White Worker Raised Plausible Bias Claims Against Japanese Company, U.S. Subsidiary

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By Jay-Anne B. Casuga  

June 27 — A white, U.S.-born former employee of a New York chemical manufacturer who was fired in a workforce reduction raised plausible race and national origin bias claims against the company and its Japanese parent company, the Second Circuit ruled June 27.

The appeals court vacated the dismissal of Todd Brown's Title VII of the 1964 Civil Rights Act and New York State Human Rights Law claims against Osaka, Japan-based Daikin Industries Ltd. and New York's Daikin America Inc., and remanded the suit to a district court for further proceedings.

The Second Circuit found that Brown sufficiently alleged that the two companies acted as a “single integrated enterprise,” with Daikin Industries purportedly exercising “centralized control” over Daikin America by directing the subsidiary to discharge only non-Japanese employees in the reduction-in-force.

In addition, the court held that Brown's complaint contained sufficient allegations that he was selected for termination “under circumstances giving rise to an inference of discrimination.” Specifically, Brown alleged that similarly situated Japanese employees in the new business development group received more favorable treatment, the court said.

Judge Susan L. Carney wrote the opinion, joined by Judges Gerard E. Lynch and Raymond J. Lohier.

Parent, Subsidiary Are ‘Single Integrated Enterprise.'

The appeals court explained that it has adopted a four-part test to determine when a parent company like Daikin Industries may be liable to its subsidiary's employees under Title VII and the NYSHRL.

It said the lower court found that Brown failed to sufficiently allege one main element of that test, namely that Daikin Industries and Daikin America had “centralized control of labor relations.”

Disagreeing, the Second Circuit pointed out that Brown alleged in his complaint that Daikin America was required to have Daikin Industries' approval for all significant employment actions and that the parent company prohibited the subsidiary from reassigning or discharging rotational employees from Japan.

“Taken together, these allegations sufficiently suggest that DIL exercised centralized control over Daikin America's decisions about which employees to terminate in the course of the workforce reduction, and that DIL, by protecting Japanese employees from discharge, effectively ensured that employees of other races or national origins, like Brown, would be terminated,” the court said.

Plausible Race, National Origin Bias Claims

Additionally, the Second Circuit found that Brown set forth plausible allegations of race and national origin bias in his complaint to avoid dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

Brown adequately alleged that the Daikin companies treated similarly situated Japanese employees more favorably, which raises an inference of impermissible discrimination, the court said.

For example, it said, Brown sufficiently claimed that he and his Japanese co-workers were similarly situated because they had a common employer, mostly reported to the same supervisor and were subjected to the “same performance evaluation and disciplinary standards.”

The “allegations sufficiently suggest that DIL exercised centralized control over Daikin America's decisions about which employees to terminate in the course of the workforce reduction, and that DIL, by protecting Japanese employees from discharge, effectively ensured that employees of other races or national origins, like Brown, would be terminated,” Judge Carney wrote.

The court added that Brown also plausibly alleged that Japanese employees received better treatment, given that his new business development group included three white Americans and three Japanese employees and that only the Americans were terminated or transferred following a 2009 workforce reduction.

Although the companies may have legitimate, non-discriminatory reasons for its RIF selections, the court said that issue can't be “properly decided on a motion to dismiss for failure to state a claim” and is better left for the summary judgment stage of the litigation.

Philip P. Kalodner of Gladwyne, Pa., represented Brown. Putney, Twombly, Hall & Hirson in New York represented Daikin Industries and Daikin America.

To contact the reporter on this story: Jay-Anne B. Casuga in Washington at jcasuga@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

Text of the opinion is available at http://www.bloomberglaw.com/public/document/Brown_v_Daikin_America_Inc_Docket_No_1202955_2d_Cir_Jul_23_2012_C.