Finkler v. Elsinore Shore Associates

Decision Date28 January 1992
Docket Number89-2143.,Civ. No. 89-2330
Citation781 F. Supp. 1060
PartiesDaniel L. FINKLER, et al., on behalf themselves and all others similarly situated, Plaintiffs, v. ELSINORE SHORE ASSOCIATES, d/b/a Atlantis Casino Hotel, et al., Defendants. HOTEL EMPLOYEES RESTAURANT EMPLOYEES INTERNATIONAL UNION LOCAL 54, Plaintiff, v. ELSINORE SHORE ASSOCIATES d/b/a Atlantis Hotel and Casino, et al., Defendants.
CourtU.S. District Court — District of New Jersey

Theodore M. Lieverman, James Katz, Tomar, Simonoff, Adourian & O'Brien, Haddonfield, N.J., for plaintiffs.

William F. Maderer, Saiber Schlesinger Satz & Goldstein, Newark, N.J., for defendants.

OPINION

GERRY, Chief Judge.

These consolidated actions arise out of the May 22, 1989 closing of the Atlantis Casino Hotel in Atlantic City. Plaintiffs are former employees of Atlantis and their representative union. Defendants are Elsinore Shore Associates ("ESA"), a New Jersey partnership that owned and operated the Atlantis; various corporations which make up the partnership; the parent corporation that controls ESA; and two individuals. Plaintiffs have brought claims under the Worker Adjustment and Retraining Notification Act ("WARN"), 29 U.S.C. §§ 2101 et seq, challenging defendants' failure to provide them with the 60 days advance notice of closing required under that act. Defendants moved for summary judgment on the grounds that since this closing was ordered by a state regulatory agency — the Casino Control Commission — rather than by the defendants themselves, they are not subject to the notice requirements of the act, which states, "an employer shall not order a plant closing or mass layoff until the end of a 60-day period after the employer serves written notice...." 29 U.S.C. § 2102(a) (emphasis added).

In our opinion of August 20, 1991 we granted defendants' motion, holding that the statute does not apply to closings that are ordered by the government. Today that summary judgment motion comes before us again on plaintiff's motion for reconsideration under Rule 59(e) of the Federal Rules of Civil Procedure. Accordingly, we have re-examined our previous opinion, and for the reasons set forth below, we now reverse our earlier holding and deny defendants' motion for summary judgment.1 768 F.Supp. 1117.

I. Factual Background

The Atlantis Casino Hotel began to suffer serious financial difficulties in 1985 which eventually led to its demise in 1989. Chapter 11 bankruptcy proceedings were initiated in 1985 as a result of a 9.2 percent decrease in ESA's gross revenues and a net operating loss by the casino of 8.2 million dollars that year. In 1986 the New Jersey Casino Control Commission ("Commission")2 renewed ESA's license for one year but began imposing numerous requirements on ESA involving the submission of monthly reports to the Commission regarding ESA's financial stability. For the next two years, the casino's revenues continued to decline, but in spite of these difficulties, ESA was discharged from bankruptcy in September 1988 under an approved plan of reorganization. The Commission continued to renew the casino's license year by year, but also continued imposing strict financial reporting requirements on ESA.

In 1988 the casino's financial health continued to deteriorate and when it came time for the Commission to issue its 1989 license, it declined to do so. After conducting hearings, the Commission decided on April 7, 1989 not to renew the casino's license and to appoint a conservator. The conservator was charged with general oversight responsibilities, pending the sale of the casino. The normal operations of the casino were still conducted by ESA, but the conservator was to have access to all books and records in order to assess and monitor ESA's financial situation, and ESA was not to take any significant actions, such as sale of the property, without first notifying the conservator.

On May 10, 1989, as a result of the casino's worsening financial situation and ESA's failure to make an interest payment to bondholders when due, the Division of Gaming Enforcement ("DGE")3 filed a petition with the Commission seeking a determination as to whether the casino operations should be terminated. A hearing was held by the Commission, and as a result, on May 16, 1989 it voted unanimously in favor of closing the casino by 4:00 a.m. on May 22, 1989, having found that the casino could no longer be operated in a sound and businesslike manner. An order was issued to that effect on May 18, 1989. Accordingly, Jeanne Hood4 sent a memo to all employees on May 16, 1989 announcing the Commission's decision and stating that their positions would be eliminated as of May 22, 1989.

