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Lemon v. Bigel

United States District Court, E.D. North Carolina, Western Division

March 11, 2019

MYERS BIGEL, P.A. f/k/a Myers Bigel & Sibley and Myers Bigel Sibley & Sajovec, P.A.; LYNNE A. BORCHERS; and UNNAMED OTHERS, Defendants.


          LOUISE W. FLANAGAN United States District Judge

         This matter is before the court on defendants' motion to dismiss (DE 17) and plaintiff's motion to amend complaint (DE 26). The matters have been fully briefed, and in this posture the issue raised are ripe for ruling.


         Plaintiff initiated this action by complaint filed April 4, 2018, against defendants Myers Bigel, P.A. (“MB”), Lynne A. Borchers (“Borchers”), and unnamed others, in Wake County Superior Court, asserting discrimination and retaliation claims under the Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000e, et seq. (“Title VII”) and discrimination claim under the Civil Rights Act of 1871, as amended, 42 U.S.C. § 1981 (“§ 1981”). Defendants subsequently removed the action to this court.

         Following the court's grant of multiple consent motions for time extensions, defendants filed the instant motion to dismiss on August 6, 2018. On November 19, 2018, plaintiff filed the instant motion to amend complaint with proposed amended complaint adding factual allegations in support of plaintiff's federal claims and two additional claims arising under North Carolina law for breach of fiduciary duty and breach of the implied covenant of good faith and fair dealing.


         The facts alleged in proposed amended complaint may be summarized as follows.[1]

         A. Plaintiff's Employment at Defendant MB

         From August 24, 2001, to this current date, plaintiff has been an attorney duly licensed to practice law by the North Carolina State Bar. Plaintiff also possesses a doctorate in biomedical sciences/pharmacology. At all times relevant herein, plaintiff's law practice has been focused in the area of patent law.

         Plaintiff alleges from around September 2001 to December 31, 2016, she was employed by defendant MB to serve as a patent lawyer. On or about September 4, 2001, plaintiff and this defendant memorialized the terms and conditions of plaintiff's employment in an employment agreement, which allowed defendant MB to terminate plaintiff's employment “without cause and at any time, by giving at least thirty (30) days' written notice . . . .” (Prop. Am. Compl. (DE 26-1) ¶ 20). The employment agreement also set terms and conditions of plaintiff's employment with defendant MB, including the following:

1. Requiring plaintiff “to devote all necessary time and [her] best efforts to the performance of [her] duties as a lawyer for [defendant MB] in accordance with the highest ethical standards of the legal profession and the rules, regulations, and policies of [defendant MB] as adopted from time-to-time”;
2. Limiting her ability to work and earn income outside of defendant MB, including income from professional services, teaching fees, director fees, and honorariums;
3. Requiring her to maintain “professional competence”; and
4. Requiring her “to observe and comply with the personnel policies, the operating policies and procedures, and all other rules and regulations of [defendant MB]” and “to carry out and perform orders, directions, and policies stated by [defendant MB] to [her.]”

(Id. ¶ 21).

         On or about January 2, 2007, plaintiff entered into the tenth modification to a shareholders' agreement between defendant MB and the 20 shareholders of defendant MB at that time, which has been modified and amended thereafter. In executing the shareholders' agreement, plaintiff agreed to purchase 5, 000 shares of defendant MB for a total $62, 241.17. Plaintiff alleges no provision of the shareholders' agreement superseded plaintiff's employment agreement; rather, the shareholders' agreement tied continued ownership of stock to plaintiff's continued employment with defendant MB. Plaintiff alleges that defendant MB would not permit a shareholder whose employment was terminated to remain as a shareholder of defendant MB, despite an amendment to the shareholder's agreement in 2009 removing the word “employee.” (Id. ¶ 42). Plaintiff alleges the employment agreement continued in full force and effect after plaintiff became a shareholder of defendant MB. Plaintiff alleges she remained subject to defendant MB's control as an employee of defendant MB and continued to be compensated as an employee rather than as a shareholder.

