Defunct firm Thelen is telling state and federal courts its hands were tied when it closed shop last year and did not pay its employees accrued vacation or give 60 days' notice of their impending joblessness.
The firm filed a response Thursday in San Francisco Superior Court to a class action brought by former employees seeking damages under the federal WARN Act. The dissolving firm filed the same answer in January to a federal claim filed in the Northern District of California.
The answers say the firm should be excused from its obligations under the WARN Act because they were impossible to fulfill. And because the firm had been seeking capital to keep in business, informing employees would have jeopardized attempts to secure a loan.
And besides, no one thought what happened would happen:
"Thelen's performance was made impracticable without fault of Thelen by the occurrence of an event the nonoccurrence of which was a basic assumption on which the contract was made," the answer said.
Thelen told its employees in late October that it would cease doing business by Dec. 1. Citibank, the only secured creditor, seized the firm's bank accounts and did not allow it to pay employees accrued vacation.
Steve Blum, who represents plaintiffs in the federal class action, said it's a "copout" to blame the banks. The partners should have ponied up the money for the employees, he said.
"I don't want to get into legal strategy, but there's some liberal case law in the 9th Circuit and we've made no secret of the fact that some of the successor entities, like Nixon Peabody, may be on the hook," Blum said. About 66 Thelen attorneys went to work at Nixon Peabody.
"This was a merger where you leave behind that for which you have no use. I don't think you can do that, just cast aside the interest of those employees that have been loyal to you for a number of years and say, 'We have no legal obligations to take care of you.'"
Latham & Watkins partner Wayne Flick, who filed the answer on behalf of Thelen, declined to comment. Cary Kletter, who represents the employees in the state suit, did not return a late call on Friday.
Thelen owed Citibank $60 million when it dissolved. It has paid off about $25 million and is continuing to collect payments, according to bankruptcy partner Peter Gilhuly at Latham & Watkins, who is also representing Thelen.
Blum is also representing former Heller employees in a potential class action against that firm, which filed for bankruptcy in December.