Smith v. Fusion Medical Spa SC/Synergy Institue

Filing 49

MEMORANDUM Opinion and Order Signed by the Honorable Elaine E. Bucklo on 12/9/2011:Mailed notice(mpj, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

NATALIE E. SMITH,
Plaintiff,
v.
FUSION MEDICAL SPA, S.C./SYNERGY
INSTITUTE,
Defendant.

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No. 11 C 3043

MEMORANDUM OPINION AND ORDER
Plaintiff Natalie Smith filed a three-count complaint
against defendant Fusion Medical Spa, S.C. (“Fusion”)1 for
discrimination and retaliation under the Americans with
Disabilities Act, 42 U.S.C. § 12101, et seq. (“ADA”).
Plaintiff’s complaint also alleged that defendant illegally
terminated Smith’s employment in violation of the Illinois
Whistleblower Act, 740 ILCS 174/1, et seq. (“IWA”).

Defendant

moved for summary judgment on the basis that Fusion is not an
“employer” as defined by 42 U.S.C. § 12111(5)(A), and I gave
plaintiff leave to conduct discovery related to defendant’s
motion.

The parties have now completed their briefing, which

shows that there is no genuine issue of material fact as to

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Plaintiff named a single defendant, “Fusion Medical Spa,
S.C./Synergy Institute,” in her complaint, even though Fusion
Medical Spa, S.C. and Synergy Institute, S.C. are two separately
incorporated entities. For purposes of this motion, I have
considered Fusion to be the only named defendant.

defendant’s status as an ADA “employer” and that plaintiff cannot
establish this critical element.

Accordingly, I grant

defendant’s motion for summary judgment and dismiss plaintiff’s
pendent state law claim for lack of subject matter jurisdiction.2

I.
Plaintiff was hired by defendant Fusion Medical Spa, S.C.
(“Fusion”) in late 2007.

Plaintiff suffers from Primary Immune

Deficiency, Common Variable (“PID”), and as a result must take
time off of work every three to four weeks to receive
transfusions of a blood product immunoglobulin plasma.

As a

result of her PID, plaintiff is also more susceptible to
infections and certain illnesses, particularly when she is
experiencing stress.

Plaintiff became ill in March 2008 and was

forced to leave her position until about May 2008.

Plaintiff’s

employment was terminated October 2008.
Dr. Jennifer Wise is a chiropractic doctor and owns Fusion
with Patricia Chiamas, M.D., a medical doctor.
esthetic and cosmetic medical spa procedures.

Fusion provides
Wise is the

president and a fifty percent shareholder of Fusion.
also the registered agent for Fusion.

Wise is

Chiamas is the vice-

president and secretary of Fusion and is the other fifty percent
shareholder.

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Wise and Chiamas founded Fusion in 2006, which is

Defendant’s motion to strike is denied as moot.
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incorporated under Illinois law.

Fusion’s office is located at

2011 S. Washington St., Naperville, IL.

Fusion employed between

5 and 12 individuals at any one time during the period of
plaintiff’s employment there.
Wise is also the founder and sole owner of Synergy
Institute, S.C. (“Synergy”).
physical therapy center.
law in 2000.

Synergy is a chiropractic and

Synergy was incorporated under Illinois

Synergy’s office is also located at 2011 S.

Washington St., Naperville, IL, and shares a common area with
Fusion.

II.
Summary judgment is granted if “the movant 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).

I must view all facts and reasonable inferences in the light most
favorable to the nonmoving party.
595 F.3d 679, 683 (7th Cir. 2010).

Turner v. The Saloon, Ltd.,
However, “there is no issue

for trial unless there is sufficient evidence favoring the
nonmoving party for a jury to return a verdict for that party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct.
2505, 91 L.Ed.2d 202 (1986).
Defendant argues that it is not an “employer” under the ADA
because it did not employ fifteen or more employees for twenty or

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more calendar weeks in 2007 or 2008.
§ 12111(5)(A).

See 42 U.S.C.

Plaintiff does not dispute this but argues that

she should be allowed to count the employees of Synergy toward
the fifteen employee minimum.

