Halkias v. General Dynamics

• Court: Court of Appeals for the Fifth Circuit
• Decided: April 1, 1998
• Docket: 97-10334
• Status: Published

Opinion

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

NO. 97-10334

JOHN HALKIAS, ET AL.,

Plaintiffs

DAWN DEE BRYANT; BARRY JACKSON,

Plaintiffs-Appellants

VERSUS

GENERAL DYNAMICS CORPORATION,

Defendant-Appellee

JAMES ANTHONY CUREINGTON,

Plaintiff

Defendant

Appeal from the United States District Court For the Northern District of Texas

April 1, 1998

Before JOLLY, DUHE’ and PARKER, Circuit Judges.

ROBERT M. PARKER, Circuit Judge:

I.

FACTS & PROCEDURAL HISTORY

On January 13, 1988, General Dynamics and McDonnell Douglas

Corporation were awarded a contract by the United States Navy to

1 jointly develop a new generation of carrier-based, medium attack

aircraft to be known as the A-12 “Avenger”. The contract contained

several provisions reflecting a concern for the abusive cost

overruns of the past. Costs between the target price of $4.4

billion and the ceiling price of $4.8 billion would be shared by

the government and the contractors (60% by the government and 40%

by the contractors). All costs over the ceiling price would be

absorbed by the contractors.

By May, 1990, the A-12 contractors had incurred substantial

unforeseen production difficulties and by its own estimate, General

Dynamics concluded that the cost of completion would be $700

million more than planned. On June 13, 1990, the contractors

notified the Navy that the costs of completion would overrun the

contract ceiling by an amount that the contractors could not

absorb. Throughout the remainder of 1990 production continued

amidst various attempts to restructure the contract, which did

result in a new delivery schedule. However, the Navy would not

agree to change the contract ceiling price. Meanwhile, the threat

of contract cancellation loomed overhead.

On December 14, 1990, the Secretary of Defense directed the

Navy to show cause by January 4, 1991, why the A-12 contract should

not be canceled. Later that same day, General Dynamics received

informal notice of the Secretary’s show cause order. On December

17, 1990, the Navy gave the contractors notice that their

performance on the A-12 contract was “unsatisfactory” and that

unless specified conditions were met by January 2, 1991, the

2 contract might be terminated. On December 20, 1990, General

Dynamics issued a special bulletin to all of its employees

notifying them that the A-12 contract was in jeopardy and promising

to provide notices the next day to each individual employee who

might lose his or her job. As promised, on December 21, 1990,

General Dynamic sent out individual notices to all potentially

affected employees, providing official but conditional notification

that they might be terminated in the event that the A-12 contract

were canceled. On January 7, 1991, Secretary Cheney announced his

decision to terminate the A-12 contract effective immediately. As

a result General Dynamics immediately began laying off affected

employees. Approximately 2000 non-union salaried employees were

laid off from General Dynamics’ Fort Worth, Texas, and Tulsa,

Oklahoma, facilities.

On November 24, 1992, Plaintiff John Halkias filed suit under

the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§

2101-2109 (1988)(the “WARN” act), claiming that General Dynamics

had failed to comply with the Act’s sixty-day notice requirement.

The district court certified a class of non-union salaried

employees and designated John Halkias as class representative. On

June 24, 1993, the district court granted General Dynamics’ Fed. R.

Civ. P. 12(c) motion to dismiss holding that the six-month statute

of limitations of the National Labor Relations Act, 29 U.S.C. §

160(b), was applicable to actions under the WARN Act, and Plaintiff

appealed to this Court. On July 11, 1995, this Court reversed the

district court and remanded the case following North Star Steel v.

3 Thomas, ___ U.S. ___, 115 S. Ct. 1927, 132 L. Ed. 2d 27 (1995),

which held that state law rather than the NLRA provided the

relevant statute of limitations for actions under the WARN Act.

Halkias v. General Dynamics Corp., 56 F.3d 27 (5th Cir. 1995).1

On October 3, 1995, the district court determined that the

Texas four-year statute of limitations for actions for debt, Tex.

