Carpenters Dist. Council v. Dillard Dept. Stores, Civ. A. No. 89-3680

• Decision Date: 17 October 1991
• Docket Number: Civ. A. No. 89-3680,89-3751.
• Parties: CARPENTERS DISTRICT COUNCIL OF NEW ORLEANS AND VICINITY, et al. v. DILLARD DEPARTMENT STORES, INC., D.H. Holmes Company Ltd., et al. Stephen J. PLESCIA and Alan A. Endermann, for themselves and on behalf of all others similarly situated v. DILLARD DEPARTMENT STORES, INC. and D.H. Holmes Company, Ltd.
• Court: U.S. District Court — Eastern District of Louisiana

778 F. Supp. 297

CARPENTERS DISTRICT COUNCIL OF NEW ORLEANS AND VICINITY, et al. v. DILLARD DEPARTMENT STORES, INC., D.H. Holmes Company Ltd., et al.

Stephen J. PLESCIA and Alan A. Endermann, for themselves and on behalf of all others similarly situated v. DILLARD DEPARTMENT STORES, INC. and D.H. Holmes Company, Ltd.

Civ. A. Nos. 89-3680, 89-3751.

United States District Court, E.D. Louisiana.

August 29, 1991.

As Amended October 17, 1991.

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William Lurye, Gardner, Robein & Urann, Metairie, La., and R. Monroe Garner, New Orleans, La., for plaintiff class.

J. Forrest Hinton and Stephen P. Beiser, McGlinchey, Stafford, Cellini & Lang, New Orleans, La., for defendant Dillard Dept. Store.

John W. Lindner II, Adams & Reese, New Orleans, La., for defendant Federal Ins. Co.

ORDER AND REASONS

RONALD A. FONSECA, United States Magistrate Judge.

These consolidated matters are brought pursuant to the Worker Adjustment and Retraining Notification Act (WARN), 29 U.S.C. § 2101 et seq. and involve a class action composed of "all former employees of either D.H. Holmes Co., Ltd. (Holmes) and or Dillard Department Stores, Inc. (Dillard) "who were involuntarily terminated from employment between May 8, 1989 and August 9, 1989, as a result of the acquisition of Holmes by Dillard and who did not receive sixty (60) days written notice of said termination either personally or through their representative." Defendants are Holmes, Dillard, certain named corporate officers, and directors of the respective corporate defendants and Federal Insurance Company (Federal), indemnity insurer of the corporate officers. Federal has also been named as a third party defendant in connection with policy insuring acts of the fiduciaries of defendants' welfare plans.

The action arose as a result of the termination of class member employees on, and subsequent to May 9, 1989, the effective date of a merger between Dillard and Holmes. Plaintiffs claim that defendants, in violation of the provisions of WARN, failed to give them 60 day advance notification of their termination as an employee and did not pay them the prescribed damages mandated by WARN in lieu of adequate notification. Defendants, on the other hand, contend that they fell within one or more exceptions of WARN, excusing them from the requirement of furnishing a full 60 day notice of termination, and, alternatively, that all affected employees received the amount of damages that would be due them under WARN, assuming they received less than the required notification.

Before the Court are motions and cross-motions for summary judgment, plaintiffs' Motion to Strike the supporting affidavit of defendants' motion for summary judgment, defendant corporate officers' and insurer's Motions to Dismiss, and Federal's Motion for summary judgment on cross-claim. We will discuss each in their order of consequence.

BACKGROUND

In 1988, as a result of steadily declining profits and revenues, Holmes, a long established retail department store headquartered in New Orleans, Louisiana, hired the firm of Kidder-Peabody, investment counselors, to seek a solution for its financial problems. Through its efforts, Holmes and Dillard entered into serious negotiations in the latter part of 1988 for the merger of the two corporations. A merger agreement was ultimately reached between representatives of the two parties which was approved by the respective Board of Directors of Dillard and Holmes on March 3 and 6, 1989. One of the conditions of the agreement was that no less than eighty percent (80%) of Holmes' stockholders vote to approve the merger. Preliminary to any vote by the stockholders however, the parties were required to furnish Holmes' stockholders a registration statement outlining the parties' respective financial conditions, which statement required the advance approval of the Securities and Exchange Commission (SEC).

The proposed registration statement was filed with the SEC on or about March 7, 1989.¹ The statement was approved by the SEC on April 10, 1989. Efforts had been made to have the SEC expedite its decision on the statement, however, prior to its ruling on April 10th, neither Holmes nor Dillard could anticipate when the decision would be forthcoming. Having received SEC approval, a Holmes' stockholder meeting was scheduled for May 9, 1989.

