Employment Practices Decisions Archive: 1937 - 1995, EMPLOYMENT-PRACTICES 20 EPD ¶30,064, James Fuller et al., Plaintiffs v. Walgreen Drug Company of Texas, Defendant., (May 15, 1979), (May 15, 1979)

James Fuller et al., Plaintiffs v. Walgreen Drug Company of Texas, Defendant.

United States District Court, Southern District of Texas, Houston Division.Civil Action No. H-79-221, May 15, 1979

Title VII--Civil Rights Act of 1964

Court Actions--Proper Service of Summons--Registered Agent of Related Company.

--A defendant in a job bias suit was not properly shown to have been served a summons or the complaint under either federal or state law where the summons and complaint were served upon the designated registered agent of a related company, but a company which was a separate entity.

Back reference.-- ¶2225.

Class Actions--Representative as Counsel for Class--Propriety.

--A plaintiff who sought to serve as both class representative and class counsel was directed to file a memorandum of law with the court indicating why an order should not be entered determining that the action could not be maintained as a class action. Where a class representative serves as class counsel there is always the possibility of impropriety.

Back reference.-- ¶2304 .

James Fuller, Pro Se, for Plaintiffs.

A. Martin Wickliff, Jr. (Fulbright & Jaworski), Houston, Texas, for Defendant.

Seal, D.J.: Presently pending before the Court is Defendant’s motion to quash return of service. Plaintiffs brought this action on their behalf and on behalf of other similarly situated black persons who are employed by the Walgreen Drug Company of Texas (the Drug Company) alleging denials of equal employment opportunities. Plaintiffs directed the United States Marshal to serve the summons and the complaint upon Mary Wilson, the designated registered agent of Walgreen Texas Company (Walgreen Texas). Defendant then moved this Court pursuant to Rule 12(b) (5), Fed.R.Civ.P., to quash the return of service or to dismiss Plaintiffs’ complaint for lack of proper service.

Rule 4(d) (3) authorizes service to be made on a domestic or foreign corporation by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or to any other agent authorized by appointment or law to receive process. Additionally, Rule 4(d) (7) provides that it is sufficient if the summons and the complaint are served in the manner prescribed by any statute of the United States or in the manner prescribed by the law of the state in which the district court is sitting. Although the cases are not consistent, it is generally held that plaintiffs have the burden to establish the validity of service of process. Shires v. Magnavox Co., 74 F.R.D. 373, 373 (E.D.Tenn. 1977); Captain Int’l Industries, Inc. v. Westbury, Chicago, Inc., 416 F.Supp. 721 (N.D.Ill. 1975); Adams v. American Bar Ass’n., 400 F.Supp. 219, 222 (E.D.Penn. 1975). See also 5 C.Wright & A.Miller, Federal Practice and Procedure: Civil §1353 at 582 (1969). But see Rosen v. Soloman, 374 F.Supp. 915 (E.D.Penn. 1974), aff’d without opinion, 523 F.2d 1051 (3d Cir. 1975); Republic Prods., Inc. v. American Fed’n Musicians of the U.S. and Canada, 173 F.Supp. 330 (S.D.N.Y. 1959).

The pleadings and the affidavits show that Mary Wilson is the secretary to the district manager who supervises certain Walgreen Stores located in the Houston area, including a number of stores owned by the Drug Company. The Drug Company and Walgreen Texas are separate entities, both of which are incorporated under the laws of Texas with different registered designated agents. It does not appear that Mary Wilson is an officer, managing agent, or general agent of the Drug Company. Further, she is not the appointed agent of the Drug Company. Accordingly, the plaintiffs have not shown that they have made proper service under Rule 4(d)(3).

Because the defendant is a domestic corporation which has a registered agent, the manner of service under state law brought into play by Rule 4(d)(7) is prescribed by Tex. Bus. Corp. Act Ann. art. 2.11A (1955). That Article provides: “The president and all vice presidents of the corporation and the registered agent of the corporation shall be agents of such corporation upon whom any process, notice, or demand required or permitted by law to be served upon the corporation may be served.” There can be no question that Mary Wilson is [not] a member of any of the categories established by the Article. The Texas courts have held that the record must demonstrate strict compliance with Section A of Article 2.11 before personal jurisdiction over a Texas corporation will be sustained. Charles Cohen, Inc. v. Adams, 516 S.W.2d 464, 466 (Tex.Civ.App.-Tyler 1974); United States Leasing Corp. v. Centennial Liquor Stores, Inc., 368 S.W.2d 951, 952 (Tex. Civ. App.-Dallas 1963). The Court concludes that there has been no service in the manner prescribed by the law of the state in which the Court is sitting. The Court further concludes that service has not been effected pursuant to any statute of the United States.

