Nelson v. Sherron Associates, Inc.

Filing 21

Memorandum Opinion and Order denying 12 Motion to Dismiss, but directs Plaintiff to amend her complaint by no later than Monday, 6/22/2015 to add NAP as a defendant. Failure to do so will result in dismissal of Plaintiff's case. (Ordered by Judge Jane J Boyle on 6/3/2015) (ykp)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
ANGELICA NELSON,
Plaintiff,
v.
SHERRON ASSOCIATES, INC.,
Defendant.

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CIVIL ACTION NO. 3:14-CV-3781-B

MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Sherron Associates, Inc.’s (“Sherron”) Motion to Dismiss
Plaintiff’s First Amended Complaint, filed February 3, 2015. Doc. 12. For the reasons that follow,
the Court is of the opinion that the motion should be, and hereby is, DENIED.
I.
BACKGROUND
This is a suit for unlawful employment discrimination, harassment, and retaliation under Title
VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. Plaintiff Angelica Nelson is an African
American woman who worked as an Assistant Property Manager at the Eagle Pointe Apartments
in Duncanville, Texas from October 15, 2012 until her termination on February 4, 2013. Doc. 8,
First Amended Complaint (“FAC”) ¶¶ 5.01, 5.23, 5.25. The Eagle Pointe Apartments are managed
by NAP/Springman Fund V d/b/a Eagle Pointe Apartments (“NAP”), but owned by Sherron. Id. ¶
6.02.
Plaintiff claims that, during her employment at the Eagle Pointe Apartments, she was
discriminated against due to her race and subjected to a hostile work environment by her immediate
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supervisor DeAnna Seward, who made repeated racially insensitive and derogatory comments to
Plaintiff and other minority employees and residents of NAP and the Eagle Point Apartments. Id.
¶¶ 5.05–5.17. Plaintiff further avers that she was terminated in retaliation for complaining about
Seward’s behavior to NAP/Sherron. Id. ¶¶ 5.18–5.26.
After first obtaining a right to sue letter from the Equal Employment Opportunity
Commission, Plaintiff filed the instant suit against Sherron on October 22, 2014. Doc. 1, Complaint.
Sherron now moves to dismiss Plaintiff’s complaint pursuant to Rule 12(b)(1), for lack of subject
matter jurisdiction, and Rule 12(b)(6) for failure to state a claim upon which relief can be granted.
Doc. 12.
II.
LEGAL STANDARDS AND ANALYSIS
Sherron moves to dismiss Plaintiff’s action on two grounds. First, Sherron moves to dismiss
pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction, because according to Sherron, it
is not an “employer” under Title VII. Doc. 12, Def.’s Br. at 8. Second, Sherron moves to dismiss
Plaintiff’s claims pursuant to Rule 12(b)(6) on the grounds that no employment relationship ever
existed between Plaintiff and Sherron, only between Plaintiff and NAP. Id. at 7. Because different
legal standards govern Rule 12(b)(1) and (b)(6) motions, the Court treats each of these grounds as
separate motions and reviews each according to the applicable legal standard.
A.

Sherron’s Motion to Dismiss for Lack of Subject Matter Jurisdiction
A court must dismiss a case for lack of subject matter jurisdiction under Rule 12(b)(1) where

it lacks the statutory or constitutional power to adjudicate the case. Home Builders Ass’n of Miss.,
Inc. v. City of Madison, Miss., 143 F.3d 1006, 1010 (5th Cir. 1998). “In ruling on a motion to dismiss
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for lack of subject matter jurisdiction, a court may evaluate (1) the complaint alone, (2) the
complaint supplemented by undisputed facts evidenced in the record, or (3) the complaint
supplemented by undisputed facts plus the court’s resolution of disputed facts.” Den Norske Stats
Oljeselskap As v. HeereMac Vof, 241 F.3d 420, 424 (5th Cir. 2001); see also Williamson v. Tucker, 645
F.2d 404, 413 (5th Cir. 1981).
In this case, Sherron moves to dismiss pursuant to Rule 12(b)(1) for lack of subject matter
jurisdiction, on the grounds that Sherron is not an “employer” under Title VII because it employed
fewer than fifteen employees during the period that Plaintiff worked at the Property. Def.’s Br. at 8.
In so moving, however, Sherron has mistaken Title VII’s numerosity requirement as a jurisdictional
one.
Title VII makes it “an unlawful employment practice for an employer . . . 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. § 2000e-2(a)(1). In its umbrella “Definitions”
section, Title VII defines the term “employer” (along with 12 other terms) as “a person engaged in
an industry affecting commerce 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, and any agent of such a
person . . .” Id. § 2000e(b). Congress included this employee-numerosity requirement “[t]o spare very
small businesses from Title VII liability.” Arbaugh v. Y&H Corp., 546 U.S. 500, 505 (2006).
For a time, a circuit split existed as to whether Title VII’s employee-numerosity requirement
was an element of a Title VII claim or a jurisdictional threshold that must be crossed to maintain a
cause of action in federal court, with the Fifth Circuit, among others, taking the latter position. See,
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e.g., Arbaugh v. Y&H Corp., 380 F.3d 219, 225 (5th Cir. 2004) (citing Dumas v. Town of Mt. Vernon,
612 F.2d 979–80 (5th Cir. 1980) (cited by Sherron)). In Arbaugh, however, the Supreme Court
resolved this division among the circuits by holding that “the threshold number of employees for
application of Title VII is an element of a plaintiff’s claim, not a jurisdictional issue.” Id. at 516.
Instead, the Court observed that the Act broadly authorizes the federal courts to exercise jurisdiction
over actions “brought under” Title VII and that Title VII is unquestionably a “la[w] of the United
States” for the purposes of establishing federal jurisdiction under 28 U.S.C. § 1331. Id. at 505.
Because all of Plaintiff’s claims in this matter are brought under Title VII, there is no question that
this Court has jurisdiction to adjudicate her dispute.
B.

