McKinney v. Carlton Manor Nursing & Rehabilitation Center, Inc.
868 F.3d 461
| 6th Cir. | 2017Background
- Carlton Manor Nursing & Rehabilitation Center was cited by the Ohio Department of Health for multiple Medicare/Medicaid regulatory deficiencies and faced loss of its provider status.
- Carlton Manor retained Sovran Management Company as a consultant to help remedy deficiencies; the parties were separate businesses under a consulting agreement.
- The Department rejected Carlton Manor’s proposed remediation plan and initiated license revocation; Carlton Manor closed soon thereafter with little or no advance notice to employees.
- Debi McKinney (on behalf of a putative class) sued under the Worker Adjustment and Retraining Notification Act (WARN), claiming Sovran owed back pay for failing to give 60 days’ notice of the plant closing.
- Carlton Manor defaulted but was insolvent; Sovran was the only solvent defendant. The district court granted summary judgment to Sovran, finding Sovran was not an "employer" that "ordered" the closing under WARN.
- The Sixth Circuit affirmed, holding Sovran was neither a "single employer" with Carlton Manor nor a separate employer of McKinney for WARN purposes, and did not "order" the closing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Sovran was an "employer" under WARN by being a "single employer" with Carlton Manor | McKinney: apply WARN regs' flexible multi-factor test (common control/dependency) to treat Sovran and Carlton as one employer | Sovran: no common ownership, directors, shared payroll/policies, or operational dependency; consultant relationship remained arm's-length | Court: Not a single employer; factors show independent entities |
| Whether Sovran was a separate "employer" of McKinney under WARN | McKinney: regs permit treating both entities as separate employers if factors show control/shared employment | Sovran: no evidence Sovran hired, fired, or treated McKinney as its employee; Carlton Manor employed and closed the facility | Court: Sovran was not McKinney's separate employer |
| Whether Sovran "ordered" the plant closing such that WARN liability attaches | McKinney: Sovran exercised de facto control and influenced the closing decision | Sovran: decision to close was made by Carlton Manor and the Department; Sovran only advised/consulted and could leave at will | Court: Sovran did not "order" the closing; no WARN liability |
| Whether lender/creditor-control cases support imposing WARN liability on Sovran | McKinney: analogizes to cases where lenders' control imposed liability | Sovran: consultant-client relationship differs fundamentally from lender-borrower control; Sovran did not become owner/alter ego | Court: lender-borrower cases inapposite; consultancy was arm's-length and insufficient to impose liability |
Key Cases Cited
- Administaff Cos. v. Tow, 337 F.3d 454 (5th Cir.) (regarding employer status under WARN)
- In re APA Transp. Corp. Consol. Litig., 541 F.3d 233 (3d Cir.) (discussing dependency of operations factor)
- Childress v. Darby Lumber, Inc., 357 F.3d 1000 (9th Cir.) (explaining de facto control as supervisory answerability to higher management)
- Coppola v. Bear Stearns & Co., 499 F.3d 144 (2d Cir.) (lender control can create alter-ego or de facto owner status)
- Pearson v. Component Tech. Corp., 247 F.3d 471 (3d Cir.) (considering lender's degree of control to pierce veil for WARN)
- Chauffeurs, Sales Drivers, Warehousemen & Helpers Union Local 572 v. Weslock Corp., 66 F.3d 241 (9th Cir.) (lender-borrower control analysis under WARN)