Bascd on the above undisputed facts, the possibility of an indictment existed as of
February 22, 2002, However, if an indictment would be filed, when it would be filed, and how long
it would take for clients to react to the filing of the indictment were unknown; and there is no
evidence supporting the claim that as of February 22, 2002, the mere possibility of the indictment
became a reasonable probability. “[J]ust because additional administrative action was possible ...
did not make it probable that closure would occur when it did ... Similarily, just because [a business]
was on notice that there were problems at the plant, did not make it foreseeable that it would shut
down when it did.” Pena, 258 F. Supp, 2d at 873-74 (citations omitted, emphasis in original).

Plaintiffs rely upon Carpenters Dist. Council of New Orleans v. Dillard, 15 F.3d 1275 (5th
Cir. 1994) (Dillard). In Dillard, the Court held that the merger of two companics which caused the
mass layoff was not unforeseeable to the corporations that were promoting and working toward the
merger. Dillard, 15 F.3d at 1282. Here, in contrast, Andersen had no control over the return of the
indictment which caused the mass layoff and, in fact, had attempted to prevent the DOJ from doing
so.

In Jurcey, the court held that a foundation’s decision to discontinue support of the defendant
hospital which caused the mass layoff was beyond the hospital’s control. See Jurcev, 7 F.3d at 625.

“An important indicator of a business circumstance that is not reasonably foreseeable is that the
circumstance is caused by some sudden, dramatic, and unexpected action or condition outside the
employer's control.” 20 C.F.R. § 639.9(b)(1) (emphasis added). As in Jurcev, the ultimate decision
of the DOJ to indict Andersen as an entity, which caused the mass layoff, was completely beyond

the contro! of Andersen.



As of January 2002, Andersen employed approximately 27,000 persons at over 80 locations

throughout the United States. (Def.’s Additional Facts | 5). As of this date, Andersen provided
services to clients throughout the United States with annual revenues of about $4 to $4.5 billion.
(Id., 9).

As of February 22, 2002, Andersen representatives were continuing to work with the
representatives of the SEC and the Department of Justice (“DOJ”) in an attempt to agree upon a
global resolution of Enron Corporation-related issues. Such resolution would not have included the
return of criminal charges against Andersen. (Def.’s Additional Facts 3). As of February 22, 2002,
the Andersen Administrative Board did not believe that criminal charges against Andersen were
probable and expected that a conclusion of matters with the SEC and DOJ would not result in
substantial damage to the financial integrity of Andersen. No consideration was being given, at that
time, to the termination of large numbers of employees because there was no reason to belicve that
the workforce needed to be downsized. (Id., 4). As of February 22, 2002, the energies of the
Andersen Administrative Board were directed primarily toward resolving the legal problems of
Andersen and keeping client service teams in place with ongoing work for clicnts. (Id., 4] 6). As of
February 2002, the role of Andersen as a major provider of administrative support services to the
Andersen network was intact or “business as usual.” (Id., 47). As of February 22, 2002, Andersen
had no factual basis for expecting an indictment was probable, and, if so, when an indictment would
occur, and, ifso, which and how many clients would withdraw their business and when such clients
would withdraw their business. Accordingly, as of February 22, 2002, the extent and identification

of persons or groups that would be necessary to layoff 60 days later because of the business damage


The WARN Act requires some employers of 100 or more full-time employees to give at last

sixty days’ advance written notice of plant closings and mass layoffs to affected employees.
28 U.S.C. § 2102(a). As noted above, this Court has previously determined that the reduction in
force on April 8, 2002, at the three Illinois job sites was a mass layoff, as defined by the WARN Act.
Tt 1s undisputed that Andersen did not give employees terminated during the mass layoff sixty days’
prior notice. The single remaining issue is whether the WARN Act's sixty-day notice is either
reduced or eliminated because the mass layoff was “caused by business circumstances that were not
reasonably foreseeable as of the time that notice would have been required.” 29 U.S.C. §
2102(b)(2)(A). Here, the inquiry is whether the business circumstances that caused the mass layoff
were reasonably foreseeable on or before February 22, 2002.