Also relevant to this motion is the fact that negotiations between ESA and Donald Trump for the sale of the Atlantis began in late February or early March of 1991 and culminated in the signing of a purchase and sale agreement on April 14, 1989. Because Donald Trump already held the maximum number of casino licenses allowable under state law, see N.J.S.A. 5:12-82(e), and therefore could not obtain another license to operate the Atlantis as a casino, there had apparently been an understanding between the parties throughout the course of these negotiations that in order for the sale to go through, ESA would have to agree to close the casino. This understanding was also incorporated into the signed agreement. Plaintiffs use this fact to argue that the defendants knew well before May 16, 1991 that the casino would close and thus, could have given notice to their employees earlier.

II. The WARN Act

The WARN Act states that "an employer shall not order a plant closing or mass layoff until the end of a 60-day period after the employer serves written notice of such an order" to each employee or to their representatives. 29 U.S.C. § 2102(a). Certain exceptions to this rule are then specifically enumerated by the statute. Thus, if the closing is caused by business circumstances that were not reasonably foreseeable as of the time that notice would have been required, or if it was caused by a natural disaster, then the statute allows for a reduction of the notification period. "An employer relying on this subsection shall give as much notice as is practicable and at that time shall give a brief statement of the basis for reducing the notification period." 29 U.S.C. § 2102(b)(3).

Defendants argue that the statute, which explicitly states that "an employer shall not order a plant closing," (emphasis added) is entirely inapplicable to cases such as this in which it was the government, not the employer, who ordered the closing. While this is not an unreasonable construction of the statutory language itself, other factors, most notably the regulations promulgated by the Department of Labor ("DOL"), compel us to conclude that government ordered closings are not entirely exempt from the Act. Rather such closings may often fall within the Act's "unforeseeable business circumstances" exception to the 60 day notice requirement. This distinction between treating government ordered closings as, on the one hand, entirely outside the purview of the Act and, on the other hand, falling within the exception provided for in the Act, is significant. A closing that falls within the exception is still subject to the requirement that some notice be given (as much as is "practicable"), and plaintiffs argue that the notice given in this instance was far less than was practicable. We therefore turn to the regulations promulgated under the Act and the legislative history of the Act for further guidance.

A. The DOL Regulations

The language of the regulations promulgated by the DOL pursuant to the WARN Act clearly indicates an intent that certain government ordered closings be considered within the purview of the Act and treated under the unforeseeable business circumstance exception. Thus, in the context of providing examples of types of closings that may fall within the exception, the regulations state that "a government ordered closing of an employment site that occurs without prior notice also may be an unforeseeable business circumstance." 20 C.F.R. § 639.9(b)(1).

Additionally, in its comments to the proposed regulations, published in the Federal Register, the DOL explicitly addressed and rejected the suggestion made by some commenters that all government ordered closings be exempted from the Act.

Several commenters ... suggested that an exception for government ordered closings be included in the regulations. No language recognizing such an exception appears in WARN and the Department is reluctant to create such an exception. However, some government-ordered closings may constitute unforeseeable business circumstances to which reduced notice applies ... Although this treatment will lead to after the fact notice in some cases, it also will lead to the provision of some notice to workers affected by the closing.

54 Fed.Reg. 16054 (1989) (emphasis added).

The comments then go on to give examples of various types of government ordered closings to which the reduced notice or after the fact notice provisions of the unforeseeable business circumstances exception would apply. They also suggest that one particular type of government ordered closing — "absolute" closings of savings and loan institutions by the FHLBB — might be entirely exempt from the Act.

The Department notes an important difference between the closings discussed above and the absolute closing of a savings and loan institution by the FHLBB. In the cases discussed above i.e. government ordered closings that are covered by the Act, the employer remains in control of its business. The employer can remedy the conditions that caused the closing and reopen the business. In the case of an absolute closing or shutdown of an S & L, in contrast, the previous ownership is ousted from control of the institution and the FSLIC assumes control of the enterprise. In this case,
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