Ien ex rel. Situated v. Transcare Corp. (In re Transcare Corp.)

• Citation: 611 B.R. 160
• Decision Date: 10 January 2020
• Docket Number: Case No. 16-10407 (SMB) (Jointly Administered),Adv. Proc. No. 16-01033
• Parties: IN RE: TRANSCARE CORP., et al., Debtors. Shameeka Ien on behalf of herself and all Others similarly situated, Plaintiff, v. TransCare Corp., TransCare New York, Inc., TransCare Ml, Inc., TC Ambulance Group, Inc., TransCare Management Services, Inc., TCBA Ambulance, Inc., TC Billing and Services Corp., TransCare Westchester, Inc., TransCare Maryland, Inc., TC Ambulance North, Inc., TransCare Harford County, Inc. Lynn Tilton, Ark II CLO 2001-1 Limited, Ark Investment Partners II, L.P., Patriarch Partners, LLC, and Patriarch Partners III, LLC, Defendants.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York

611 B.R. 160

IN RE: TRANSCARE CORP., et al., Debtors.Shameeka Ien on behalf of herself and all Others similarly situated, Plaintiff,

v.TransCare Corp., TransCare New York, Inc., TransCare Ml, Inc., TC Ambulance Group, Inc., TransCare Management Services, Inc., TCBA Ambulance, Inc., TC Billing and Services Corp., TransCare Westchester, Inc., TransCare Maryland, Inc., TC Ambulance North, Inc., TransCare Harford County, Inc. Lynn Tilton, Ark II CLO 2001-1 Limited, Ark Investment Partners II, L.P., Patriarch Partners, LLC, and Patriarch Partners III, LLC, Defendants.

Case No. 16-10407 (SMB) (Jointly Administered)

Adv. Proc. No. 16-01033

United States Bankruptcy Court, S.D. New York.

Signed January 10, 2020

OUTTEN & GOLDEN LLP, 3 Park Avenue, 29th Floor, New York, NY 10016, Jack A. Raisner, Esq., René S. Roupinian, Esq., Robert N. Fisher, Esq., Of Counsel, Attorneys for Plaintiff

PROSKAUER ROSE LLP, Eleven Times Square, New York, NY 10036, Nicole A. Eichberger, Esq., Gillian G. Egan, Esq., Kathleen M. McKenna, Esq., Of Counsel, Attorneys for Non-Debtor Defendants

LAMONICA HERBST & MANISCALCO, LLP, 3305 Jerusalem Avenue, Wantagh, NY 11793, Joseph S. Maniscalco, Esq., Holly R. Holecek, Esq., Of Counsel, Attorneys for Debtor-Defendants

MEMORANDUM DECISION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

STUART M. BERNSTEIN, United States Bankruptcy Judge:

This class action concerns claims under the Worker Adjustment and Retraining Notification Act ("US WARN Act"), 29 U.S.C. § 2101 et seq ., and the New York Worker Adjustment and Retraining Notification Act ("NY WARN Act"), New York Labor Law ("NYLL") § 860 et seq . (collectively, the "WARN Acts"), as well as unpaid wages under various state laws. The Plaintiff filed this motion for partial summary judgment, (see Plaintiff's Memorandum of Law in Support of Motion for Partial Summary Judgment , dated May 21, 2019 ("Motion ") (ECF Doc. # 123)), contending that the notices sent to the Debtors' employees did not satisfy the requirements of the WARN Acts and, consequently, the Debtor Defendants and Non-Debtor Defendants cannot assert certain statutory defenses discussed below.¹ For the reasons that follow, the Motion is granted in part and denied in part.

BACKGROUND

At all relevant times prior to February 24, 2016, TransCare Corporation and its subsidiaries ("TransCare" or "Debtor Defendants") provided ambulance and paratransit transportation services in New York, Pennsylvania, and Maryland. The subsidiaries included TransCare New York, Inc., TransCare ML, Inc., TC Ambulance Group, Inc., TransCare Management Services, Inc., TCBA Ambulance, Inc., TC Billing and Services Corp., TransCare Westchester, Inc., TransCare Maryland, Inc., TransCare Harford County, Inc., and TC Ambulance North, Inc. (collectively, with TransCare Corporation, the "Initial Debtors") and TransCarePennsylvania, Inc., TC Ambulance Corporation, and TC Hudson Valley Ambulance Corp. (collectively, the "Subsequent Debtors"). Facing financial problems, TransCare and those who controlled it² embarked on a restructuring plan. They would terminate the operations of the Initial Debtors and continue the operations of the Subsequent Debtors through the foreclosure of their assets and the assignment of those assets to two new entities: Transcendence Transit, Inc. and Transcendence Transit II, Inc. (collectively, "Transcendence"). Under this plan, approximately 700 employees of the Subsequent Debtors would continue to work for Transcendence and it would be business as usual.