Whether this provision, generally known as the “unforeseeable business circumstance
exception,” applies requires a two-step analysis: causation and foreseeability, See Jurcev v. Central
Comm. Hosp., 7 F.3d 618, 622-24 (7th Cir. 1993). The provision is narrowly construed, and the
employer relying on the provision bears the burden of persuasion. See Local Union 7107 vy.
Clinchfield Co., 124 F.3d 639, 640-41 (4th Cir. 1997) (Clinchfield); Pena v. American Meat Packing
Corp., 258 F. Supp. 2d 864, 871 (N.D. Ill. 2003) (Pena).

CAUSATION

Plaintiffs argue that the causes of the mass layoff were multiple and preceded the
announcement of the indictment, including Andersen’s destruction of documents between
October 10 and November 9, 2001, the publicity surrounding Andersen’s destruction of documents
beginning on January 10, 2002, and Andersen’s consequent loss of clients to competitors. Andersen

argues that the publication of the indictment on March 14, 2002, caused the mass layoff because it



On March 31, 2002, the Andersen Administrative Board decided that severe business
conditions resulting from the firm’s indictment announced on March 14, 2002, required a large
layoff of several thousand employees throughout the United States, effective as soon as local
Management could perform the necessary review of employee's needs at each employment site, with
a target date of April 8, 2002, for the layoffs. (Def.’s 56.1(a)(3) Statement { 13). The business
conditions that caused the layoffs included huge clicnt losses between March 15 and March 31, 2002
that accounted for more than $400 million annually in revenues; and many additional client losses
were considered to be imminent. Also, on March 28, 2002, Andersen announced that, effective
April 2, 2002, the non-United States participants in the Andersen network reduced payments to
Andersen for administrative support services by more than 60%. Furthermore, Andersen announced
that these support functions were expected to be eliminated entirely within a few months. Andersen
attributes these losses to the indictment of Andcrscn announced on March 14, 2002, arising from the
destruction of some of Andersen’s documents relating to its work for Enron, (Def.’s 56.1(a)(3)
Statement { 14.)

In the period between January |, 2002 and March 2002, client losses amounted to
approximately $5 million annualized, or about 1 to 1-1/2% of annual revenues for the office.
However, between March 15, 2002 and March 3], 2002, losses of client business serviced by or out
of the Chicago practice group at 33 West Monroe Street amounted to approximately $57 million
annualized, or 14% of total annual fees for that office. This was consistent with the losses already
being experienced throughout the rest of the United States. (Def.’s 56.1(a)(3) Statement 16).

Based on the acute amount of client losses having occurred between March 15 and March 31, 2002,

and further projected client losses, the Chicago practice group was evaluated/analyzed by



from the March 14, 2002 indictment would have been pure guesswork based on what was known
by or on February 22, 2002. (Def.’s 56.1(a)(3) Statement 4 15).

Between January1, 2002 and March 14, 2002, only four major clients, other than Enron, had
left Andcrscn with a revenue loss of less than $20 million annually. Andersen's client engagements
and retention was in normal limits in keeping with general business conditions; and as of mid-
February, almost all clients were still being scrved. (Def.’s Additional Facts 6).

On March 1, 2002, the DOJ informed Andersen that it intended to seek an indictment against
the firm. This development was a surprise to the Andersen Administrative Board. After
March 1, 2002 and through March 13, 2002, discussions occurred on an ongoing basis between
Andersen and the DOJ for the purpose of attempting to resolve issues without an indictment of
Andersen and a public trial. On March 5, 2002, counsel for Andersen sent a correspondence to the
DOJ stating, in pertinent part, “As we have explained to DOJ’s investigative team during the last ten
days ... a criminal action by DOJ against Andersen will cause the rapid collapse of the firm.”
(Plaint.’s Additional Facts J 41). On March 7, 2002, Andersen Country Managing Partner, Terry
Hatchett, sent a communication to all United States Andersen personnel stating, in part, that no final
conclusions had been reached concerning the negotiations with the DOJ. (Def.’s 56.1(a)(3)
Statement { 15).

On March 14, 2002, the United States DOJ unsealed an indictment charging Anderscn with
obstruction of justice. (Plaint.’s 56.1(a)(3) Statement | 22). According to the indictment, on or
about and between October 10, 2001 and November 9, 2001, Andersen knowingly and corruptly
persuaded and attempted to persuade others to withhold documents and alter, destroy, mutilate, and

conceal objects. (Id., § 23).