Civ. Prac. & Rem. Code Ann. § 16.004(a)(3)(Vernon 1986), was the

most analogous to actions under the WARN Act and denied General

Dynamics’ Rule 12(c) motion. Since this holding was at odds with

a holding by the district court for the western district of Texas,

the district court granted General Dynamics the right to take an

interlocutory appeal on October 6, 1995, which invitation General

Dynamics accepted. Over one year later, on October 22, 1996,

following the decision in Staudt v. Glastron, Inc., 92 F.3d 312

(5th Cir. 1996), this Court affirmed the district court’s ruling

concerning the statute of limitations and remanded the case.

Halkias v. General Dynamics Corp., 101 F.3d 698 (5th Cir.

1996)(table).

On December 12, 1996, the district court issued a scheduling

order establishing July 31, 1997, as the deadline for completion of

discovery. On January 16, 1997, General Dynamics filed its motion

for summary judgment, arguing that sixty-day advance written notice

was not required in this case, because the layoffs were “caused by

business circumstances that were not reasonably foreseeable as of

1 During the pendency of this appeal, Plaintiff John Halkias passed away, and on remand his widow, Billie Halkias, was substituted as Plaintiff and Appellant Dawn Dee Bryant was substituted as class representative.

4 the time that notice would have been required.” 29 U.S.C. §

2102(b)(2)(A). In response Appellants sought to have General

Dynamics’ motion for summary judgment continued so that more

discovery might be conducted in accordance with Fed. R. Civ. P.

56(f) . That motion was denied. The motion for summary judgment

was fully briefed, and on March 5, 1997, the district court granted

it. Plaintiffs-Appellants have taken this appeal raising the

following issues:

1. Did the district court err by refusing to continue General

Dynamics’ motion for summary judgment so that additional discovery

might be conducted in accordance with Fed. R. Civ. P. 56(f)?

2. Did the district court err by granting General Dynamics’

motion for summary judgment?

II.

LAW & ANALYSIS

A.

The WARN Act

The WARN Act provides that:

“[a]n employer shall not order a plant closing or mass layoff until the end of a 60-day period after the employer serves written notice of such an order ... to each representative of the affected employees as of the time of the notice, or if there is no such representative at that time, to each affected employee....”

29 U.S.C. § 2102 (a)(1). However, the Act further provides that;

“[a]n employer may order a plant closing or mass layoff before the conclusion of the 60-day period if the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable as of the time that notice would have been required ... An employer relying on this subsection shall give as much notice as is practicable and at that time shall give a brief statement

5 of the basis for reducing the notification period.”

29 U.S.C. § 2102 (b)(2)(A) & (b)(3)(emphasis added). This case

centers around the proof in support of and against the proposition

that General Dynamics should have reasonably foreseen the impending

contract cancellation and therefore cannot avail itself of the

exception in § 2102(b)(2)(A). This Court reviews a district court

decision to grant summary judgment de novo, applying the same

standard as the district court. Wynn v. Washington National

Insurance Company, 122 F.3d 266, 268 (5th Cir. 1997), citing

Bodenheimer v. PPG Indus., Inc., 5 F.3d 955, 956 (5th Cir. 1993).

General Dynamics argues that the cancellation of the A-12

contract and the resultant layoffs did not become reasonably

foreseeable until December 14, 1990, at the earliest if at all,

when General Dynamics learned through informal channels that

Secretary Cheney had issued an order to the Navy requiring it to

show cause why the A-12 program should not be terminated. General

Dynamics argues that from December 14 until official notice was

given to all affected employees on December 21, 1990, it acted with

due diligence in an attempt to identify those employees who would

be affected and to prepare the appropriate notices in compliance

with § 2102 (b)(3). General Dynamics argues that it reasonably

believed that the program would not be terminated, in spite of

serious cost overruns and a projected production delay of 22

months, because both the Navy and Secretary Cheney still expressed

very high support for the program.

Appellant argues that General Dynamics knew or should have

6 known that the A-12 contract would be canceled. As evidence that

the cancellation was reasonably foreseeable, Appellant offered the

testimony of its expert, Dr. Lawrence Korb, in another WARN Act

case arising out of these layoffs, wherein Dr. Korb testified that

General Dynamics knew as early as October, 1990, that if it did not

pass the Defense Acquisition Board’s review in December, 1990, the

project would not go forward.2 Appellant also offered various

minutes from General Dynamics’ board of directors meetings wherein

the A-12 project and its possible termination were discussed.

