173 F.3d 175 (3rd Cir. 1999), 97-5789, Hotel Employees and Restaurant Employees Intern. Union Local 54 v. Elsinore Shore Associates

Docket Nº:International Union, Appellant at No. 97-5789,
Citation:173 F.3d 175
Party Name:HOTEL EMPLOYEES AND RESTAURANT EMPLOYEES INTERNATIONAL UNION LOCAL 54 v. ELSINORE SHORE ASSOCIATES d/b/a Atlantis Hotel and Casino; Elsinore Corporation; Elsub Corporation; Elsinore of Atlantic City; Elsinore of New Jersey, Inc. (D.C. Civil No. 89-02143). Daniel L. Finkler; Doreen Vitalo; Frank Franceschini; John M. LeGrand; Kenneth Arthur; Christi
Case Date:March 31, 1999
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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Page 175

173 F.3d 175 (3rd Cir. 1999)

HOTEL EMPLOYEES AND RESTAURANT EMPLOYEES INTERNATIONAL UNION LOCAL 54

v.

ELSINORE SHORE ASSOCIATES d/b/a Atlantis Hotel and Casino;

Elsinore Corporation; Elsub Corporation;

Elsinore of Atlantic City; Elsinore of

New Jersey, Inc. (D.C. Civil

No. 89-02143).

Daniel L. Finkler; Doreen Vitalo; Frank Franceschini;

John M. LeGrand; Kenneth Arthur; Christine Bednarski;

Jean Bruno; Paulette Chapman; Denise Lynne Crowe; Jerry

Fisher; Al Glenn; Linda Pasquale Krause; Cheryl McCarty;

Joseph Manno; Leon A. Sarao; Barry R. Shapiro; Tom

Tavener; Babette Weinstein; Sallie Williamson; Lane F.

Yoshida; David Owens; Edward Malesinski; Rose Brennan;

Grace Jasper; Arturo Barrera; Lorrie Lennox; Ronald J.

Sohl, Sr., on behalf of themselves and all others similarly situated

v.

Elsinore Shore Associates, d/b/a Atlantis Casino Hotel;

Elsub Corporation; Elsinore of Atlantic City; Elsinore of

New Jersey, Inc.; Elsinore Finance Company; Elsinore

Corporation; Jeanne Hood (D.C. Civil No. 89-02330),

Local 54, Hotel Employees and Restaurant Employees

International Union, Appellant at No. 97-5789,

Local 54, Hotel Employees and Restaurant Employees

International Union; Daniel L. Finkler; Doreen Vitalo;

Frank Franceschini; John M. LeGrand; Kenneth Arthur;

Christine Bednarski; Jean Bruno; Paulette Chapman; Denise

Lynne Crowe; Jerry Fisher; Al Glenn; Linda Pasquale

Krause; Cheryl McCarty; Joseph Manno: Leon A. Sarao;

Barry R. Shapiro; Tom Tavener; Babette Weinstein; Sallie

Williamson; Lane F. Yoshida; David Owens; Edward

Malesinski; Rose Brennan; Grace Jasper; Arturo Barrera;

Lorrie Lennox; Ronald J. Sohl, Sr., on behalf of themselves

and all others similarly situated, Appellants at No. 98-5116.

Nos. 97-5789, 98-5116.

United States Court of Appeals, Third Circuit

March 31, 1999

Argued Sept. 14, 1998.

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[Copyrighted Material Omitted]

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Theodore M. Lieverman, (argued), Tomar, Simonoff, Adourian, O'Brien, Kaplan, Jacoby & Graziano, Cherry Hill, New Jersey, for appellants.

William F. Maderer, (argued), Saiber, Schlesinger, Satz & Goldstein, Newark, New Jersey, for appellees.

Before: SLOVITER, SCIRICA and ALITO, Circuit Judges.

OPINION OF THE COURT

SCIRICA, Circuit Judge.

This case involving an interpretation of the Worker Adjustment and Retraining Notification Act, 29 U.S.C.A. § 2101 et seq. (Supp.1998), arises from the closing of the gambling casino at the Atlantis Hotel and Casino by the New Jersey Casino Control Commission. Plaintiffs, former employees of the Atlantis, 1 sued Elsinore Shore Associates, the owner of the Atlantis, claiming that Elsinore Shore Associates' failure to provide them with 60 days' notice of the closing violated the WARN Act. The District Court concluded Elsinore Shore Associates' failure to provide notice was excused by the "unforeseeable business circumstances" exception to the WARN Act. There are two issues on appeal: whether the closing of the Atlantis is subject to the WARN Act and whether the "unforeseeable business circumstances" exception applies to this case. We will affirm.

I.

A.

