Finnan v. LF Rothschild & Co., Inc.
| Decision Date | 04 December 1989 |
| Docket Number | No. 89 Civ. 2718 (PNL).,89 Civ. 2718 (PNL). |
| Citation | 726 F. Supp. 460 |
| Parties | Carol FINNAN, Pennie Rodriguez, W. Brian Maillian, Deanne Landress, Lynn Van Haren, Steven Kanney, Dan Walsh, Nina Horowitz, Joseph DiSalvo, and Simon Knox, on behalf of themselves and all others similarly situated, Plaintiffs, v. L.F. ROTHSCHILD & CO., INCORPORATED; L.F. Rothschild Holdings, Inc.; Franklin Financial Services, Inc.; and Franklin Savings Association, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Wolf Haldenstein Adler Freeman & Herz, New York City, Greenfield & Chimicles, Haverford, Pa. (Jeffrey G. Smith, Betsy C. Manifold, of counsel), for plaintiffs.
Kaye, Scholer, Fierman, Hays & Handler, New York City (Fred A. Freund, Jay W. Waks, Gregory J. Wallance, David E. Prager, of counsel), Robinson Silverman Pearce Aronsohn & Berman, New York City (Andrew Irving, of counsel), for defendants L.F. Rothschild & Co. Inc. and L.F. Rothschild Holdings, Inc.
Stinson, Mag & Fizzell, Kansas City, Mo. (John C. Noonan, Paul E. Donnelly, Richard L. Connors, of counsel), Proskauer Rose Goetz & Mendelsohn, New York City (Edward A. Brill, of counsel), for defendant Franklin Sav. Ass'n.
This motion presents a narrow question of first and perhaps also last impression. It concerns the interpretation of the Worker Adjustment and Retraining Notification Act of 1988 (the "WARN Act"), 29 U.S.C. §§ 2101-2109, during the first 60 days after its effective date. Defendant L.F. Rothschild & Co. Incorporated ("Rothschild")1 moves for judgment on the pleadings pursuant to F.R.Civ.P. Rule 12(c) dismissing the complaint on the grounds it does not state a claim upon which relief can be granted. In the alternative, Rothschild moves to strike the claim for punitive damages. Plaintiffs move for class certification pursuant to F.R.Civ.P. Rule 23.
The amended class action complaint (hereafter the "Complaint") asserts claims on behalf of at least 127 former employees of Rothschild who were dismissed on or soon after March 10, 1989. The Complaint alleges that Rothschild failed to provide 60-days notice to the plaintiff class prior to terminating their employment, as required by the WARN Act. The Complaint seeks statutory remedies as well as punitive damages.
Defendant Rothschild is an "investment banking, trading, arbitrage and brokerage house." Complaint ¶ 21. It is a wholly owned subsidiary of defendant L.F. Rothschild Holdings, Inc. ("LFR Holdings"). LFR Holdings is a holding company which itself is a wholly owned subsidiary of defendant Franklin Financial Services, Inc. ("FFSI"). Complaint ¶ 22. FFSI is also a holding company, which itself is wholly owned by the defendant Franklin Savings Association ("Franklin"). Complaint ¶ 23. Franklin is a stock savings and loan association which is engaged in a broad array of financial services. Complaint ¶ 24. All four of these defendant-entities share common officers and directors and are chaired by the same individual, Ernst Fleisher ("Fleisher"). Complaint ¶¶ 24, 25. The Complaint alleges that all of the personnel decisions of the defendant-entities are made under the control and direction of Fleisher. By virtue of this exercise of control, all of the defendant-entities are deemed a single defendant for purposes of the WARN Act. Complaint ¶ 27.
The Complaint alleges a series of events leading up to the WARN violations. The October 1987 crash of the stock market placed Rothschild in a poor financial position. Complaint ¶ 29. Interested only in Rothschild's government securities dealership and its tax loss carry-forwards, Franklin agreed in February 1988 to acquire Rothschild. Complaint ¶ 30.
After the closing of the deal in June 1988, Fleisher attempted to build up Rothschild by bringing in new areas of business. Complaint ¶¶ 31, 33. Despite these efforts, Rothschild continued to lose money and was forced to cut back its operations repeatedly. Complaint ¶ 33. Prior to the effectiveness of WARN, mass layoffs occurred without notice to employees. Complaint ¶ 33. In January 1989, Rothschild announced that it was withdrawing as a government securities dealer, and would concentrate on mortgage-backed, high-yield and investment grade debt securities. Complaint ¶ 35. At this time, Rothschild convened meetings of the surviving employees to reassure them of the company's commitment to preserving these areas of work. Complaint ¶ 35.
