260 F. Supp. 3d 369
S.D.N.Y.2017Background
- Plaintiffs Winifred Garner and Sophia Theus, former employees at Atherotech facilities in Birmingham, AL, sued on behalf of themselves and ~300 former Atherotech employees under the WARN Act for failing to give 60 days’ notice and related compensation after plant closings.
- FAC alleges Behrman Brothers IV, LLC and Behrman Brothers Management Corp. (collectively, Behrman) acquired and controlled Atherotech (Behrman owned >90% of Atherotech Holdings, which owned Atherotech) and shared officers/directors with Atherotech.
- Plaintiffs allege Behrman (through partner Mark Visser) exercised daily de facto control over Atherotech, set personnel policies, directed the decision to shut down, drafted a WARN notice, and instructed Atherotech’s CEO McClintic how and when to distribute (and to mislead employees about) the shutdown.
- Plaintiffs allege mass terminations occurred on or about February 26, 2016 (FAC alleges 2016/2017 dates variably), without the required 60 days’ notice, prompting claims for 60 days’ pay and benefits under WARN.
- Procedural posture: Behrman moved to dismiss the FAC under Rule 12(b)(6) and 12(b)(7) and to drop both defendants under Rule 21; the Court denied all motions and ordered the parties to propose a discovery schedule.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FAC states a plausible WARN Act single-employer claim (Rule 12(b)(6)) | FAC alleges common ownership, common directors/officers, unity of personnel policies, de facto control, and that Behrman decided the shutdown and instructed Atherotech on notice distribution | Behrman contends allegations are conclusory as to unity of personnel policies, dependency of operations, and de facto control, and thus insufficient | Denied — court finds FAC pleads sufficient factual allegations on DOL factors (common ownership, common directors, unity of personnel policies, and de facto control) to survive 12(b)(6) |
| Whether failure to join Atherotech requires dismissal (Rule 12(b)(7)/Rule 19) | Plaintiffs may proceed against Behrman alone; Atherotech (direct employer) is not indispensable because joint tortfeasors need not be joined | Behrman argues Atherotech is necessary/indispensable and cannot be joined because it is in bankruptcy and holds relevant evidence | Denied — court treats Atherotech as a permissive (joint) tortfeasor; joinder not required under Rule 19, so dismissal is improper |
| Whether defendants should be dropped for misjoinder (Rule 21) | Plaintiffs: joinder is proper; claims arise from same transactions and common questions of law/fact | Behrman seeks to relitigate merits via affidavits and asks court to drop both defendants under Rule 21 as misjoined | Denied — court will not use Rule 21 to resolve factual disputes or substitute its view for Rule 12(b)(6) standards; misjoinder is not ground for dismissal |
| Scope of pretrial resolution (standard of review / evidence the court may consider) | Plaintiffs rely on FAC allegations and must be credited at motion-to-dismiss stage | Behrman offers declarations to contest FAC facts and urges consideration under Rule 21 | Held: On 12(b)(6) court accepts FAC allegations as true; for 12(b)(7)/21 court may consider extrinsic facts but declined to adopt Behrman’s factual narrative to dismiss claims at this stage |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (legal conclusions not entitled to assumed truth on a motion to dismiss)
- Guippone v. BH S & B Holdings LLC, 737 F.3d 221 (adopts DOL multi-factor test for WARN Act employer liability)
- Vogt v. Greenmarine Holding, LLC, 318 F. Supp. 2d 136 (DENY motion to dismiss where allegations defendant directed shutdown warranted discovery on WARN claim)
- Pearson v. Component Tech. Corp., 247 F.3d 471 (discusses de facto control and when parent liability attaches)
- In re Great Atl. & Pac. Tea Co., Inc., 467 B.R. 44 (discusses WARN Act notice requirements and affiliated-corporate liability under DOL regs)
- ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (court must accept well-pleaded factual allegations on Rule 12(b)(6) review)