Court Opinion

ID: 4019427
Source: CourtListenerOpinion
Date Created: 2016-07-27 20:00:30.146342+00
Date Added: 2024-06-11T07:44:58.188338
License: Public Domain

NOT PRECEDENTIAL

          UNITED STATES COURT OF APPEALS
               FOR THE THIRD CIRCUIT
                  ________________

                        No. 14-4331
                     ________________

           IN RE: JEVIC HOLDING CORP., et al.,
                                  Debtors

       CASIMIR CZYZEWSKI; MELVIN L. MYERS;
      JEFFREY OEHLERS; ARTHUR E. PERIGARD;
     DANIEL C. RICHARDS, on behalf of themselves and
               all others similarly situated,
                                          Appellants

                              v.

 JEVIC TRANSPORTATION, INC.; JEVIC HOLDING CORP;
CREEK ROAD PROPERTIES, LLC; SUN CAPITAL PARTNERS,
              INC.; JOHN DOES 1-10

                     ________________

              On Appeal from the District Court
                  for the District of Delaware
                (D.C. Civil No. 1-13-cv-01127)
          District Judge: Honorable Sue L. Robinson
                      ________________

       Submitted Pursuant to Third Circuit LAR 34.1(a)
                      October 27, 2015

Before: GREENAWAY, JR., SCIRICA, and ROTH, Circuit Judges

                    (Filed: July 27, 2016)
                                     ________________

                                         OPINION*
                                     ________________

SCIRICA, Circuit Judge

       In this adversary proceeding, part of a broader bankruptcy case, plaintiffs Casimir

Czyzewski et al. appeal an order granting summary judgment to Sun Capital Partners,

Inc. (SCPI) on plaintiffs’ claim that SCPI and debtors Jevic Transportation, Inc.

(“Jevic”), Jevic Holding Corp. (“Jevic Holding”), and Creek Road Properties, LLC were

a “single employer” under the Worker Adjustment and Retraining Notification Act, 29

U.S.C. § 2101 et seq. (“WARN Act”). The WARN Act provides “[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 affected employee. 29 U.S.C. § 2102(a)(1)

(2012). “[I]ndependent contractors and subsidiaries which are wholly or partially owned

by a parent company are treated as . . . a part of the parent or contracting company”—that

is, as a single employer—“depending upon the degree of their independence from the

parent.” 20 C.F.R. § 639.3(a)(2) (2015).

       For the reasons given in the well-reasoned opinions of the District Court and

Bankruptcy Court, we will affirm.1

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
1
 The Bankruptcy Court had jurisdiction under 28 U.S.C. §§ 157(a), 157(b)(1), and
1334(b). It noted the adversary proceeding was a “core” proceeding under 28 U.S.C. §§
                                             2
                                             I.

       The debtors in the broader bankruptcy case are Jevic, Jevic Holding, and Creek

Road Properties, LLC. All the debtors’ operations occurred through Jevic. Jevic, a now-

bankrupt trucking company, is a wholly-owned subsidiary of Jevic Holding, which is

itself a wholly-owned subsidiary of Sun Transportation, LLC. SCPI owns 100 percent of

the equity in Sun Transportation, LLC. SCPI created Sun Transportation, LLC and Jevic

Holding to acquire the debtors. SCPI’s co-Chief Executive Officers are Rodger R. Krouse

and Marc J. Leder.

       In 2006, Sun Transportation, LLC acquired the debtors in a leveraged buyout. The

buyout gave Jevic access to an $85 million revolving credit facility from a bank group led

by CIT Group/Business Credit, Inc. (“CIT”). Upon the acquisition, Jevic and SCPI

entered into a management-services agreement governing the relationship between them.

Jevic struggled through 2007 and eventually its assets fell below the level required to

maintain its credit facility from CIT. In March 2008, SCPI chose not to invest more

money in Jevic, and Jevic began an active sale process. After meetings with buyers did

not produce a sale, on May 16, 2008, Jevic’s board authorized a bankruptcy filing. Jevic

then sent its employees termination notices under the WARN Act, which they received

on May 19, 2008. Jevic filed for Chapter 11 bankruptcy the next day, May 20.

