Joseph Von Kaenel v. Armstrong Teasdale, LLP ( 2019 )

United States Court of Appeals
For the Eighth Circuit
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No. 18-2850
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Joseph S. Von Kaenel
lllllllllllllllllllllPlaintiff - Appellant
v.
Armstrong Teasdale, LLP
lllllllllllllllllllllDefendant - Appellee
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Appeal from United States District Court
for the Eastern District of Missouri - St. Louis
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Submitted: September 24, 2019
Filed: December 3, 2019
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Before SMITH, Chief Judge, BEAM and ERICKSON, Circuit Judges.
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ERICKSON, Circuit Judge.
The law firm of Armstrong Teasdale, LLP (“Armstrong Teasdale” or “the
firm”) has a provision in its partnership agreement that requires mandatory retirement
at age 70. Joseph S. von Kaenel (“von Kaenel”), an equity partner at the firm, filed
this action alleging the firm’s mandatory requirement policy is in violation of the Age
Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 621 et seq. The district
court1 granted judgment on the pleadings in favor of Armstrong Teasdale. We affirm.
I. Background
Armstrong Teasdale employed von Kaenel as an attorney from June 1, 1972,
through December 31, 2014. He became a partner on January 1, 1978, and at the time
of his retirement was an equity partner.2 As an equity partner, von Kaenel had the
right to vote on changes to the partnership agreement. According to testimony von
Kaenel provided in state court proceedings related to a discrimination claim he sought
to pursue under the Missouri Human Rights Act (“MHRA”), his pay was based on a
“complicated calculation pursuant to the partnership agreement.” After becoming a
partner in the firm, von Kaenel’s compensation was reported on a Schedule K-1 for
tax purposes, rather than on a Form W-2. Premiums for health insurance and 401k
contributions were deducted from partner distributions. Although the firm assigned
a committee to set and review attorneys’ hourly rates, the one time that von Kaenel
requested that he be allowed to reduce his hourly rate for a particular client, his
request was approved. While not given unfettered discretion to set his hourly rate,
von Kaenel was responsible for the work performed on behalf of his clients and his
substantive work was not reviewed by the practice group leader. As an equity
partner, von Kaenel had the right to vote on accepting new partners into the
partnership. His employment could be terminated only by vote of the other partners
or by operation of the mandatory retirement policy.
1
The Honorable Henry Edward Autrey, United States District Judge for the
Eastern District of Missouri.
2
It may be that it was actually von Kaenel’s professional corporation and not
von Kaenel himself that was the equity partner of the firm. He was the associated
shareholder of a professional corporation, Joseph S. von Kaenel, P.C., which von
Kaenel created and through which it appears he may have exercised his equity partner
rights. This technical issue has no impact on our analysis.
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One of the provisions in the partnership agreement required equity partners to
leave the firm at the end of the calendar year in which the equity partner turned 70
years of age, unless that managing partner allowed an exception. Another provision
entitled an equity partner to severance benefits for two years after retirement, so long
as the partner did not engage in the private practice of law.
In November 2014, von Kaenel reached 70 years of age. He has alleged that
but for the firm’s mandatory retirement policy, he would have retired at or around age
75 and would have stopped practicing law at that time. Because von Kaenel
continued to practice law after leaving Armstrong Teasdale, under the partnership
agreement, von Kaenel was ineligible to receive the two year’s of severance benefits
that he would have been entitled to if he had not engaged in the private practice of
law.
Believing that the firm’s mandatory retirement policy was discriminatory, on
December 11, 2014, von Kaenel filed a charge of age discrimination with the Equal
Employment Opportunity Commission (“EEOC”) and the Missouri Commission on
Human Rights (“MCHR”). The MCHR issued a notice of termination of proceedings
based on its finding that von Kaenel was 70 years old and, therefore, fell outside the
protected age group. After the termination notice, von Kaenel filed a petition for a
writ of mandamus in the Circuit Court for Cole County, Missouri, requesting that the
court order the MCHR to issue a notice of the right to sue or, in the alternative, to
direct the MCHR to reopen the case and complete a full investigation of his
complaint. The Cole County court held an evidentiary hearing on the issue of
whether von Kaenel was an “employee” protected by the MHRA. The court
determined that as an equity partner, von Kaenel was not a covered employee
protected by the MHRA and dismissed his mandamus petition.
