Chain v. Land-Air Express of New England, Ltd.

Background

The plaintiffs brought claims under the federal Worker Adjustment and Retraining Notification Act, the New York Worker Adjustment and Retraining Notification Act, and the New Jersey Millville Dallas Airmotive Plant Job Loss Notification Act. These laws generally require advance notice of certain large layoffs or facility closures. The claims arose from the closure of Land-Air’s Rock Tavern, New York terminal in January 2016.

Land-Air failed to appear, and Judge Vincent L. Briccetti entered a default judgment against it. The plaintiffs later amended their complaint to add North East Freightways, Inc., doing business as Land Air Express, and LAX, LLC, alleging that those companies were liable as successors to Land-Air. The court certified three subclasses by stipulation. After summary-judgment proceedings, a bench trial was held from July 20 through July 24, 2020 concerning the federal and New York WARN Act claims. The defendants also moved to decertify the class.

Findings About the Rock Tavern Closure

The court found that Land-Air’s owner, Spencer, decided to close the terminal around January 25, 2016, after the terminal lost a major customer and Land-Air faced financial difficulties. The court also found that employees generally were not told about the impending permanent closure until January 29, and that the evidence did not establish why most employees who left before then did so.

WARN Act Numerosity Requirement

The federal WARN Act requires a qualifying plant closing to involve at least 50 employment losses at one site during a 30-day period. The New York WARN Act uses a lower threshold of 25 employees. The court held that the plaintiffs had not proved that either threshold was met.

First, the court concluded that employees who left before the January 29 closure departed voluntarily under the applicable WARN Act principles. The court found no evidence of an intolerable work environment or undue coercion that would establish a forced departure. It also found that delayed compensation, by itself, was insufficient to establish a forced departure. The court distinguished a cited case involving employees who left after receiving definite notice that the business would close because the Rock Tavern employees had not received comparable notice before most of them left.

Second, the court found that the evidence did not establish that at least 25 employees were terminated on January 29. Although the plaintiffs argued that five additional people should be counted, the court found that the mileage drivers did not have Rock Tavern as their single site of employment. They were over-the-road drivers, reported to a dispatcher in Boston, and did not receive assignments from or report to the Rock Tavern terminal.

The court also found that Mabie and Dash did not suffer an employment loss because both continued working for Land-Air after the terminal closed. Finally, the court excluded Barreto and Moore from the count because they were part-time employees under the federal and New York WARN Acts. As a result, the plaintiffs failed to prove the number of qualifying employment losses needed to trigger the notice requirements.

Successor Liability

The court separately held that, even if the plaintiffs had proved a qualifying plant closing, NEF and LAX would not be liable as successor employers. It applied the Department of Labor’s five-factor test for determining whether related companies functioned as a single employer: common ownership, common directors or officers, control over operations, unified personnel policies, and dependency of operations.

The court found that the factors did not support liability. NEF and LAX had no direct ownership interest in Land-Air during the relevant period. Anagnost Investments had an option to purchase a 60 percent interest in Land-Air but never exercised it. The court also found no sufficient proof that Land-Air and the defendants shared officers or directors when the terminal closed.

The court found that the evidence did not show unified personnel policies, centralized hiring or wage payments, jointly maintained personnel records, or shared benefits or collective-bargaining policies. Although the defendants helped with some operational matters, the court credited testimony that Spencer retained decision-making authority and alone decided to close the terminal. The court further found that the defendants’ involvement did not establish control over Land-Air’s daily operations or specifically direct the terminal’s closure.

The court also rejected the plaintiffs’ state-law successor-liability theory. Under the principles discussed in the opinion, a buyer’s purchase of corporate assets ordinarily does not create successor liability unless an exception applies, such as a formal assumption of debts, fraud, a de facto merger, or continuation of the seller. The court found that the plaintiffs had not shown the required continuity of ownership or otherwise established a de facto merger.

Disposition

The court’s conclusion states that the plaintiffs’ federal and New York WARN Act claims are denied. It directed the clerk to enter judgment for NEF and LAX. The defendants’ motion to decertify the proposed class was declared moot, and the pending motion was terminated.

Because the earlier default judgment against Land-Air was inconsistent with the trial finding that the WARN Act notice requirements were never triggered, the court respectfully reported and recommended to Judge Vincent L. Briccetti that the default judgment be vacated and the action against Land-Air be dismissed. That portion was a Report and Recommendation because Land-Air had not consented to the magistrate judge’s jurisdiction. The parties were given 14 days to file objections concerning the recommendation.