157(b)(2)(A), 157(b)(2)(B), and 157(b)(2)(O). The District Court had jurisdiction under
28 U.S.C. § 158(a). We have jurisdiction under 28 U.S.C. §§ 158(d) and 1291.
                                             3
       On May 21, 2008, plaintiffs filed a class-action lawsuit alleging Jevic and SCPI

were a “single employer” for purposes of the WARN Act. The Bankruptcy Court

certified the class.

       During discovery, plaintiffs deposed twelve people. They also asked to depose

Krouse and Leder. After SCPI moved for a protective order, the Bankruptcy Court

quashed plaintiffs’ notices of the depositions of Krouse and Leder.

       SCPI and plaintiffs each moved for summary judgment on the plaintiffs’ single-

employer claim. The Bankruptcy Court held Jevic and SCPI were not a single employer

under the WARN Act. Accordingly, it granted SCPI’s motion and denied plaintiffs’

motion. In re Jevic Holding Corp., 492 B.R. 416 (Bankr. D. Del. 2013). Subsequently,

plaintiffs appealed to the District Court, which affirmed the Bankruptcy Court in all

respects. In re Jevic Holding Corp., 526 B.R. 547 (D. Del. 2014). Plaintiffs appealed.

                                            II.

       We review de novo the legal conclusions in a WARN Act “single employer”

liability determination made on summary judgment. In re APA Transp. Corp. Consol.

Litig., 541 F.3d 233, 239 (3d Cir. 2008). We construe the facts in the light most favorable

to the nonmoving party. Id. Summary judgment is appropriate if “there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.”

Fed. R. Civ. P. 56(a). We review a decision to quash a subpoena for abuse of discretion.

NLRB v. Frazier, 966 F.2d 812, 815 (3d Cir. 1992).

                                            III.

                                             4
       Plaintiffs raise the same two claims of error they raised in the District Court. First,

they contend the Bankruptcy Court erred by holding SCPI was not a single employer with

Jevic under the WARN Act. Second, they contend the Bankruptcy Court erred by

quashing their notices of the depositions of Krouse and Leder.

                                              A.

       To determine whether two business enterprises are a single employer under the

WARN Act, we apply the five-factor test we adopted in Pearson v. Component

Technology Corporation, 247 F.3d 471 (3d Cir. 2001), and clarified in APA Transp.

Corp. The five factors are “(1) common ownership, (2) common directors and/or officers,

(3) de facto exercise of control, (4) unity of personnel policies emanating from a common

source, and (5) dependency of operations.” APA Transp. Corp., 541 F.3d at 243. The

five-factor test is a balancing test, but the factors are not balanced equally. Id. Satisfying

“the first and second factors, common ownership and common directors and/or officers,

[is] not sufficient to establish that two entities are a ‘single employer.’” Id. And “if the de

facto exercise of control was particularly striking—for instance, were it effectuated by

disregard[ing] the separate legal personality of its subsidiary—then liability might be

warranted even in the absence of the other factors.” Pearson, 247 F.3d at 504 (internal

citation and quotation marks omitted).

       Here, SCPI does not dispute the lower courts’ findings that the first two factors

were satisfied. But plaintiffs and SCPI dispute whether there is a genuine issue of

material fact with respect to the final three factors.

                                               5
       The third factor, de facto exercise of control, tests whether “the parent or lender

was the decisionmaker responsible for the employment practice giving rise to the

litigation.” Id. at 503–04. We agree with the courts below that plaintiffs have not

demonstrated the genuine dispute of material fact necessary to survive summary

judgment with respect to this factor.

       The Bankruptcy Court found that “the facts in Pearson [are] analogous to the facts

of this case” and “as a practical matter [the secured creditor] exerted even more control in

Pearson than [SCPI] is alleged to have done here.” J.A. 34. And the District Court held

that “any alleged oversight during the process leading up to filing for bankruptcy [wa]s

significantly lower than in Pearson where the indebted party was required to seek

approval for many of its decisions.” Id. at 15 (internal citation and quotation marks

omitted). The facts in APA Transp. Corp. are also analogous to the facts of this case. In

APA Transp. Corp., we found that “while APA Truck Leasing may have made certain

loans to APA Transport and shared certain administrative functions, it was not

‘controlling’ APA Transport and played no role in APA Transport’s decision to close its

facilities.” 541 F.3d at 245. Here, as the courts below found, “it remains undisputed that

the Debtors made the decisions to shut down the company” and “Jevic was directly

responsible for signing the WARN notice and terminating employees.” J.A. 15 (internal

citation and quotation marks omitted).