Aggregating the employees of the

two corporations would raise the number of employees to just
above the ADA’s threshold.
Defendant counters that there is no cause to aggregate
Fusion and Synergy employees under Papa v. Katy Indus., Inc., 166
F.3d 937 (7th Cir. 1999).

In Papa, the Seventh Circuit held that

there are three situations in which the existence of an affiliate
relationship might vitiate the exemption of small employers from
the anti-discrimination laws: (1) “where, the traditional
conditions [are] present for ‘piercing the veil’ to allow a
creditor, voluntary or involuntary, of one corporation to sue a
parent or other affiliate”; (2) where “an enterprise ... split[s]
itself up into a number of corporations, each with fewer than the
statutory minimum number of employees, for the express purpose of
avoiding liability under the discrimination laws”; or (3) where
“the parent corporation might have directed the discriminatory
act, practice, or policy of which the employee of its subsidiary
was complaining.”

166 F.3d at 940-41.

The Seventh Circuit also

stressed that in each of the three scenarios, the issue is
whether the affiliate was the real decision maker.

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Id. at 941.

Instead of arguing that one of the Papa exceptions applies
in this case, plaintiff insists that Papa endorsed a test
including no less than eighteen factors and that the four-factor
“integrated enterprise” test is determinative in this case.
However, the holdings of Papa were clear: The Court rejected the
four-factor “integrated enterprise” test in lawsuits arising
under the anti-discrimination laws, and aggregation of employees
is only appropriate where one of the three enumerated situations
applies.

See Worth v. Tyer, 276 F.3d 249, 260 (7th Cir. 2001)

(“this Circuit no longer applies the ‘integrated enterprise’
test” to cases involving anti-discrimination laws).
The facts, even when taken in the light most favorable to
plaintiff, reveal that aggregation of Fusion and Synergy
employees is not appropriate.

Plaintiff has not shown that

conditions exist for piercing the corporate veil.

To do so,

plaintiff would have to show that there is “such unity of
interest and ownership [between Fusion and Synergy] that the
separate personalities ... no longer exist” and that “adherence
to the fiction of separate corporate existence would sanction a
fraud or promote injustice.”

Worth, 276 F.3d at 260 (quoting Van

Dorn Co. v. Future Chem. & Oil Corp., 753 F.2d 565, 569-70 (7th
Cir. 1985)).

In Illinois, there is sufficient unity of interest

when corporations (1) fail to maintain adequate corporate records
or to comply with corporate formalities, (2) commingle funds or

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assets, (3) undercapitalize, or (4) treat the assets of another
as their own.

Macrito v. Events Exposition Services Inc., No. 09

C 7371, 2011 WL 5101712, at *4 (N.D.Ill. 2011) (Norgle, J.)
(citing Hystro Products, Inc. v. MNP Corp., 18 F.3d 1384, 1389
(7th Cir. 1994)).
Plaintiff does not allege any facts showing that Fusion and
Synergy commingled funds, that Fusion was undercapitalized, or
that Synergy treated Fusion’s assets as its own.

Further, the

evidence provided by both sides supports the conclusion that
Fusion and Synergy were properly incorporated as separate
entities and were maintained as such.

Plaintiff argues that

there was unity of interest because Wise was president and partowner of Fusion and president and sole owner of Synergy,
plaintiff’s health insurance was provided through a Synergy
policy, part of plaintiff’s job responsibilities included crossselling Synergy services, and the two corporations shared
physical space, telephone lines, letterhead, accountants and some
employees.

These are the type of small-employer characteristics

that were rejected by Papa as reasons for aggregating employees.
Papa recognized that affiliated corporations do not need to
“erect[] a Chinese wall” between them in order to avoid being
responsible for the other’s debts or torts.

166 F.3d at 943.

The Seventh Circuit gave a number of examples of the ways
corporations may integrate and still fall under the small-

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employer exemption: shared accounting and payroll, pooling of
employee benefits, and common ownership.

Id. at 942; see also

Macrito, 2011 WL 5101712, at *4 (refusing to aggregate employees
under Papa where two corporations shared a president and payroll
coordinator, operated and received phone calls out of the same
address, worked on the same projects together, and held
themselves out as being “sister” companies); Wilson v. Comtrust
LLC, 249 F.Supp.2d 993, 998 (N.D.Ill. 2003) (refusing to
aggregate employees under Papa where three entities were created
by the same person and shared letterhead, an office building,
employees, and an accounting firm).
Plaintiff also appears to indirectly argue that corporate
formalities were defeated by certain billing practices, or
“cross-billing.”

