Opinion ID: 3010150
Heading Depth: 2
Heading Rank: 2

Heading: Reduction in workforce

Text: We turn, first, to the threshold question of whether Ms. Marzano's employment was terminated as part of a reduction in workforce caused by financial distress, as Defendants claim. It is worth noting that this question bears not only on what legal standard governs Ms. Marzano's discrimination claim, but on her two other claims as well. The two parties disagree as to what is the appropriate work unit for us to consider in answering this question. Ms. Marzano argues that her employer at the time of her layoff was CSC Partners. She offers substantial evidence of CSC Partners's stellar financial performance in the years preceding and following her termination, including receipt of an Eagle Award for financial success in 1993 by the AT&T Business Unit. App. at A194-96; see Appellant's Brief at 9-12. In addition, she offers substantial evidence that CSC was also extremely profitable during the relevant time-period. Id. at 8-9. As a result, she suggests that Defendants' contention that she was laid off as the result of a reduction in workforce caused by financial distress is not credible. Id. at 36. Defendants do not challenge Ms. Marzano's rosy account of their financial picture, and do not claim that Ms. Marzano was laid off as part of a workforce reduction in either CSC as a whole or CSC Partners as a whole caused by either firm's financial situation. Appellees' Brief at 39. Rather, they note that from the time of her termination, Ms. Marzano was consistently told that her layoff was caused by the deteriorating financial situation of the division of CSC Partners for which she worked, the AT&T National Business Unit [the AT&T Unit or the Unit], as a result of which a workforce reduction was taking place within that unit. In her termination letter dated October 5, 1993, Ms. Marzano was specifically told: [R]evenues generated by the AT&T Business Unit have not materialized as anticipated. Over the past several months, our efforts to develop new business opportunities within AT&T have been largely unsuccessful. . . . [T]he CSC Consulting/AT&T Business Unit is forced to reduce the number of administrative personnel supporting the practice. Letter from Marzi to Marzano of 10/5/93. According to Defendants, [b]etween October 1993 and April 1994, ten positions, including plaintiff's, out of approximately 50 located in the AT&T National Business Unit in New Jersey, were eliminated. Appellees' Brief at 10. Defendants also allege that the Unit was ultimately merged into another Partners unit, the NY Metro Business Unit. Id. at 13. Ms. Marzano, however, argues that the Court should reject any argument made by Defendants based on the AT&T Unit's financial situation. She asserts that [t]he purported AT&T Business Unit is not an independent unit, but simply part of CSC Partners. Appellant's Brief at 14. Magistrate Judge Hughes, who reviewed the financial documents of both CSC Partners and the AT&T Unit in considering a discovery motion by Ms. Marzano, reached a similar conclusion. Marzano v. Computer Science Corporation, Inc., Civil No. 94-3102 (CSF) (D.N.J. June 22, 1995) (mem.) (Hughes, M.J.) [hereinafter Hughes Opinion]. Judge Hughes found, first of all, evidence of other projects where AT&T worked in conjunction with several other units of CSC Partners. Id., typescript at 5. The expenses and profits from these joint projects were credited to the AT&T account, but the other units were allowed to get 'shadow credit' for their efforts on this project. Id. As Judge Hughes explained, [t]his is not indicative of what one would expect from an independent unit. Rather, it is more indicative of many aspects of a corporation coming together in order to benefit the collective body of the Partners organization. Id. Judge Hughes also discussed evidence that the AT&T Unit's financial records incorporate the revenue of other supposedly independent units. Id. at 5. Judge Hughes found it inexplicable how these profit and loss units can portray the revenues of other units as their own, while at the same time Defendants maintain the position that they are independent of each other. Id. at 5-6. Finally, Judge Hughes expressed concern over testimony by employees of the defendants that suggests that profits from one unit, the El Segundo pseudo unit, were allocated to that unit, while expenses were allocated to some other unit, so that both units' financial pictures would offer a distorted picture of their profitability. Id. at 6. Summarizing his findings, Judge Hughes explained that the AT&T Unit has cooperated on projects with other units of Partners, it has been involved with the transfer of expenses and revenues between units, and it has had one of its more lucrative sections removed at a very convenient time. Id. at 7. Based on all this evidence, he reached the following conclusion: The AT&T unit does not reach the level of independence achieved by [separate, self-sufficient, independent portions of a corporation]. The AT&T unit was one of many symbiotic units, working, sharing and transferring their resources to each other, for the benefit of the whole. . . . All in all, it appears the AT&T unit is independent in name only. Id. While the defendants do not challenge the Magistrate Judge's various findings, they reject Ms. Marzano's conclusion and argue that the existence of the AT&T Unit is simply beyond cavil. Appellees' Brief at 37. There is, indeed, ample evidence that CSC Partners contained a division that operated by that name. What is in dispute is whether the division was independent enough from the rest of CSC Partners to constitute an autonomous unit, whose personnel actions and financial performance should or even could be considered separately from the rest of the firm. As to this issue, Judge Hughes certainly recognized that there is a question of fact regarding whether the AT&T Unit was an independent profit-and-loss center within the firm. The defendants argue that their sworn testimony which described the severe financial pressures facing the AT&T National Business Unit stands unrebutted. Id. at 36-37. Interestingly enough, the testimony to which they refer is that of Robert Marzi, whose deposition took place on April 25, 1995. App. at DAS 170. It is clear that the Magistrate Judge, for one, did not find Mr. Marzi's testimony unrebutted, since nearly two months later he issued his opinion in which he concluded that it appears the AT&T unit is independent in name only. And while it is literally true, as the defendants claim, that Judge Hughes did not find that the reduction-in-force was based on anything other than the financial statements of the AT&T National Business Unit, Appellees' Brief at 40, we are hard-pressed to find any significance to this fact, since the Magistrate Judge did not address this question in any way. Rather, the question before the Judge was whether the AT&T Unit was a separate revenue generating profit and loss unit, Hughes Opinion, typescript at 2-3, and he expressed considerable doubt on the subject. By casting doubt on the validity of the AT&T Unit's financial statements, Judge Hughes did in fact implicitly leave open the possibility that the reduction in force might have been based on something other than the financial statements, that there might not have been an independent AT&T Unit, that accordingly the Unit could not be in financial distress while the rest of CSC Partners was flourishing, and that therefore no reduction in force could occur as a result of the alleged unit's alleged financial distress. As Judge Hughes's opinion demonstrates, there is ample evidence in the record on the basis of which a finder of fact could conclude that the AT&T Unit's financial statements are of no value, and that the so-called AT&T Unit was merely a part of the collective body of the Partners organization. Id. at 5. Based on this conclusion, a factfinder could further conclude that no valid and true reduction in force occurred in the unit since the unit had no independent existence of its own. Because the district court conducted its analysis under the legal standard applicable to discrimination in a force-reduction setting, we presume that it concluded, as a matter of law, that a reduction of force did occur in the AT&T Unit. For the reasons just articulated, we conclude that the issue of whether the AT&T Unit was the appropriate work unit and whether a reduction in force did occur was a question of fact that should have been presented to the jury and which, on summary judgment, should be resolved in favor of the non-moving party, i.e., Ms. Marzano. We hold that the district court committed legal error when it failed to do so.