Three years ago, the U.S. Supreme Court ruled that equal employment opportunity laws apply to decisions on whether or not an associate is made partner in firms organized as partnerships -- a typical setup in law, accounting, medicine and management consulting. Since then, lower courts have been working at applying the reasoning behind that decision to a variety of personnel squabbles.
Three decisions this summer begin to fill in some of the gaps left by the high court opinion.
Both the U.S. District Court in Manhattan and the U.S. Court of Appeals in Denver had to decide whether, once a salaried worker is elevated to partner status, he or she loses the protections against bias-based firings that "employes" have. On July 14, the District Court said no, that the protections are still in place. Thirteen days later, the appellate court came to just the opposite conclusion -- that federal bars against firing because of sex or race do not apply to partners. But, in fact, the two courts used pretty much the same kind of analysis, and the differences between the two decisions have more to do with the makeup of the partnerships than they do with different interpretations of the law.
The consultant who won his case in Caruso v. Peat, Marwick, Mitchell & Co. managed to impress the judge with how little control he had over the firm's operations. He had no ownership stake and, although he received an annual bonus based on profits, most of his compensation came from a salary.
Similarly, the accountant who filed the case before the Denver court, Wheeler v. Main Hurdman., tried to show her lack of clout within the firm, and that making partner changed neither her client load nor her relationship with her boss. But key differences were that, by making a contribution to capital, she had acquired an ownership position in the partnership, and her compensation was based entirely on a share of profits, with her monthly checks being considered merely a draw against that distribution. To the judges, that added up to something different from a mere employe. In those cases, at least the plaintiffs had made partner.
On Aug. 4, the U.S. Court of Appeals here in Washington had to deal with a situation like the one that produced the Supreme Court ruling: a disgruntled employe who was passed over for partnership. The high court had made clear that a plaintiff who feels that unlawful bias is behind a turndown can sue, but it did not define what is unlawful bias. Advocates and opponents of Ann Hopkins, the senior manager who sued Price Waterhouse when she was not made partner, agreed on her strengths and weaknesses. She was a top producer -- bringing in, by her count, more business than any of the men being considered for partner in her class -- but she was also rated (perhaps not unrelatedly) as extremely aggressive, demanding and impatient with staffers. Hopkins convinced the judges that such a reputation would not be a bar to a man's winning partnership.
In other cases, courts ruled that: A spiteful employe can get a whole company in trouble. A computer maker sued a software company, claiming that bad-mouthing by one of its employes caused the manufacturer's backer to cancel a $500,000 line of credit. The trial court threw out the suit, but the U.S. Court of Appeals in Richmond decided that there may be some merit in the action. The employe was angry because the computer maker had gone over his head and obtained from his bosses a better price on the software they were buying than he had quoted. If his later conversations about the firm were motivated by spite rather than legitimate business reasons, then his employer may well be guilty of an unfair trade practice, the judges said. (BVI v. Microsoft, Aug. 11) Former owners of a company can continue its legal battles, if they do it correctly. The four shareholders of a commuter airline sold the firm, but only after buying, for $15,000, its rights to pursue an antitrust suit against a major airline. The U.S. District Court in St. Paul has now approved the deal. Given all the costs and risks of litigation, $15,000 is not an unreasonable price for a suit that might produce millions, the opinion says, and anyway the amount paid for something under a business contract does not have to equal its value. Without a formal assignment of the right to sue, however, the former shareholders would not be able to press the suit. (Fischer Bros. v. NWA, Aug. 13) A shipping line can insist on being paid its published tariffs for handling cargo, even if it quoted a customer a lower rate. The U.S. Court of Appeals in San Francisco, is a dispute over a container of billiard tables bound for Saudi Arabia, decided that the 1916 Shipping Act allows the line to sue to enforce the rate cards it files with the Federal Maritime Commission. The statute itself is not clear on the issue. But the approval given the line by the San Francisco judges is consistent with older opinions from three other regional courts of appeals. (Sea-Land v. Murrey & Son's, Aug. 10)Moskowitz covers legal affairs for McGraw-Hill World News.