Sherron’s Motion to Dismiss for Failure to State a Claim
Rule 12(b)(6) authorizes the court to dismiss a plaintiff’s complaint for “failure to state a

claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In considering a Rule 12(b)(6)
motion to dismiss, “[t]he court accepts all well-pleaded facts as true, viewing them in the light most
favorable to the plaintiff.” In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir.
2007)(quoting Martin K. Eby Constr. Co. v. Dall. Area Rapid Transit, 369 F.3d 464, 467 (5th Cir.
2004)). The court will “not look beyond the face of the pleadings to determine whether relief should
be granted based on the alleged facts.” Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999), cert.
denied, 530 U.S. 1229 (2000).
To survive a motion to dismiss, a plaintiff must plead “enough facts to state a claim to relief
that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “Threadbare
recitals of the elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “A claim has facial plausibility when the plaintiff
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pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Id. “The plausibility standard is not akin to a ‘probability
requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.
When well-pleaded facts fail to achieve this plausibility standard, “the complaint has alleged—but
it has not shown—that the pleader is entitled to relief.” Id. at 679 (internal quotations and
alterations omitted).
Here, Sherron argues that Plaintiff cannot establish a claim against it under Title VII because
no employment relationship ever existed between Plaintiff and Sherron, only between Plaintiff and
NAP. Def.’s Br. at 7. Sherron bases its argument on facts set forth in the Affidavits of DeAnna
Seward, the Property Manager at the Eagle Point Apartments, and Tom Armstrong, the Vice
President of Development and Construction at Sherron, and attachments thereto. Doc. 12-1, Seward
Aff. and Exhibits A-1–A-4; Doc. 12-7, Armstrong Aff. In response, Plaintiff argues that NAP was
Plaintiff’s employer on paper only; Plaintiff’s job duties, training, and obligation came directly from
Sherron and its owner C. Edward Springman, who according to Plaintiff, also owns, operates, and
manages NAP. Doc. 15, Pl.’s Resp. Br. at 3.
Before the Court can decide Sherron’s Rule 12(b)(6) motion, however, the Court must
determine how to treat the materials submitted by Sherron. It is well-settled that where a Rule
12(b)(6) motion to dismiss is supported by materials outside the pleadings, the Court may, in its
complete discretion, accept the materials and convert the motion into a motion for summary
judgment under Rule 56, or reject or ignore the materials. Isquith v. Middle South Utils., Inc., 847 F.2d
186, 193 n. 3 (5th Cir. 1988). It may not, however, accept the materials and consider the motion
under Rule 12(b)(6). Fed. R. Civ. P 12(d) (“If ... matters outside the pleadings are presented to and
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not excluded by the court, the motion must be treated as one for summary judgment under Rule 56,”
and “[a]ll parties must be given a reasonable opportunity to present all the material that is pertinent
to the motion”); Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999), cert. denied, 530 U.S. 1229
(2000) (stating that courts may “not look beyond the face of the pleadings to determine whether
relief should be granted based on the alleged facts”). In deciding whether to accept or reject material
outside the pleadings, courts will generally consider “whether or not the proffered material, and the
resulting conversion from the Rule 12(b)(6) to the Rule 56 procedure, is likely to facilitate the
disposition of the action.” 5 C. Wright & A. Miller, Federal Practice and Procedure § 1366 (3d ed.);
accord. Isquith, 847 F.2d at 193 n. 3.
After reviewing the material submitted by Sherron in support of its Rule 12(b)(6) motion to
dismiss, the Court concludes that it is not likely to facilitate disposition of this action. A two-step
process is required to determine whether a defendant is an “employer” under Title VII. “First, the
defendant must fall within the statutory definition. Second, there must be an employment
relationship between the plaintiff and the defendant.” Deal v. State Farm Cnty. Mut. Ins. Co. of Texas,
5 F.3d 117, 118 n.2 (5th Cir. 1993). Because, as discussed below, both of these steps require
factually-intensive inquiries, the Court concludes that it would be inappropriate to decide whether
Sherron was Plaintiff’s “employer” under Title VII until both parties have had the opportunity to