On February 24, 2016, the Initial Debtors filed for bankruptcy under chapter 7 of the Bankruptcy Code in this Court, and Salvatore LaMonica, Esq. was appointed chapter 7 trustee ("Trustee"). Earlier that day, the employees of the Initial Debtors had received³ an email ("First February 24 Notice") that described the plan just mentioned. After explaining that the paratransit and Pittsburgh and Hudson Valley ambulance businesses would continue to operate through Transcendence and save 700 jobs, the email continued:

Sadly, as a result of a decision by our senior lender to cease providing additional funding, the remaining operations (NYC 911, Core, Westchester and Maryland), which have continued to face significant challenges throughout the restructuring process, are being forced into liquidation under Chapter 7 of the Bankruptcy Code. The operations associated with these businesses will discontinue starting today and responsibility for their remaining assets will be transferred to the custody of a court-appointed trustee.

For those at work currently or scheduled to work today, please continue your usual good service until such time as you hear from the court appointed Trustee. We expect the appointed trustee to be able to provide you with further direction and answers to your questions in the days ahead.

Please know that we have worked hard for months now to restructure the entire business. Unfortunately, today's events made that impossible, and we are deeply sorry for the job losses and any service interruptions for the communities we have served.

(Raisner Declaration , Ex. K (ECF Doc. # 123-14); accord Ex. M (ECF Doc. #123-16).) The First February 24 Notice was issued by Glen Youngblood, a TransCare vice president, and signed "From the TransCare Management Team" but contained no contact information.

Later that same day, after the Initial Debtors had filed their chapter 7 cases, Youngblood drafted an "update" ("Second February 24 Notice") which was apparently sent to all employees and held out the hope of continued employment with the Initial Debtors for an indefinite period:

We are writing to be certain that the information people are receiving about the TransCare restructuring is accurate. As we noted in our earlier communication, we have been working for months to try to restructure the business and save the jobs of our valued employees.

Unfortunately, one of our senior lenders decided to cease funding, and we have been forced to file certain of our business units -- the NYC 911, NYC Core, Westchester and Maryland businesses -- for Chapter 7 bankruptcy.

These businesses have NOT been immediately shut down.

Tomorrow certain assets of TransCare will be in the hands of a court appointed trustee who we expect will have the needed runway to effect an orderly wind down.

As stated previously, TransCare's existing ambulance divisions in Pittsburgh and the Hudson Valley will be acquired by Transcendence Transit, Inc. Aside from the name of the new legal entity, nothing will change operationally for these businesses or their respective employees.

In addition, TransCare's paratransit business will be acquired by Transcendence Transit II, Inc. No positions in this business will be eliminated as a result, and all employees of the paratransit business will be employed by this new legal entity.

We believe that through these restructuring efforts we have been able to save 700 jobs. While we are disappointed that we could not save all the business units and jobs, we are grateful that much of TransCare's history can live on.

(Id. , Ex. P (bold face in original) (ECF Doc. # 123-19).) This email was also signed by "The TransCare Management Team" with no other contact information. Although the Second February 24 Notice held out the prospect of continued employment, the Trustee advised the employees the next day to return the vehicles to the garages because the businesses were being shut down. (Id. , Ex. Q. at 54:2-55:19 (ECF Doc. # 123-20).)

The plan to continue the remaining operations through Transcendence quickly died. On February 26, 2016, the employees of the Subsequent Debtors received the following email ("February 26 Notice," and together with the First and Second February 24 Notices, the "February Notices") authored by Tom Fuchs, Vice President of Transit Services:

This is a sad day for all of us who have loved and respected the work of TransCare employees. We were excited to have an opportunity to begin anew with our Hudson Valley, Pittsburg and Para-transit divisions in a new company to preserve 700 jobs. Unfortunately, today Wells Fargo, the Carl Marks restructuring firm and the Trustee of the bankrupt estate have decided not to fund payroll for last week's payroll obligation. This is particularly distressing given Wells Fargo's previous commitment to fund a proper wind down plan upon which we agreed to file for Chapter 7 bankruptcy protection. Regrettably, the Trustee disputes our claims to assets that were foreclosed upon earlier this week. This action prevents our ability to operate these three divisions. Consequently, we simply cannot effectively serve our customers and our communities with these restrictions. We are devastated by today's decisions, but unfortunately our hands are tied. This means we must cease our operations immediately. Please secure your vehicles and operations and await further instruction from the court appointed Trustee.

(Id. , Ex. S (ECF Doc. # 123-22); accord Ex. T (ECF Doc. # 123-23); Declaration of Nicole A. Eichberger, Esq. in Support of Non- Debtor Defendants' Motion for Summary Judgment , dated May 21, 2019 (ECF Doc. # 113), Ex. SSS, P000132 (ECF Doc. # 113-71).) The February 26 Notice included Fuchs' contact information.

The Subsequent Debtors filed chapter 7 petitions in this Court on April 25, 2016. Mr. LaMonica was also appointed chapter 7 trustee in these cases, and all of the cases filed by the Debtor-Defendants have been administratively consolidated.

This Adversary Proceeding

According to her Complaint, (see Complaint , dated Mar. 1, 2016 (ECF Doc. # 1)), the Plaintiff was employed by the "Defendants." (¶ 11.)⁴ She alleges that on or about February 24, 2016, the Debtors and the Non-Debtor Defendants terminated her and other similarly situated employees without advance notice and seeks relief under the WARN Acts and unpaid wages under state law. (Id. ¶ 2-4.) On October 24, 2016, the Court...