The process of determining who to immediately terminate involved reviews of the records
of employees, the jobs they were currently doing, their job skills, and trying to match those skills
with what was expected to be temporarily left of functions to be performed at each of these locations
for the remaining member firms, including the function of transition activities. (Def.’s 56.1(a)(3)
Statement 23). As to the United States support personnel, the evaluation/analysis process was done
as quickly as possible by involved management personnel at several levels. Termination lists which
were subject to many changes between March 28 to April 5, 2002, were finalized by April 5, 2002,
or on the following weekend, to be announced on April 8 or 9, 2002. (Id., 7 24).

On or about April 8, 2002, notices were sent toa number of Andersen’s cmployees, notifying
each employee that his or her employment would be terminated at a future date, after a specific
period of continued employment and “job search” time. (Plaint.’s 56.1(a)(3) Statement { 4). These
notices of termination were sent to employees at three Lllinois job sites: 33 West Monroe Street and
225 North Michigan Avenue in Chicago and Andersen’s training facility in St. Charles, Minois, (Id.,
5). Each employee who received a notice of termination on or after April 8, 2002, was given at
least two weeks of paid “job search” time. (Id., 6).

The April 2002 layoffs at the 33 West Monroe Strect site were caused by a loss of client
business of approximately $50 billion in revenue that occurred in the Chicago practice between
March 15-31, 2002. (Def.’s Additional Facts {| 1). The layoffs at the North Michigan Avenue and
St. Charles sites were caused by Andersen’s worldwide network of affiliated firms” “pulling the
plug,” on March 28, 2002, on Andersen’s being their major supplier of administrative support

services. (Id., §2).



"°— Minute Onder Farm (46/97)

United Stiles District Court, Northern vist at Illinois

Name of Assigned Judge John W. Darrah Sitting Judge if Other
ov Magistrate Judge thun Assigned Judge
CASE NUMBER 02 C 2689 DATE 3/22/2004
CASE Roquct, et. al. Vs. Arthur Andersen, LLP
TITLE

[ln the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) slute briefly the nature

of the motion being presented.

MOTION;

DOCKET ENTRY:

() Qo Filed motion of [ use listing in “Motion” box above,]

(2) Oo Brief in support of mation due

(3) im Answer brief to motion duc__—- Reply to answer brief duc

(4) Oo Ruling/Hearingon___setfor_— at

(5) i Status hearing[held/continued to] (set for/re-set for] on set fora

(6) 0 Pretrial conference(held/continued to] [set for/re-set for]on__—set for at
mM Cc ‘Trial[set for/re-set for]on at

(8) o [Bench/Jury trial] [Hearing] held/continued to at

(9) o This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OFRCP4(m) O Local Rule 41.1 OFRCP41(a)(1) OO FRCP41(a)(2).

ao) [Other docket entry] The minute order, opinion and judgment of 3/2/04 is hereby vacated. For the
reasons stated in the attached amended memorandum opinion and order, plaintiffs’ motion for summary
judgment is denicd. Defendant’s motion for summary judgment is granted. Enter Amended Memorandum

Opinion and Order.

dl @ [For further detail sce order attached to the original minute order.|

No notices required, advised in open court.

No notices required. sber of moti
umber of notices

Notices mailed by judge's staff.

HAR 2.3 2004

date ducketeal

Notified counsel by telephone.

o& | Docketing to mail notices,

' cao - Gr

duckie deputy initials

a | Muil AO 450 fom.

Copy to judge/magistrate judge. Aa

dave mailed noticw
courtroam

ME deputy’s
initials

Date/time received in
central Clerk's Office mailing deputy wt ints



reasonably foreseeable focuses on an employer’s business judgment. The employer must exercise
such commercially reasonable business judgment as would a similarly situated employer in
predicting the demands of its particular market.” 20 C.F.R. § 639.9(b)(2).