The only remaining question concerning service is whether proper service under another subsidiary of the same parent corporation constitutes effective service under the “alter-ego” doctrine or any other agency theory. This question more frequently arises when the corporation’s amenability to process, and not the manner of service, is at issue. See, e.g., Cannon Mfg. Co. v. Cudahay Packing Co., 267 U.S. 3 (1925); Wells Fargo & Co. v. Wells Fargo Exp. Co., 556 F.2d 406 (9th Cir. 1977); Burman v. Tampa Electric Co., 505 F.2d 122 (5th Cir. 1974); Aeronca, Inc. v. Style-Crafters, Inc., 499 F.2d 1367, 1371 (4th Cir. 1974); Markow v. Alcock, 356 F.2d 194 (5th Cir. 1966); Stienway v. Majestic Amusement Co., 179 F.2d 681 (10th Cir. 1949); Cook v. Bostich, Inc., 328 F.2d 1, 3 (2nd Cir. 1964); Exquisite Form Industries, Inc. v. Exquisite Fabrics of London, 378 F.Supp. 403 (S.D.N.Y. 1964); Rea v. An-Son Corporation, 79 F.R.D. 25 (W.D.Okla. 1978). In those cases the plaintiff’s cause of action commonly depended upon the amenability to process of the out-of-state parent or subsidiary. Thus, those plaintiffs went to the trouble and expense of presenting facts which they claimed evidenced the existence of an agency relationship or justified employment of the “alter-ago” doctrine. The courts then examined the facts and determined “whether the two corporations are in fact mere ‘divisions’ or ‘branches’ of a larger whole.” Wells Fargo, supra. In making that determination the courts have considered the following factors: whether the two corporations have the same shareholders or officers; whether the subsidiary has adequate capital; whether both corporations maintain separate payrolls; and, whether the formal legal requirements such as separate directors’ meetings are observed. For example, one court refused to disregard the separate legal existence of two corporations merely because they shared the same business address and phone number. Exquisite Form Industries, Inc., supra.

Corporate separation, although perhaps often merely formal, is real, and the Court will treat two separately incorporated companies as distinct legal entities until reasons to the contrary appear. It would be particularly inappropriate to find Walgreen Texas to be the agent of the Drug Company because the nature of the claim asserted makes it improbable that Walgreen Texas is in way related to the action. See Mizokami Bros. of Ariz., Inc. v. Baychem Corp., 556 F.2d 975 (9th Cir. 1977). The plaintiffs have not come forward with any facts which justify the application of the “alter-ego” doctrine or an agency theory. Accordingly, the Court concludes that the defendant has not been served properly.

The defendant has moved the Court either to quash the return of service or to dismiss the complaint. In this instance there clearly is a reasonable prospect that the plaintiffs ultimately will be able to serve the defendant properly. The affidavits attached to plaintiffs’ opposition to defendant’s motion supply the address of the proper agent for service under Rule 4(d)(3) or (7). Because of the jurisdictional nature of the filing requirements under Title VII, the Court will exercise caution before dismissing an action which has been commenced properly by the filing of a complaint when a less drastic solution is available. See Stranga v. McCormick Shipping Corp., 268 F.2d 544 (5th Cir. 1959). See also Aquascutum of London, Inc. v. S.S. American Champion, 426 F.2d 205, 210 (2d Cir. 1970); Richardson v. Ingram Corp., 374 F.2d 502 (3d Cir. 1967), cert. denied, 389 U.S. 866 (1968); Smith v. Boyer, 442 F.Supp. 62, 63-64 (W.D.N.Y. 1978); Mattes v. National Hellenic Am. Line, S.A., 427 F.Supp. 619, 630 (S.D.N.Y. 1977); Croy v. Skinner, 410 F.Supp. 117, 132 (N.D. Ga. 1976); 5 C.Wright & A.Miller, Federal Practice and Procedure: Civil §1354 (1969).

Accordingly, the Court hereby Orders:

The Return of Service of Summons against Defendant Walgreen Drug Company of Texas is Quashed and of no effect.

[Ruling on Class Representative]

It has come to the attention of the Court upon consideration of defendant’s motion to quash the return of summons that plaintiff James Fuller seeks to serve both as class representative and class counsel. Such an arrangement raises questions about the plaintiff’s ability to represent adequately the class and counsel’s ability to avoid the appearance of impropriety. The Fifth Circuit recently has stated: “attorneys who are ... members of the class of plaintiffs should be subject to a per se rule of disqualification under Canon 9 [of the Code of Professional Responsibility] and should not be permitted to serve as counsel for the class.” Zylstra v. Safeway Stores, Inc., 578 F.2d 102, 104 (5th Cir. 1978). See also Susman v. Lincoln American Corp., 561 F.2d 86 (7th Cir. 1977) (class representative who was a close professional associate of attorney of record could not adequately represent the class); Brick v. CPC International, Inc., 547 F.2d 185 (2d Cir. 1976); Kramer v. Scientific Instruments Control Corp., 534 F.2d 1085 (3d Cir. 1976) (holding that Canon 9 precludes class counsel from serving as class representative when the action might result in the creation of a fund from which attorney’s fees might be awarded); Turoff v. May Co., 531 F.2d 1357 (6th Cir. 1976) (per curiam) (Rule 23(a) (4) precludes representation of the class as plaintiff and as counsel). Accordingly, the Court hereby Orders:

The plaintiffs shall file within ten days a memorandum of law showing cause why the Court should not enter an order determining that this case should not be maintained as a class action.

The Clerk shall file this Memorandum and Order and shall provide counsel for all parties with a true copy.