Thelen's former employees are using a novel legal argument in an $18 million suit against five firms that hired many of Thelen's partners, according to an opposition brief filed Friday.
The employees, represented by Los Angeles litigation boutique Blum Collins, argue the firms' hiring of the partners amounted to purchasing a portion of Thelen's business. Therefore, the firms are bound by the same obligations as an employer under the WARN Act. The defendant firms, meanwhile, argue that since there was no merger, they had no obligations to former Thelen staff.
That argument only raised more questions for the plaintiffs.
"My question is, does that mean the WARN Act doesn't apply to law firms?" said Blum Collins partner Craig Collins.
Wednesday will mark the one-year anniversary of Thelen's collapse. Hundreds of lawyers scattered to dozens of firms, and hundreds of employees were left jobless. Staffers were given 30 days' notice, not 60 as required under the WARN Act. The WARN Act portion of the claims is $6 million.
A similar case brought by former Brobeck employees, McCaffrey v Brobeck, failed a few years ago. In that case, the employees had been fired before Morgan, Lewis & Bockius acquired many of Brobeck's partners. But with Thelen, the employees lost their jobs after the firm collapsed and the partners scattered. The Thelen employees' attorneys at Blum Collins say this is a crucial distinction left unanswered by the judge in the Brobeck case. Typically an acquiring company is liable under the WARN Act for employees left behind.
The defendant firms, Orrick, Herrington & Sutcliffe; DLA Piper; Nixon Peabody; Howrey and Morgan, Lewis, filed motions to dismiss the case in August. They argue Thelen dissolved and there simply was no acquisition or merger.
"Orrick believes the case was filed without a proper factual investigation, and the theory has absolutely no legal merit," said firm spokesman David Schaefer. "That's why we filed a motion to dismiss, and we are confident about the ultimate outcome of this case."
Morgan Lewis was a defendant in the Brobeck case, so it has some experience fighting off claims by former employees of defunct law firms. It denies there was any merger involving Thelen and points out in its motion to dismiss that the implication of a merger was much stronger in the Brobeck case than in this one, and still the judge rejected the claims.
"Neither Thelen's individual partners nor its individual employees were 'assets' to be 'purchased' by Morgan Lewis or anyone else," reads Morgan Lewis' motion.
The defendants question the plaintiffs' logic, wondering how the employees could be simultaneously employed by six firms, all with their own WARN Act obligations. But the employees argue that this is irrelevant: Defendants don't understand that "the WARN Act creates a constructive fiction that the acquiring firm 'employs' the selling firm's employees only for the purpose of assigning the duty to give WARN Act notice," the brief says.
Blum Collins is the firm that recently secured a $19 million settlement for employees in the Heller bankruptcy. Craig Collins said they decided not to pursue Thelen in bankruptcy court because the firm doesn't have any money and still owes its secured creditor $6 million.
"We think eventually there's going to be money in Thelen," Collins said. "We think eventually we are going to get it back from the partners. This seemed to be the quickest way to get money for the employees."