Plaintiffs argue that the indictment and resulting loss of business were reasonably
foreseeable by Andersen on February 22, 2002, because Andersen knew there was a likelihood of
an indictment in light of the destruction of documents and Andersen’s attempts to dissuade the DOJ
from bringing the indictment. Specifically, Plaintiffs refer to correspondence by Andersen’s counsel
of March 5, 2002, set out above, which refers to Andersen's representations to the DOJ
investigations “within the last 10 days” predicting an indictment of Andersen would cause
Andersen’s collapse. However, assuming this letter demonstrates an awareness by Andersen of the
loss of business in the catastrophic amount which later occurred, the letter refers to a period of time
beginning the day after February 22, 2002.

Defendant further argues that the indictment and resulting loss of business were not
reasonably foreseeable on February 22, 2002, because as of February 22, 2002, the DOJ had not yet
decided if it was going to seek an indictment and Andersen had not suffered significant business loss
and was operating “business as usual.” In other words, while the possibility of an indictment existed,
if and when such an indictment would be filed and against whom, and which clients and how many
would react to the indictment would have been guesswork by Andersen. “[T]the WARN Act deals
in probabilities, not possibilities.” Pena, 258 F. Supp. 2d at 873, citing Halkias v. General Dynamics
Corp., 137 F.3d 333, 336 (Sth Cir, 1998) (Hatkias).

Generally, even if an employer is aware that an event might occur that would cause a

business to shut down, such an event may still be deemed sudden, dramatic or unexpected. See

\


was only after this time that Andersen lost a substantial number of clients and was no longer
operating within normal business ranges,

Andersen concedes that it was common knowledge in January and February of 2002 that
some of Andersen’s cmployecs had been involved in the destruction of Enron-related documents,
that Andersen was under investigation by the DOJ, and that an indictment might be returned as a
result thereof, However, during this time period, which was prior to the publication of the
indictment, the undisputed facts show that Andersen had lost only a small portion of its business,
that Andersen was operating within the normal business ranges, and that Andersen continued to
provide support services for Anderscn’s worldwide nctwork. There is no evidence of the final
dramatic downturn prior to the announcement of the indictment. Rather, the facts are decidedly to
the contrary. As such, the evidence clearly demonstrates that it was only after the publication of the
indictment that Andersen lost a substantial portion of its client base, that Andersen was no longer
operating within normal ranges of business, and that Andersen could no longer provide support
service for Andersen’s worldwide network.

FORESERABILITY

Andersen has shown that the cause of the mass layoffs was the announcement of the
indictment on March 14, 2002. Andersen must also show that the announcement of the indictment
was “not reasonably foresecable” on February 22, 2002, the undisputed date on which notice of the
mass layoff would have otherwise been required, See 29 U.S.C. § 2101(b)(2)(A). “An important
indicator of a business circumstance that is not reasonably foreseeable is that the circumstance is
caused by some sudden, dramatic, and unexpected action or condition outside the employer's

control,” 20 C.F.R. § 639.9(b)(1). “The test for determining when business circumstances are not

10


management to determine, in light of projected continuing client work and transition needs for
departing clients, which cmployces to retain and which to immediately terminate. Similarly,
management in the 33 West Monroe Street cmployec group, which was performing administrative
support services only for the Andersen United States operations, identified its personnel as either
necded or no longer needed in light of client losses throughout the United States. (Id., 17). This
evaluation was done as quickly as possible by involved management personnel at several levels; and
termination lists, which were subject to many changes from March 31, 2002 to approximately
April 5, 2002, were finalized by April 5 , 2002, or on the following weekend, to be announced on
April 8 or 9, 2002. (Id., 4 18).

Because payments for administrative support services to Andersen had been reduced
immediately by more than 60% and were to fully phase out over a period of several months,
Andersen’s function in providing services to the participants in the Andersen network was
immediately and drastically reduced. (Def.’s 56.1(a)(3) Statement 4] 20). These immediate
reductions in functions, and payments for those functions, caused the jobs of many employees who
had been performing these functions to be immediately eliminated so Andersen was immediately
overstaffed at the St. Charles and North Michigan Avenue facilities. (Id., 21). Commencing with
the decision to cut services from Andersen for the benefit of other participants in the Andersen
network and reduce payments for such services to Andersen, local management at the St. Charles
and North Michigan Avenue facilities began the process of deciding which Anderscn employees
must be immediately terminated and which and how many should be temporarily retained for what
work was anticipated and for possible eventual transition to other participants in the Andersen

network. (Id., ] 22).



