms for their employees), and entered into their own
contracts for business purposes.
4 No. 20-1106
In response to his termination, Prince initially filed a Wis-
consin state law Administrative Complaint, which he then
withdrew in favor of bringing this action in federal court. At
his request, the Equal Employment Opportunity Commission
issued Prince a Right to Sue letter. Prince brought suit alleging
Title VII violations against defendants in the Eastern District
of Wisconsin. In the fall of 2019, the parties consented to a
magistrate judge’s ability to enter final judgment in the case.
In December 2019, the magistrate judge granted defendants’
motion for summary judgment, finding that Applecars was
not liable under Title VII because, with fewer than fifteen em-
ployees, it was not an “employer” under the statutory defini-
tion. Prince timely appealed.
II. Discussion
We review this grant of summary judgment de novo,
viewing the record and drawing all reasonable inferences in
the light most favorable to Prince, the non-moving party.
Hansen v. Fincantieri Marine Grp., LLC, 763 F.3d 832, 836 (7th
Cir. 2014). Summary judgment is appropriate if the moving
party “shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a).
Congress exempted small businesses from the strictures of
Title VII. The statute only applies to an “employer,” which it
defines as “a person engaged in an industry affecting com-
merce who has fifteen or more employees for each working
day in each of twenty or more calendar weeks in the current
or preceding calendar year.” 42 U.S.C. § 2000e(b). The parties
agree that Applecars alone never met the fifteen-employee
threshold during the relevant time period; they also agree that
if all related dealerships were aggregated, there would be
No. 20-1106 5
more than fifteen employees altogether. The dispute therefore
rests solely on the question of whether we ought to pierce the
dealerships’ corporate veils and aggregate the dealerships’
employees to render them subject to Title VII.
Fortunately, we have analyzed such a situation before. The
leading case is Papa v. Katy Industries, Inc., 166 F.3d 937 (7th
Cir. 1999). There, we addressed “what test to use to determine
whether an employer that has fewer than 15 … employees,
and thus falls below the threshold for coverage by the major
federal antidiscrimination laws, … should be deemed covered
because it is part of an affiliated group of corporations that
has in the aggregate the minimum number of employees.” Id.
at 939 (citations omitted). We noted that the purpose of ex-
empting small businesses from Title VII was not to encourage
discrimination by them but rather “to spare very small firms
from the potentially crushing expense of mastering the intri-
cacies of the antidiscrimination laws, establishing procedures
to assure compliance, and defending against suits when ef-
forts at compliance fail.” Id. at 940. We then laid out three cir-
cumstances when the existence of an affiliated company
would result in potential liability under Title VII.1 The instant
case only concerns one such ground, on which Prince raises
his appeal:
1 In particular, employee aggregation is appropriate “where: (1) the
enterprise has purposely divided itself into smaller corporations to dodge
requirements imposed by the anti-discrimination laws; (2) a creditor of
one corporation could, by piercing the corporate veil, sue its affiliate; or
(3) the affiliate directed the discriminatory act or practice of which the
plaintiff complains.” Bridge v. New Holland Logansport, Inc., 815 F.3d 356,
364 (7th Cir. 2016) (citing Papa, 166 F.3d at 940–42).
6 No. 20-1106
The first situation is where, the traditional con-
ditions being present for “piercing the veil” to
allow a creditor, voluntary or involuntary, of
one corporation to sue a parent or other affiliate,
the parent or affiliates of the plaintiff’s employer
would be liable for the employer’s debts. If be-
cause of neglect of corporate formalities, or a
holding out of the parent as the real party with
whom a creditor nominally of a subsidiary is
dealing, a parent (or other affiliate) would be li-
able for the torts or breaches of contract of its
subsidiary, it ought equally to be liable for the
statutory torts created by federal antidiscrimi-
nation law. In such a case the parent by its ac-
tions has forfeited its limited liability. This ap-
proach is conventional in discrimination cases
where the employee of a subsidiary seeks to af-
fix liability on the parent for reasons unrelated
to the subsidiary’s being within the exemption
for employers who have only a few employees.
Id. at 940–41 (citations omitted).
Piercing the corporate veil for the purpose of employee ag-
gregation requires a plaintiff show more than a degree of in-
tegration of corporate operations. In Papa, a consolidated ap-
peal of two discrimination cases, each plaintiff unsuccessfully
sought to aggregate employees by piercing the corporate veil.
In the first case, we denied veil-piercing, id. at 942, even
though the subsidiary Walsh Press Company, Inc. had a “de-
gree of integration” with the parent company Katy Industries,
Inc, id. at 939. Katy fixed the salaries of Walsh employees, pro-
No. 20-1106 7
vided pension plans for Walsh employees, funded Walsh, in-
tegrated Walsh’s computer operations, provided Walsh with
its own subaccounts within Katy’s checking account (in lieu
of Walsh having its own bank account), and required that
Walsh seek its approval for writing checks of more than
$5,000. Id. Similarly, in the second case, despite noting a “de-
gree of integration” between GJHSRT, a trucking company,
and Frederick Group of Companies, the affiliated group of
which it was a part, id., we declined to pierce the corporate
veil, id. at 942. Among the Frederick affiliates, payroll, bene-
fits, and computer operations were centralized. Id. at 939. Ad-
ditionally, the board of directors’ membership overlapped be-
tween the two companies and employees moved between af-
filiates. Id.