         At all times relevant, defendant MB had a strict quality control policy. Defendant MB required plaintiff and defendant MB's other shareholders to comply with the quality control policy, by which defendant MB required plaintiff and other shareholders to submit their work product for substantive review by another shareholder to ensure that assignments were met satisfactorily and provide plaintiff with feedback regarding the same.

         The quality control policy further required plaintiff and defendant MB's other shareholders to submit all draft bills to the managing shareholder “for compliance and [to] take appropriate action as necessary.” (Id. ¶ 23). During 2016, plaintiff alleges all attorneys at the firm reported to the management committee, and to defendant Borchers as managing shareholder.

         During the tenure of plaintiff's employment, including after plaintiff became a shareholder, defendant MB issued plaintiff a Form W-2 for each tax year for purposes of reporting her gross income to the United States Internal Revenue Service. Plaintiff never received a Schedule K-1 from defendant MB.[2] Plaintiff's compensation was governed at all relevant times by the attorney compensation plan, an addendum to the employment agreement.

         At all times during her tenure of employment, plaintiff met or exceeded all reasonable work expectations of her employer and generally excelled in the performance of her job duties. At no time during her tenure did plaintiff ever receive any disciplinary sanction, counseling, warning, or complaint. As a general practice, plaintiff treated all supervisors, colleagues, and subordinates in a professional manner with fairness, respect, and good will.

         B. Organization of Defendant MB

         As a professional association, defendant MB is owned by its shareholders. Although defendant MB is a professional association, at all times relevant, it functioned more as a partnership, demonstrated by, among other circumstances alleged by plaintiff, the fact that each shareholder held an equal number of shares of defendant MB and served as a director and officer of defendant MB. At all times relevant, defendant MB was governed by a board of directors. Each shareholder also served as a director of defendant MB, as required by its bylaws.

         Defendant MB conducted its business through regularly occurring special meetings of the board of directors. Although the bylaws did not require defendant MB to state the purpose of a special meeting, defendant MB regularly circulated an agenda prior to the meeting stating the purpose for the meeting and outlining matters to be considered.

         The bylaws expressly reserved determination of “admission of new member(s) to the Corporation as Shareholder(s), the expulsion of a Shareholder, or the termination of employment of a Shareholder” to defendant MB's board of directors. (Id. ¶ 35). The bylaws also provided for appointment of officers, including president, managing shareholder, vice president, secretary, treasurer, assistant secretary, and assistant treasurer.

         Each shareholder served as an officer of defendant MB in some capacity. During 2016, plaintiff served as vice president and secretary, and defendant Borchers served as managing shareholder. Plaintiff alleges that while the bylaws set forth the duties and responsibilities of defendant MB's officers, in practice, at all times relevant, the only officer with any actual authority was defendant Borchers as managing shareholder. Plaintiff and defendant Borchers were shareholders of defendant MB during 2016. During 2016, there were 25 shareholders of defendant MB, each owning 5, 000 shares of defendant MB stock with equal shareholder rights and voting power.

         C. Defendant MB's Management Committee

         Defendant MB's board of directors also elected a management committee, consisting of five shareholders, to “manage” defendant MB and “generally carry out such duties as the Board of Directors may delegate from time to time and carry out generally the legal practice and administrative affairs of [defendant MB].” (Id. ¶ 46). Plaintiff alleges that in practice, most of the board of directors' control was delegated to the management committee.

         In 2016, the management committee consisted of defendant Borchers, David Beatty (“Beatty”), Alice Bonnen (“Bonnen”), Rohan Saba, and one of the female complainants plaintiff alleges was thereafter “retaliatory remov[ed] by the Board of Directors.” (Id. ¶ 47). Defendant Borchers was the longest serving member of the management committee at the time.