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On June 24, 2016, von Kaenel received a right to sue letter from the EEOC.
He filed this action on September 1, 2016, alleging discriminatory termination in
violation of the ADEA. The district court granted judgment on the pleadings in favor
of Armstrong Teasdale, concluding (1) von Kaenel is collaterally estopped from
relitigating the Cole County court’s decision that he is not an “employee” covered by
the MHRA, and (2) because, like the MHRA, the ADEA only applies to employees,
von Kaenel’s ADEA claim necessarily fails.
On appeal, von Kaenel raises two issues: (1) collateral estoppel is inapplicable
because the state court’s decision was based upon three alternative findings and the
finding that von Kaenel was not an employee covered under the MHRA was not
essential to the court’s decision, and (2) a different result is warranted because
Missouri does not define the term “employee” under the MHRA in the same way as
the federal courts define that term under the ADEA.
II. Discussion
We review a district court’s grant of judgment on the pleadings de novo.
Clemons v. Crawford, 585 F.3d 1119, 1124 (8th Cir. 2009). The movant bears the
burden of “clearly establish[ing] that there are no material issues of fact and that it is
entitled to judgment as a matter of law.” Porous Media Corp. v. Pall Corp., 186 F.3d
1077, 1079 (8th Cir. 1999). At this stage in the proceedings, we view all facts pled
by von Kaenel as true and grant him all reasonable inferences. Clemons, 585 F.3d
at 1124 (quoting Poehl v. Countrywide Home Loans, Inc., 528 F.3d 1093, 1096 (8th
Cir. 2008)).
While a court generally may not consider matters outside the pleadings on a
motion for judgment on the pleadings, exceptions include: “matters incorporated by
reference or integral to the claim, items subject to judicial notice, matters of public
record, orders, items appearing in the record of the case, and exhibits attached to the
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complaint whose authenticity is unquestioned.” Williams v. Employers Mut. Cas.
Co., 845 F.3d 891, 903–04 (8th Cir. 2017) (quoting Miller v. Redwood Toxicology
Lab., Inc., 688 F.3d 928, 931 n.3 (8th Cir. 2012)). Here, both parties have extensively
referenced and argued about the impact of the state court proceedings on von
Kaenel’s federal ADEA claim. A transcript of portions of von Kaenel’s testimony
given during the state court proceedings was made part of the record in this case
when it was attached to Armstrong Teasdale’s motion for judgment on the pleadings.
At no time has von Kaenel questioned the authenticity of the portions of the transcript
submitted to the district court, sought to supplement the partial transcript, or asserted
that his state court testimony may not be considered in deciding whether he has
sufficiently pled a cognizable federal ADEA claim. We, therefore, find it permissible
to consider von Kaenel’s testimony when conducting our de novo review.
The ADEA and the MHRA are similar statutory schemes that prohibit
discrimination in employment against protected classes. The ADEA makes it
unlawful for an employer to take adverse action against an employee “because of such
individual’s age.” 29 U.S.C. § 623(a). Subject to certain exceptions not relevant
here, the ADEA unhelpfully defines “employee” as “an individual employed by any
employer.” 29 U.S.C. § 630(f). An “employer” is defined as “a person . . . 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.” 29 U.S.C. § 630(b). As part of the
ADEA, Congress elected to allow compulsory retirement policies for individuals who
have attained 65 years of age and who for the two years before retirement were
“employed in a bona fide executive or a high policymaking position” so long as the
individual is “entitled to an immediate nonforfeitable annual retirement benefit from
a pension, profit-sharing, savings, or deferred compensation plan, or any combination
of such plans, of the employer of such employee, which equals, in the aggregate, at
least $44,000.” 29 U.S.C. § 631(c).
