Lexplug logoLexplug

In Re APA Transport Corp. Consolidated Litigation

Court of Appeals for the Third Circuit
28 I.E.R. Cas. (BNA) 97, 541 F.3d 233, 45 Employee Benefits Cas. (BNA) 2100 (2008)
ELI5:

Sections

Rule of Law:

Under the WARN Act, standing to sue is limited to employees, unions, and local governments as defined by Department of Labor regulations; affiliated companies are only a 'single employer' if they lack operational independence; and the 'faltering company' defense requires an employer to be actively taking specific steps to obtain capital at the specific time the 60-day notice is due.


Facts:

  • APA Transport (a trucking company) and APA Truck Leasing were distinct companies owned by the same individuals, maintaining separate employees, payrolls, and unions.
  • APA Transport operated under a loan agreement with Transamerica that was scheduled to expire on February 28, 2002.
  • Following the September 11 attacks and financial losses, APA Transport met with Transamerica on October 24, 2001, to discuss the company's future but made no formal written request for a loan extension at that time.
  • On December 20, 2001—exactly 60 days before the eventual shutdown—APA Transport had not yet taken specific steps or submitted written requests to extend their expiring loan.
  • On January 2, 2002, APA Transport sent a letter to Transamerica requesting additional financing secured by mortgages on freight terminals.
  • Transamerica formally rejected the request for additional financing on February 13, 2002.
  • On February 20, 2002, APA Transport shut down its terminals and terminated all employees without providing the full 60-day notice required by the WARN Act.

Procedural Posture:

  • Employee Plaintiffs and ERISA Funds filed suit against APA Transport and affiliated entities in the U.S. District Court for the District of New Jersey alleging WARN Act violations.
  • The District Court consolidated the cases.
  • APA Transport moved for summary judgment against the Plaintiff Funds regarding standing.
  • Plaintiff Funds and Employee Plaintiffs moved for partial summary judgment on the 'single employer' and 'faltering company' issues.
  • The District Court granted summary judgment for APA Transport, ruling the Plaintiff Funds lacked standing.
  • The District Court granted summary judgment for the affiliated defendants, ruling they were not a 'single employer' with APA Transport.
  • The District Court granted summary judgment for APA Transport on the 'faltering company' defense.
  • The Plaintiff Funds and Employee Plaintiffs appealed to the U.S. Court of Appeals for the Third Circuit.

Locked

Premium Content

Subscribe to Lexplug to view the complete brief

You're viewing a preview with Rule of Law, Facts, and Procedural Posture

Issue:

Do ERISA benefit funds have standing to sue under the WARN Act, do separate corporate entities with common ownership constitute a 'single employer,' and does an employer qualify for the 'faltering company' defense if they were not actively seeking capital on the date WARN notice was required?


Opinions:

Majority - Fuentes

No, the court held that ERISA funds lack standing, the entities were not a single employer, and the faltering company defense did not apply. Regarding standing, the court reasoned that while the statute uses the broad term 'person,' Department of Labor (DOL) regulations explicitly list authorized plaintiffs (employees, unions, local governments) and exclude others. Since the regulations are reasonable and the statute is silent, they control. regarding the 'single employer' issue, the court found that while common ownership existed, the companies operated at arm's length regarding labor and control, failing the Pearson test for integration. Finally, regarding the 'faltering company' defense, the court ruled that the exception is a narrow affirmative defense. To qualify, an employer must be 'actively seeking' capital at the precise time notice would have been required (60 days prior to closing). Since APA Transport merely had general discussions in October and did not take specific steps (like offering collateral) until January—after the 60-day window began—they failed to meet the strict statutory timing requirement.



Analysis:

This decision significantly tightens the application of the WARN Act's 'faltering company' defense, establishing a strict liability standard regarding the timing of financing efforts. Employers cannot rely on vague ongoing discussions with lenders to excuse a lack of notice; they must prove they were taking specific, active steps to secure capital on the exact date notice was due. Furthermore, the ruling clarifies that common ownership alone is insufficient to pierce the corporate veil for WARN Act liability, protecting affiliated companies that maintain operational distinctness. Finally, it limits the class of potential plaintiffs by deferring to DOL regulations that exclude benefit funds from suing directly.

G

Gunnerbot

AI-powered case assistant

Loaded: In Re APA Transport Corp. Consolidated Litigation (2008)

Try: "What was the holding?" or "Explain the dissent"