GUIPPONE v. BH S & B HOLDINGS LLC

• Decision Date: 05 January 2010
• Docket Number: No. 09 Civ. 1029 (CM).,09 Civ. 1029 (CM).
• Parties: Michael GUIPPONE, on behalf of himself and all others similarly situated, Plaintiffs, v. BH S & B HOLDINGS LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

681 F. Supp.2d 442

Michael GUIPPONE, on behalf of himself and all others similarly situated, Plaintiffs, v. BH S & B HOLDINGS LLC, et al., Defendants.

No. 09 Civ. 1029 (CM).

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

January 5, 2010.

Rene Sara Roupinian, Jack A. Raisner, Outten & Golden, LLP, New York, NY for Plaintiffs.

Richard A. Stieglitz, Jr., Dechert, LLP, Peter C. Moskowitz, Jackson Lewis, LLP, Richard P. Swanson, Arnold & Porter, LLP, Israel Dahan, Cadwalader, Wickersham & Taft LLP, Owen L. Cyrulnik, Grais & Ellsworth, LLP, New York, NY, Philip Selden, Justin S. Antonipillai, Marjorie Levine, Arnold & Porter, LLP, Washington DC, for Defendants.

DECISION AND ORDER DISMISSING THE COMPLAINT WITHOUT PREJUDICE / AND SETTING A SCHEDULE FOR A NEW COMPLAINT

McMAHON, District Judge.

INTRODUCTION

The facts relevant to the pending motion to dismiss in this Worker Adjustment and Retraining Notification Act ("WARN Act") case are as follows:

In August 2008, defendant BH S & B Holdings LLC purchased the assets of a corporation known as Steve & Barry's Manhattan LLC ("Steve & Barry's") (Compl. ¶ 12)—whose business is not specified in the complaint, but who is identified in a brief as running a chain of discount fashion clothing stores—from its prior owner. (Pl. Mem. of Law in Opp. to Mot. to Dismiss ("Plaintiffs Brief"), Nov. 20, 2008, at 1.) The Asset Purchase Agreement entered into by the parties specifically provided that, "Purchaser desires to purchase substantially all the assets ... of the Sellers with the present intention of operating the Business as a going concern." (Debtors' Mem. of Law in Supp. of Mot. to Dismiss ("Debtors' Brief"), Apr. 24, 2009, Ex. 5 at 1 (emphasis added).) The Employee and Employee Benefits sections of the Asset Purchase Agreement reflect as much, going so far as to refer to the individuals who worked for Steve & Barry's prior to the sale as "Transferred Employees" for employee benefits purposes. (Id. at 41-42.)

Three months after the sale, on November 17, 2008, the defendants fired all of these carryover employees without giving them notice under the WARN Act, 29 U.S.C. § 2102(a)(1), which requires employers to provide sixty days advance notice of plant closings and mass layoffs. (Pl. Br. at 1; see also Compl. ¶ 20.)

The terminated plaintiffs brought a class action the next day, suing both the purchaser defendant (who at that time was not yet in bankruptcy) and three of its affiliates (BHY S & B Intermediate Hold-Co LLC, Bay Harbor Management LC and York Capital Management¹), and seeking damages for violations of the WARN Act. (Pl. Br. at 2; see also Compl. ¶ 13.) On November 19, the BH S & B Holdings LLC filed a Chapter 11 petition, as did a related entity, defendant BHY S & B Intermediate HoldCo LLC (collectively, the "Debtor Defendants"). (Pl. Br. at 2.) Plaintiffs' action was immediately discontinued, and on November 20, it was refiled as an Adversary Proceeding in the United States Bankruptcy Court for the Southern District of New York. (Id.) Thereafter, all parties agreed that the case should be litigated before this Court, so on February 19, 2009, the case was reinstated on the Court's docket. (Id. at 3.) One month later, on April 15, 2009, this Court granted an uncontested motion to withdraw the reference. (Id.)

On April 24, 2009, both sets of defendants filed motions to dismiss the complaint. (Id.) Defendants argue that the plaintiff class was not entitled to WARN notification because the class members qualified as "part time employees." (See generally Non-Debtors' Br. at 6-12; Debtors' Br. at 4-8.) That is, they had been employed by the defendant-purchasers for less than six months—even though they had been employed by Steve & Barry's for much longer, some for years and years. (Id.)

The defendants are wrong about the reach of the WARN Act, and the Court denies their motions to dismiss with prejudice on that ground. The Court agrees with defendants that the complaint is deficiently pleaded and requires remediation; I therefore grant the motions to dismiss without prejudice so that plaintiff can serve and file a complaint that incorporates necessary factual allegations from its brief into the pleading itself.

FACTS

According to plaintiff's opposition brief, Steve & Barry's is a chain of discount clothing stores that has operated for many years out of, among other places. Port Washington, New York (in the Eastern District of New York) and Columbus, Ohio. The complaint itself contains no allegation whatever about the business of Steve & Barry's.

