payment and discipline of its employees, as well as performing
humar. resources functions.

Custom emplcys Terry Klonowski as its Vice President of Human
Resources, Custom pays its own employees, and offers its own
benefits and 401(k) package.

Ii. ANALYSIS

A. Summary Judgment

Summary Judgment appropriate if “the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine

issue as to any material fact and that the mcving party is entitled

tc a judgment as a matter of law.” Fep. R. Civ. P. 56{c}. The court

mast view all the evidence and any reasonable inferences therefrom
in the light most favorable to the nonmoving party. See Miller v.
Am. Family Mut. Ins. Co., 203 F.3d 997, 1003 {7th Cir. 2000).
B. Piercing the Corporate Veil

In Papa v. Katy Industries, i166 F.3d 937 (7th Cir. 1999) the
Seventh Circuit outlined the proper test for determining whether
companies are sufficiently affiliated to warrant treating them as
a single employer under Title VII. The Court noted that the
purpose cf the standard is to spare very small firms from the
potentially crushing expense of mastering the intricacies of the
anti-discrimination laws, establishing procedures tc ensure

compliance, ana defending against suits when efforts at compliance



enforcement of a non-competition agreement. As already stated,
Custom has its own human resources department, made its own hiring
decisions and created its own personnel policies separate from
CDNL. See LaBouve, 387 F. Supp. 2d at 852.
III. CONCLUSION

As discussea above, the conditicns for piercing the corporate
veil do not exist in this case. Thus, CDNL’s Motion for Summary
Judgment is granted.

IT IS SO ORDERED.

oa

Harry DO. Leinenweber, Juage

United States District Court
Dated: ib. HOG



separate corporate existence would sanction a fraud or promote
injustice.

In determining whether a corporaticn is so contrelled by
another to justify disregarding their separate identities, courts
focus on four factors: (1) the failure to maintain adequate
corporate records or to comply with corporate formalities; (2) the
comningiing of funds or assets; (3) undercapitalization; and (4)
one corperation treating the assets of another corporation as its
own. Jackowski v. Seoco, Inc. Northern, No. 98 C. 50337, 2001 WL
709485 (N.D. Ili. June 22, 2001).

1. Corporate Formalities

Plaintiffs argue that Custom ard CDNL failed to observe
corporate formalities because Custom executives played a role ir
the formation of CDNL. Specifically, Plaintiffs allege that CDNL
used an attorney that nas appeared on behalf of Custom in this
case. The attorney is also a part-owner with Durkin in an
employment comoany that leases empioyees to CDNL. Farther,
Plaintiffs aliege that when CDNL took over the local cartage
business from Custom, it adopted Mandera’s work and leasing
practices without engaging in competitive bidding. Fina_ly,
Plaintiffs point to a Custom e-mail listing Koizow as an “Executive
Board Member” and years later another email informing him of an

Executive Board meeting.

~I



fail. Id. at 940. The standard does not allow for treating any
affiiiated group as a single employer. Id. Although the Court
established three situations in which the policy behind the
exemption of a small employer is vitiated by the presence of an
affiliated cerporation, by agreement of the parties, only one
exemption petentially applies in this case.

A court will treat affiliated companies as one for purposes of
the anti-discriminaticn laws where the conditions are present for
“piercing the [corporate] veil,” traditionally used to allow a
creditor to sue a parent or other affiliate and hold the affiliate
liable for the employer’s debt. Id. at 940-41. If the affiliated
companies neglect corporate formalities, hold out the parent as the
real party with whom one is dealing, the parent may be held liable
for torts created by the anti-discrimination laws. The basic
principle is that the affiliate forfeits its limited liability only
if it acts to ferfeit it by failing to comply with statutory
conditions of corporate status, or misleading creditors of an
affiliate. Id. at 341.

