Burnsides v. MJ Optical, Inc.
| Citation | 128 F.3d 700 |
| Decision Date | 08 December 1997 |
| Docket Number | No. 97-1097NE,97-1097NE |
| Parties | 136 Lab.Cas. P 10,303, 13 IER Cases 1024, 13 IER Cases 717 Linda K. BURNSIDES, suing on behalf of herself individually and on behalf of a class of similarly-situated persons; Mary M. Sorg, suing on behalf of herself individually and on behalf of a class of similarly-situated persons; Gary Vyborney, suing on behalf of himself individually and on behalf of a class of similarly-situated persons, Appellants, v. MJ OPTICAL, INC., Nebraska Corporation; Optical Illusion, Inc., Nebraska Corporation; Commercial Optical Company, Inc., Nebraska Corporation; Optical Services, Inc., Nebraska Corporation; C.O.C., Inc., Nebraska Corporation; Optical Services, Limited Partnership; Sheldon I. Rips, an Individual, Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (8th Circuit) |
James F. Kasher, Omaha, NE, argued (David G. Wilwerding, Omaha, NE, on the brief), for appellees.
Patrick Joseph Barrett, Omaha, NE, argued (A. Stevenson, Bogue, NE, on the brief), for appellants.
Before FAGG, LAY and WOLLMAN, Circuit Judges.
After Commercial Optical Company, Inc. sold its equipment to MJ Optical, Inc., terminated its employees, and ceased operations, the former employees brought this action against MJ Optical, Commercial, Commercial's affiliated companies, and Sheldon I. Rips, Commercial's former president, director, and owner, asserting they failed to give the employees notice of employment loss in violation of the Worker Adjustment and Retraining Notification Act (WARN), 29 U.S.C. §§ 2101-2109 (1994). Following a trial, the district court granted judgment in favor of MJ Optical, Commercial, and the other defendants. The former employees appeal. We affirm in part, reverse in part, and remand for further proceedings.
Commercial operated an optical lens grinding and finishing facility in Omaha, Nebraska. After suffering significant financial losses in 1991 and 1992, Commercial sought financing and potential buyers in January and February 1993 without success. In March 1993, Rips began discussing a business consolidation with MJ Optical, another Omaha optical business. The parties signed a letter of intent on March 24, tentatively agreeing that MJ Optical would purchase most of Commercial's assets, including certain inventory, equipment, and customer accounts, and would take over operations at Commercial's plant for up to forty-five days, with the plant's later use left open for further negotiation. Rips believed MJ Optical would continue to employ Commercial's employees. Potential consideration for the transaction exceeded $1 million. Negotiations continued until Sunday, May 2, when Rips and Commercial's attorney met with MJ Optical's president, Michael Hagge, and his attorney at Commercial's plant. When Rips demanded a certain price, Michael Hagge indicated he was no longer interested and left. During the meeting, Martin Hagge, Hagge's son and second-in-command at MJ Optical, had inspected Commercial's facility. After the meeting, he told his father the plant could not be operated profitably. Rips and Commercial's attorney discussed the company's dire financial situation, and decided to contact MJ Optical that evening and try to strike some kind of deal. Michael Hagge offered to buy Commercial's equipment and remaining inventory.
On Monday, May 3, Michael Hagge sent Martin Hagge to observe Commercial's plant in operation. Rips announced to employees that Commercial was selling substantially all of its assets to MJ Optical, but the employees would continue to work in Commercial's facility for MJ Optical. Rips introduced Martin Hagge as the new production manager, and Martin Hagge confirmed to employees who inquired that MJ Optical would have to have employees. Later that day, however, Michael Hagge decided MJ Optical would not take over operations at Commercial's plant, and informed his attorney to draw up papers to that effect. Between May 3 and May 5, attorneys for MJ Optical and Commercial drafted and revised an asset purchase agreement. On May 5, Rips signed the agreement in which MJ Optical offered to buy Commercial's equipment, tools, and supplies for $100,000, inventory for cost, and intangibles for $100. The agreement specifically excluded accounts receivable from the sale and provided MJ Optical would not assume Commercial's liabilities. The agreement set the closing on May 7, and provided that from closing up to 45 days later, MJ Optical would be allowed access to Commercial's building to remove the purchased assets, but prohibited from manufacturing there. Rather than transferring employees from Commercial to MJ Optical, the parties agreed that Commercial would encourage its employees to apply for employment with MJ Optical.
