United States Court of Appeals FOR THE EIGHTH CIRCUIT

_____________ No. 97-1097NE

_____________ Linda K. Burnsides, suing on behalf of * herself individually and on behalf of * a class of similarly-situated persons; * Mary M. Sorg, suing on behalf of * herself individually and on behalf of * a class of similarly-situated persons; * Gary Vyborney, suing on behalf of * himself individually and on behalf of * a class of similarly-situated persons, *
* Appellants, *

* Appeal from the United States
v. * District Court for the District of
* Nebraska. MJ Optical, Inc., Nebraska Corporation; * Optical Illusion, Inc., Nebraska * Corporation; Commercial Optical * Company, Inc., Nebraska Corporation; * Optical Services, Inc., Nebraska * Corporation; C.O.C., Inc., Nebraska * Corporation; Optical Services, Limited * Partnership; Sheldon I. Rips, an * Individual, *
* Appellees. *

_____________ Submitted: September 8, 1997

Filed: November 10, 1997

_____________-2-

Before FAGG, LAY, and WOLLMAN, Circuit Judges.

_____________ FAGG, Circuit Judge.
After Commercial Optical Company, Inc. sold its equipment to MJ Optical, Inc., terminatedits employees, and ceased operations, the former employees brought thi s action against MJ Optical, Commercial, Commercial’s affiliated companies, an d Sheldo n I. Rips, Commercial’s former president, director, and owner, asserting the y failed to give the employees notice of employment loss in violation of the Worke r Adjustment and Retraining Notification Act (WARN), 29 U.S.C. §§ 2101-21 09 (1994). Following a trial, the district court granted judgment in favor of MJ Optical , Commercial, and the other defendants. The former employees appeal. We affirm in part, reverse in part, and remand for further proceedings.

Comm ercial operated an optical lens grinding and finishing facility in Omaha , N ebraska. After suffering significant financial losses in 1991 and 1992, Commercial sough t financing and potential buyers in January and February 1993 without success. In March 1993, Rips began discussing a business consolidation with MJ Optical , anotherOmaha optical business. The parties signed a letter of intent on March 24 , te ntatively agreeing that MJ Optical would purchase most of Commercial’s assets , including certain inventory, equipment, and customer accounts, and would take ove r operations at Commercial’s plant for up to forty-five days, with th e plant’s later use left open for further negotiation. Rips believed MJ Optical would continue to emplo y Com mercial’s employees. Potential consideration for the transaction exceeded $ 1 millio n. Negotiations continued until Sunday, May 2, when Rips and Commercial’ s at torney met with MJ Optical’s president, Michael Hagge, and his attorney a t Commer cial’s plant. When Rips demanded a certain price, Michael Hagge indicated he was no longer intere sted and left. During the meeting, Martin Hagge, Hagge’s son and second-in-command at MJ Optical, had inspected Com mercial’s facility. After the-3-

meeting, he told his father the plant could not be operated profitably. Rips an d C o mmercial’s attorney discussed the company’s dire financial situation, and decided to contact MJ Optical that evening and try to s trike some kind of deal. Michael Hagge offered to buy Commercial’s equipment and remaining inventory.

On Monday, May 3, Michael Hagge sent Martin Hagge to observe Commercial’ s plantin operation. Rips announced to employees that Commercial was sellin g substantially all of its assets to MJ Optical, but the employees would continue to work in Comm ercial’s facility for MJ Optical. Rips introduced Martin Hagge as the ne w production manager, and Martin Hagge confirmed to employees who inquired that MJ Optical wo uld have to have employees. Later that day, however, Michael Hagg e decided MJ Optical would not take over operations at Commercial’s plant, an d informed his attorney to draw up papers to that effect. Between May 3 and May 5 , attor neys for MJ Optical and Commercial drafted and revised an asset purchas e agreement. On May 5, Rips signe d the agreement in which MJ Optical offered to buy Commercia l’s equipment, tools, and supplies for $100,000, inventory for cost, an d intangibles for $100. The agreement specifically excluded accounts receivable fro m the sale and provided MJ Optical would not assume Commercial’s liabilities. Th e agreement set the closing on May 7, and provided that from clos ing up to 45 days later, MJ O ptical would be allowed access to Commercial’s building to remove th e purchased assets, but prohibited from manufacturing there. Rather than transferrin g employees from Commercial to MJ Optical, t he parties agreed that Commercial would encourage its employees to apply for employment with MJ Optical.
At about 3:00 p.m. on May 7, Commercial informed its employees abo ut the sale of assets and closing of th e facility that day. Commercial’s attorney, comptroller, and hum anresource manager all addressed the employees. Michael Hagge tol d Commercial ’s employees that MJ Optical wanted to hire as many people as possible, andthe employees should apply. Later that afternoon, MJ Optical began removin g equipment from Commercial’s building. Some former Commercial employees later-4-

