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Nesbit v. Gears Unlimited

October 21, 2003


Appeal from the United States District Court for the Middle District of Pennsylvania (D.C. Civil Action No. 99-cv-00655) District Judge: Honorable Yvette Kane

Before: Nygaard, Roth and Ambro, Circuit Judges

The opinion of the court was delivered by: Ambro, Circuit Judge


Argued March 22, 2002


Title VII of the Civil Rights Act of 1964 prohibits companies employing "fifteen or more" persons from discriminating on the basis of sex in hiring, discharge, compensation, or terms of employment. 42 U.S.C. §§ 2000e(b), 2000e-2(a)(1). Norma Nesbit alleges that Gears Unlimited, Inc. ("Gears") terminated her employment as a machine operator because of her sex. She concedes that Gears did not employ fifteen persons during the pertinent time period, but argues that we should also count the employees at a related entity, Winters Performance Products ("Winters"). Together, Gears and Winters had more than fifteen employees. We hold that the District Court properly refused to aggregate the number of employees at these companies. Because Title VII does not cover Gears by itself, we affirm the dismissal of Nesbit's complaint. But we part with the District Court on the path to this result. It viewed Title VII's "fifteen or more" person requirement as jurisdictional. We affirm the dismissal of Nesbit's complaint on the merits rather than for lack of subject matter jurisdiction.


In 1973, Vaughn Winter, Sr. ("Vaughn Sr.") founded Winters, which manufactures "rear ends" for highperformance automobiles. In 1990, he acquired Gears, a transmission parts manufacturer. Vaughn Sr. and his wife, Madeline Winter ("Madeline"), also formed Maverick Industries, Inc. ("Maverick"), which warehouses automotive parts, including parts produced at Winters. At the time of the events relating to this suit — December 1994 through August 1997 — Vaughn Sr. had a stake in three automotive companies: Gears, Winters, and Maverick.

The Winter family shares ownership and control of these three companies. Vaughn Sr. owns ten percent of Gears, with the remainder held in trust in equal shares for his children — Nina and Vaughn Jr. Vaughn Sr. is president of Gears and his children are corporate officers. He and Madeline own Winters and Maverick in equal shares. He is president of Winters and Maverick, and Madeline is the Secretary/Treasurer at Winters.

Gears and Winters occupy separate plants about one mile apart in York, Pennsylvania. In almost all respects, they operate independently. Their products are distinct — Gears produces transmissions and Winters produces automotive rear ends — and each company has its own equipment and production lines. Winters contracts to buy parts from Gears at market rates. The companies maintain separate financial records and payrolls, write separate checks, and file separate tax returns.

Vaughn Sr. monitors operations at both Gears and Winters. While he participates in day-to-day management at Winters, Gears is managed by Randy Lau. Vaughn Sr. testified that he visits the Gears facility only about twice a month, usually because a machine has broken down. Nesbit disputes this testimony, contending that Vaughn Sr. spends time at Gears "pretty much every day."

The only area in which Gears and Winters cooperate considerably is in hiring. Typically, if either Gears or Winters has an opening, a Winters employee will place a "help wanted" sign on the street in front of the Winters building. Prospective employees obtain applications at the Winters front office and return them there as well. If Winters is hiring, either Vaughn Sr. or his wife will invite qualified applicants for an interview. If Gears has an opening, someone at Winters will communicate with the applicant on Lau's behalf and then direct him or her to the Gears plant to interview with Lau. The hiring decision is then Lau's "prerogative." However, Vaughn Sr. (who, as noted above, normally does not participate in Gears management) can request that Gears hire a particular applicant and Gears will generally do so. Either Lau or the Winter children normally decide whether to terminate an employee, but Vaughn Sr. testified that he could ask Gears to fire an employee who engaged in significant misconduct.

On December 14, 1994, Nesbit submitted a standard employment application to Winters for a machine operator position. That day, either Vaughn Sr. or Madeline interviewed her.*fn1 The interviewer concluded that no available positions at Winters would be suitable for Nesbit and instead referred her to Gears, which hired her as a machine operator.*fn2 Vaughn Sr. personally accompanied Nesbit to meet Lau, but the parties dispute whether Vaughn Sr. or Lau actually made the hiring decision.

Nesbit remained at Gears for two years and eight months. She perceived that Lau was her "boss" and was "more or less in charge" at Gears. Occasionally she also worked an extra shift at Winters following her regular shift at Gears. She would punch out on the time clock at Gears and then punch in at Winters. When working a Winters shift, she received a separate paycheck. Her hours at the two plants were not consolidated for overtime pay.

