Vogt v. Greenmarine Holding, LLC

• Decision Date: 29 January 2004
• Docket Number: No. 02 Civ. 2059(GEL).,02 Civ. 2059(GEL).
• Citation: 318 F.Supp.2d 136
• Parties: Michael VOGT, Paul Beaumont, and Fred Breu on their own behalf and as representative plaintiffs on behalf of all similarly situated employees of Outboard Marine Corporation, Plaintiffs, v. GREENMARINE HOLDING, LLC, Quasar Strategic Partners, LDC, Greenlake Holdings, LLC, Greenlake Holdings II, LLC, Quantum Industrial Partners, LDC, Quantum Industrial Holdings, Ltd., QIH Management Investors, L.P., and QIH Management, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

318 F.Supp.2d 136

Michael VOGT, Paul Beaumont, and Fred Breu on their own behalf and as representative plaintiffs on behalf of all similarly situated employees of Outboard Marine Corporation, Plaintiffs, v. GREENMARINE HOLDING, LLC, Quasar Strategic Partners, LDC, Greenlake Holdings, LLC, Greenlake Holdings II, LLC, Quantum Industrial Partners, LDC, Quantum Industrial Holdings, Ltd., QIH Management Investors, L.P., and QIH Management, Inc., Defendants.

No. 02 Civ. 2059(GEL).

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

January 29, 2004.

Jeffrey H. Daichman, Nahum A. Kianovsky, Kane Kessler, P.C., New York City, James C. Anders, P.A. & Associates, Columbia, SC, of counsel, for Plaintiffs.

Mark A. Jacoby, Lawrence J. Baer, Weil, Gotshal & Manges, LLP, New York City, for Greenlake Holdings LLC and Greenlake Holdings II, LLC.

Mark H. Alcott, Mark D. Meredith, John W.R. Murray, Paul, Weiss, Rifkind, Wharton & Garrison, LLP, New York City, for Greenmarine Holdings LLC, Quasar Strategic Partners, LDC, Quantum Industrial Partners, LDC, Quantum Industrial Holdings Ltd., QIH Management Investors, L.P., and QIH Management, Inc.

OPINION AND ORDER

LYNCH, District Judge.

This is an action brought under the Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101 et seq. ("WARN" or "the Act"), which requires employers to give sixty days notice to employees prior to a mass layoff or plant closing. Plaintiffs bring suit on behalf of themselves and similarly situated former employees of Outboard Marine Corporation ("OMC"), a South Carolina company formerly engaged in the design, manufacture and sale of outboard motors, and currently in bankruptcy under Chapter 11. Because OMC is in bankruptcy proceedings, it is neither possible, because of the automatic stay, nor practical, to sue the company itself. Instead, plaintiffs bring this action for failure to provide notice of the plant closings against a group of investment companies that together owned or controlled the majority of OMC's stock. Essentially, plaintiffs seek sixty days' pay and benefits for each person in the class, plus costs and attorneys' fees.

Defendants move to dismiss the complaint pursuant to Rule 12(b)(6), Fed.R.Civ.P., for failure to state a claim upon which relief can be granted.¹ Because plaintiffs have made specific factual allegations regarding the relationship of certain of the defendant companies to OMC and their role in the decision to effect a mass layoff of OMC employees, which, if true, would entitle plaintiffs to relief under the WARN Act's test for intercorporate liability, the motions to dismiss shall be denied as to defendants Greenmarine Holdings, LLC ("Greenmarine"); Quantum Industrial Partners, LDC ("QIP");² and Quantum Industrial Holdings, Ltd. ("QIH"), and granted as to defendants Quasar Strategic Partners, LDC; Greenlake Holdings, LLC; Greenlake Holdings II, LLC ("Greenlake II"); QIH Management Investors, L.P.; and QIH Management, Inc.

BACKGROUND

On December 21, 2000, OMC filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. On or about that date, OMC shut down its thirteen facilities in states including Florida, Georgia, and North Carolina, and fired the majority of its employees, approximately 6,500 people, without prior notification. Lawsuits alleging violation of the WARN Act were filed against the defendants by former employees in at least two other federal courts before the instant complaint was filed here on March 13, 2002.³

The complaint seeks damages not from OMC itself, but from eight investment companies that together owned or controlled the majority of OMC's stock. Plaintiffs allege that defendants Greenmarine, Greenlake Holdings II, QIP and the companies that owned or controlled them, together with OMC, acted as a "single employer" for purposes of the WARN Act, essentially for three reasons. First, plaintiffs allege that defendants owned or controlled a majority of OMC's stock and "control[led] all corporate transactions of OMC." (Compl. ¶¶ 5, 18.) Second, plaintiffs allege that the defendants and OMC were part of a single integrated structure because the same individuals who were on the boards of various defendant companies were also directors of OMC at the time OMC petitioned for bankruptcy. (Id. ¶ 30) Additionally, plaintiffs argue that the defendant companies are directly liable under the WARN Act as parents of OMC, because, they allege, certain defendant companies had the authority to and did make the decision that OMC petition for bankruptcy and effect the mass layoff in violation of the WARN Act.

