3rd Circuit tosses sex bias lawsuit by law firm shareholder

A woman lawyer cannot sue her firm for sex discrimination if her status as a shareholder and director gives her the ability to participate in firm governance and a percentage of firm profits, the 3rd U.S. Circuit Court of Appeals has ruled.

The ruling is a victory for Pittsburgh firm Dickie McCamey & Chilcote and means that attorney Alyson Kirleis' four-year court battle with the firm has ended with a fizzle as the appellate judges issued a tersely worded, four-page, nonprecedential opinion that adopted the lower court's reasons for dismissing the case on summary judgment.

"We cannot agree that Kirleis is a mere employee of DMC, and our review of the record supports the district court's conclusion in this regard," Senior U.S. Circuit Judge Jane R. Roth wrote.

Kirleis' remaining options have now dwindled to statistically unlikely ones -- seeking a rehearing before all 14 judges on the 3rd Circuit or petitioning the U.S. Supreme Court to take up her case.

Her lawyer, Edward B. Friedman of Friedman & Friedman in Pittsburgh, declined to comment except to say that he does intend to seek rehearing before the full court.

"We're gratified by the 3rd Circuit's affirming of the judge's decision and pleased that the firm has been vindicated," said Jeffrey T. Wiley, the managing director and chief operating officer of Dickie McCamey.

Roth, who was joined by Judges Julio M. Fuentes and Ruggero J. Aldisert, noted that Kirleis, as a Class A shareholder at Dickie McCamey, has the right not to be terminated without a vote by a supermajority of the firm's board.

As a result, Roth concluded that Kirleis was unable to qualify as an employee under the multifactor test created by the U.S. Supreme Court to decide whether a worker should be deemed an employer or an employee.

And since only employees have the right to sue for sex discrimination, Roth found that U.S. District Judge Arthur J. Schwab of the Western District of Pennsylvania was right to dismiss the case.

Kirleis' latest appeal had the potential for breaking legal ground if she had succeeded in establishing that some law firm partners are not equal to their fellow partners and ought to be allowed to pursue employment discrimination claims such as suing for equal pay.

In her first appeal, Kirleis set a legal precedent when the 3rd Circuit held that she could not be forced to arbitrate her claims, rejecting the firm's argument that its bylaws mandate arbitration.

But when the case was remanded, Schwab granted summary judgment in favor of the firm on the grounds that Kirleis cannot be considered an "employee" of the firm.

In a second appeal, Kirleis was asking the 3rd Circuit to revive her case, arguing that despite her titles of shareholder and director, she should be treated as an employee because her work is "subject to the control of" the firm's 13-member executive committee.

Supporting Kirleis was an amicus brief from the Women's Law Project in Philadelphia, the National Women's Law Center and the National Partnership for Women and Families, that criticized Schwab's decision as one that "relied on a mistaken view of how law firms currently function and misapplied the appropriate legal standard, denying Kirleis a day in court." In the suit, Kirleis accused Dickie McCamey of paying female lawyers less than males and alleged she was told by a male partner that a woman with children should relinquish her partnership and work only part-time.

Kirleis, who has worked at the firm since 1988, also claimed she was told by another male partner that the role of women lawyers was to prepare lawsuits for trials that would be handled by male lawyers. The suit also included allegations that Kirleis has suffered retaliation since her suit was filed, and that Dickie McCamey's annual Christmas party is effectively closed to women "because of the sexually explicit nature of the entertainment including skits, songs, pornographic materials and props." In an October 2009 decision that dismissed the suit, Schwab concluded that Kirleis is barred from suing because of her status.

Schwab said he recognized that a partner in a law firm "should not automatically be deemed an employer" under the U.S. Supreme Court's 2003 decision in Clackamas Gastroenterology Associates v. Wells.

In Clackamas, the justices said that the "touchstone" of the inquiry into whether a worker may sue as an employee is "control," and instructed lower courts to consider several factors to determine whether an organization exercises control over the plaintiff, such as hiring and firing, supervision, hierarchy, liability, and influence.

But Schwab found that applying the Clackamas test to Dickie McCamey showed that the Class A partners at the firm cannot be treated as employees.

"The indicia of control and ownership in traditional large firm partnerships tilts toward recognizing equity partners as employers and not employees, although all factors must be considered," Schwab wrote.

Kirleis, he said, "shares many of the attributes of traditional equity partners in a large law firm partnership. She owns DMC as much as any other Class A shareholder/director owns it, including members of the executive committee and its officers, and she shares in its profits, losses and liabilities, unlike those employees and associate attorneys whose salaries are fixed." On appeal, Kirleis argued that Schwab's analysis of the Clackamas test was flawed at every step, and that her status as a shareholder and director of the firm was merely a "rubber-stamp" function.

The appeal said Dickie McCamey's executive committee -- and not its board -- sets all hourly billable rates, makes compensation decisions, and sometimes forces shareholders to resign.

But the 3rd Circuit was unimpressed and concluded that Kirleis must be considered an employer "as a matter of law" because of her position on the board, her sharing in profits, and her status as someone who could be fired only if 75 percent of the board voted to do so.

Roth closed the short opinion with a ringing endorsement of Schwab's ruling, saying "for these and all of the other reasons set forth in the district court's thorough opinion, we find that Kirleis is an employer at DMC" who is therefore "precluded from bringing claims under the employment anti-discrimination laws." Dickie McCamey's lawyers -- Martin J. Saunders and Sunshine R. Fellows of Jackson Lewis in Pittsburgh -- could not be reached for comment.

(Published by Law.com – July 20, 2010)