Those are the questions posed to District Court Judge Susan Davis Wigenton in a case brought by Gershwain Sprauve.
Sprauve seemed to have everything going his way at The West Indian Company Limited (“WICO”). He started working for them as the Manager of Mall Operations and was soon after appointed to be WICO’s Corporate Secretary. Sprauve always received exemplary performance reviews, salary raises, and cash bonuses due for his performance. Sprauve was recommended for President and CEO, and was the Acting President when the position became open. The Board of Directors of WICO unanimously accepted his application for the top spot, and discussed a six-month transition period for Sprauve. They told him that they planned to have a draft contract to him shortly.
In the following months, no steps were initiated to transition Plaintiff into the President and CEO position, and no contract was drafted. The Board stalled and then suggested that Sprauve apply for the newly-created Chief Operating Officer (“COO”) position. Sprauve expressed his frustration with the process.
After he interviewed, he was not given the job. The Board chose Boschulte to be the new WICO President and CEO.
Sprauve claimed that soon after Boschulte took over the position, he received “open hostility” from him. Sprauve presented a memo to the Board complaining about his treatment from Boschulte and stated that his unprofessional attitude and use of inappropriate language created a “hostile work environment”. Sprauve said he was reprimanded by the Board for drafting the memo and not following the practice and procedures outlined in the WICO Employee Handbook.
After other similar incidents, Boschulte terminated Sprauve as COO effective immediately for his failure to perform his duties, among other things. Sprauve alleged that WICO didn’t hold a hearing before terminating him and that he was not notified of the accusations until he received the termination letter.
Sprauve filed an appeal of discrimination with the Virgin Islands Public Employees Relations Board (“PERB”), which referred the matter to mediation. Sprauve’s appeal was dismissed for lack of jurisdiction.
Early this year, Sprauve initiated a lawsuit, which alleged numerous federal and territorial claims for relief. WICO and Boschulte (in both his personal and official capacity as CEO of WICO) filed a Motion to Dismiss.
The Third Circuit said that a pleading "requires a complaint with enough factual matter (taken as true) to suggest’ the required element." The Third Circuit directed the District Court to conduct a two-part analysis. First, the court must separate the factual elements from the legal conclusions, and must accept all of the complaint’s well-pleaded facts as true. Second, the court must determine if the facts alleged in the complaint are sufficient to show that the plaintiff has a "plausible claim for relief."
Judge Wigenton said that the first and central issue raised was whether WICO was a public corporation with public employees or private. The court’s jurisdiction over the case hinged on this element. The PERB noted recently that the “law clearly states that a public employee must be a person holding a position by appointment in the service of a public employer.” PERB concluded that WICO employees were not “public employees” as WICO operated as a private corporation, its employees were hired by WICO management and not through appointment by the Division of Personnel, and WICO employees did not participate in the Government Employees’ Retirement System. Based on this determination, PERB declined jurisdiction over WICO employees.
Of interest in this case was the fact that the Government of the Virgin Islands purchased shares of WICO in 1993, and that the Legislature of the Virgin Islands granted WICO the status and authority of a public corporation and governmental instrumentality of the Government of the Virgin Islands of the United States and [was] deemed to be a public entity operating on behalf of the Government, rather than a private corporation.” Sprauve argued that WICO was granted complete public status by virtue of Act, but the company said it enjoyed a “special dual status” as both a public and private entity. WICO acknowledged language from the Legislative act that conferred tax benefits to WICO as a public corporation, however, they asserted that it otherwise functioned as a private corporation under the laws of the U.S. Virgin Islands.
Judge Wigenton wrote that, based on the record and relevant authority, she found that WICO couldn’t be considered a purely public entity, even though it was clear the company was granted certain benefits and characteristics of a public entity. This alone, she explained, didn’t exemplify the characteristics of a public corporation. The judge held that WICO appeared to function as a private corporation in that: (i) WICO’s employees were not beneficiaries of the Virgin Islands Employees’ Retirement System; and (ii) there was no indication that the employees were given appointed positions in the service of a public employer. WICO employees were not “public employees” and as WICO was not a purely public entity, it would not be deemed a “public corporation.”
In addressing the board’s capacity to sue and be sued, Judge Wigenton stated that pursuant to Federal Rule of Civil Procedure 17(b)(2), the “[c]apacity to sue or be sued … for a corporation, [is determined] by the law under which it was organized.” According to U.S. Virgin Islands law, a board of directors cannot sue other parties or be sued by another party in its own capacity because it “is not a suable entity.” As a result, the Board argued that as an internal structure, a board of directors that cannot be sued can’t receive service of process, especially where there is no registered agent upon which process can be served. Judge Wigenton agreed.
Because personal service couldn’t be properly effected on the WICO Board pursuant to Federal Rules, and Sprauve failed to assert any legal authority to the contrary, his complaint was dismissed. The Board’s Motion to Dismiss and Motion to Quash were granted. Sprauve v. West Indian Company Limited, Slip Copy, 2013 WL 5542902 (D.Virgin Islands October 8, 2013).
If you have questions about issues with your employees, or need assistance determining how to address incidents arising in your company, or any other business matters, contact Ravinder S. Nagi at BoltNagi PC. Attorney Nagi has successfully represented private and public companies in numerous industries, including franchises, hotels, banks, financial service corporations, insurance companies, luxury retailers, restaurant chains, and auto dealerships.
BoltNagi PC is one of the largest firms in the United States Virgin Islands and has experienced legal professionals to assist companies based in or seeking to relocate to the U.S. Virgin Islands.