Sara Randazzo reports for Litigation Daily sibling publication The Am Law Daily.
The Dewey & LeBoeuf estate has failed in its effort to squelch a proposed class action that claims the firm gave 550 employees inadequate notice before terminating them weeks before filing for Chapter 11 protection on May 28, 2012.
In a ruling issued Monday, U.S. bankruptcy court judge Martin Glenn denied the Dewey estate’s motion to dismiss the suit, which seeks 60 days of wages and benefits for those affected by the layoffs. Vittoria Conn, a former Dewey staff member employed in the firm’s documents department, filed the suit in New York federal court May 10, 2012–three days after she was terminated and about two weeks before the firm filed for bankruptcy. The suit, which is based on state and federal laws related to the federal Worker Adjustment and Retraining Notification, or WARN, Act, was transferred to bankruptcy court on May 29 as a so-called adversary proceeding.
In allowing the case to continue, Glenn disagreed with the two primary arguments offered by lawyers for the Dewey estate: that the former employees’ grievances should be brought as part of the regular bankruptcy claims process rather than as an adversary proceeding, and that there is no basis for a WARN suit to qualify as a class action.
Glenn also chided Dewey’s lawyers for raising issues he deemed irrelevant in a motion to dismiss, including the estate’s position that the firm was not required to comply with the WARN Act because it was no longer operating as a viable business at the time it laid off the workers in question. "While the Debtor may ultimately prevail on the liquidating fiduciary affirmative defense, or some other defense, the defenses are not established as a matter of law from the four corners of the Complaint," Glenn wrote.
Glenn did not rule on whether the case should proceed as a class action. That issue, he said, would be considered at a hearing scheduled for March 28.
Outside of New York, WARN-related class actions have advanced in at least two other law firm bankruptcies. Employees terminated by Heller Ehrman, which filed for bankruptcy in San Francisco in 2008, received between 24 and 33 cents on the dollar for $13.2 million in WARN Act and other claims. Former Howrey employees laid off prior to that firm’s 2011 dissolution recently received the go-ahead from San Francisco federal bankruptcy court judge Dennis Montali to proceed with a WARN class action of their own.
Conn’s attorneys at Outten & Golden–who were passed over as counsel in the Howrey suit in favor of Los Angeles firm Blum Collins–did not immediately respond to a request for comment Tuesday on Glenn’s ruling in the Dewey suit.
A spokeswoman for the Dewey estate declined to comment. The estate’s motion to dismiss was filed by lawyers at Togut, Segal & Segal and Goulston & Storrs.
In denying the motion to dismiss, Glenn also chose not to rule on the plaintiffs’ argument that their claims should be given either administrative expense or wage priority status. He wrote that such a determination can only be made in the context of Dewey’s bankruptcy and not in an adversary case.
Dewey’s advisers are in the process of winning creditor approval for a Chapter 11 plan that, once confirmed, would put the case in the hands of two liquidating trustees tasked with maximizing the defunct firm’s remaining assets. A hearing at which Glenn will consider that plan is scheduled for February 27.