At about 3:00 p.m. on May 7, Commercial informed its employees about the sale of assets and closing of the facility that day. Commercial's attorney, comptroller, and human resource manager all addressed the employees. Michael Hagge told Commercial's employees that MJ Optical wanted to hire as many people as possible, and the employees should apply. Later that afternoon, MJ Optical began removing equipment from Commercial's building. Some former Commercial employees later applied with MJ Optical. MJ Optical hired some of the applicants and rejected others.
WARN generally requires that before any plant closing, an employer must give sixty days' notice in writing to each affected employee. See 29 U.S.C. § 2102 (1994). A "plant closing" is a shutdown of a single site of employment that causes an "employment loss" for fifty or more employees during a thirty-day period. See id. § 2101(a)(2). An "employment loss" includes employment termination, that is, the permanent cessation of the employment relationship. See id. § 2101(a)(6). In exclusions from the definition of employment loss, WARN provides:
In the case of a sale of part or all of an employer's business, the seller shall be responsible for providing notice for any plant closing ... in accordance with section 2102 of this title, up to and including the effective date of the sale. After the effective date of the sale of part or all of an employer's business, the purchaser shall be responsible for providing notice for any plant closing....
Id. § 2101(b). The subsection "allocates notice responsibility to the party who actually makes the decision that creates an 'employment loss,' but 'creates no other employment rights.' " International Alliance of Theatrical & Stage Employees v. Compact Video Servs., Inc., 50 F.3d 1464, 1468 (9th Cir.) (quoting 20 C.F.R. § 639.6), cert. denied, 516 U.S. 987, 116 S.Ct. 514, 133 L.Ed.2d 423 (1995).
The employees argue MJ Optical was responsible for giving them notice under § 2101(b). We doubt that § 2101(b) applies to the mere sale of assets in this case. Congress enacted the subsection to clarify that when employees are transferred from seller to buyer as part of a sale, employees have not suffered an employment loss. See Headrick v. Rockwell Int'l Corp., 24 F.3d 1272, 1280-81 (10th Cir.1994) (White, J.). Courts have held that § 2101(b) does not apply to asset sales when there is no transfer of any employees into the purchaser's employment along with the purchased assets. See Oil, Chem. & Atomic Workers Int'l Union v. CIT Group/Capital Equip. Fin., Inc., 898 F.Supp. 451, 457 (S.D.Tex.1995). We need not resolve the issue here, however. Even if this case involves the "sale of part or all of an employer's business" within the meaning of § 2101(b), responsibility for giving notice never passed to MJ Optical because the plant closing occurred on the sale's effective date. Through the end of that day, the employees were still employed by Commercial. See Hotel Employees Restaurant Employees Int'l Union Local 54 v. Elsinore Shore Assocs., 724 F.Supp. 333, 335 (D.N.J.1989) (). Commercial brought about the employment loss by deciding to accept MJ Optical's offer to purchase the manufacturing equipment without transferring employees. Commercial terminated the employees, and MJ Optical had no reason to give the employees notice. MJ Optical did not automatically hire Commercial's employees, buy Commercial's facility, conduct any operations there, or take on any of Commercial's receivables or liabilities. Relying on 29 C.F.R. § 639.4(c), which states responsibility for giving notice remains with the seller "up to and including the effective date (time) of the sale," the employees argue the sale became effective at closing on the morning of May 7, and responsibility for giving notice transferred to MJ Optical then, before Commercial fired the employees or closed the plant. We reject the employees' interpretation of § 2101(b) because it is contrary to the plain terms of the statute. Under § 2101(b), the seller is the party responsible for giving notice during the effective date of the sale, and the asset purchase agreement declared it was "effective [the] 7th day of May." In sum, we conclude Commercial, not MJ Optical, was responsible for giving the employees notice.
The district court concluded two of WARN's affirmative defenses excused Commercial from the sixty-day notice requirement. Under 29 U.S.C. § 2102(b), the sixty-day notification period may be shortened if the employer shows the existence of certain circumstances. First, an employer need not give sixty days' notice if, at the time notice would normally be required, the employer was actively seeking capital or business to avoid or postpone the plant closing and the employer reasonably believed the giving of notice would have prevented the employer from obtaining the needed capital or business. See id. § 2102(b)(1). Second, an employer may order a plant closing before the sixty-day notice period concludes if the closing "is caused by business...
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