Legal News

Morgan Lewis, Other Firms Get Claims by Former Thelen Employees Thrown Out

By Brian Harris

By Gina Passarella
Of the Legal Staff
 
In Monday?s article ?Buyer Beware: Firms Look Closely at Legal Liabilities of Merger Partners,? The Legal mentioned a suit Morgan Lewis & Bockius and other firms were fighting that was brought by a group of former Thelen employees who sued the firm for alleged violations of the WARN Act.

Since the time the article was filed, a judge in that case has granted the law firms? summary judgment motions, dismissing any claims against them.

A recent report by The Recorder, a Legal affiliate, noted that Morgan Lewis was sued in October along with Orrick Herrington & Sutcliffe, DLA Piper, Nixon Peabody and Howrey over WARN Act violations. Staffers were given 30 days' notice, not 60 as required under the act. The employees argue that the acquisition by the defendant firms of Thelen partners shortly before the announced dissolution of Thelen equated to a purchase of part of the business. That makes them bound to the same obligations as an employer under WARN, the employees argued according to the report.

In a Nov. 25 opinion, U.S. District Court Senior Judge Samuel Conti for the Northern District of California granted the summary judgment motions filed by each firm as to the sole claim against them ? a violation of the Worker Adjustment and Retraining Notification Act.

Thelen announced Oct. 30, 2008, that it would be dissolving and that the employees? final day would be Nov. 30, 2008. Some of the firm?s whole practice groups or groups of partners had previously left for the defendant firms. Morgan Lewis acquired the bulk of the energy transactions practice, according to the opinion.

The plaintiffs alleged these acquisitions were the ?vivisection? of the firm and ultimately caused its demise. They argued that when the defendant firms ?purchased? the attorneys, they effectively became the employer of each of the 700 employees still at Thelen and were bound by the WARN Act in regard to those employees, Conti said.

The judge said the plaintiffs were taking too far-reaching an interpretation of the section of the act that dealt with the ?sale? of one business to another.

?However, the mere migration of employees or partners from one firm to another cannot, in itself, constitute a ?sale? under the WARN Act,? he wrote.

Even if he were to assume the defendant firms did ?purchase? parts of Thelen, Conti said there is no case law that has determined whether those firms would be responsible for employees that still remained at Thelen for a period of time after the purchase and before the firm dissolved.

When Section 1(b) of the act is read alone, Conti said it is ambiguous but can be viewed in favor of the employee?s argument. The section states, "any person who is an employee of the seller, ?shall be considered an employee of the purchaser immediately after the effective date of the sale,?? Conti said.

?Nevertheless, the WARN Act, when read as a whole, does not foist upon a buyer the duty to provide WARN notice to all of the seller's employees in perpetuity,? he said.

A separate section of the act offers employees a remedy under the act only if the employer has issued a mass layoff or plant closing, Conti said.

?In most instances, where a seller continues to operate indefinitely after the sale of part of its business [as Thelen did], it would be absurd to suggest that the buyer's decision to not hire its employees (who may continue to work for the seller) is tantamount to an ?order? of a mass layoff or plant closing,? Conti said.

Full post as published by The Legal Intelligencer Blog on December 02, 2009 (boomark / email).