Appellant argued that those minutes showed that General Dynamics’

CEO Stanley Pace was aware of the cancellation of a similar

Lockheed aircraft project because of cost overruns and production

delays.

Before we may review the evidence, some clarification of the

precise question before this Court is in order. We must determine

whether the evidence before the district court supported a finding,

as a matter of law, that 60-days before the layoffs in this case

General Dynamics could not reasonably have foreseen the

cancellation of the A-12 contract which precipitated these layoffs.

Yet, the question of reasonable foreseeability begs another

question: by adopting “reasonable foreseeability” as a standard,

does the WARN Act envision the probability of an unforeseen

business circumstance (i.e. the contract cancellation) or instead

the mere possibility of such a circumstance? We can only conclude

2 The cited testimony of Dr. Korb was in International Association of Machinists and Aerospace Workers, AFL-CIO v. General Dynamics Corp., 821 F. Supp. 1306 (E.D. Missouri 1993).

7 that it is the probability of occurrence that makes a business

circumstance “reasonably foreseeable” and thereby forecloses use of

the § 2102(b)(2)(A) exception to the notice requirement. A lesser

standard would be impracticable. Since cancellation is a

possibility every time there is a cost overrun, defense contractors

like General Dynamics would be put to the needless task of

notifying employees of possible contract cancellation and

concomitant lay-offs every time there is a cost overrun, and

experience teaches us that there are invariably cost overruns,

which most often do not lead to contract cancellation.

B.

The Evidence

Having reviewed the summary judgment evidence closely, we must

conclude that the district court properly granted summary judgment.

There is no doubt that the evidence showed General Dynamics’ board

of directors knew of the possibility of contract cancellation and

mass lay-offs as early as June, 1990. In particular, as early as

June 6, 1990, minutes of the General Dynamics board of directors

meeting indicate that the board was aware of the likelihood of a

substantial cost overrun and production delay, that the Navy and

Department of Defense were aware of these problems and that General

Dynamics had begun negotiations with the Navy and Department of

Defense to restructure the contract.

At the August 1, 1990, meeting of the board of directors, the

Chairman of the board, Mr. Stanley Pace discussed with the board

members the recent experience of the Lockheed corporation in its

8 development of an aircraft for the Navy. It was reported by Mr.

Pace that Lockheed had received insufficient assistance from the

Navy when it experienced the same sort of problems that General

Dynamics was experiencing with the A-12 program. Mr. Pace reported

that the Lockheed contract was eventually canceled and that

Lockheed’s experience might be indicative of what General Dynamics

could expect. On October 16, 1990, Mr. Pace again addressed the

board of directors regarding the A-12 contract. He indicated that

the program was due to be reviewed by the Defense Acquisition Board

(“DAB”) on December 7, 1990, and that the DAB would be considering

all aspects of the program, including termination of the contract.

Finally, on November 7, 1990, Mr. Pace informed the board that,

although recent congressional enactments did not cancel the

remaining options under the A-12 contract, those bills did allow

Secretary Cheney to take action to address the huge cost overruns

and production delays in the program.

Therefore, by November 7, 1990, it is clear that three

possibilities existed. Either the contract would be restructured,

the contract would be canceled, or General Dynamics would simply

default rather than absorb the cost overruns. The minutes of

various board meetings would support a jury’s conclusion that the

board was aware of the possibility that the contract would be

canceled. Nevertheless, the evidence in mitigation of the

potential for contract cancellation, precludes that possibility

from becoming a probability. As noted previously, the Navy and

Secretary Cheney had expressed their continuing support for the A-

9 12 program up to the last minute. Given that unwavering support,

it seemed less than probable that the contract would be canceled.

Therefore, even if the evidence presented a good faith dispute as

to the possibility of contract cancellation, in the face of the

Navy’s and Secretary Cheney’s continuing support, no rational jury

could have concluded that contract cancellation was a foreseeable

probability until the last minute, i.e., December 14, 1990.

III.

CONCLUSION

Having concluded that summary judgment was appropriate, we

affirm. We do not reach the question of whether the district court

erred by refusing to allow further discovery before ruling on

General Dynamics’ motion for summary judgment. Appellants have not

demonstrated to this Court that further discovery would lead to any

evidence, which might raise the A-12 contract cancellation from a

possibility to a probability any sooner than December 14, 1990.

AFFIRMED.