614 B.R. 187
Bankr. S.D.N.Y.2020Background
- TransCare, an ambulance/paratransit provider, experienced severe liquidity problems in 2015–early 2016, missed payrolls, lost vendors, and relied on capital infusions and loans from entities controlled by Lynn Tilton.
- Tilton (sole director of TransCare) and Patriarch-related personnel developed and executed the “Tilton Plan”: foreclose on assets of certain TransCare units and transfer them to new entities (Transcendence) to preserve much of the business; a wind‑down was planned for the remainder.
- Notices were issued: February 24, 2016 notices triggered layoffs of Initial Debtors’ employees; a February 26, 2016 notice followed when the Transcendence transfer failed and additional employees were terminated.
- Plaintiff Ien sued under the federal WARN Act, the New York WARN Act, and unpaid-wage statutes of NY/PA/MD, naming TransCare and non-debtor defendants (Tilton, Patriarch entities, Ark/AIP funds).
- On summary judgment the court held triable issues as to whether Patriarch Partners was a “single employer” with TransCare but granted summary judgment for Patriarch III and the Funds on that issue; the court denied resolution of the unforeseeable business circumstances defense on summary judgment and granted partial summary judgment for the plaintiff on state wage claims against Tilton.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Single‑employer liability under WARN | TransCare and Patriarch/ Tilton acted as a single employer (common ownership, shared directors, control, unified personnel practices, dependency) | Defendants deny single‑employer status for Patriarch Partners, Patriarch III, and the Funds; argue lack of control or only ordinary ownership/lending relations | Triable issues exist as to Patriarch Partners (denied SJ). SJ granted for Patriarch III and the Funds on single‑employer ground (no evidence of control/personnel) |
| Unforeseeable Business Circumstances (UBC) defense to WARN liability | Movants: layoffs after Feb 24 were caused by unforeseeable events (Trustee/Wells Fargo refusal, asset control issues), so UBC applies | Plaintiff: TransCare’s insolvency and dependence on Tilton/Patriarch made failure probable; UBC not established | Court adopts the probability foreseeability test (Halkias/AE Liquidation). UBC raises factual disputes; cannot be decided on summary judgment for Patriarch Partners |
| State unpaid‑wage employer liability (NY/MD/PA) | Plaintiff: Tilton (and Patriarch Partners) exercised operational and financial control, so are employers under the economic‑reality test | Defendants: Tilton and the entities were not employers; Funds/Patriarch III had no employees or operational control | Court grants summary judgment for Plaintiff against Tilton on NY, MD, PA wage claims (Rule 56(f)(1)). Issues remain as to Patriarch Partners; SJ for Patriarch III and the Funds on wage claims |
| Court sua sponte SJ for nonmovant under Rule 56(f)(1) | Plaintiff asked court to grant SJ against Tilton on wage claims | Defendants argued procedural unfairness and lack of time/notice | Court gave both sides supplemental briefing and applied Rule 56(f)(1); granted SJ to Plaintiff on Tilton for the state wage claims (no procedural prejudice) |
Key Cases Cited
- Guippone v. BH S&B Holdings LLC, 737 F.3d 221 (2d Cir. 2013) (adopts DOL five‑factor single‑employer test for WARN claims)
- Coppola v. Bear Stearns & Co., 499 F.3d 144 (2d Cir. 2007) (lender/creditor control test — de facto owner standard)
- Halkias v. Gen. Dynamics Corp., 137 F.3d 333 (5th Cir. 1998) (adopts probability standard for WARN unforeseeable business circumstances defense)
- AE Liquidation, Inc. v. Varela (In re AE Liquidation, Inc.), 866 F.3d 515 (3d Cir. 2017) (endorses probability foreseeability test and analyzes UBC elements)
- Irizarry v. Catsimatidis, 722 F.3d 99 (2d Cir. 2013) (FLSA/NYLL individual‑employer liability; operational control and economic‑reality test)
- Barfield v. New York City Health & Hosps. Corp., 537 F.3d 132 (2d Cir. 2008) (economic‑reality test for employment relationship)
- Herman v. RSR Sec. Servs. Ltd., 172 F.3d 132 (2d Cir. 1999) (four‑factor FLSA employer test)
- Pearson v. Component Tech. Corp., 247 F.3d 471 (3d Cir. 2001) (single‑employer inquiry: whether entities operated at arm’s length)
- Vogt v. Greenmarine Holdings, LLC, 318 F. Supp. 2d 136 (S.D.N.Y. 2004) (WARN Act single‑employer factor analysis)