487 B.R. 169
Bankr. S.D.N.Y.2013Background
- Dewey & LeBoeuf, an international law firm, filed for chapter 11 on May 28, 2012 after a large collapse and staffing reductions.
- Conn, a former Dewey document specialist, was terminated around May 7, 2012 and filed a WARN action in district court on May 10, 2012.
- Conn’s District Court Action was stayed by the bankruptcy petition on May 29, 2012, and she commenced this adversary proceeding on May 29, 2012 with about 550 purported class members.
- The Complaint alleges WARN Act violations (federal, NY, and CAL WARN Acts) for mass layoffs around May 11, 2012, seeking back pay and benefits with mixed administrative/priority treatment up to statutory limits.
- The Debtor moved to dismiss, arguing prepetition WARN claims must be pursued via proofs of claim and that class treatment and the liquidating fiduciary defense preclude relief; the Plaintiff opposed, and JP Morgan joined supporting the Debtor in part.
- The court granted extensions, extended the WARN bar date, and scheduled class certification for March 28, 2013; the motion to dismiss is addressed on the merits, with class certification to be decided later.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can WARN Act claims be brought in an adversary proceeding? | WARN claims are equitable; Rule 7001(7) allows adversary relief. | Prepetition WARN claims belong in the claims allowance process; adversary proceeding inappropriate. | Yes; WARN claims may proceed in an adversary proceeding. |
| Is the liquidating fiduciary defense determinative at dismissal? | Facts show potential liability; defense not dispositive at this stage. | Liquidating fiduciary defense may negate employer status prepetition or precludes liability as a matter of law. | Not determinative on a Rule 12(b)(6) motion; factual disputes remain. |
| Should the class action be decided at the motion to dismiss stage? | Class treatment is appropriate in WARN actions; Rule 7023 applies to adversaries. | Class issues should be considered outside bankruptcy or after merits; dismissal/summary stage. | Not decided at this stage; class certification to be heard March 28, 2013. |
| Whether administrative or priority status for WARN relief may be determined in this adversary proceeding? | Claims sought administrative priority or wage priority under §§ 503(b)(1)(A) and 507(a)(4)-(5). | Administrative/priority status must be determined by motion in the main case, not in an adversary proceeding. | Such relief must be addressed in the main bankruptcy case, not this adversary proceeding. |
Key Cases Cited
- Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147 (2d Cir. 2001) (Title VII back pay is equitable relief)
- In re Protected Vehicles, Inc., 392 B.R. 633 (Bankr. D.S.C. 2008) (WARN back pay is equitable; remedies are discretionary)
- Bledsoe v. Emery Worldwide Airlines, Inc., 635 F.3d 836 (6th Cir. 2011) (WARN remedies are equitable; back pay as restitution)
- MF Global Holdings Ltd. (In re MF Global Holdings Ltd.), 481 B.R. 268 (Bankr.S.D.N.Y. 2012) (postpetition facts; liquidating fiduciary issues discussed)
- In re Jamesway Corp. (Jamesway I), 1997 WL 327105 (Bankr.S.D.N.Y. 1997) (liquidating fiduciaries and WARN implications discussed)
- In re Jamesway Corp. (Jamesway II), 235 B.R. 329 (Bankr.S.D.N.Y. 1999) (post-petition terminations and WARN defenses debated)
- United Healthcare Sys., Inc. (In re United Healthcare Sys., Inc.), 200 F.3d 170 (3d Cir. 1999) (liquidating fiduciaries and employer status discussed)
- Partsearch Technologies, Inc., 453 B.R. 84 (Bankr.S.D.N.Y. 2011) (WARN class actions; illustrative guidance on certification)
- Borders Group, Inc., 465 B.R. 365 (Bankr.S.D.N.Y. 2012) (WARN class action settlements and procedures)
- Guippone v. BH S&B Holdings LLC, 2011 WL 1345041 (S.D.N.Y. 2011) (warn act class treatment noted in discussion)