611 B.R. 160
Bankr. S.D.N.Y.2020Background
- TransCare Corporation and subsidiaries operated ambulance/paratransit services; facing insolvency they pursued a restructuring that involved foreclosing assets and transferring some operations to new entities ("Transcendence").
- On Feb. 24, 2016 the Initial Debtors filed Chapter 7; employees received two emails that day ("First Feb. 24" and "Second Feb. 24") that were ambiguous about whether and when employment would end, omitted contact information, and failed to state separation dates or bumping rights.
- On Feb. 26, 2016 employees of the Subsequent Debtors received a clear notice stating operations must cease immediately because lenders and the trustee would not fund payroll and would not permit Transcendence to operate; that notice included a contact.
- Plaintiff (class representative) sued under the federal and New York WARN Acts and state wage laws; a WARN class and NY sub-class were certified; plaintiff moved for partial summary judgment to preclude defendants from invoking the WARN Act exceptions on the ground the notices were inadequate.
- The chapter 7 trustee conceded the Debtor Defendants did not send WARN-compliant notices; Non-Debtor Defendants argued the February notices (read together) were sufficient to support the statutory exceptions.
- The court held the Feb. 24 communications were insufficient under WARN (ambiguous, omitted required content) but the Feb. 26 notice satisfied the shortened-notice requirements; it struck certain affirmative defenses as to class members affected by the Feb. 24 notices and otherwise denied the motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Were the Feb. 24 notices compliant with WARN content requirements? | Feb. 24 notices were ambiguous, failed to state first separation date, lacked contact info and bumping-rights info | Notices taken together gave employees reasonable information about continued operations and wind-down | Court: Feb. 24 notices insufficient — failed to give required separation date, contact, bumping info; cannot support WARN exceptions for affected employees |
| Was the Feb. 26 notice compliant with WARN shortened-notice requirements? | Plaintiff argued notices generally inadequate; Feb. 26 still must meet content rules | Feb. 26 gave a brief written statement explaining unforeseeable circumstances, stated immediate cessation, and provided contact | Court: Feb. 26 notice sufficient — explained basis for reduced notice, provided contact, made clear employment ended that day |
| Can defendants invoke the Faltering Company / Unforeseeable Business Circumstances exceptions given the notices? | Defenses cannot stand because notices did not comply with statute/regulations | Defendants asserted exceptions apply and that communications satisfied "as soon as practicable" and explanatory requirements | Court: Debtor Defendants conceded they cannot invoke defenses; Non-Debtors may invoke exceptions only where timely written explanatory notice was given (Feb. 26 recipients), but not for Feb. 24-affected employees |
| May multiple communications be read together to satisfy WARN? | Multiple communications here created confusion and do not cure deficiencies | Communications should be read together to resolve ambiguities and supply missing information | Court: Communications can be combined only when they clarify; where they create ambiguity (as Feb. 24 pair did) they fail to satisfy WARN |
Key Cases Cited
- Alarcon v. Keller Indus., Inc., 27 F.3d 386 (9th Cir. 1994) (shortened-notice statement must adequately explain factual basis for exception)
- Varela v. AE Liquidation, Inc. (In re AE Liquidation, Inc.), 866 F.3d 515 (3d Cir. 2017) (regulatory and statutory requirements for WARN defenses reviewed; communications may be read together in some circumstances)
- Grimmer v. Lord Day & Lord, 937 F. Supp. 255 (S.D.N.Y. 1996) (discussing adequacy of WARN notices and exception explanations)
- Conn v. Dewey & LeBoeuf LLP (In re Dewey & LeBoeuf LLP), 507 B.R. 522 (Bankr. S.D.N.Y. 2014) (shortened-notice explanation must be written)
- In re Organogenesis Inc., 316 B.R. 574 (Bankr. D. Mass. 2004) (employer that gave no written WARN notice cannot rely on exceptions requiring reduced written notice)
- Barnett v. Jamesway Corp. (In re Jamesway Corp.), 235 B.R. 329 (Bankr. S.D.N.Y. 1999) (analyzed §639.7 requirements and employer's inability to invoke exceptions without written notice)
- Saxion v. Titan-C-Mfg., Inc., 86 F.3d 553 (6th Cir. 1996) (courts may look to WARN's remedial purposes and treat technical defects flexibly in some contexts)
- Schmelzer v. Office of Compliance, 155 F.3d 1364 (Fed. Cir. 1998) (WARN notice adequacy evaluated by underlying purposes)
- Kalwaytis v. Preferred Meal Sys., Inc., 78 F.3d 117 (3d Cir. 1996) (communications should be fairly read to determine whether information given satisfied WARN)
- In re Advanced Accessory Sys., LLC, 443 B.R. 756 (Bankr. E.D. Mich. 2011) (contrasting view on whether shortened notice must be written; district court found that view unpersuasive)