On August 19, 1997, Nesbit's machine at Gears "crashed," leaving it unusable without repairs. Nesbit became upset, which apparently caused her to develop a headache and neck pains. She informed the acting supervisor, Greg Pell, that she was leaving work to visit her chiropractor. When she returned the next day, Lau was on vacation, and Vaughn Sr. discharged her for insubordination.

After receiving permission from the Equal Employment Opportunity Commission, Nesbit filed suit in the United States District Court for the Middle District of Pennsylvania alleging that Gears discriminated against her because of gender. Gears moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction on the basis that it employed fewer than fifteen persons during the relevant time period and therefore was not an "employer" subject to Title VII.

Nesbit then filed an amended complaint alleging that Gears and its "associate corporation" Winters Transmission, Inc. — a company different from Winters that Vaughn Sr. owned from 1955 to 1985 — were really a single employer with more than fifteen employees. Gears moved again for a dismissal, this time observing that the entity called "Winters Transmission, Inc." had ceased operation long before Nesbit began working at Gears. Nesbit then filed a second amended complaint, alleging that Gears and Winters are associate corporations that together meet the fifteen-employee threshold. On the basis of that allegation, the District Court ordered discovery limited to the question whether Gears and Winters constitute a single employer under Title VII. Following discovery, the District Court issued a memorandum and order in which it concluded that Gears and Winters are separate entities and, because Gears unquestionably employs fewer than fifteen persons by itself, dismissed Nesbit's complaint for lack of subject matter jurisdiction. This appeal followed.


A. Is the Number of Employees a Jurisdictional Requirement?

We first address whether Title VII's fifteen-employee threshold is a jurisdictional prerequisite — as the District Court believed it was in dismissing Nesbit's complaint pursuant to Rule 12(b)(1) — or whether it is a substantive element of a Title VII claim. Whether an aspect of a claim concerns subject matter jurisdiction or the merits has at least three implications. First, because subject matter jurisdiction is non-waivable, courts have an independent obligation to satisfy themselves of jurisdiction if it is in doubt. See Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 278 (1977). A necessary corollary is that the court can raise sua sponte subject-matter jurisdiction concerns. Second, if the fifteen-employee requirement is not jurisdictional, a Title VII claim for which the number of employees is in doubt nonetheless will support supplemental jurisdiction under 28 U.S.C. § 1367 over state claims. Da Silva v. Kinsho Int'l Corp., 229 F.3d 358, 362 & 365 (2d Cir. 2000); 13B Wright, Miller & Cooper, Federal Practice and Procedure § 3564, at 73-5 (2d ed. 1984). Third, in most contexts the question will be important to the plaintiff 's burden of proof. If an aspect of a claim concerns jurisdiction, and when jurisdiction turns on whether a particular fact is true as here (as opposed to whether the complaint sufficiently alleges jurisdiction on its face), a court may inquire into the jurisdictional facts without viewing the evidence in a light favorable to either party. See Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). By contrast, if an aspect of a claim concerns the merits, on a Rule 12(b)(6) motion to dismiss for failure to state a claim a court must accept the complaint's allegations as true, United States Express Lines Ltd. v. Higgins, 281 F.3d 383, 388 (3d Cir. 2002); on a Rule 56 motion for summary judgment it must view the evidence in the light most favorable to the non-moving party and, if there are disputes over genuine issues of material fact, they are for the jury to resolve, Huang v. BP Amoco Corp., 271 F.3d 560, 564 (3d Cir. 2001).

1. Relevant Caselaw

The question whether Title VII's fifteen-employee threshold is a jurisdictional prerequisite when a plaintiff brings a colorable Title VII claim has divided the courts of appeals.*fn3 The Second and Seventh Circuits conclude that it is a substantive element that the plaintiff must prove unless the claim that there are fifteen employees is so obviously unfounded that it fails to raise a genuine federal controversy. Da Silva, 229 F.3d at 364-65 (2d Cir.); Johnson v. Apna Ghar, Inc., 330 F.3d 999, 1001-02 (7th Cir. 2003), petition for cert. filed, 72 U.S.L.W. 3021 (U.S. Sept. 2, 2003) (No. 03-354); Papa v. Katy Indus., Inc., 166 F.3d 937, 943 (7th Cir. 1999); Sharpe v. Jefferson Distrib. Co., 148 F.3d 676, 677-678 (7th Cir. 1998). Moreover, the D.C. Circuit has held the Americans with Disabilities Act's ("ADA") fifteen-employee threshold an element ...

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