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CARUSO v. PEAT

June 7, 1991

CONRAD S. CARUSO, PLAINTIFF,
v.
PEAT, MARWICK, MITCHELL & CO., DEFENDANT.



The opinion of the court was delivered by: Robert P. Patterson, Jr., District Judge.

OPINION AND ORDER

This is an action alleging age discrimination and retaliatory discharge in violation of the Age Discrimination in Employment Act ("ADEA"), as amended, 29 U.S.C. § 621 et seq. Defendant moves pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment dismissing plaintiff's age discrimination claim in Count 1 of the amended complaint. For the reasons set forth below, defendant's motion is denied.

BACKGROUND

KPMG Peat Marwick ("Peat Marwick"), formerly Peat, Marwick, Mitchell & Co., is a public accounting and consulting firm employing thousands of professionals, approximately 1350 of whom are partners or principals. Caruso Aff. filed Feb. 13, 1989 ¶ 6. In May 1969, at the relatively older age of 34, Conrad Caruso ("Caruso") joined Peat Marwick as a Senior Consultant in the Management Consulting Department of Peat Marwick's New York office. Id. ¶ 2. In 1970, Caruso was promoted to the position of manager and began to develop a practice in the field of government contracts. Id.

Caruso was under the direct supervision of the Partner-in-Charge ("PIC") of the New York Management Consulting Department, who from July 1978 was Russell Peppet ("Peppet"). Peppet Aff. ¶ 2. Peppet promoted Caruso's candidacy for election to the Peat Marwick partnership.*fn1 Id. ¶ 5. The department nominated Caruso in the fall of 1979 and Caruso was elected the partnership in the spring of 1980. Id.

In 1981 William Hasler ("Hasler") replaced Peppet as Partner-in-Charge, a position Hasler held until the fall of 1984. Hasler Aff. ¶ 1. In the course of acquainting himself with the partners in the department, Hasler states he found Caruso to have among the lowest performance levels in the department. Id. Partner performance at Peat Marwick is measured by two figures, "accountancy income" and "chargeability." "Accountancy income" is the amount of fees billed to clients for engagements generated by and managed by a particular partner. Id. ¶ 5 n. 5. "Chargeability" is the percentage of an individual's available time — normally 2080 hours per year — which is billed to clients. Id. ¶ 3 n. 4. After two to three years, partners at Peat Marwick were expected to generate $800,000 in accountancy income and achieve 40-60% chargeability. Id. ¶ 3; Montgomery Aff. ¶ 4.

In June 1983, when Caruso had been a partner for three years, Hasler conducted Caruso's annual performance review and expressed concern about Caruso's performance. Caruso's 1983 Performance Evaluation shows that his accountancy income for the preceding year was $300,000 with 34%, chargeability, short of the firm's goal for him of $600,000 in accountancy income and 45% chargeability set during the preceding year's review. Hasler Aff. ¶ 5 & Exh. B. For 1984 Caruso and Hasler set a goal of $750,000 in accountancy income and 45% chargeability for Caruso. Id. In a separate evaluation form not shown to Caruso, Hasler ranked Caruso 27th out of 29 partners and principals in the Management Consulting Department. Id. ¶ 6.

In February 1984 Caruso began appearing on "watch lists" identifying persons being tracked by the Operating Committee whose resignations were likely to be sought if their performance failed to improve. Hasler Aff. ¶ 10; Peppet Aff. ¶ 7. One such list dated February 20, 1984 entitled "Sub-Standard and Marginally-Performing Partners" and addressed to members of Peat Marwick's Operating Committee lists Caruso as one of nine such partners in the Northeast Region. Hasler Aff., Exh. D. A second undated watch list appears in the record entitled "Counseling of Partners" and lists Caruso under the heading "Sub-Standard." Id.

In May 1984, Hasler conducted Caruso's 1984 Performance Evaluation. Far from meeting the goal of $750,000 set the previous June, Caruso had achieved accountancy income of less than $400,000 in the preceding year.*fn2 Hasler Aff. ¶ 7. Hasler made plans to conduct a mid-year review with Caruso in December 1984. Id. Hasler claims that mid-year reviews are "extremely rare" at Peat Marwick and that he intended to seek Caruso's resignation after the mid-year review if his performance did not substantially improve. Id. ¶ 8. In the confidential portion of the Evaluation, Hasler ranked Caruso 29th out of 31 partners and principals in the department but noted:

  [Caruso] did respond to last year's counseling by
  attempting to diversify his government contracting
  practice into defense industries with some
  success. . . . This momentum, plus his continued
  professionalism and dedication, offers some
  potential for improved success in FY 85.

Id., Exh. G at 5. Hasler gave Caruso an overall rating and a rating for Practice Development of "A" or "Needs Improvement," a rating which calls for "constructive counseling." Id. at 6; Garcia Aff., Exh. D.

Caruso's December 1984 mid-year review did not take place because in October 1984 John Montgomery ("Montgomery") replaced Hasler as Partner-in-Charge of the New York Management Consulting Department. Montgomery Aff. ¶ 1. Montgomery states that as the new PIC, he "was not prepared to seek Mr. Caruso's resignation immediately." Id. ¶ 5. He states he was however prepared to do so after conducting Caruso's 1985 Performance Evaluation in May or June of 1985 if Caruso's performance failed to show substantial improvement. Id. Caruso alleges that Montgomery did not counsel him about his performance at any time. Caruso Aff. ¶ 5.

In October 1984, the Board of Directors of Peat Marwick proposed an Enhanced Early Retirement Program ("EERP") designed to reduce the total number of units in the partnership through a program whose terms would "encourage the early retirement of a number of partners whose contribution to the Firm had leveled off." Hasler Aff., Exh. E. William Mecklenburg, a member of the Operating Committee, testified at his deposition that the program was more broadly aimed at "partners who were getting up in years who were tired, whose contribution to the partnership was not what it had previously been commensurate with their earning capacity." Garcia Aff., Exh. N at 15.

Pursuant to the board's proposal, Peat Marwick's Operating Committee formulated eligibility requirements for participation in the EERP by partners whose performance was less than satisfactory and who might be asked to resign. Category 1 of the EERP comprised partners who, as of June 1985, were at least 49 years old and whose combined age and years of service equalled at least 72. Certain partners in this category would be asked to resign, others would be encouraged but not forced to resign and still others would not be encouraged to resign under the program. Category 2 of the EERP comprised partners who had at least 10 years of service at Peat Marwick and whose combined age and years of service totalled at least 63. Partners in Category 2 were the partners who met the age and service requirements and whose poor performance was such that they ...


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