While one issue in the bankruptcy of Jevic Holding Corp. will be decided next year in the Supreme Court, the Third Circuit used the Jevic bankruptcy to slam the door on the notion that the acquirer in a typical leveraged buyout takes on liability for workers’ wages under the federal Worker Adjustment and Retraining Notification Act, or WARN Act.
Sun Capital Partners Inc., a private-equity investor, acquired Jevic in 2006. Two years later, Jevic was liquidating in bankruptcy, firing workers in the process. Workers mounted a class suit in bankruptcy court against Sun Capital, contending they were not given the 60 days’ notice of mass layoffs required by the WARN Act.
Bankruptcy Judge Brendan Shannon of Delaware granted summary judgment in favor of Sun Capital and was upheld in September 2014 by District Judge Sue L. Robinson. The workers fared no better when the Third Circuit upheld the lower courts’ “well-reasoned opinions” on July 27.
The appeals court’s non-precedential decision by Circuit Judge Anthony J. Scirica said there was no liability under the “single employer” doctrine because the plaintiffs failed to bring facts forward satisfying the applicable five-part test.
Although Sun Capital conceded there was common ownership and common directors and officers, Judge Scirica said the plaintiffs did not satisfy the third test, requiring de facto control, because Jevic itself decided to shut down.
Similarly, the plaintiffs failed to show “unity of personnel policies” and “dependency of operations.”
Even when the first two parts of the test are satisfied, Judge Scirica said that Jevic is another case where there is no single-employer liability absent proof satisfying the final three factors.
The Supreme Court granted certiorari in Czyzewski v. Jevic Holding Corp. to decide whether bankruptcy courts are allowed to dismiss chapter 11 cases when property is distributed in a settlement that violates the priorities contained in Section 507 of the Bankruptcy Code. To read ABI’s discussion on that issue, click here.
To read the Jevic case in the Supreme Court, click here.