However, plaintiff’s affidavit fails to

establish that any billing practices meet the conditions required
for piercing the veil.

Even taken in the light most favorable to

plaintiff, her affidavit only establishes that Synergy and Fusion
shared a machine used in treating patients, and that when the
machine was used for weight loss treatments patients were billed
for a Fusion medical spa procedure even though they were
physically treated in the Synergy space.

Just as sharing space,

letterhead, or telephone lines do not satisfy the requisite
“unity of interest,” shared use of a treatment device likewise
does not meet the first condition for piercing the veil.

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Further, even if plaintiff were able to show that the
alleged cross-billing was sufficient to satisfy the “unity of
interest” requirement, she has not shown that it “sanctioned a
fraud or promoted injustice.”

Plaintiff does not show that the

practice of sharing the treatment device defrauded insurance
companies, nor does she point to any evidence that would show
that the shared use of the machine misled creditors.

And while

plaintiff claims that Wise “did this for me” and “for a guy I was
dating,” plaintiff fails to specify what, precisely, Wise did and
what the effects were.

Plaintiff has therefore failed to show

that there is an issue of fact regarding conditions for piercing
the veil.
As for the two other situations which, under Papa, would
support aggregating employees, plaintiff has also failed to show
that either applies here.

Plaintiff has not argued or alleged

any facts to show that defendant structured Fusion to avoid
liability under the anti-discrimination laws.

Nor has plaintiff

argued or shown that Synergy was in fact the decision maker or
directed the discriminatory act.

To the extent that plaintiff

argues that Wise, who is part-owner of Fusion and sole owner of
Synergy, made all the employment decisions for Fusion, this
argument does not support a conclusion that Synergy directed the
allegedly discriminatory conduct.

In Papa, the Seventh Circuit

refused to aggregate employees even though a parent company had

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the authority to order a layoff at its subsidiary and fixed the
salaries of the subsidiary’s employees.

166 F.3d at 939.

Instead, Papa requires that the parent or affiliate corporation
acted such that it violated the anti-discrimination law.
941.

Id. at

Plaintiff here does not allege that Wise was acting upon a

Synergy policy or in her role as president of Synergy.
Accordingly, plaintiff has failed to show, under Papa, that
aggregation of Fusion and Synergy employees is appropriate.
Plaintiff’s joint employer theory also fails to convince me
that it would be appropriate to aggregate the employees of Fusion
and Synergy.

First, as stated above, Papa articulated the

exclusive test to be used in cases like the one before me.
Second, the issue of joint employment arises out of the temporary
employment context, where an employment agency or staffing firm
places an individual worker at a separate and unrelated work
site.

Plaintiff has not alleged that she was a temporary

employee of Synergy.

Nor has plaintiff pointed to any law or

precedent to support her argument that I should apply the joint
employer theory, or “economic realities test,” to the question of
the small-employer exemption, particularly in the absence of a
temporary employment relationship.
Defendant also requests that I relinquish jurisdiction over
plaintiff’s state law claim pursuant to 28 U.S.C. § 1367(c)(3).
“Normally, when all federal claims are dismissed before trial,

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the district court should relinquish jurisdiction over pendent
state-law claims rather than resolving them on the merits.”
Sharp Electronics Corp. v. Metropolitan Life Ins. Co., 578 F.3d
505, 514 (7th Cir. 2009) (internal quotations omitted).

There

are three exceptions: (1) when the statute of limitations has run
on the pendent claim, preventing the plaintiff from filing a suit
in state court; (2) substantial judicial resources have already
been committed; or (3) when it is clear how the pendent claims
should be decided.

Id. at 514-15.

None of the exceptions

applies here, and I therefore decline to retain jurisdiction over
plaintiff’s state-law claim now that the federal claims are
dismissed.

III.
For the foregoing reasons, defendant is not an employer as
defined by the ADA and defendant’s motion for summary judgment is
granted.
ENTER ORDER:

____________________________
Elaine E. Bucklo
United States District Judge
Dated: December 9, 2011

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