On or about August 22, 2008, the United States Bankruptcy Court for the Southern District of New York (Gropper, J.) entered an order authorizing, inter alia, an asset sale by a business known as Steve & Barry's Manhattan LLC and its debtor affiliates. The terms of the purchase were set forth in an Amended and Restated Purchase Agreement (the "Agreement" or "Purchase Agreement") dated August 21, 2009, among S & B Industries, Inc. and certain of its affiliates ("Sellers"), Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC on behalf of a certain joint venture controlled by them (collectively the "Sub-Agent") and defendant BH S & B Holdings LLC ("Buyer" or "Purchaser" or "BH S & B"). Buyer was incorporated in July 2008 for the express purpose of purchasing certain assets of the Sellers.

The Preamble to the Agreement begins: "WHEREAS, Purchaser desires to purchase substantially all of the assets and assume certain leases and other obligations of the Sellers with the present intention of operating the Business as a going concern." (Debtors' Br. Ex. 5 at 1.)

The "Purchased Assets" listed in Article 2 of the Agreement included almost all of Sellers' accounts receivable, their inventory, their purchase orders, deposits and prepaid charges and expenses, all of Sellers' rights under certain leases, together with all improvements, fixtures and related appurtenances (including furniture and equipment); Sellers' intellectual property, their contracts, their cash their business permits. (Id. at 14.) Plaintiffs characterize this as all or substantially all of the assets of the Sellers (Pl. Br. at 14); whether that is in fact the case is irrelevant at this moment, because the Court finds that such a characterization is not inconsistent with the terms of the Agreement and assumes it to be true.

The Purchase Agreement provided that BH S & B could hire any, all or none of the employees of Steve & Barry's. (Id. at 41.) It required the Seller to provide information about its existing employees to the Purchaser, who would then "deliver, in writing, an offer of employment to those Employees as determined by Purchaser in its sole discretion. The new employment of each Employee who accepts Purchaser's offer of employment shall commence with effect from the Closing Date...." Id. (§ 9.1(b).) These continuing employees are referred to as "Transferred Employees" (id.), and their employee files (but not the employment files of anyone who did not receive an offer of employment from BH S & B) fall within the definition of "Purchased Assets" of Steve & Barry's. (See id. at 15 (§ 2.1(k)(1)).)

Plaintiff alleges that he was employed at a facility operated by "defendants" in Port Washington, New York. (Compl. ¶ 6.) He does not allege how long he was employed at the facility. (Cf. id.) Since he sues under the WARN Act, I will assume that he worked at the facility, or for Steve & Barry's, under the prior owners. However, this is just one of many details that will have to be cleared up in an amended pleading (see below).

Until on or about November 17, 2008, plaintiff worked for the new owner of the business. (Id.) On that day, he—along with numerous others (more than 100)— were fired. (Id. ¶ 21.) They were not given notice sixty days in advance of being fired. (Id. 28.)

Plaintiff and members of the class he purports to represent allege that defendants—the new owner of Steve & Barry's (BH S & B), the company of which the new owner was a wholly-owned affiliate (BHY S & B Intermediate HoldCo LLC) (id. ¶ 13), a company called York Capital Management, whose "principals .... oversaw and directed the operations of BH S & B" (id. ¶ 14), and a company called Bay Harbour Management LC, an owner of BH S & B whose role is not described with any specificity in the complaint (see id. ¶¶ 13-14)—were required to give notice to the Steve & Barry's employees pursuant to the WARN act before engaging in the mass layoff they carried out (id. ¶ 25).

In their moving briefs, defendants represent, inter alia, that BH S & B filed in Chapter 7 and began liquidating within ninety days after purchasing the assets of Steve & Barry's Manhattan LLC. (Debtors' Br. at 3.) It is undisputed that plaintiff worked under the new ownership for less than six months.

The Motion to Dismiss

Defendants move to dismiss the complaint. The principal (though not the exclusive) thrust of their motions is that whoever might be considered an employer of plaintiff following the August 22, 2008 purchase of Steve & Barry's had no obligations under the WARN Act because that entity/those entities did not employ plaintiff or any other persons who had theretofore been employed by Steve & Barry's for six months prior to dismissing them. This, according to defendants, rendered them "part time" workers, who are not counted toward the number of workers required to meet the WARN Act's threshold for giving notice. (See generally Non-Debtors' Br. at 6-12; Debtors' Br. at 4-8.) Defendants also move on the ground that the complaint fails to plead sufficient facts to warrant the case's going forward, citing recent Supreme Court jurisprudence on the meaning of notice pleading. (See generally Non-Debtors' Br. at 12-18.)

The principal thrust of plaintiffs response to the motions is that the WARN Act applies because he and his co-workers worked for Steve & Barry's for more than six months. (Pl....