Initially, Andersen seeks to strike Plaintiffs’ Statements of Undisputed Facts that are based
on media reports, including newspapers and radio, because such Statements are based on
imadmissible hearsay.

Evidence submitted for or in opposition to a motion for summary judgment must be
admissible at trial under the Federal Rules of Evidence. See Stinnett v, Iron Works Gym/Executive
Health Spa, Inc., 301 F.3d 610, 613 (7th Cir. 2002). “[H]carsay is inadmissible in summary
judgment proceedings to the same extent that it is inadmissible in a trial.” Eisenstadt v. Centel
Corp., 113 F.3d 738, 742 (7" Cir. 1997) (Eixenstadt). Hearsay consists of an out-of-court statement
offered to prove the truth of the matter asserted. See Fed. R. Evid. 802; Eisenstadt, 113 F.3d at 742.
Media reports, including newspaper articles, that are being offered for the truth of the matter asserted
are inadmissible hearsay and cannot be relied upon for summary judgment proceedings. See
Chicago Firefighters Local 2 v. City of Chicago, 249 F.3d 649, 654 (7th Cir. 2001); Eisenstadt, 113
F.3d at 742. Plaintiffs concede that the media reports would generally be considered hearsay but
contend that they are admissible because they are not being offered for the truth of the matters
asserted but rather to demonstrate constructive knowledge to Andersen of the grounds fora criminal
indictment in the early part of 2002. Accordingly, the media reports will be considered only for that
limited purpose, i.¢., evidence of what was being reported in the media concerning Andersen but not
for the truth of the contents of the media reports,

Beginning in January 2002, media outlets were reporting that some of Andersen’s employees
were concerned about layoffs. (Id., 4] 19). It was also reported that some of Andersen’s clients were

contemplating switching or had decided to switch to other auditors. (Id., 4] 20).



Finally, a determination of the foreseeability of the causal business circumstances must
consider the reasonableness of Andersen’s business judgment in context with the relevant facts.
“The test for determining when business circumstances are not reasonably foreseeable focuses on
an employer’s business judgment. The cmployer must exercise such commercially reasonable
business judgment as woulda similarly situated employer in predicting the demands of its particular
market.” 20 C.F.R. § 639.9(b)(2). To hold that Andersen should have given Section 2102(a) notice
by February 22, 2002, weeks before the full extent of the consequences of the indictment became
known at the end of March 2002, would not be consistent with the exercise of commercially
reasonable business judgment.

Based on the above, the undisputed facts establish that the April 8, 2002 mass layoffs were
not reasonably foreseeable by Andersen. Accordingly, Andersen is not liable under the WARN Act.
Plaintiffs’ Motion for Summary Judgment is denied. Defendant's Motion for Summary Judgment

is granted.

—"

f

Dated: joe 22 Dbb4-

: ot W. DARRAIT

United States District Judge

14



speciality consulting in various locations in the United States,’ (Plaint.’s 56. 1(a)(3) Statement 1).
Nancy Roquet was an employee of Andersen from January 7, 2002 to Apri 24, 2002, at which time
her employment was terminated. (Id., § 2). Coretta Robinson was an employee of Andersen from
October 6, 1997 to May 15, 2002, at which time her employment was terminated, (Id., 43).

In June 2001, Andersen entered into an agreement with the United States Securities
Exchange, consenting to the entry of a permanent injunction enjoining it from violating Section
10(b) of the Securities Exchange Act of 1934 and Rule 10B05 thereunder. (Plaint.’s 56.1(a)(3)
Statement § 10). The agreement also required Andersen to pay a $7 million fine. (Id., 4 11).
Andersen also agreed to allow the Securities & Exchange Commission (“SEC”) to enter an order
pursuant to Rule 102(e), censuring Andersen for unprofessional conduct. (id., 112). The basis for
the consent decree was the SEC’s finding that Andersen had knowingly or recklessly issued false and
misleading, unqualified audit reports on the annual financial statement between 1993 and 1996 for
Waste Management, Inc. (Id., § 13).

