Equal Employment Opportunity Commission v. Peat, Marwick, Mitchell and Company
775 F.2d 928
8th Cir.
1985
Check Treatment

*1 judgment the district court 914; O’Connor 95 N.W.2d Iowa at part Ass’n, part in and reversed in 224 Iowa affirmed Loan Savings & Home v. (1938). proceedings con- case is remanded N.W. opinion. with this director defend- sistent court held district contract. On had not breached ants urge that plaintiffs

appeal, GUG failing to determine whether

erred of the con- statutory terms

breached of this the merits do not reach

tract. We re- case will be

challenge. Because this court grounds, the district other

manded on issue, particular

should reconsider first, whether the points: to two attention EQUAL OPPORTUNI- EMPLOYMENT Shockley, v. Swanson recent decision COMMISSION, Appellee, TY (Iowa 1985), affects 364 N.W.2d second, relief on this claim; recovery duplicative claim would be MARWICK, PEAT, AND MITCHELL recognized right of action implied on the COMPANY, Appellant. above. No. 84-1869. complain about certain also Plaintiffs Appeals, that on We are satisfied jury instructions. United States Court retrial, Eighth the district court will jury, if to a Circuit. requested instruc- carefully consider 18, 1985. Submitted Jan. therefore light opinion. of our We tions in arguments. consider these need not further Oct. Decided Finally, plaintiffs contend that sharehold- adequate notice before not receive

ers did Insurance hearing held the Iowa find no error in the We

Commissioner. ruling court’s on this issue.

district major

The defendants raise four including appeal, stockholder

defenses on causation,

ratification, lack of dam lack of reject the ratification

ages, and laches. We

defense, merely a variation defendants should

argument have liability they could

escape all because For the merger.

properly executed reason, is mer the causation defense

same properly was The laches defense

itless. court, any argu

rejected by the district damages may present regarding

ments Finally, we conclude on remand.

ed its discre court did not abuse

the district plaintiffs refusing to award the

tion in charging party each

attorneys’ fees or Industries costs. See J.E.K. own (8th Shoemaker, Cir. F.2d Co.,