In the late 1980's Elsinore Shore Associates encountered severe financial problems, suffering massive losses, laying off hundreds of employees and languishing in Chapter 11 proceedings. For these reasons, the Casino Control Commission in 1988 conditioned the renewal of Atlantis's gaming license upon (1) Elsinore Shore Associates' promise to maintain a cash position of $6 million; (2) the agreement of Elsinore Shore Associates' parent Elsinore to provide $5 million in working capital; and (3) Elsinore's agreement to provide Elsinore Shore Associates with an additional $2 million in working capital if Elsinore Shore Associates' combined cash reserves dipped below $7 million. But these measures were unable to stanch Elsinore Shore Associates' losses. Within four months Elsinore Shore Associates exhausted Elsinore's initial $5 million and by February 1989, it began drawing down the additional $2 million, which it exhausted by early April. Also in March, Elsinore Shore Associates' independent auditors reported that Elsinore Shore Associates' financial problems raised "substantial doubt about [Elsinore Shore Associates'] ability to continue as a going concern" for more than one year.

When it became apparent the licensing conditions could not be realized, the Casino Control Commission considered assuming an active role in the Atlantis's operations. On March 6, 1989, the New Jersey Division of Gaming Enforcement, the Casino Control Commission's investigative and enforcement branch, suggested the Casino Control Commission appoint a conservator to oversee the Atlantis's gaming operations and to arrange for the casino's sale. The Division of Gaming Enforcement also recommended the Casino Control Commission deny Elsinore Shore Associates' request for a license renewal. Nevertheless, Elsinore Shore Associates resolved to sell the Atlantis before a conservator was appointed and stepped up ongoing negotiations with prospective buyer Donald Trump. After the Casino Control Commission denied Elsinore Shore Associates' request for a six-month license on March 28, Elsinore Shore Associates asked for a two-year license

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and attempted to demonstrate its financial viability for that period.

On April 7, the Casino Control Commission refused to renew Elsinore Shore Associates' license, declaring it would choose a conservator to oversee the Atlantis. Seven days later the Casino Control Commission appointed attorney Joseph Nolan as conservator. Moments before Nolan's appointment became effective, Elsinore Shore Associates signed an agreement to sell the Atlantis Hotel to Donald Trump. The agreement provided for the sale to be completed within 60 to 85 days and made closing the casino a condition of the sale. The conservator immediately objected to the agreement and began searching for a buyer who would pay a higher price than Trump. Supporting the conservator, the Casino Control Commission prohibited Elsinore Shore Associates from completing the sale. On April 18, Elsinore Shore Associates agreed to keep the Atlantis Hotel open until the sale was completed but told its employees that it could make "no firm plans" until the Trump agreement was approved. From April 18 until the end of the month, events slowed as the conservator continued to look for a buyer.

The uneventful second half of April gave way to a chaotic May. By May 8, it became clear that Elsinore Shore Associates' cash position would remain below the Casino Control Commission-imposed level for at least the rest of the month. Two days later, the Division of Gaming Enforcement petitioned the Casino Control Commission for a hearing to determine whether the Atlantis should be closed. On May 12, the Casino Control Commission commenced hearings. Four days later, on May 16, the Casino Control Commission ordered the Atlantis to close effective May 22, 1989. Immediately after the Casino Control Commission's order, Elsinore Shore Associates informed its employees of the closing and the elimination of their jobs. See Finkler v. Elsinore Shore Assocs., 781 F.Supp. 1060, 1062 (D.N.J.1992).

B.

On May 18, 1989, plaintiffs brought suit in District Court, alleging that Elsinore Shore Associates' failure to give 60 days' notice of the Atlantis closing violated the WARN Act. Elsinore Shore Associates responded that the Casino Control Commission's closing was not an employer-ordered closing and therefore was not subject to WARN. In 1991, the late Chief Judge Gerry found WARN did not apply to government-ordered closings and granted defendants summary judgment. Hotel Employees Local 54 v. Elsinore Shore Associates, 768 F.Supp. 1117 (D.N.J.1991). Looking at the plain language of the statute, he held that WARN applies only when "the employer orders the closure," id. at 1123, adding that WARN's legislative history revealed that "Congress intentionally identified the employer as the entity which must order the closing ... in order to be held accountable under the statute." 2

Turning to the Department of Labor regulations, the District Judge noted they subjected most government-ordered closings to WARN, but exempted closings by the Federal Savings and Loan Insurance Corporation when it " 'assumes control' " over a bank. Id. at 1126 (quoting 54 Fed.Reg. 16,042). Finding "the Commission directly ordered the closing, and to this extent 'assume[d] control' of the enterprise," the District Judge concluded that Elsinore Shore Associates' termination fit within this exemption. Id. (quoting 54 Fed.Reg. 16,054). Moreover, the District Judge said he did "not believe purposes of WARN would be furthered by holding [Elsinore Shore Associates] liable in this case." Id. Stating that WARN's purpose was to protect workers by providing them

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with 60 days notice of a plant closing or mass layoff, he found that although

notice to plaintiffs would have allowed them some transition time to adjust to the prospective loss of employment, it would have been unreasonable in this case to require defendants to prematurely close its [sic] facilities in anticipation of the State's decision to close, in order to comply with the federal plant closing law.

Id. at 1127 (footnote omitted).

On reconsideration one year later, the District Judge vacated his grant of summary judgment, holding that WARN applies to government-ordered closings unless the government ousts the employer from control. See Finkler v. Elsinore Shore Assocs., 781 F.Supp. 1060, 1063-65 (D.N.J.1992). He retreated from his reliance on WARN's plain language, finding that "other factors, most notably...

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