The WARN Act became effective February 4, 1989.
On March 8, 1989, Rothschild held a meeting of employees to announce that it was going to discontinue its operations in mortgage-backed and fixed income securities and terminate many employees. Complaint ¶ 39. On March 10, 1989, many Rothschild employees, including class plaintiffs, received written notices of termination effective immediately. Complaint ¶ 40. Two weeks later, Rothschild announced that it would also close its high-yield securities area, and served written notice of termination effective that day on other employees, also members of the plaintiff class. Complaint ¶¶ 45, 46.
Plaintiffs claim that the WARN Act required Rothschild to give them 60-days notice before terminating their employment. Complaint ¶ 48.2
Rothschild moves for judgment on the pleadings dismissing the complaint on the grounds that it fails to state a claim. It contends that the WARN Act did not apply to its action in March of 1989. In the alternative, Rothschild moves to strike the claim for punitive damages on the grounds that the WARN Act's remedies are exclusive and do not allow for an award of punitive damages. Plaintiffs move for certification of a class pursuant to F.R.Civ.P. Rule 23.
The WARN Act, passed after a prolonged public debate, compels employers to give 60-days notice to their employees before mass layoffs or plant closings which would result in the termination of a large number of jobs.
Section two of the Act defines which employers and employees are covered by the act and what actions constitute a "plant closing" or "mass layoff" for purposes of the notice requirement. 29 U.S.C. § 2101. Section three is the operative section which sets forth the notice period. Written notice must be served not only upon the affected employees or their representatives, but also on the local government office within whose jurisdiction the job loss is to occur. Section three also details certain fact situations which would reduce or obviate the notice period. 29 U.S.C. § 2102. Section five provides the means of enforcement by creating a civil cause of action against employers by the aggrieved employees in the federal district courts. The remedies, which are stated to be exclusive, are back pay for each day of the violation, calculated by a specific formula, and any benefits which would have accrued had the employee remained in his job during the period of violation. Courts are expressly barred from enjoining either a plant closing or mass layoff. 29 U.S.C. § 2104. The Department of Labor is empowered to prescribe regulations for compliance with the law. 29 U.S.C. § 2107.
Defendant's motion to dismiss presents the question of the meaning of the effective date of the Act. Rothschild argues that, because WARN did not become effective until February 4, 1989, it did not impose any obligations on employers prior to that date, and therefore did not obligate employers to give notice earlier than February 4, 1989. According to this interpretation, the statute would apply only to layoffs occurring on or after April 4, 1989— that is, sixty days after the effective date of the statute. The defendant contends that WARN could not apply to its layoff on March 10, 1989 without giving unlawful retroactive application of the statute. It argues that the Complaint fails to state a claim upon which relief can be granted because it seeks to hold Rothschild liable for a failure to give notice which it was under no legal duty to furnish at the time.
On a motion to dismiss the complaint, the burden is on the defendant to prove that no set of facts would support the plaintiff's claim for relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957). Accepting the allegations of the complaint as true for purposes of this motion, the court must determine whether WARN liability may be imposed on Rothschild for its actions on March 10 and March 31, 1989.3
Interpretation of a statute must begin with a careful examination of its expressed terms.
The WARN Act was signed into law on August 4, 1988. Section eleven expressly provides that it "shall take effect" six months after the date of enactment, which is February 4, 1989. On the other hand, the same section specifically excepts from the six-month delay the authority of the Secretary of Labor to make regulations under Section eight, which is "effective upon enactment." 29 U.S.C. § 2101, note.
Section three states that "an employer shall not order a plant closing or mass layoff until the end of a 60-day period after that employer serves written notice of such an order ... (on certain required persons)." 29 U.S.C. § 2102. The remedy section provides that, "Any employer who orders a plant closing or mass layoff in violation of section 3 of this Act shall be liable...." 29 U.S.C. § 2104.
This language of the statute focuses on the closing or layoff as the affected event. Liability is attached to closings or layoffs occurring after the effective date which do not comply with the statute by the giving of sixty-days' notice. Nothing in the language suggests that Congress did not intend liability to attach unless the closing occurred more than sixty days after the effective date, which is the interpretation defendants argue for.
Such an interpretation would give rise to serious problems of fairness had the statute been immediately effective. It could then have exposed employers to liability for a...
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