applied with MJ Optical. MJ Optical hired s ome of the applicants and rejected others.
WARN generally require s that before any plant closing, an employer must give sixty days’ notice in writing to each affected employee. See 29 U.S.C. § 2102 (1994). A “ plant closing” is a shutdown of a single site of employment that causes a n “employment

loss” for fifty or more employees during a thirty-day period. See id. § 2101( a)(2). An “employment loss” includes employment termination, that is, th e pe rmanent

cessation of the employment relationship. See id. § 2101(a)(6). I n exclusions from the definition of employment loss, WARN provides:

In the cas e of a sale of part or all of an employer’s business, the selle r shall be responsible for providing notice for any plant closing . . . i n ac cordance with section 2102 of this title, up to and including th e effective date of the sale. After the eff ective date of the sale of part or all of an employer’s business, the purchaser shall be responsible fo r providing notice for any plant closing . . . .
Id. § 2101(b). The subsection “allocates no tice responsibility to the party who actually makes th e decision that creates an ‘employment loss,’ but ‘creates no othe r
employment

rights.’” International Alliance of Theatrical & Stage Employees v

. Compa ctVideo Servs., Inc. , 50 F.3d 1464, 1468 (9th Cir.) (quoting 20 C.F.R. § 639.6), cert. denied , 116 S. Ct. 514 (1995).
The employees argue MJ Optical was responsible for giving them notice under § 2101(b). We doubt that § 2101(b) applies to the mere sale of assets in this case

. Congress enacted the subsection to clarify that when employees are transferred from seller to buyer as part of a sale, employees have not suffered an employment loss. See Headrick v. Rockwell Int’l Corp. , 24 F.3 d 1272, 1280-81 (10th Cir. 1994) (White, J.). Courts have held that § 2101(b) does not apply to asset sales when there is no transfer of any em ployees into the purchaser’s employment along with the purchased assets

. See Oil, Chem. & Atomic Workers Int’l Union v . CIT Group/Capital Equip. Fin., Inc. ,-5-

898 F. Supp. 451, 457 (S.D. Tex. 1995). We need not resolve the issue here , however. Even if this case involves the “sale of part or all of an employer’s business” withinthe meaning of § 2101(b), responsibility for giving notice never passed to MJ Opt ical because the plant closing occurred on the sale’s effective date. Through th e end of tha t day, the employees were still employed by Commercial. See Hote l Employees Restaurant Employees Int’l Union Loca l 54 v. Elsinore Shore Assocs. , 724 F. Supp. 33 3, 335 (D.N.J. 1989) (“whoever is the employer at the time of the plan t closing is responsible” fo r giving notice). Commercial brought about the employment loss by deciding to accept MJ Optical’s offer to purc hase the manufacturing equipment without transferring employees. Commercial terminated the employee s, and MJ Optical had no r eason to give the employees notice. MJ Optical did not automatically hir e Commercial’s employees, buy Commer cial’s facility, conduct any operations there, or take on a ny of Commercial’s receivables or liabilities. Relying on 29 C.F.R. § 639.4(c), which states responsibility for giving notice remains with the seller “up to and including the effective date (time) of the sale,” the employees argue the sale becam e effe ctive at closing on the morning of May 7, and responsibility for giving notic e transferredto MJ Optical then, before Commercial fired the employees or closed the plant. We reject the employees’ interpretation of § 2101(b) because it is contrary to th e plain terms of the statute. Under § 2101(b), the seller is the party responsible for gi ving notice during the effective date of the sale, and the asset purchase agreemen t declaredit was “effective [the] 7th day of May.” In sum, we conclude Commercial, not MJ Optical, was responsible for giving the employees notice.

Th e district court concluded two of WARN’s affirmative defenses excuse d Comm ercial from the sixty-day notice requirement. Under 29 U.S.C. § 2102(b), th e sixty-day notificati on period may be shortened if the employer shows the existence of certain circumstances. First, an employer need not give sixty days’ notic e if, at the time notice would normally be required, the employer was actively seeking capital o r business to avoid or postpone the plant closing and the employer reasonably believed the giving of notice would have prevented the employer from obtaining the needed-6-

capi tal or business. See id. § 2102(b)(1). Second, an employer may order a plan t closi ng before the sixty-day notice period concludes if the closing “is caused b y busi ness circumstances that were not reasonably foreseeable [when the sixty-day ] notice wo uld have been required.” Id. § 2101(b)(2)(A). In either situation, th e emp loyer “shall give as much notice as is practicable and . . . a brief statement of the basis for reducing the n otification period.” Id. § 2102(b)(3); see Local Union 7107 v. Clinchfield Coal Co. , No. 96 -1731, 1997 WL 562195, at *1 (4th Cir. Sept. 11, 1997).