A corporate entity will be disregarded and the veil of limited
liability pierced when two requirements are met: (1} there must be
such a unity of interest and ownership such that the separate
personalities of each corporation no longer exist; and, {2} the

circumstances must be such that adherence to the fiction of



Mandera to Durkin. Additionally, Custom assisted CDONL in entering
a banking agreement to establish a $500,000 line of credit to
cperate its basiness. The line was secured by Custom, as a result
of an agreement based on a time-lag concerning accounts
receivables. Plaintiffs also allege that a common operation
relationship is evidenced by Custom and CDNL’s shared use of
personnel. Plaintiffs allege that Klonowski assisted CDNL with
requesting job postings on internet sites and complying with
workman’s compensation regulations.

Plaintiffs’ allegations, taken as true, de not establish the

commingling cf assets and personnel or undercapitalization required

to pierce the ccorporate veil. Papa, 166 F.3d at 943 (“The
corporate veil is pierced, when it is pierced, not because the
corporate group is integrated . . . but {in the most common case}

because it has neglected forms intended to protect creditors from
being confused about whom they can look to for payments of their
claims.”}. The loan and line of credit constitute twe business
transactions between affiliated companies. Id. at 942 (holding
that forms of contractual integration are not sufficient to pierce
corporate veil}. The companies maintain their own bank accounts,
and are each responsible for the payment of their separate
employees. See Hystro Products, Inc., 18 F.3d at 1389. Further,
the alleged sharing of personnel consists of a few menial tasks and

employees that left one company to work at another without



IN THE UNITED STATES DISTRICT COURT F | L
FOR THE NORTHERN DISTRICT OF ILLINOIS

OCT 2 6 2006
EASTERN DIVISION oc Li oy b
JUDGE HARRY D. LEINENWEBER

US. DISTRICT COURT JUDGE
UNITED STATES EQUAL EMPLOYMENT

OPPORTUNITY COMMISSION,

Plaintiff,
Case No. (02 C 3768
and 03 € 2293
CATHERINE COPELLO and ALLISON Hon. Harry D. Leinenweber

KENNEDY,
Plaintiffs-Intervenors,
Vv.
CUSTOM COMPANIES, INC., CUSTOM

EXECUTIVE GROUP, INC. and CDN
LOGISTICS,

Defendants.

MEMORANDUM OPINION AND ORDER

The Equal Employment Opportunity Commission (hereinafter, the
“EEOC”) and Plaintiff-Interveners Catherine Copello and Allison
Kennedy (hereinafter, the “Interveners”) (collectively, the
“Plaintiffs”} filed suit against Defendants Custom Companies, inc.
(hereinafter, “Custom’}), Custom Executive Group (hereinafter,
“CEG”}, and CDN Logistics (hereinafter, “CDNL”) (collectively, the
“Defenaants”) alleging sexual harassment and retaliation in
violation of Title VII cf the Civil Rights Act, as amended,
42 U.S.C. § 2000 ec seg. Together, the EEOC and the Interveners
allege that Defendants subjected a class of women to a hostile

environment of sexual harassment. The EEOC alleges <hat Defendants



Plaintiffs present no eviderce that Custom and CDNL neglected
corporate formalities or that adhering te the separateness of
Custom and CDNL wouic work an injustice on Plaintiffs. LaBouve v.
The Boeing Co., 387 F. Supp. 2d 845, 853 (N.D. Ill. 2005). Rather,
CONL presented uncontroverted evidence that it remained a separate
ard distinct legal entity from Custom. Custom and CDNL do not nave

common stecxnolders, officers or directors. Hystro Products, Ine.

Ve. MNP Corp., 18 F.3d 1384, 1389 (N.D. - 1994) (“Stock control
and the existence of common officers and directors are generally
prerequisites to the piercing of the corporate veil although
facters alone will not suffice.”). Although they may have employed
the same outside attcrney, that does not suffice to show neglect of

corporate formalities. See Papa, 166 F.3d at 942.

