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March 27, 2002


The opinion of the court was delivered by: Gershon, District Judge.


Plaintiffs Catherine Marvelli, Denise Mattox, Lillian Morales, Seon Mickle, and Tanisha Gardner bring this action against defendants CHAPS Community Health Center, Staten Island University Hospital ("SIUH"), Municipal Training Center ("MTC"),*fn1 Duncan Huie, and Mark Appel alleging 1) unlawful sexual and racial harassment in violation of 42 U.S.C. § 1981, the New York Executive Law §§ 296 et seq. ("NYSHRL"), and Article 8 of the New York City Administrative Code ("NYCHRL"); 2) retaliatory termination in violation of 42 U.S.C. § 1981, the NYSHRL, and the NYCHRL; and 3) assault and battery. A further claim for intentional infliction of emotional distress has been withdrawn.

Defendants SIUH, CHAPS, and Huie, and separately, Appel, move for summary judgment pursuant to Fed.R.Civ.P. 56(b) to dismiss plaintiffs' claims in their entirety. Plaintiffs oppose the motions for summary judgment and seek to amend the complaint to add a Title VII claim.


Unless otherwise indicated, the following facts are undisputed.

1. Mattox and Marvelli's Employment History:

Mark Appel founded CHAPS in January 1998 as an out-patient healthcare facility, and managed the company for a year. Originally, there were four employees. There were two doctors, Dr. Denise Mattox and Dr. Cheryl Brown-Murray, as well as an Administrator, Karen Bronstein, and a Receptionist, Donna Samuels. In June 1998, Bronstein resigned and Appel hired Duncan Huie as CHAPS' Administrator. Huie began working in July 1998, and Catherine Marvelli began work as an intern shortly thereafter. On August 3, 1998, Huie hired Marvelli as a billing assistant. Huie knew Marvelli from Brookdale Hospital, where she had worked as an intern for Huie. According to Marvelli, Huie told her that CHAPS is an "Article 28" facility under the New York Public Health Law, which means that it bills patients at a flat rate of $146.47, regardless of the services rendered. Other clinics could charge only between $40 and $60 for the same services. According to Marvelli, Huie explained to her that CHAPS agreed with other clinics to bill Medicare under CHAPS' name for the higher amount, and the two clinics split the additional revenue. Marvelli Dec. ¶ 4.

In late 1998, Appel negotiated with SIUH for SIUH to acquire corporate sponsorship over CHAPS for $2.5 million. Pursuant to the transfer of sponsorship between CHAPS and SIUH dated December 28, 1998, SIUH became the sole member/sponsor of CHAPS, effective January 1, 1999. It is undisputed that at all times CHAPS and SIUH were two "separate entities." They had separate operations, payrolls, employee handbooks, employment practices and procedures, offices, locations, and bank accounts. After the transfer of sponsorship, Appel was no longer affiliated with either CHAPS or SIUH in any manner.

In February 1999, SIUH appointed James Walsh to be CHAPS' Executive Director. Walsh claims that he made frequent visits to CHAPS, but Marvelli claims that he only rarely visited the CHAPS facility. Walsh Dec. ¶ 5; Marvelli Dec. ¶ 50. Walsh read and analyzed CHAPS' financial records, payroll records, and other business related records in February 1999, which showed CHAPS had a negative cash flow from operating activities in excess of $400,000.*fn2 Defendants submit an independent auditors' report with their Reply Memorandum from independent auditor KPMG dated December 31, 1998 indicating that CHAPS had a negative cash flow of over $400,000. Walsh believed that this was due, in part, to a lack of patients using the facility. Walsh Dec. ¶ 8.*fn3 On a visit, Walsh noticed that Brown-Murray and Mattox were not treating many patients and that Marvelli was frequently absent. According to the payroll, Marvelli worked only an average of 26 hours a week for the first quarter of 1999, when she was supposed to be working at least 35 hours a week. Walsh Depo. 31-34; Walsh Aff. ¶¶ 8-9. Marvelli claims that she:

did take some sick days, but I had no other attendance problem and Walsh never mentioned this to me. . . . While Walsh was rarely at CHAPS, it is possible that I would not have been there on occasion. This is because, as a result of my complaints to Appel about Huie, Appel told me that I could do billing on the weekends and minimize the amount of time that I had to work with Huie. Therefore I adjusted my schedule and sometimes worked on the weekend and took days off during the week.

Marvelli Dec. ¶ 57.

