Goldberg Kohn Represents Meridian Rail Corp in WARN Act Case

June 2, 2006

Meridian Rail Corp.'s sale of its Chicago Heights plant in 2004 did not affect the 50 workers needed to trigger the advance notice requirement of the Worker Adjustment and Retraining Notification Act, a federal trial judge in Illinois ruled (Phason v. Meridian Rail Corp., N.D. Ill., No. 04 C 5845, 5/8/06).

Judge James F. Holderman of U.S. District Court for the Northern District of Illinois May 8 granted summary judgment to Meridian after a fine-tuned review of the disputed lists of active and laid-off workers and job applicants supplied by Meridian, the employee plaintiffs, and new owner NAE Nortrak. The court concluded that only 31 Meridian employees active at the time of the sale were rejected for employment by Nortrak, and that at most 12 workers on layoff sought unsuccessfully to come back to new jobs. Added together, the 43 workers did not constitute a large enough pool to trigger WARN Act requirements, the court concluded.

As a result, the court decided that the class action brought by the former employees no longer was valid, and so decertified the class. An earlier court "rested its decision to certify the class on the plaintiffs' representation that 50 or more putative class members were 'affected employees' under the WARN Act," the court said. "On summary judgment, this court finds that the evidence does not support the plaintiffs' representation."

According to the court, Meridian employed both salaried and union-represented hourly employees at its Chicago Heights plant. Hourly workers were covered by a collective bargaining agreement that allowed for recall rights for up to two years after a layoff. In September 2002, Meridian had laid off 31 hourly employees with full recall rights, and in September 2003 had laid off an additional 19 workers with such rights.

Meridian and Nortrak negotiated the sale Dec. 19, 2003, and closed the deal Jan. 8, 2004. Meridian told employees at the Chicago Heights facility Dec. 31, 2003, that it would close production operations one week later. Meanwhile, Nortrak had sent a notice to active Meridian employees Dec. 15, 2003, and advertised in the newspaper, that it would accept applications for employment up to and including Dec. 19, 2003. According to the court, a union official, one of the named plaintiffs in the class, called laid-off members to inform them that Nortrak was taking applications. Nortrak hired 90 former Meridian employees active at the time of the sale, and 20 laid-off employees as well.

Former Meridian employees filed the class action Sept. 7, 2004, alleging violations of the WARN Act, which requires employers of more than 100 employees to provide a 60-day warning of a plant closing or mass layoff if the action will result in employment loss for 50 or more full-time employees at a single employment site during any 30-day period. Workers on temporary layoff or leave who have a reasonable expectation of recall are counted as employees.

The class certified in April 2006 included all salaried employees and active hourly and laid-off hourly employees with seniority and recall rights at the Chicago Heights plant who lost their jobs upon the sale and were not rehired by Nortrak. Plaintiffs estimated at the time that the class would total 77 former employees of Meridian--40 active hourly employees not hired by Nortrak, seven salaried workers, and 30 laid-off workers. It also included the four named plaintiffs--Robert Phason, Juan Ortiz, Clifford Rush, and Richard Zimmerman, who were former union officers employed as hourly workers at the plant at the time of its closure and sale.

The first math problem that faced the court was to determine how many active Meridian employees were denied employment by Nortrak--thus qualifying them for WARN Act status. Using in large part a declaration, accepted by both sides, provided by Nortrak Human Resources Manager Clay Johnston, the court determined that 31 active Meridian employees sought new jobs, but were not hired by Nortrak. The court accepted Meridian's statistic that it employed 126 active employees at the time of the sale, and the court cited Johnston's declaration that 36 of those workers were not hired by the new owner. "Deducting the 5 Meridian employees who chose not to work for Nortrak ... leaves 31 active employees who sought employment with Nortrak but were not hired," the court said, a number too low to trigger the WARN Act's protections.

The court then addressed the problem of determining whether any laid-off employees with recall rights tried unsuccessfully to get jobs at Nortrak, thus enlarging the pool of potentially protected workers. The court observed that Johnston provided undisputed evidence that Nortrak hired three of the 31 hourly employees laid off in 2002 and 17 of the 19 laid off in 2003. What was less apparent, the court continued, was how many laid off employees applied but were rejected. After several computations, described in detail in its 14-page decision, the court determined that only 12 unsuccessful applicants for new jobs came from the Meridian layoff pool.

"Comparing the list of persons applying to Nortrak (Ex. 3) with the list of those hired by Nortrak (Ex. 4), there were 41 applicants of the 113 total who were not hired by Nortrak. That 41 number was determined by subtracting the 72 hourly applicants hired by Nortrak as set forth in Exhibit 4, including the additional 3 hourly Meridian employees hired into salaried positions, from the 113 total applicants listed in Exhibit 3. Knowing that 41 applicants were not hired by Nortrak from the list of 113 candidates (Ex. 3) and knowing, as both parties agreed, that 29 active hourly employees who applied to Nortrak were not hired ... it is clear that 12 applicants (41-29=12) who were not active employees of Meridian at the time of the sale were not hired by Nortrak."

The court then concluded that those 12 applicants came from the layoff pool. "Because all of the workers with recall rights laid off in September 2002 and 2003 were hourly employees that would be included on Nortrak's list of applicants (Ex. 3), this court finds based on the undisputed facts that, at most, only 12 laid-off, hourly workers applied for a position at Nortrak," the court said.

"The class is decertified but judgment is not entered because there is still a pending motion to revise class certification that this ruling does not moot," the court concluded. "The parties are again encouraged to discuss settlement to resolve this case in its entirety."

Meridian Rail Corp. was represented by Lester W. Armstrong and Steven Moss of Kahn Kleinman in Chicago, and Michael Dean Karpeles and Jon Eric Klinghoffer of Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz Ltd. Plaintiffs were represented by Carol Tran Nguyen, Despres Schwartz & Geoghegan, Chicago, Jorge Sanchez, Mexican American Legal Defense & Educational Fund in Chicago, and Thomas Edward Sarikas of Merlo Kanofsky Brinkmeier & Gregg Ltd., Chicago