1985); v. Monsanto Robinson Cir.1985). (8th *2 LAY,

Before Judge, Chief and JOHN R. PAGG, GIBSON and Judges. Circuit FAGG, Judge. Circuit Peat, Marwick, (PM) Mitchell & Co. ap- peals from an order of the district court requiring produce it to subpoe- documents Equal naed Employment Opportuni- ty (EEOC). Commission We affirm. May In began the EEOC investi- gating the practices retirement policies of PM in an effort to determine whether practices policies are violative of the Age Employment Discrimination in Act (ADEA), 29 seq. U.S.C. 621 et In accord- § ance with the investigatory powers granted 7(a) it under ADEA, section 626(a), U.S.C. subpoenaed doc- § PM bearing upon uments of “the relation- ship of members to the firm and members vis-a-vis members” and relating policies. After PM comply refused to with the subpoena, the EEOC initiated this enforce- ment proceeding in the district court. In response to the EEOC’s for an why order to show cause enforced, contended, should not be PM things, (1) other the informa- sought by tion the EEOC is not relevant to any legitimate EEOC; (2) interests of the the EEOC’s efforts to subpoe- enforce the pro- na amount to an abuse of the court’s faith; (3) good cess and are not in enforcement of the would violate rights various constitutional of PM and its court, F.Supp. members. The district ordered enforcement of the granted stay and also motion PM’s en- produce pending forcement of the order to appeal. this primary argument appeal PM’s on is that should not be enforced be- cause the EEOC’s is not for a legitimate purpose by Congress. authorized prohibits The ADEA discrimination an employer against employee prospec- or Earle, III, City, Victor M. New York for employee age. tive on the basis of See appellant. 623(a). PM U.S.C. contends that its Mastroianni, Peggy D.C., Washington, R- ners under the ADEA appellee. for they but rather fall within the definition Act, 343; Donovan, employers in the see U.S. at S.Ct. at provided PM, 989; Quick Inc., Markets, 630(b). Thus, according Shop F.2d at U.S.C. § coverage ques- investigation of the relation- 526 F.2d Often a employers, to the tion cannot be resolved until the adminis- partners, ship of agency opportunity other and its trative had an firm and to each subpoenaed practices and examine records. Endi- retirement *3 343; cott, 508-09, legitimate pur- 317 U.S. at 63 S.Ct. at is for a the Donovan, 668 F.2d by Congress. pose authorized *4 argues production PM also whether partners partners that the PM are purposes of the documents violates constitutional of the It has served the rights. address this partnership We decline to issue as tecum, a duces by the requesting it was not ruled on district court. potentially partnership sensitive documents, to make this determination. We affirm. observes, As today it is settled GIBSON, Judge, JOHN R. Circuit dis- that under Oklahoma Press Publishing senting. 186, Co. v. Walling, 327 U.S. 66 S.Ct. (1946), 90 L.Ed. 614 the EEOC is authoriz- I what the am troubled with court does ed to make the initial determination as to today. I either the do not believe statute who is covered the within definitions set today’s precedent or result. allows Nor do by ADEA, out may subpoena the and doc- I think such a result was intended or antici- uments for purpose. this This authority, pated by Congress. I therefore respectful- however, a significant limitation. Un- ly dissent. Powell, der United States U.S. Age Congress enacted the Discrimination (1964), S.Ct. 13 L.Ed.2d the (ADEA), Employment Act 29 U.S.C. investigation EEOC “must show the will be seq., prevent employers et from § pursuant legitimate pur- conducted to a discriminating against their on pose.” partnership, PM is a employer age. the basis of 29 U.S.C. 623. Con- § agree under the ADEA. I cannot gress Equal Employment authorized the relationships (EEOC) Opportunity Commission to en- partners supported PM is a force the ADEA. The definitional section legitimate purpose. of the statute reflects the limitations Con- The gress record before district court on the intended to set makes a partnership. clear that PM is PM “Employee” of the ADEA. 630(f), commonly accepted possesses defined in with certain attrib- U.S.C. § specific here, partners utes of Its exceptions partnership. relevant a make not by any capital, profits “an share employed employer.” individual contributions to and 630(b) losses, “Employer” is in 29 partnership defined U.S.C. and vote on matters. person engaged industry partners sign partnership as a in an The affect- must ing commerce, turn, “person” agreement partners approve and must all Peat, agreement. including partnership. defined as amendments to the The Marwick, (PM) entire on partner- partnership Mitchell is a votes candidates for & Co. agree ship. question The us is admission. Partners must before whether devote professional empowered investigate EEOC is re- all their time attention to partnership