In re AE Liquidation, Inc., et al.

Case Type:
Case Status:
16-2203 (3rd Circuit, Aug 04,2017) Published
Affirms entry of summary judgment in favor of debtor/company in WARN Act class action suit & adopts 5th Circuit ruling in Halkias v. Gen'l Dynamics Corp. that mass layoffs must be probable, not merely a foreseeable possibility, to trigger WARN Act notification requirement. The "objective facts [must] reflect that the layoff [is] more likely than not." The most well-intentioned subjective belief will not excuse WARN Act notice requirement if not "commercially reasonable" in light of available facts during 60-day notice period. Here, layoffs were not "probable" until case converted to Chapter 7.
Procedural context:
Class action complaint was filed by Debtor's employees against the Debtor. Bankruptcy court granted summary judgment in favor of the company, finding that "unforeseeable business circumstances" justified the company's failure to provide WARN Act notifications. The District Court affirmed.
When jet engine maker filed Chapter 11 case, it entered agreement to sell the company to its largest shareholder. The deal was to be funded by a state-owned Russian bank, but the funding that had been repeatedly promised never materialized. At 60-days before layoffs, debtor was preparing to be sold as a going concern via auction procedures approved by Bankruptcy Court. When closing did not occur, Debtor's directors sought concrete funding commitment from buyer's funding source, and were constantly assured funding was forthcoming. The company's long business relationship with buyer, including as major shareholder and members of board of directors, buyer's history of providing financial assistance on multiple prior occasions was critical factor in decision. Assurances, in hindsight, may appear hollow, but these were not grandiose promises from a stranger, but assurances from a credible business partner with a demonstrated commitment to company's survival.
Krause (author), Fisher, Greenberg

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