Ien v. TransCare Corp. (In re TransCare Corp.)

552 B.R. 69
CourtUnited States Bankruptcy Court, S.D. New York
DecidedMay 23, 2016
DocketCase No. 16-10407 (SMB) (Jointly Administered); Adv. Proc. No. 16-1033, Adv. Proc. No. 16-1048
StatusPublished

This text of 552 B.R. 69 (Ien v. TransCare Corp. (In re TransCare Corp.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ien v. TransCare Corp. (In re TransCare Corp.), 552 B.R. 69 (N.Y. 2016).

Opinion

MEMORANDUM DECISION GRANTING MOTION TO DISMISS SUBSEQUENTLY FILED ADVERSARY PROCEEDING AND APPOINTING INTERIM CLASS COUNSEL

STUART M. BERNSTEIN, United States Bankruptcy Judge:

Shameeka Ien, the plaintiff in class action adversary proceeding no. 16-1033 (the [72]*72“Ien Proceeding”) brought under the federal and New York Worker Adjustment and Retraining Notification Acts, 29 U.S.C. §§ 2101 et seq. (the “WARN Act”), and New York Labor Law § 860 et seq., moved to dismiss the subsequently filed class action adversary proceeding no. 16-1048 (the “Pena Proceeding”), or alternatively, consolidate the Pena Proceeding with her earlier action. Ien also moved to appoint her counsel, Outten & Golden LLP (“Outten & Golden”), as interim class counsel under Rule 23(g)(3) of the Federal Rules of Civil Procedure, made applicable to this adversary proceeding by Rule 7023 of the Federal Rules of Bankruptcy Procedure. ' For the reasons that follow, the Court grants the motion to dismiss the Pena Proceeding and appoints Outten & Golden as interim class counsel.

BACKGROUND

Prior to the commencement of the bankruptcy case, the Debtors1 operated an emergency medical transportation business primarily under contracts with municipalities, counties and other governmental agencies. (See Joint Administration Motion at ¶¶ 5-7 (ECF/Main Case Doc. # 7)).2 On February 24, 2016, the Debtors filed voluntary petitions for relief under chapter 7, and Salvatore LaMonica, Esq. was appointed as the interim chapter 7 trustee (the “Trustee”) on February 25, 2016. (Id. at ¶¶2-3.) He subsequently became permanent trustee by operation of law. See 11 U.S.C. § 702(d).

A. WARN Act Proceedings in the District Court and the Ien Complaint

Following the commencement of the Debtors’ bankruptcy cases, former employees of the Debtors commenced three separate class action suits in the United States District Court against certain non-debtor defendants under the federal and New York WARN Acts.3 With certain exceptions, the WARN Acts prohibit mass terminations of employees without advance written notice. See 29 U.S.C. § 2102(a); N.Y. Lab. Law § 860-b(l) (McKinney’s 2015). Employers who fail to give notice under the Acts may be liable for back pay and employee benefits. 29 U.S.C. § 2104(a)(1); N.Y. Lab. Law § 860-g(l).

On March 1, 2016, Ien, a former employee of the Debtors, commenced the Ien Proceeding on behalf of herself and a class [73]*73of all similarly situated former employees of the Debtors. (See Adversary Class Action Complaint, dated Mar. 1, 2016 (“Ien Complaint”) (ECF/Ien Doc. # 1).) The Ien Complaint asserted federal and New York WARN Act claims and claims for unpaid wages under New York, Pennsylvania and Maryland law. In addition to the Debtors, the Ien Complaint named Patriarch Partners, LLC (“Patriarch Partners”), its founder and CEO Lynn Tilton, and several direct or indirect subsidiaries of Patriarch Partners: ARK CLO 2001-1 Limited (“ARK CLO”), ARK Investment Partners II, L.P. (“ARK Investment”), and Patriarch Partners III, LLC (“Patriarch III,” and collectively with Patriarch Partners, Tilton, ARK CLO and ARK Investment, the “Ien Defendants”). It alleged that the Debtors and the Ien Defendants were part of a single employer group, (Ien Complaint at ¶ 25), setting forth in some detail the roadmap of ownership that connected the Debtors to the Ien Defendants as well as their common management and joint operational structure. (Id. at ¶¶ 26-32, 50.) The Ien Complaint also averred that the Tilton and Patriarch Partners exercised de facto control over the Debtors. The Debtors did not have an independent CEO, and Patriarch Partners terminated the Debtors’ CEO in January 2016 and advertised an opening for the position on its website. (Id. at ¶¶ 37-39.) It then installed Peter Wolf as the COO and the Carl Marks Advisory Group as the CFO of the Debtors. However, W. Randall Jones, Jean Luc Pelissier and John Harrington, managing directors at Patriarch Partners, and Michael Greenberg, a Patriarch Investment and Credit Professional, oversaw the Debtors’ operations and finances, including exercising control over the timing and payment of amounts to vendors and creditors. (Id. at ¶¶ 40-42.) Patriarch Partners demanded and the Debtors paid Patriarch Partners management fees and $400,000 in interest payments each month ahead of other obligations such as payroll. (Id. at ¶ 45.)

The Debtors also depended on Patriarch Partners for their day to day financial support, and Patriarch Partners did not permit the Debtors to obtain their, own funding or attain independent viability. (See id. at ¶¶ 51, 53, 54.) Patriarch. Partners infused capital so that the Debtors could make payroll and pay other expenses and reimbursed itself with interest taken from the Debtors. (Id. at ¶ 46.) Patriarch Partners and Tilton decided to place the Debtors into bankruptcy and planned to transfer the existing business into a new ambulance business called “Transcendence.” (Id. at ¶ 47.) However, the plan did not come to fruition. (Id.) Patriarch Partners and Tilton then decided not to fund the Debtors’ payroll, which had been accruing since February 14, 2016, with full knowledge that the Debtors had no other source for such funding. (Id. at ¶48.) The decision not to fund payroll caused the filing of the chapter 7 cases, the immediate shutdown of the Debtors’ operations, and the termination of approximately i,700 employees. (Id. at ¶ 49.)

The Ien Defendants filed an answer to the Ien Complaint on April 22, 2016. (Answer to Adversary Class Action Complaint, dated Apr. 22, 2016 (“Answer*’) (ECF/Ien Doc. # 18).) The Answer admitted that Tilton was “an owner and sole director of TransGare,” (id. at ¶ 25), but denied that the Ien Defendants and the Debtors comprised a single employer group. (Id. at ¶¶ 19-20, 25.) The Answer also asserted twenty eight affirmative defenses, including statutory defenses under the federal and New York WARN Acts. (Id. at 17-20.)

B. The Pena Complaint

On April 1, 2016, Joseph Pena, Michelle Escobar and Mercedes Tavares (collective[74]*74ly, the “Pena Plaintiffs”), also former employees of the Debtors, initiated the Pena Proceeding on behalf of an identical class. (Adversary Proceeding Class Action Complaint, dated Apr. 1, 2016

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Bluebook (online)
552 B.R. 69, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ien-v-transcare-corp-in-re-transcare-corp-nysb-2016.