         Although defendant MB's bylaws gave the management committee authority to “carry out such duties as the Board of Directors may delegate, ” plaintiff alleges the management committee “controlled” the board of directors in the following ways:

1. The management committee scheduled all meetings of the board of directors;
2. The management committee controlled the matters presented to the board of directors by preparing and circulating the agenda for such meetings; and
3. The management committee, through defendant Borchers as managing shareholder, made its recommendations regarding corporate actions to the board of directors, which were generally followed, as a matter of course.

(Id. ¶ 48).

         D. Defendant MB's Controlling Group of Shareholders

         Plaintiff alleges that defendant Borchers was the leading member of a controlling group of shareholders consisting of David Purks, Scott Hatfield (“Hatfield”), Tim Wall, David Hall, Peter Siddoway, and others.[3] Plaintiff alleges this group of shareholders was responsible for a significant portion of defendant MB's revenues and major client relationships, and was followed by the majority of defendant MB's shareholders as a matter of course. Plaintiff alleges through their control of defendant MB's revenues and major client relationships, this group was able to exercise actual control over the management committee, the board of directors, and defendant MB, although this group did not hold numeric majority of defendant MB shares.

         For example, plaintiff alleges in 2015, Ken Sibley (“Sibley”), founder and then-president of defendant MB, recognized that he was not being permitted to exercise the authority given to him as president under the bylaws, and raised this issue with the management committee. In 2016, the management committee presented this issue to the board of directors. Allegedly at the direction of defendant Borchers, with the support of the above-named group, the board of directors decided to consolidate the role of the president with the managing shareholder, and otherwise to recognize that defendant Borchers was already occupying both roles in practice.

         E. Discrimination at Defendant MB

         Plaintiff alleges that since at least 2011 through the relevant time period, defendant MB and its shareholders, directors, and officers failed to remediate, and instead fostered, a workplace that was hostile to women and minorities. Plaintiff alleges that an incident occurred wherein a male shareholder commented to a female shareholder that he would be “so far up [her] a** she wouldn't be able to see straight, ” resulting in the management committee, while plaintiff served on that committee, discussing “the necessity of setting a professional standard of conduct for the work environment that would be applicable to all employees” and a working environment which is “pleasant, healthful, comfortable and free from intimidation, hostility or other offense that might interfere with work performance” and which would not tolerate “harassment of any sort; verbal, physical or visual . . . .” (Id. ¶¶ 58-59). Plaintiff alleges, however, that no steps were taken to ensure the workplace was free of harassment.

         Plaintiff alleges another instance occurred which resulted in one shareholder leaving defendant MB in 2012 “due in part to the firm's lack of support for women and families.” (Id. ¶ 60). Plaintiff further alleges that she witnessed or was told about hiring discrimination against minorities and discrimination against minorities advancing to become shareholders of defendant MB.

         Plaintiff alleges defendant MB hired attorney Kevin S. Joyner (“Joyner”) of the Ogletree, Deakins, Nash, Smoak & Stewart, P.C. law firm at some point prior to June 2, 2016, to investigate and advise it concerning ongoing claims of gender discrimination, including a hostile work environment, that were asserted by three of defendant MB's female attorneys/employees (“complainants”). As part of his investigation, Joyner met with plaintiff on or about June 2, 2016 to determine her personal knowledge about gender discrimination in defendant MB's workplace. During the course of the interview, which lasted at least one hour, plaintiff allegedly candidly reported her personal knowledge to Joyner about facts that ultimately supported the complainants' concerns about gender discrimination in defendant MB's culture and workplace environment.

         During the course of the interview, Joyner informed plaintiff that he did not represent plaintiff. Plaintiff alleges that Joyner used the substantive information provided to him by plaintiff regarding gender discrimination in the workplace in part to prepare a “confidential memorandum” for defendant MB's board of directors to review. Plaintiff requested and was denied an opportunity to review this memorandum, after which plaintiff consulted an attorney to assist and advise her in connection with Joyner's investigation.