The employees argue t

he defenses in § 2102(b) do not apply to the facts of this

case. We agree that the actively seeking capital or business defense in § 2102(b)(1) is inapplicable. The district court found Commercial was seeking financing between March 7 and May 7, and any notice of a plant closing before May 7 would hav e doome dCommercial’s efforts. But the undisputed evidence, including Rips’s ow n testimony, shows Commercial was not seeking capital or bu siness after February 1993. The district court also concluded MJ Optical’s May 5 decision not to continu e Comme rcial’s operations as the parties had previously planned was an unforeseeable business circumstance under § 2102(b)(2). An unforeseeable business circumstanc e is “a sudden, dramatic, and unexpected event o utside the employer’s control.” Loehrer

v. McDonnell-Douglas Corp. , 98 F.3d 1056, 1061 (8th Cir. 1996); see 20 C.F.R. § 639. 9(b)(1). The test for reasonable foreseeability focuses on an employer’ s commercially reas onable business judgment. See Loehrer , 98 F.3d at 1060, 1061; 20 C.F. R. §§ 639.9(b)(1)-(2); Teamsters Nat’l Freight Indus. Negotiating Comm. v

. Churchill Truck Lines, Inc. , 935 F. Supp. 1021, 1026 (W.D. Mo. 1996), aff’d , 121 F.3d 447 (8th Cir. 1 997) (per curiam). Commercial did not have to show it was no t economically feasible to wait sixty days before closing the plant. See Loehrer , 98 F.3d at 1061-62 n.7.

We conc lude the closing of Commercial’s facility was caused by busines s circumstances that were not reasonably foreseeable on March 7, 1993. At that time,-7-

Commercial was negotiating a sale of its business that included a transfer of employees to MJ Optical. Had the sale occurred as contemplated, it would not have caused a plant closing triggering WARN’s notice requirement. Commercial exercise d

comm ercially reasonable business judgment in believing the sale would go throug h according to the March letter of i ntent. As it turned out, Michael Hagge decided at the last minute not to continue Commercial’s operation and instead offered to purchas e only cert ain assets. After MJ Optical’s eleventh-hour change of heart, Commercia l reasonably decided to cut its loss es by selling its equipment to MJ Optical and closing the plant.
The employees argue the unforese eable business circumstances defense should not apply when parties negotiate a sale including a transfer of employees for month s and then change their minds at the last minute. The employees argue that application of the defense in these circumsta nces encourages collusion between a seller and buyer to avoid W ARN liability. There is no evidence of collusion to avoid WARN in thi s
case. Indeed, the employees’ baseless collusion theory ignores the obvious : Commercial h ad a strong motive to bargain for transfer of its employees to avoi d triggering WARN’s notice requirement. Despite this incentive, Com mercial found itself

co mpelled to accept terms dictated by the only interested buyer willing to offer some paymentfor assets of the unprofitable business. Also, the March 24 letter of inten t
makes clear the parties had only tentatively agreed to consummate a sale with a definitive agreement yet to be negotiated.

Nevert heless, when Commercial agreed on May 5 to sell its equipment to M J Optical without transferring the employees, Commer cial had an obligation to notify the employees that they would lose their jobs in two days. See Teamsters Nat’l Freight , 935 F. Supp. at 1026 (unforeseeable business circumstances defense still require s employer to give as much notice of closing as practicable once causal event becomes known). C ommercial should have notified the employees then and explained wh y sixty days’ notice was not given. Although the district court found Rips knew or-8-

sho uld have known when he signed the asset purchase agreement on May 5 that Commercial ’s employees would not be transferred, the district court did not hol d Comm ercial responsible for failing to give notice on that date because of the court’ s incorre ct view that notice before May 7 would have doomed Commercial’s efforts to obtain financing. Th e district court also did not address the employees’ assertion that Comme rcial cannot avoid liability for failing to give sixty days’ notice becaus e Commercial failed to give the notice or brief statement required by § 2102. Havin g rejected Commercia

l’s financing defense, we remand for the district court to consider the employees’ assertion and to calculate damages for Co mmercial’s WARN violation. See29 U.S.C. § 2104(a)(1) (employees are entitled to back pay and benefits for each day that an employer violates § 2102).

We affirm the district court’s decision that Commercial rather than MJ Optical

was responsible for giving notice under WARN, reverse the district court’s decisio n that Commercial did not violate WARN, and remand for furt her proceedings consistent with this opinion.
A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.