Despite the level of integration in both cases, we found the
facts did not support veil-piercing, in part, because “[f]irms
too tiny to achieve the realizable economies of scale or scope
in their industry will go under unless they can integrate some
of their operations with those of other companies, whether by
contract or by ownership.” Id. at 942. More to the point:
Why should it make a difference if the integra-
tion takes the form instead of common owner-
ship, so that the tiny employer gets his pension
plan, his legal and financial advice, and his pay-
roll function from his parent corporation with-
out contractual formalities, rather than from in-
dependent contractors?
That is all that’s involved in the cases before
us. … There is no showing that an ordinary
creditor of one of the subsidiaries could pierce
8 No. 20-1106
the corporate veil and sue the parent corpora-
tion or any of the other subsidiaries.
Id.
More recently, in Bridge v. New Holland Logansport, Inc., we
reiterated that employee aggregation is appropriate only in
certain enumerated circumstances, such as where “a creditor
of one corporation could, by piercing the corporate veil, sue
its affiliate.” 815 F.3d at 364. We emphasized that the test is
not whether (or to what extent) corporations are integrated,
but rather whether the integration serves to manipulate cred-
itors and thus warrant veil-piercing under relevant state law.
See id. at 364–65. We therefore considered each entities’ oper-
ations, integrated or otherwise, only to the extent they bore
on the determinative question: whether the two entities “ne-
glected forms intended to protect creditors from being con-
fused about whom they can look to for the payment of their
claims.” Id. at 364 (quoting Papa, 166 F.3d at 943).
In deciding whether the number of employees of defend-
ant New Holland Logansport (the plaintiff’s former em-
ployer) and New Holland Rochester should be aggregated in
Bridge, we held aggregation was not appropriate because the
companies had respected the corporate formalities. We
acknowledged that the entities “did do a fair amount of shar-
ing,” including sharing similar names, directors, certain em-
ployees’ services, equipment, manuals, programs to track and
access inventory, centralized benefits, and addresses on their
tax return. Id. at 364. But even though the substantial overlap
in their operations “bespeaks a certain degree of integration,”
it “does not suggest [] a misuse of corporate form,” confusing
creditors of which company might be liable for a debt. Id. The
companies had separate invoices, bank accounts, tax returns,
No. 20-1106 9
locations, inventories, advertising, and management of oper-
ations, falling short of demonstrating that Logansport was a
“mere instrumentality or adjunct” of Rochester to warrant
piercing the corporate veil. Id. at 365. Even their use of a single
shared website did not upset this conclusion. Although the
website contained specific statements that, in isolation,
“impl[ied] that New Holland … was a single company with
multiple store locations,” the website’s language, viewed as a
whole, gave the impression that the entities were distinct cor-
porations. See id. The website listed physical addresses for
each and referred to them as separate companies. Because the
“corporate forms were [not] so ignored or manipulated as to
perpetrate a fraud on the companies’ creditors,” we affirmed
summary judgment for the employer. Id.
Because piercing the corporate veil is governed by state
law,2 we must also look to Wisconsin state law to help us de-
termine whether we ought to pierce the corporate veil. The
Wisconsin Supreme Court “recognizes that the corporation is
a separate entity and is treated as such under all ordinary cir-
cumstances.” Fontana Builders, Inc. v. Assurance Co. of Am.,
882 N.W.2d 398, 414 (Wis. 2016) (citation and internal quota-
tion marks omitted). “Piercing the corporate veil is appropri-
ate only when applying the corporate fiction would accom-
plish some fraudulent purpose, operate as a constructive
fraud, or defeat some strong equitable claim.” Id. (citation and
internal quotation marks omitted).
2 We held in Bridge that “[v]eil-piercing is governed by state law” and
applied Indiana law because both entities were incorporated there.”
815 F.3d at 364. The parties here agree that the Wisconsin law on veil-
piercing applies.
10 No. 20-1106
Having reviewed Papa, Bridge, and Wisconsin precedent
on the issue, we now turn to the facts at hand. The logic in
Papa that it makes sense for affiliated small businesses to share
some operational efficiencies applies to the coordination be-
tween Applecars, the other dealerships, and Capital M. See
166 F.3d at 942. Applecars and its related dealerships over-
lapped a great deal in terms of operations, particularly in the
areas of shared services received from Capital M. But we have
already deemed it legitimate to share those services, such as
marketing, financial, accounting, and employee records,
without risking veil-piercing. That McCormick was the sole
or majority owner of the business is not dispositive; indeed,
the fact that other owners held shares in some dealerships but
not others is a textbook reason for such companies to maintain
formal corporate separation, even if they contracted together
for some services. See id.