lationships among, partner- partnership. of a The files members ship, “person” “employer” partnership hence an tax returns and information partners. within the under Form K-l to its definitions ADEA. Con- distributes suggest the ADEA even employment does enter into partnership does play a role in the relation- partners. The EEOC should any of the agreements ships among partners. the role of distinguishes clearly record employees.1 of their from that partners PM concurring opinion in Hi- Justice Powell’s clear in EEOC made significantly, Most Spalding, King & shon contending that “not that it was open court 2229, 2236, -, 81 L.Ed.2d (Tr. 25) p. partnership.” PM is a sham VII, (1984), deals with Title con- suggest despite seems to The EEOC opin- firms this view. As Justice Powell’s record, simply because apparently clear, this intend to Congress did not ion makes partners, some number of large has a management of a Title VII to the extend part- something than less partners may be partners characterize law firm its or to 1,375 firm of in a argues It ners. relationship among partners as an “em- those partners,2 it is debatable relationship to Title VII ployment” interest, physically or equity minute with a apply. at 69-70.3 Title VII con- would Id. partic- effective from or otherwise isolated analogous to those tains definitions or control of management ipation in the of PM affairs, partners within directly thus runs at odds with Hishon. exemp- statutory the ADEA’s meaning of and Powell Certainly Press to assert that It seeks employers. tion for questions sustain the view may of PM be labeled some members determined in the first instance ners, purposes are not. for ADEA but coverage is a agency. But in this case *5 but with here not with labels We deal Furthermore, question of law. settled relationships. The acknowledged legal inquiry is argued if that a factual even it is expressly calls for documents relevant, unique record in this case relationship of members bearing upon “the legal the existence of a relation- establishes mem- vis-a-vis to the firm and members scope of the stat- ship falling outside the argument upon based bers.” The EEOC’s ute, relationship has been estab- “employee” and statutory definition of not to be a lished and has been admitted that “it “employer,” its conclusion and circumstances, these Powell sham. Under partner- of a that a member doesn’t follow brought be dictates that (Brief p. employee,” ship can never be legitimate pursuant halt as not to to a 14) confuses the definitions clouds and production of purpose and analysis creates a case the statute. Its compelled. not be time might at the same an individual which as to the A serious issue exists further The en- employer employee. and both be per- subpoena. The of the EEOC’s breadth protect to em- tire of the ADEA is thrust subject to of a missible breadth em- relationship their ployees in their require- fourth amendment reasonableness lan- in the ployers. There is no evidence ments, Press, at legislative histo- or its guage of the statute 505-06, only mandate that pro- to ry Congress perceived a need to the specifically relevant those documents Nowhere partners tect from one another. thoroughly agency has con- questioning how profits, bear Employees do not do not share 1. losses, responsible for case. of and are not sidered its the risk management practice and offices. of the firm’s report may sign They the firm’s name to a not partnership both have considered 3. Other courts process engaged part in the electoral or take corporations outside the professional and partners. Friedman, scope VII. Burke v. of Title Dowd, (7th Cir.1977); & EEOC v. Dowd position underpinnings of its The shallow (7th Cir.1984). Ltd., EEOC F.2d 1177 EEOC brief a statement in the best illustrated distinguish involve attempts these cases that to partners nationwide. have 300 that PM legal organizations. This overlooks the small (Brief 13) readily admits and p. 17 ri. emphasis primary relationship was the public that PM has some information states of these cases. in each 1,375 inaccuracy partners. leaves me Such produced. inquiry stated need be Here permits sult which powers EEOC broad stated of EEOC’s is to compel the disclosure of information determine whether PM is covered partnerships from outside the scope of its go Yet it seeks documents that statutory authority. merely but to substantive Oklahoma Press and Powell underscore questions possible of whether there are the concern improper investigatory ac- Among violations. the PM documents sub- tivity. Here the specifically EEOC directs poenaed by the relating EEOC are those its efforts toward a partnership. In so and doing, the steps outside the bounds partners. its These documents have no investigatory authority established in reasonable relevance to whether PM’s 626(a). 29 U.S.C. I would reverse subject ners are proscriptions order quashed. presents This question case of wheth-