2. Commingling of Funds or
Assets and Undercapitalization

Plaintiffs argue that piercing the corporate veil is
appropriate because Custom and CDNL have shared persennel and
assets and Custcm has provided working capital te CDNL. Plaintiffs
point to statements in the financial statements discussing that
Custom provided “management services and working capital” to CDN.
The management services relate to the non-enfcorcement of Custom’s
non-competition agreements with employees that left to work for
CDONL. Additionally, Plaintiffs allege that while Mark Inman was
xesponsible for the truck operations at CDNL, he also received
payments from CEG, The working capital consists of a loan meade sy

-8-



annuai and interim meetings of their shareholders. The minutes are
kept and maintained at the companies’ respective offices.
2. The Relationship between Custom and CDNL

CDKL is ore of Custom’s vendors. It provides local cartage
and truckload services to Custom. The Custom sales representatives
sell truckload services on behalf of Custom. The services are then
prokered to various vendors, including CDNL. CDNL has additional
customers aside from Custom. The percentage of Custom’s revenues
generated from CDNL services is less than 25%. The percentage of
CDNL revenues generated from providing services to Custom is less
than 50%. In May 2001, CDNL took over local cartage, providing
service for local freight traffic, services for Custom. Prior to
May 2001, Custom did its local cartage business itself. Plaintiffs
allege that CDNL employs the same individuals for its local cartage
as Custom did.

Plaintiffs argue that Mandera provided all of the start up
capital to Durkin in oxder to form CDNL. Further, Kolzow and Marc
Inman, former Custom employees, were involved in the formation of
CDNL.

3. Management of the Companies

CDNL leases its driver and dock employees from Transportation
Personnel Services. Prior to using Transportation Personnel
Services, it leased its employees from Innovative Benefits

Concepts, Transportation Personnel Services is responsible for



are a “single employer” under Title VII; and that (2) CDNL was
mistaxeniy named as Custom Distribution Network in the original
complaint.
B. Factual Background
i. The Companies

Custom is located at 317 West Lake St. in Northlake, Illinois.
Perry Mandera (“Mandera”} is Custom’s sole shareholder and officer.
Custem is a full-service transportation company that brokers
freight to various outside shippers. It does not actually move
freight. Through its vendors, it offers local cartage, aixrfreight,
truckload and less than truckload transportation services.

CDNL is an Illincis corporation incorperated on May 15, 2998.
CONL is a transportation company licensed as a motor carrier by the
Department of Transportation and engaged in the business of
providing Local and long distance transportation services tc its
customers. Robert Durkin {“Durkin’) is the sole director,
president and secretary of CDNL. Durkin and Thomas Kolzow
(“Kolzow”%) are CDNL’s sole sharehclders. Kolzow is also CDNL’s
Chief Operating Officer.

CDNL is alse located at 317 West Bake St. in Northlake,
Iliinois. CDNL has its own office space and a separate entrance
from Custom. Both companies lease their office space through The

Center Point Properties. Both companies conduct separate, regular



retaliated against Kimberly Fritkin and Corinne Miller in violation
of Title VII. Individuals Catherine Copello and Allison Kennedy
also allege retaliation and sex discrimination.

CDNL was added as a defendant by the EEOC in a second amended
complaint because the EEOC alleges that it is the “same
corocration” as Custom. CDNL moves for summary judgment on the
basis that it is not the same corperation as Custom. For the
reasons stated herein, CDNL’s Moticn for Summazy Judgement is
granted.

I. BACKGROUND

The extensive factual background of this case is set forth in
this Court’s previous summary judgment opinion. The Court assumes
the reader‘s familiarity with the earlier decision and attempts to
recite only those facts relevant to the current Motion fer Summary
Judgment, and those needed for context.

A. Procedural Background

On May 28, 2002, the EEOC initiated the above-captioned case,
No, 02 C 2768, on benalf of Copello and a class of former Custom
employees. On April 2, 2003, the EEOC initiated the above-
captioned case, No. 03 C 2293, on half of Corinne Miller and
Kimberly Fritkin. Gn July 23, 2004, the EEOC filed its Second
Amended Complaint in both of the above cases, removing Custom
Distribution Network, Inc. as a defendant and adding CDNL. the

EEOC gave two reasons for adding CDNL: (1) that CDNL and Custom