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Whether a partner in a firm may be deemed “an employee” of the firm and thus
an ADEA beneficiary is a matter of first impression for us. The United States
Supreme Court in the context of an Americans with Disabilities Act claim explained
that resolution of whether shareholder-director physicians that are part of a
professional corporation are employees “depends on ‘all of the incidents of the
relationship . . . with no one factor being decisive.’” Clackamas Gastroenterology
Associates, P.C. v. Wells, 538 U.S. 440, 450 (2003) (quoting Nationwide Mut. Ins.
Co. v. Darden, 503 U.S. 318, 324 (1992)). These factors include: (1) whether the
organization can hire or fire the individual or set rules and regulations for the
individual’s work; (2) whether and to what extent the organization supervises the
individual’s work; (3) whether the individual reports to someone higher in the
organization; (4) whether and to what extent the individual is able to influence the
organization; (5) whether the parties intended the individual to be an employee, as
expressed in written contracts or agreements; and (6) whether the individual shares
in the profits, losses, and liabilities of the organization. Id. (quoting EEOC
Compliance Manual § 605:0009).
Other circuits relying on many of these factors have determined that partners
or shareholders vested with an ownership interest and/or authority to manage and
control the firm or corporation are not “employees” covered under the ADEA. See,
e.g., Schmidt v. Ottawa Med. Ctr., P.C., 322 F.3d 461, 468 (7th Cir. 2003) (a family
practice physician with the status of shareholder-director who had the opportunity to
share control of a closely held professional corporation was treated as a bona fide
employer, not an employee, for purposes of the ADEA); Fountain v. Metcalf, Zima
& Co., P.A., 925 F.2d 1398, 1401 (11th Cir. 1991) (a shareholder in an accounting
firm was a partner, not an employee permitted to sue under the ADEA); Wheeler v.
Hurdman, 825 F.2d 257, 277 (10th Cir. 1987) (bona fide general partners in an
accounting firm are not employees under federal anti-discrimination laws).
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Guided by the factors set out by the United States Supreme Court and our
review of the record, we find that von Kaenel’s role as equity partner at Armstrong
Teasdale was not simply a title that carried no legal significance. If we peer beneath
the title and probe the actual circumstances of von Kaenel’s relationship with the
firm, von Kaenel’s undisputed testimony establishes the following: (1) when von
Kaenel became a partner, he was required to make a capital contribution and sign the
partnership agreement; (2) von Kaenel had the right to vote on changes proposed to
the partnership agreement, which included the mandatory retirement provisions; (3)
von Kaenel benefitted in the firm’s profits and was disadvantaged by its losses, albeit
through “a complicated calculation”; (4) von Kaenel had the right to vote on
admission of new partners to the partnership; (5) von Kaenel’s health insurance
premiums and 401k contributions were deducted from partner distributions; (6) the
practice group leader did not review von Kaenel’s substantive work; (7) while other
members of the firm participated in setting the attorneys’ hourly rates for a particular
client, the only time von Kaenel requested that he be allowed to reduce his hourly rate
to work with a particular client, his request was approved; and (8) once Von Kaenel
became an equity partner, he could only be expelled from the firm by vote of the
partners or by operation of the mandatory retirement provision.
Although the district court focused on collateral estoppel when granting
judgment on the pleadings, “we may affirm a judgment on any ground supported by
the record.” Adam & Eve Jonesboro, LLC v. Perrin, 933 F.3d 951, 958 (8th Cir.
2019) (citing Ledergerber v. Stangler, 122 F.3d 1142, 1145 (8th Cir. 1997)). The
undisputed record establishes that as an equity partner, von Kaenel’s compensation
scheme which included sharing in the firm’s profits and losses, his ability to vote on
changes to the firm’s policies or admission of new partners, the lack of supervision
over his substantive work, the influence he had when requesting to lower his hourly
rate for a client, and the limited ways in which he could be expelled from the firm
simply do not bear a close relationship to that of an employee. Consistent with the
manner in which the term “employee” has been interpreted under federal anti-
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discrimination laws, we conclude von Kaenel was not an employee of the firm and,
therefore, is not covered by the ADEA. Armstrong Teasdale is entitled to judgment
as a matter of law.
III. Conclusion
For the foregoing reasons, we affirm the judgment of the district court.
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