       Plaintiffs contend that because SCPI’s actions overwhelmed Jevic, SCPI should be

subject to single-employer liability based on the “de facto exercise of control” factor

                                             6
alone. We disagree. We see no genuine dispute of material fact with respect to the third

factor and hold that this factor weighs in favor of SCPI.

       The fourth factor, unity of personnel policies emanating from a common source,

tests “whether the companies actually functioned as a single entity with regard to [their]

relationships with employees.” Pearson, 247 F.3d at 499. Both courts below found the

record was insufficient to create a genuine dispute of material fact with respect to this

factor. As the District Court found, plaintiffs “failed to produce evidence that appellee

directly hired or fired Jevic employees, paid the salaries of Jevic employees or shared a

personnel or benefits recordkeeping system with Jevic.” J.A. 17 (emphasis removed).

Plaintiffs contend SCPI shared certain personnel-related programs with Jevic and policed

Jevic’s personnel actions. But the companies in APA Transp. Corp. shared “certain

benefit plans and some employee monitoring functions” too. 541 F.3d at 245. Plaintiffs’

specific allegations here—that SCPI set up and oversaw an incentive compensation

program for Jevic’s management, that Leder reviewed the proposal for the program, and

that SCPI once proposed $3 million in headcount cuts—do not raise a genuine issue of

material fact about “whether the companies actually functioned as a single entity with

regard to [their] relationships with employees.” Pearson, 247 F.3d at 499.

       The fifth factor, dependency of operations, addresses whether two business

enterprises “shar[e] administrative or purchasing services,” “interchange[] employees or

equipment,” and “commingle[] finances.” Id. at 500. Requests for approval of actions do

not alone demonstrate dependency of operations without evidence the parent was

“involved in the details or manner of implementation of any . . . business plans” of the

                                              7
subsidiary. Id. at 502. Similarly, the mere fact a subsidiary “was financially dependent on

[the parent’s] loans, and ultimately was unable to stay afloat without them” is insufficient

to demonstrate dependency of operations. Id. at 503. The Bankruptcy Court noted it was

“undisputed that Jevic maintained separate books and records, had its own bank accounts,

[] prepared its own financial statements,” and “did not share administrative services,

facilities, or equipment with [SCPI].” J.A. 40. It also found “no evidence that [SCPI]

employees were involved in the day-to-day business operations of Jevic sufficient to

show an existence of dependency.” Id. The District Court agreed with this analysis.

       Plaintiffs now argue Jevic depended on the administrative arrangements it shared

with SCPI, SCPI was involved in the creation, details, and manner of implementation of

Jevic’s business plans, and SCPI undercapitalized Jevic and extracted management fees

from it. But their support for these claims is thin, and does not demonstrate dependency

of operations. SCPI continued to operate without incident after Jevic folded, just as APA

Truck Leasing continued to operate without incident after APA Transport folded. See

APA Transp. Corp., 541 F.3d at 245. In short, plaintiffs’ claims are insufficient to create

a genuine issue of material fact regarding the companies’ dependency of operations.

       We have held there is no single-employer liability when “the final three factors are

clearly in favor of” a company opposing such liability. Id. That is the case here.

Accordingly, we will affirm the grant of summary judgment.

                                             B.

       Plaintiffs also contend the Bankruptcy Court should have permitted them to

depose Krouse and Leder. They contend Krouse and Leder had particularized and

                                             8
specific knowledge of SCPI’s business practices and the critical interactions and

decisions that are the focus of this litigation. But as SCPI points out, plaintiffs “do not

suggest that this alleged ‘err[or]’ itself warrants reversal of the judgment.” Br. Appellees

54. Instead, plaintiffs contend they should be permitted to take Krouse’s and Leder’s

depositions in the event this case is remanded for further proceedings. Because we will

not remand this case, we need not reach this issue.

                                             IV.

       For the foregoing reasons, we will affirm the judgment of the District Court.

                                              9