Specifically, plaintiffs allege that from 1997 through December 22, 2000, "the financial, management and operational decisions that resulted in the mass plant closings and Chapter 11 Bankruptcy filing of OMC were made by the Management Committee of Greenmarine.... During the year 2000, the Management Committee of Greenmarine consisted of Alfred Kingsley, Gary Duberstein, Frank Sica, Ron Hiram and Richard Katz[, who] also constituted the board of directors of OMC." (Id. ¶ 21.) In addition, the complaint alleges that "in November 2000, ... [QIP and QIH] directed OMC to file bankruptcy and sell all its assets" (id. ¶ 28), and that "[QIP] participated in and caused the preparation of the corporate resolution and the directions contained therein to be issued which resolution directed the company to file bankruptcy" (id. ¶ 33).

Furthermore, plaintiffs allege that QIP and QIH solicited Roger Fix to join OMC as its Chief Operating Officer (id. ¶ 26), contracted with Fix to coordinate the bankruptcy filing and negotiate sale of OMC's assets (id. ¶ 29), and that QIP signed Fix's employment contract and guaranteed payment of his compensation (id. ¶ 26). Finally, the complaint alleges vaguely that "representatives of certain defendants or their affiliated companies" and "lawyers from the law firm of Paul, Weiss, Rifkin[d], Wharton & Garrison who ... were representing Defendants [Greenmarine], Quasar Strategic Partners, LDC, [QIP, QIH], QIH Management Investors, L.P. and QIH Management Inc." were present at telephone meetings when "critical decisions were made directly affecting OMC employees, including ... the decision for OMC to file Chapter 11 bankruptcy." (Id. ¶ 34.)

Defendants contend that the defendant companies are investors in OMC, not joint-employers with OMC, and acted the way parent companies commonly act in regard to a subsidiary. They argue that no extraordinary circumstances exist which would make them liable for the acts of OMC in petitioning for bankruptcy and shutting down its facilities.

DISCUSSION

I. Standard for Dismissal under Federal Rule of Civil Procedure 12(b)(6)

In the context of a motion to dismiss, the Court accepts "as true the facts alleged in the complaint," Jackson Nat'l Life Ins. Co. v. Merrill Lynch & Co., 32 F.3d 697, 699-700 (2d Cir.1994), and may grant the motion only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Thomas v. City of New York, 143 F.3d 31, 36 (2d Cir.1998) (internal citations omitted). The "issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir.1996) (internal quotation marks and citations omitted). Furthermore, "[c]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss." Smith v. Local 819 I.B.T. Pension Plan, 291 F.3d 236, 240 (2d Cir.2002), quoting Gebhardt v. Allspect, Inc., 96 F.Supp.2d 331, 333 (S.D.N.Y.2000).

Plaintiffs argue that the allegations in the complaint concerning OMC's relationships to defendant companies are sufficient to permit them to conduct full discovery in order to attempt to prove those allegations. (Pl. Mem. at 8.) Defendants respond that plaintiffs have not alleged specific facts which would enable them to pierce the corporate veil, and that therefore plaintiffs are not entitled to any discovery into the corporate relationships alleged nor into the decision to shut down OMC's facilities.

Defendants' argument is unpersuasive because the standard for veil piercing does not govern claims arising under the WARN Act. Rather, the question is more simply whether plaintiffs have alleged facts about defendants' corporate structure and the decision to shut down the OMC plants and effect mass layoffs which, if true, would entitle them to relief against these defendants under WARN. As to some of the defendants, that standard is met.

II. The Worker Adjustment and Retraining Notification Act

WARN requires employers to give sixty days' notice to their employees before mass layoffs or plant closings. 29 U.S.C. § 2101. It was enacted in the wake of numerous plant closings in the 1970s and 1980s, in order to soften the blow of job loss to workers and their families by providing some advance notice to allow for transition time to different employment. See Hotel Employees & Rest. Employees Int'l Union Local 54 v. Elsinore Shore Assocs., 173 F.3d 175 (3d Cir.1999). A principal enforcement mechanism of the Act permits employees to seek damages from their employer in federal court in an amount equivalent to sixty days' pay and fringe benefits when the employer fails to give proper notice of a mass layoff. 29 U.S.C. § 2104(a).

There is no question that the complaint alleges a blatant violation of the WARN Act by OMC, committed virtually on Christmas Eve, as if to drive home the company's disdain for its workers as well as for the law. The question presented by this motion to dismiss is whether plaintiffs have alleged specific facts which, if true, are sufficient to show that the companies that owned or controlled a majority interest in OMC are employers of the laid-off employees within the meaning of the Act.

The Act defines an...