In November 2001, there were discussions in the media that Andersen might be and was the
subject of an SEC investigation in relation to its client Enron Corporation. (Plaint.’s 56.1(a)(3)
Statement ff] 14-15). In December 2001, the media was reporting that experts were speculating that
Andersen might not survive the SEC’s investigation. (Id., 16). In January 2002, the media
reported that Andersen had announced that some of its employees had disposed of or deleted a
number of documents related to Enron. (Id., 17).

"The underlying facts are fully set forth in this Court’s previous dispositions addressing
the Defendant’s Motion to Dismiss, Defendant’s Motion for Summary Judgment, and Plaintiffs’
Cross-Motion for Partial Summary Judgment on the Issue of Existence of Mass Layoff.

Accordingly, they need not be repeated here; and only those facts relevant to the issue of the
existence of the unforeseen circumstances exception are included.

2


eine
if Gy KE i
UNITED STATES DISTRICT COURT MAR 2 3 2004
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
NANCY J. ROQUET and CORETTA ROBINSON, +)
)
Plaintiffs, ) No. 02 C 2689
)
v. ) Judge John W. Darrah
)
ARTHUR ANDERSEN LLP, )
)
Defendant. )

AMENDED MEMORANDUM OPINION AND ORDER

Plaintiffs, Nancy J. Roquet and Coretta Robinson, brought a class action suit against
Defendant, Arthur Andersen LLP, alleging Defendant violated the Worker Adjustment and
Retraining Notification Act (“WARN Act”), 29 U.S.C. § 2101-2109. On May 22, 2003, Plaintiffs’
Cross-Motion for Partial Summary Judgment on the Issue of Existence of Mass Layoff was granted.
On August 12, 2003, Plaintiffs’ Renewed Motion for Class Certification was granted. Presently
before the Court are the parties’ cross-motions for summary judgment on the unforeseen
circumstances exception to liability under the WARN Act.

The Warn Act requires sixty days’ notice before a mass layoff, 28 U.S.C. § 2102(a); in this
case, by February 22, 2203 (Def.’s 56.1(a)(3) Statement § 15). The unforesecn circumstances
exception reduces or eliminates the Warn Act’s sixty-day notice if the mass layoff is “caused by
business circumstances that were not reasonably foreseeable as of the time that notice would have
been required.” 29 U.S.C. § 2102(b)(2)(A).

Andersen was engaged in the business of accounting, auditing and tax services, and

brown cd
MAR 2 3 2004


Pena, 258 F. Supp. 2d at 873. In Jurcev, the Court found that even though the employer “had long
been aware” of the cvents that led to the cause of the closure, the cause was still sudden, dramatic,
and unexpected. See Jurcev, 7 F.3d at 626; see also Clinchfield, 124 F.3d at 641-42 (despite ongoing
contractual problems with cmployer’s primary purchaser of coal, employer could not foresee sixty
days in advance that coal purchaser would offer a purchase price that was economically impossible
for the employer to accept); Hotel Employees & Restaurant Employees Int'l Union Local 54 v.
Elsinore Shore Assoc., 173 F.3d 175, 186 (3rd Cir. 1999) (Elsinore) (despite ongoing disputes with
the Casino Control Commission and the possibility that the Commission could close the employer,
Commission’s closure of the employer was not reasonably foreseeable); Halkias, 137 F.3d at 337;
Loehrer v, McPonnell Douglas Corp., 98 F.3d 1056, 1062-63 (8" Cir. 1996) (Loehrer) (employer's
awareness of possibility that contract would be cancelled did not make subsequent cancellation of
contract a foreseeable probability).

In the instant case, prior to February 22, 2002, Andersen, as well as the general public,
including Andersen's clients, was aware of the 2001 Waste Managcment consent decree, that
Andersen was alleged to have destroyed documents in relation to its client Enron, that the DOJ was
investigating Andersen, that the possibility of an indictment existed, and that an indictment would
likely have major negative effects on Andersen’s viability as a company. However, at this time,
Andersen was operating within the normal ranges of its business.

Although Andersen’s counsel met with the DOJ on February 22, 2002, there were no
pertinent facts that Andersen learned as to whether the DOJ was going to seek or file an indictment
or when, if ever, an indictment might be returned. It was only on March 1, 2002, that the DOJ

informed Andersen of its intent to indict Andersen as a company.

12