         On or about June 14, 2016, Joyner provided defendant MB's board of directors with a copy of the confidential memorandum that included information that plaintiff had provided to him and that confirmed or corroborated gender discrimination existing in defendant MB's work environment. Plaintiff alleges defendant Borchers provided a copy of the confidential memorandum to other attorney-shareholders who were not on the management committee prior to its circulation to members of defendant MB's board of directors.

         On or about June 15, 2016, defendant MB held a board of directors meeting to review and discuss Joyner's confidential memorandum among defendant MB's board members. Plaintiff alleges that during defendant MB's board meeting of June 15, 2016, board members “openly excoriated” plaintiff after reviewing the confidential memorandum in at least the following ways:

1. Hatfield openly referred to plaintiff's statements concerning the hostile work environment as “idiotic;”
2. Shortly thereafter, Joyner informed the board members during the board meeting that Hatfield's characterization of plaintiff's concerns was “not accurate;'
3. Another board member responded openly to Joyner's statement that he would have said “much worse [than Hatfield]” in describing his reaction to plaintiff's statements concerning the hostile work environment;
4. Other board members screamed at plaintiff to “grow up” and “stop complaining;” and
5. Other board members chastised plaintiff for having hired a lawyer to advise her after Joyner's interview of her.

(Id. ¶ 71).

         Plaintiff alleges no reproach or reprimand was issued by defendant MB to these other board members. Plaintiff alleges that after the June 15, 2016 meeting, the allegedly controlling group of board members held discussions regarding forcing plaintiff and another female complainant to leave defendant MB. Plaintiff alleges this group and defendant Borchers began exploring possible retaliatory efforts against plaintiff and the other female complainants, including possibly ending the firm's trademark practice, which was led by one of the female complainants.

         Following the June 15, 2016 board meeting, defendant MB's shareholder Julie Richardson (“Richardson”) told another shareholder that plaintiff “played the black card too much.” (Id. ¶ 76). Plaintiff alleges that at that point in time, plaintiff had never made any complaints to defendant MB about “race” or being “black.” Plaintiff alleges Richardson “sought to spread the inaccurate and ugly stereotype about African-Americans as being applicable to plaintiff in an effort to discredit and isolate plaintiff from collegiality and support in the workplace and amongst the defendant MB Board of Directors and shareholders in retaliation for having reported gender discrimination to Joyner.” (Id. ¶ 77).

         On July 8, 2016, Beatty, a defendant MB shareholder and management committee member, prepared and circulated an email to defendant MB's shareholder/employees that referenced plaintiff as a “bad a**hole” for having expressed “sincere concerns” about gender discrimination to Joyner. (Id. ¶ 79). The email stated that defendant MB needed more “good a**holes” instead. (Id.).

         On July 11, 2016, at the direction of defendant Borchers and the management committee, Ashley Woodruff (“Woodruff”), defendant MB's director of administration, circulated what purported to be the complete agenda for a board of directors meeting scheduled for July 13, 2016; however, the agenda did not include consideration of removal of one of the female complainants from the management committee. Plaintiff alleges that nevertheless, during this meeting, defendant MB's board of directors unilaterally expelled one of the complainants as a member of defendant MB's management committee. Plaintiff alleges this was done in retaliation for having complained about the hostile work environment, as was reported in Joyner's confidential memorandum. Plaintiff alleges during this meeting a non-shareholder attorney “openly reprimanded plaintiff for her having expressed sincere concerns about gender discrimination” and directed plaintiff to “leave [the firm] and do better.” (Id. ¶ 82).

         Defendant MB held a board of directors meeting on July 14, 2016, to discuss the removal of one of the female complainants as a member of the management committee. Prior to the meeting, Sibley noted his disappointment “that a motion of such gravity-which was not on the agenda circulated 7:11 pm Monday evening not postponed by the board, so that partners not present (and who had no idea such a motion would be made) would have an opportunity to participate in the discussion and subsequent vote.” (Id. ΒΆ 84). In the June 14, 2016 meeting, Sibley, along with plaintiff, moved to cancel the removal of one of the ...

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