On April 19, 1989,² at the direction of Dillard personnel, Holmes notified employees assigned to both its Corporate Planning Division and warehouse facilities³ that they would be terminated effective May 9, 1989, in the event the merger with Dillard was approved by Holmes' stockholders. A second notice was sent to certain "transitional" employees at the above two locations between April 21 and 28, 1989, informing them that they would be laid off between May 9 and July 1, 1989. Finally, a notice was sent on May 12, 1989 informing employees in the Canal Street retail store that they would be laid off between June 10 and July 8, 1989.⁴

Some of the employees receiving the latter notice were discharged during that time frame, while the employment of the rest was extended to a period between July 8 and August 9, 1989.

As stated above, defendants, out of an abundance of caution, paid each affected employee an amount of wages that they determined would be due under WARN, assuming, but not admitting, that they were exempt from providing 60 days notification. Dillard developed a formula for payment which, according to its own interpretation of WARN, satisfied the penalty provisions of the Act. Under the formula, they construed the 60 day penalty period as set forth in § 2104(a)(1)(A) to be the actual number of work weeks within that period rather than 60 individual days. Dillard determined that this meant each employee not receiving any notice would be entitled to eight (8) weeks of pay. Relying on the provisions of § 2104(a)(2) of the act, Dillard further concluded that it could deduct from this amount (eight weeks of pay, or any portion thereof due), any severance or vacation pay that would be due and paid to the employee. Additionally, under defendants' interpretation of the Act, part-time employees are not "affected employees."

The parties to this action have consented to have this Magistrate Judge try the issues pursuant to 28 U.S.C. § 636(c). Separate trial dates have been set on the severed issues of liability and damages.

PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT⁵

In this motion, plaintiffs seek a partial summary judgment on liability, as to both full-time and part-time employees, contending that defendants failed to provide them 60 days notice before terminating their employment. Additionally, they contend that they did not receive sufficient payment upon termination as mandated by WARN.

Defendants oppose this motion on the basis: a) that WARN, due to the factual circumstances leading up to the merger in this matter, provides an exception to the requirement that they provide 60 days notice; b) that the officers and directors named as defendants herein are not liable under the Act;⁶ and, c) the WARN Act is unconstitutional.

Essentially defendants' opposition to plaintiffs' motion for partial summary judgment, with the exception of the claim that the Act is unconstitutional, is based, in several respects, on the meaning and interpretation of the Act's provisions.

Ordinarily, prudence would dictate that we refrain from considering the manner in which the Act should be interpreted until its constitutionally has been determined. However, much time and energy has already been expended by counsel for the parties and by the Court on the instant motions and separate trial dates on liability and damages are set respectively for the weeks of September 23 and October 21, 1991. It would be helpful to the parties, and the progress of this litigation, that they be made aware, as early as possible, of the interpretation we place on the provisions of WARN, assuming we find the Act meets constitutional muster, to enable the parties to proceed to trial on the issues resolved in the motions before us. Therefore, pursuant to FRCP Rule 56(d),⁷ we enter the following findings of fact and conclusions of law which will be deemed established at trial in this matter.

The WARN Act, which became effective on February 4, 1989, is intended to provide protection to workers, their families and communities by prohibiting certain employers from ordering a plant closing or mass layoff until 60 days after notice of the layoff is given to the employees and/or their union. 20 C.F.R. 639.1.

The Act provides in relevant part:

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 —

(1) to each representative of the affected employees as of the time of the notice or, if there is no such representative at that time, to each affected employee; and

(2) to the State dislocated worker unit ... and the chief elected official of the unit of local government within which such closing or layoff is to occur.

29 U.S.C. § 2102(a).

The Act defines "employer" as:

any business enterprise that employs —

(A) 100 or more employees, excluding part time employees; or

(B) 100 or more employees who in the aggregate work at least 4000 hours per week (exclusive of hours of overtime).

29 U.S.C. § 2101(a)(1).

The Act defines "plant closing" as

The permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment, if the shutdown results in an employment loss at the single site of employment during any 30-day period for 50 or more employees excluding any part-time employees.

29 U.S.C. § 2101(a)(2).

Employers who violate the 60 day advance notice provision are liable to each aggrieved employee for back pay and employee benefits for the period of the violation. 29 U.S.C. §...