Based on its deficits and lack of patients, Walsh made the decision to restructure CHAPS and terminate Brown-Murray, Mattox, and Marvelli. Walsh Depo. 31-34; Walsh Aff. ¶ 10. In March 1999, CHAPS contracted with the University Physicians Group ("UPG"), which is affiliated with SIUH, to run CHAPS. Under the agreement, UPG would operate the entire CHAPS operation. Walsh concluded that UPG would provide a better opportunity for UPG to create a positive cash flow because UPG physicians had their own patient base. SIUH had used UPG with success on previous occasions for other out-patient facilities. Walsh Depo. 18, 31; Walsh Aff. ¶ 11. Walsh testified as follows:

Q Why did you determine that they [Mattox and Marvelli] should be terminated?
A It was a business decision. The two or three weeks that I spent there, I noticed a lack of patients, and the time that the doctors were doing nothing because of the lack of patients.
I then looked at the revenue that were being generated there, and the actual costs of the doctors and Ms. Marvelli, and I decided that we should go in a different direction.

Q What was the direction that you decided to go in?

A At that time, we were looking at various options, and the one that we finally went with was an interim step through University Physicians Group.
Q What was the reason for terminating Catherine Marvelli?
A We were deciding to go in a different direction, and I felt that it was better to everybody during this reconstruction — let's go start with a fresh team.
Q What was the new direction with respect to effecting Ms. Marvelli's employment?
A I just felt that besides her sporadic attendance when I was there, that she was entrenched with the same model, the same concept that was already there. The culture was there and the model. I felt a new team was the right decision.
Q What was the culture and concept that you were referring to?
A They seemed to be very satisfied with no patients. They didn't seem to be upset that the business was not there, that it was okay.

Walsh Depo. 31-33. It is undisputed that neither Huie nor Appel were involved in any manner with Walsh's decision to contract with UPG and terminate Mattox and Marvelli. Walsh Aff. ¶ 14, 31, 52-53.

Walsh terminated Brown-Murray, Mattox, Marvelli at a meeting on March 16, 1999. Mattox testified that the following exchange occurred at the meeting:

Q What did Mr. Walsh say to you?

A We were fired.

Q Did he inform you that Chaps was running at a deficit or at a loss?

A Yes, he did.

Q What else did he tell you?

A He said they just couldn't keep doing that, that he had analyzed the situation since he had been Administrator and he looked into it and he just really couldn't — he couldn't be responsible for continuing an operation that was hemorrhaging financially to such an extent, so that he was going to close Chaps and restructure it so that it would be — so I guess it would be more cost-effective or something.
Q Did he inform you that he was going to attempt to restructure Chaps to have it run not at a deficit?
A He said the reason that he was closing it was because it was running at such a tremendous loss and it needed to be restructured.

Mattox Depo. 194-95. In an affidavit, Marvelli states that Walsh told her how CHAPS was going to expand and make a lot of money, and that he "never said anything" about CHAPS losing money. However, later in the affidavit, and at her deposition, Marvelli claims that, at the March 16, 1999 meeting, Walsh said "something about the place was hemorrhaging financially and because of the financial costs, he would have to let me go and restructure CHAPS or something like that." Marvelli Depo. 23; Marvelli Dec. ¶¶ 54, 56.

According to a Personnel Policy and Procedure that Appel instituted in 1997:

Employment with the C.H.A.P.S. Community Health Center is not for any stated period and can be terminated by either party at any time.

1.1a Dismissal

Management and/or the Board at its sole discretion may terminate employment due to changes in staffing patterns, reduction in work force or for budgetary or other economic reasons. Employees will be given as much notice as possible.

1.1b Reorganization and Restructure

* If the results of reorganization or restructure of the C.H.A.P.S. Community Health Center causes the elimination of certain jobs, those employees affected will be given at least one month's notice. Exception to this would be if funds are suddenly fund [sic] thereby not allowing such notice.

O'Brian Ex. B.

2. Huie's Alleged Harassment of Mattox and Marvelli

Shortly after beginning work, Marvelli claims that Huie made "low level off color remarks" such as saying he did not notice any panty lines and asking whether Marvelli was wearing a thong. However, she claims that his comments began to become more severe beginning in September 1998. She claims that he constantly commented about women's shoes, and at one point took a picture of Mattox's feet. He also started to talk a lot about his personal life, particularly the fact that he dated a lot of strippers. Marvelli Dec. ¶¶ 11-12. Huie spoke "about how he dated a stripper with big breasts and that it stunk, her breasts stunk from underneath." Marvelli Depo. 69. He said that Marvelli would not have that problem because she has small breasts. When Marvelli asked Huie to stop, he said "you're a part of the iddy bitty titty community and that's why you don't want to talk about it." Marvelli Dec. 27. According to Marvelli, Huie would also ask Marvelli "[a]fter you take a shit, do you look in the toilet bowl before you flush?" Marvelli Depo. 107. Marvelli testified that she found this sexually offensive. Marvelli Depo. 107.

In October 1998, Huie told a patient that Marvelli was a transvestite. Marvelli Depo. 62, 75-76. Following this incident, Huie would make daily jokes about Marvelli being a transvestite to her and the patients. Marvelli claims she asked Huie to stop, but he ignored her. Marvelli notified Appel about this incident. While she testified that she did not recall the exact date of the complaint to Appel, she testified as follows:

Q As you sit here today, are you sure that you reported this incident to Mr. Appel ...

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