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HERMAN v. BLOCKBUSTER ENTERTAINMENT GROUP

August 25, 1998

ADAM HERMAN, DIONNE DUROSARO-KELSON, MICHELLE FITZPATRICK, SHAWN DAVILA, KELLEE ANTHONY, KENYA NEWELL, PAULETTE RUIZ, LASHAWNDA BONNER, ASHIREA MOORE, and FANNIE SMITH, Plaintiffs, against BLOCKBUSTER ENTERTAINMENT GROUP, and VIACOM INTERNATIONAL, INC., Defendants.


The opinion of the court was delivered by: LOWE

OPINION AND ORDER

 MARY JOHNSON LOWE, U.S.D.J.

 Before the Court is the motion for summary judgment of Defendants Blockbuster Entertainment Group ("Blockbuster") and Viacom International, Inc. ("Viacom") (collectively the "Defendants") pursuant to Federal Rule of Civil Procedure 56. For the reasons set forth below, the Court hereby grants summary judgment in favor of Defendants.

 BACKGROUND

 Plaintiffs Adam Herman, Dionne Durosaro-Kelson, Michelle Fitzpatrick, Shawn Davila, Kellee Anthony, Kenya Newell, Paulette Ruiz, Lashawnda Bonner, Ashirea Moore, and Fannie Smith ("Plaintiffs") commenced this action alleging violations of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq., and the New York Human Rights Law § 290, et seq. Plaintiffs are all former employees of Discovery Zone, *fn1" a chain of children's indoor recreational facilities with approximately 300 outlets in the United States and Europe. Blockbuster owns 49.9 percent of Discovery Zone's common stock. As of September 29, 1994, Blockbuster is a wholly-owned subsidiary of Viacom.

 In June 1997, Defendants sought leave to move to dismiss this action, claiming they could not be held liable as Plaintiffs, "employers" under either Title VII or the New York Human Rights Law. The Court, finding discovery on this issue necessary, denied Defendants' request and ordered discovery on the limited issue of whether the management and operations at Blockbuster and Discovery Zone were sufficiently integrated to hold Blockbuster liable under Title VII for the alleged discriminatory acts at Discovery Zone's stores. After the parties completed this limited discovery, Defendants filed the instant motion on the integrated enterprise issue.

 Plaintiffs, one male and nine females, were all hired by Discovery Zone between December 1994 and August 1995. Each worked at a New York area Discovery Zone location. The nine female plaintiffs allege that, during their employment in 1995, they each were subjected to sexual harassment and discrimination by male general managers at Discovery Zone. In July 1995, several of the plaintiffs reported the incidents to plaintiff Adam Herman ("Herman"), an assistant manager at Discovery Zone's Manhattan location. Herman allegedly reported these complaints to Laurie Fleurent ("Fleurent"), the director of Discovery Zone's Human Resources department. Herman claims that, at a subsequent meeting with various Discovery Zone management on August 11, 1995, he was effectively told to remain quiet if he wished to advance within the company. Herman resigned soon after the meeting. Herman and several other plaintiffs allege that they were constructively discharged in retaliation for reporting the discriminatory conduct.

 On April 17, 1995, Viacom and Blockbuster entered into a Management Services Agreement ("MSA") with Discovery Zone whereby Blockbuster agreed to provide various management services to Discovery Zone. See Weinstein Aff., Ex. 5 (MSA). The MSA provides that "Blockbuster should take over the operational and administrative functions of [Discovery Zone] by providing certain management services for [Discovery Zone]." See id. at 1. The MSA further provides that "Blockbuster shall provide the overall coordination and supervision of the business of [Discovery Zone] and its subsidiaries and shall direct and manage the day-to-day operations and business affairs of [Discovery Zone] and its subsidiaries." See id.

 The MSA lists specific services to be provided to Discovery Zone, including:

 
(iii) General financial, accounting and payroll services, including (A) general accounting (billing/invoicing, accounts payable services, accounts receivables management and collection services and maintenance of general ledgers), (B) cash management and banking services, (C) budget preparation and (D) accounting and financial services associated with the preparation and filing of reports to federal, state and local governmental organizations, including those associated with the preparation and filing of reports to the United States Securities and Exchange Commission (the "SEC"); . . .
 
(vi) legal and tax services, including . . . (B) the preparation and filing of, and assistance with respect to, tax returns and reports to the SEC and other governmental agencies . . . and (D) the management of the defense or prosecution of litigation, and of other legal services furnished by outside counsel, and making recommendations with respect thereto; . . .
 
(xi) human resource and personnel administration services, including (A) employee and labor relations, (B) compensation and benefits, (C) hiring, promoting, demoting, discharging and transferring employees and (D) providing incentive and severance packages to employees . . .

 See id. at 2-3. Discovery Zone was to "reimburse Blockbuster for the costs and expenses incurred in its provision of management service to [Discovery Zone]." See id. at 1; see also id. at 5-6 ("Compensation for Services").

 During the limited discovery period, Plaintiffs deposed Al Detz ("Detz"), the former Chief Financial Officer of Blockbuster, and Johnny Taylor ("Taylor"), former in-house counsel at Blockbuster. Detz testified that Blockbuster provided certain services to Discovery Zone under the MSA as a cost-cutting measure. See Detz Tr. at 26. For each service contemplated under the MSA, Discovery Zone performed a cost analysis to determine if Blockbuster could provide the service cheaper. See id. at 26, 96-97. Pursuant to the MSA, Blockbuster actually provided the following services to Discovery Zone: payroll processing, tax return preparation, insurance claim processing, computer operation work, and certain legal services. See id. at 25-26, 33-34.

 In addition to the services provided, Detz served as interim CFO at Discovery Zone from June 1995 until the Spring of 1996. See id. at 54-55. Steve Berrard, the Chief Executive Officer of Blockbuster, served as interim CEO at Discovery Zone during the same period. See id. Blockbuster also transferred approximately 30-70 financial accounting personnel to Discovery Zone after the MSA was signed. See id. at 15-16.

 DISCUSSION

 I. Legal Standards Under ...


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