conduct discovery on the issue. Instead, the Court will merely review Plaintiff’s complaint to
determine if it states sufficient facts from which the Court can reasonably infer that Sherron was
Plaintiff’s employer.
Title VII defines “employer” as “a person . . . 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
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[and] any agent of such a person.” Id. “However, Title VII’s scope is not necessarily limited to direct
or titular employers. Superficially distinct entities may be exposed to Title VII liability when they and
the direct employer comprise a single, ‘integrated enterprise.’” Lavergne v. HCA Inc., 452 F. Supp.
2d 682, 689 (E.D. Tex. 2006) (citing Trevino v. Celanese Corp., 701 F.2d 397, 403-404 (5th
Cir.1983)). To determine when an integrated enterprise exists, courts consider four factors: (1)
interrelation of operations; (2) centralized control of labor relations; (3) common management; and
(4) common ownership or financial control. Chaiffetz v. Robertson Research Holding, Ltd., 798 F.2d
731, 735 (5th Cir. 1986); Trevino, 701 F.2d at 404. Of these factors, the Fifth Circuit has placed the
“highest importance” on the second, which it has narrowed to an inquiry of “what entity made the
final decisions regarding employment matters related to the person claiming discrimination.”
Chaiffetz, 798 F.2d at 735.
To determine whether an employment relationship exists between the defendant and the
plaintiff, this circuit applies a hybrid test that combines the elements of the economic realities and
common law control tests. Nowlin v. Resolution Trust Corp., 33 F.3d 498, 505 (5th Cir. 1994) (citing
Mares v. Marsh, 777 F.2d 1066, 1067 (5th Cir.1985)); see also Deal v. State Farm Cnty. Mut. Ins. Co.
of Texas, 5 F.3d 117, 118–19 (5th Cir. 1993); Fields v. Hallsville Indep. Sch. Dist., 906 F.2d 1017, 1019
(5th Cir. 1990). Under this hybrid test, courts focus on whether the defendant had the right to
control the means and manner of the plaintiff’s work in light of the economic realities of their
relationship, such as whether the defendant paid plaintiff’s salary, withheld taxes, provided benefits,
and set the terms and conditions of the plaintiff’s employment. Fields, 906 F.2d at 1019 (citing Mares,
777 F.2d at 1068).
In her complaint, Plaintiff alleges that Sherron is the owner of multiple alter ego companies,
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including NAP, that run individual apartment complexes like the Eagle Pointe Apartments, where
Plaintiff was employed as an Assistant Property Manager. FAC ¶¶ 5.03, 6.02. Further, “Sherron
would set up all policies and procedures for each of [its] alter ego companies.” Id. ¶ 6.02. Also,
according to Plaintiff, Sherron has at least fifteen employees. Id. Although Plaintiff confuses “alter
ego” doctrine, which allows a plaintiff to “pierce the corporate veil” and hold individual owners and
shareholder’s liable for a corporation’s actions, see Castleberry v. Branscum, 721 S.W.2d 270, 272
(Tex. 1986), with the “integrated enterprise” doctrine, which permits a Plaintiff to treat two or more
entities as one integrated employer for the purposes of establishing Title VII liability, see Trevino, 701
F.2d at 403–404, the Court nonetheless finds the allegations in Plaintiff’s complaint are sufficient
to support the reasonable inference that Sherron and NAP were an integrated enterprise that had
more than fifteen employees and with which Plaintiff had an employment relationship. As such, the
Court will permit Plaintiff to proceed with her claims to hold Sherron liable under Title VII.
III.
CONCLUSION
For the aforementioned reasons, the Court concludes that it has subject matter jurisdiction
over Plaintiff’s Title VII claims and that Plaintiff has stated plausible claims for relief against Sherron
under the theory that Sherron and NAP constituted an integrated enterprise. However, to proceed
under an integrated enterprise theory of liability, Plaintiff must name as defendants both companies
that comprise the integrated enterprise. Trevino, 701 F.2d at 403. Accordingly, the Court hereby
DENIES Sherron’s Motion to Dismiss, but directs Plaintiff to amend her complaint by no later than
Monday, June 22, 2015 to add NAP as a defendant. Failure to do so will result in dismissal of
Plaintiff’s case.
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SO ORDERED.
Dated: June 3, 2015.
_________________________________
JANE J. BOYLE
UNITED STATES DISTRICT JUDGE

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