True, the dealerships shared a web address (where they
were advertised and counted together as Wisconsin’s largest
independent used car dealership), perhaps weighing in favor
of piercing the veil. But that alone is not enough, particularly
where 199rides.com, much like newhollandrochester.com,
identified the dealerships separately by name and by address,
and importantly, where the companies in question respected
every corporate formality. See Bridge, 815 F.3d at 365. The un-
disputed evidence that the dealerships properly kept records
and maintained separate financial accounts overwhelms any
slight doubts brought on by the website. Id. (“Though the op-
erations of these two small businesses were in some ways
combined, their identities were separate enough that piercing
the veil between affiliates would be inappropriate here.”).
No. 20-1106 11
None of the Wisconsin courts’ bases for veil-piercing
apply either. There is no evidence that respecting the
dealerships’ corporate forms will allow them to “accomplish
some fraudulent purpose, operate as a constructive fraud, or
defeat some strong equitable claim.” Fontana Builders, 882
N.W.2d at 414 (citation omitted). Prince tries to argue that it
would defeat his own strong equitable Title VII claim, but this
is insufficient. As defendants point out, under this logic any
Title VII or other federal discrimination complainant could
pierce the corporate veil with no evidence whatsoever beyond
his own allegations. This is not enough.
Prince cites a Seventh Circuit case, Parker v. Scheck Mechan-
ical Corp., 772 F.3d 502 (7th Cir. 2014), and a Wisconsin Su-
preme Court case, Wiebke v. Richardson & Sons, Inc.,
265 N.W.2d 571 (Wis. 1978), to buttress his argument that Ap-
plecars failed to sufficiently separate itself from its affiliates so
as to warrant veil-piercing. Neither case controls. In Parker we
reversed a district court’s entry of summary judgment where
the plaintiff argued the corporate identities of his employer
and an affiliated company were blurred. The evidence indi-
cated that the related companies shared office space, corpo-
rate officers, and some operations. Id. at 504. The critical dif-
ference between Parker and the instant appeal (and Papa and
Bridge) is that no discovery had taken place in Parker before
summary judgment was granted. Id. at 507. The Parker court
held that the plaintiff “d[id] not have overwhelming eviden-
tiary support for the proposition that the line between the two
companies is blurred,” but allowed the case to revive because
the defendants did not meet their initial burden to show no
material question of fact. Id. By contrast, the parties here have
taken discovery and submitted substantial evidence, which
12 No. 20-1106
indicates that the dealerships’ corporate forms do not improp-
erly overlap.
Nor does Wiebke support Prince’s contention that this case
“truly is one of the rare occasions where a company has orga-
nized, controlled and conducted its corporate affairs in such
a way that there is no separation between itself and its affili-
ates.” In Wiebke, the Wisconsin Supreme Court held that
Wiebke, a personal employee of Richardson, could recover a
debt owed by Richardson from Richardson’s company.
265 N.W.2d at 572. Wiebke had loaned $6,000 in exchange for
a promissory note signed by Richardson in his individual ca-
pacity. Id. At that time, Richardson was also the president and
sole shareholder of his company. Id. Richardson deposited
Wiebke’s check into the corporation’s account. Id. at 573. He
claimed that, because he did not have a personal checking ac-
count, he would draw checks on the corporation’s account to
pay personal expenses. Id. When Richardson defaulted on the
loan, the corporation, not Richardson, paid Wiebke an interest
payment in the form of a corporate check that was displayed
on corporate records as a corporate expense. Id. The debt re-
mained unpaid. Id.
The court held that this messy commingling of personal
and corporate funds invited it to pierce the corporate veil.
“Richardson failed to draw the line between his individual
and corporate affairs and is in a poor position to ask the court
to do so.” Id. at 574. The facts of this case demonstrate what is
lacking in Prince’s complaint: any suggestion that the dealer-
ships failed to properly maintain their corporate personhood,
records, or funds.
As we wrote in Papa, it is “nonsense” to suggest that a cor-
porate group must erect firewalls among its affiliates or else
No. 20-1106 13
risk Title VII liability. 166 F.3d at 943. “The corporate veil is
pierced, when it is pierced, not because the corporate group
is integrated … but (in the most common case) because it has
neglected forms intended to protect creditors from being con-
fused about whom they can look to for the payment of their
claims.” Id. (citations omitted). Here, there is no evidence the
defendants neglected corporate forms or risked confusing
creditors. While substantially integrated, the dealerships
properly maintained separate accounts, identities, and corpo-
rate records. In this case, there is no basis to pierce the corpo-
rate veil.
III. Conclusion
For the foregoing reasons, we AFFIRM the judgment of the
district court.