er the power EEOC has unlimited to ac-

quire all relevant records of a business

entity Congress place did not within the ADEA. PM is one professional

thousands of or- business ganizations employing FLITTIE, Roger George Appellant, legal form of structure. The court’s deci- therefore, today, sion has broad conse- SOLEM, Warden, Herman South Dakota quences implicates serious concerns. Penitentiary; State and Mark V. Meier- majority relies on Oklahoma Press henry, Attorney General, State of South appreciating without the careful balance Dakota, Appellees. Supreme Court (the struck between im- portant public private interests at No. 84-1248. stake. compro- Oklahoma Press reflects a Appeals, United States Court of public mise between the interests and the Eighth Circuit. *6 private interests “of men to be free from intermeddling, officious whether because April Submitted irrelevant to lawful or because 14, 1985. Decided Oct. law, unauthorized concerning matters proper which on occasion and within law-

fully conferred authority of broad limits subject public examination in the

public interest.” 327 U.S. at Rutledge noted, As Justice

“(o)fficious examination expensive, can be

so much so up that it eats men’s substance.

It can consuming, be time clogging the

processes of business.” Id.

We deal here with a

admittedly is not a If partnership sham. something

is in fact other than that form of

organization, principles apply. different A

distinctly different situation was involved

in Oklahoma Press and the cases on which relied, Congress’s

it where commerce power brought

clause enormous numbers firms within the of the Fair Labor I

Standards Act. cannot sanction this re- notes determination that showing The EEOC “The of reasonable cause “[a] employee is an an individual required support of whether to en an for by protections the therefore covered forcement of a duces tecum ‘is on the label ADEA should not center the satisfied ... court’s determination [the] give organization investigation has chosen the is authorized Con order, purpose First Catholic for a position.” gress, Congress to the EEOC v. can 1068, Association, F.2d sought Ladies 694 and the documents are relevant to Slovak ” Cir.1982), (6th denied, Donovan, 464 inquiry.’ 1070 cert. U.S. the 668 F.2d at 989 819, 80, (1983). 209, Press, (quoting 104 S.Ct. 78 L.Ed.2d 90 327 U.S. at Oklahoma 505-06). at Sig v. 66 S.Ct. also United North American See See Zimmerman Powell, 48, 57-58, (7th 85 Co., 347, n. 4 v. 379 U.S. 704 F.2d 352 and States nal 248, 254-55, (1964); 112 Cir.1983). S.Ct. 13 L.Ed.2d that it has sub EEOC maintains Co., States v. 338 U.S. to United Morton Salt the records PM in an effort poenaed of 632, 652-53, 368-69, 357, 70 S.Ct. 94 L.Ed. that PM whether individuals determine (1950). investigation 401 The of EEOC’s “partners” fall within the defi classifies as PM is in an effort to determine “employees” purposes of the of for nition practices policies dis ADEA. against classified as criminate individuals Congress established the purposes for employees body empow the EEOC as administrative Thus, legit for a investigate of the ADEA ered to violations by Congress. imate authorized given subpoena power and has the EEOC questioned relevancy the PM has not the of carry investigations. in order to out its subpoenaed by the EEOC to a documents in authority investigate violations of this question. determination investigate authority cover cludes argues PM also district court that Shaw, age under the v. statute. Donovan in enforcing committed error (8th 985, Cir.1982). no F.2d 989 It can 668 abusive, unreasonable, it is not in because en longer disputed “a be that faith, good of the constitution- violative proper fo proceeding forcement is not the In this rights of PM and its members. al question of litigate rum in argues EEOC has regard, a particular under federal stat attempted made or to make a show- never Id. at 989. Press ute.” See Oklahoma partners may in fact be ing that PM’s 186, v. 327 U.S. Publishing Walling, Co. ADEA, or purposes 214, 494, (1946); 508, L.Ed. 614 66 S.Ct. 90 reason that PM’s it has to believe Perkins, v. 317 Corp. Endicott Johnson retirement 501, 509, 339, 343, 87 L.Ed. U.S. 63 S.Ct. of violative (1943); Express, Roadway 424 EEOC v. 40, Cir.1984); to make Inc., (6th required The EEOC is not 750 F.2d 42 indicated, Quick Inc., showing. previously As Shop Markets, 526 F.2d such Cir.1975). (8th must show that its initial determina the EEOC 803 legitimate purpose to the authorized coverage question is left is for tion of subpoe Congress and the documents agency seeking enforcement administrative Press, inquiry. relevant Okla subpoena. 327 to its naed of Endicott, Press, at 508; at 66 S.Ct. U.S. S.Ct. at homa U.S. made, gress 505-06. If this demonstration is did not govern intend ADEA subpoe relationships among partners EEOC is entitled to the nor did it au- judicial investigate naed unless PM demonstrates that thorize the EEOC to such rela- tionships. enforcement would process. the court’s amount to abuse of contrary The EEOC to the contends that 57-58, Powell, 379 U.S. at 85 S.Ct. at 254- just enterprise because a business calls it- 55; Lask, see United 703 F.2d States self a partnership, participants and the Cir.), denied, (8th cert. enterprise partners, call themselves (1983); L.Ed.2d 107 purposes does not for ADEA make it Corp., EEOC v. K-Mart perceives so. The EEOC the issue as one (6th Cir.1982). presented PM has no of legal labels rather relationships. than evidence or an of bad faith abuse only The EEOC claims that it has the au- process by court’s the EEOC. thority to determine in the first instance ordering