Liquidating fiduciary exception to warn
In Riker Industries, the trustee alleged that the facility closing resulted from a sudden loss of financing.
The court rejected this argument, stating that "withdrawal of that financing should have been anticipated by [the] debtor as it was, no doubt, aware of its precarious financial condition." In United Healthcare, the bankruptcy court held that the "unforeseeable business circumstances" exception was not available because there were "months of warning signals" that placed the debtor's board on notice that debtor was "in financial extremis." With respect to the "faltering business" exception, the "capital or business" sought must be such that it would prevent or postpone the plant closing, and there must be a reasonable chance that the capital, financing or sale will occur. Return to article See, e.g., In re Jamesway Corp., 242 B.
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While the exceptions allow less than 60 days' notice, the employer is required to give as much notice as is practicable and must explain in the notice why less notice was given.
An employer may order a plant closing or mass layoff before the conclusion of the 60-day period if the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable as of the time that notice would have been required.
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The decision of the Third Circuit Court of Appeals in United Healthcare suggests that a DIP that "operates to liquidate" may be a liquidating fiduciary, and therefore not an "employer" for WARN Act purposes.
suggesting that the outcome might have been different had such evidence existed.
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The reported cases illustrate the difficulty most chapter 11 debtors-in-possession (DIPs) or trustees have in complying with the requirements of either exception.