Norman B. Newman, solely as Liquidating Trustee of the World Marketing Liquidating Trust v. Crane, Heyman, Simon, Welch & ClarRESPONSEN.D. Ill.June 10, 2019IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION NORMAN B. NEWMAN, as Liquidating Trustee of the World Marketing Liquidating Trust, Plaintiff, Civil Action No. 17-6978 v. Judge Thomas M. Durkin CRANE, HEYMAN, SIMON, WELCH & CLAR, Magistrate Judge Susan E. Cox Defendant. DEFENDANT’S MEMORANDUM OF LAW IN OPPOSITION OF PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 1 of 31 PageID #:1266 i TABLE OF CONTENTS INTRODUCTION ...........................................................................................................................1 FACTUAL BACKGROUND ..........................................................................................................2 A. The Underlying Bankruptcy ................................................................................................2 B. Prior to CH’s Retention, WM Principals Discussed the WARN Act and Decided WM Did Not Need to Send a WARN Notice ......................................................................4 C. Committee Counsel SF Becomes Counsel to the Liquidating Trustee and Intentionally Lodges Incomplete Objections to the WARN Claim. ....................................5 a. Trustee’s Counsel SF’s Inexplicable Failure to Proffer Proof to Support LF Exception. .......................................................................................5 b. Trustee’s Counsel SF’s Inexplicable Waiver of Other Valid Act Exceptions. .........................................................................................................7 D. SF’s Appeal, Settlement of the WARN Claim and Abandonment of the Appeal ...............8 E. Ongoing and Related Litigation ...........................................................................................9 STANDARD FOR SUMMARY JUDGMENT ...............................................................................9 THE WARN ACT..........................................................................................................................10 ARGUMENT .................................................................................................................................11 I. Plaintiff’s Motion For Partial Summary Judgment Is Premature Because Necessary Discovery Remains ...........................................................................................11 II. Trustee’s Motion For Partial Summary Judgment Should Be Denied Because There Are Genuine Questions of Material Fact. ................................................................13 A. Trustee Could Have and Should Have Raised the UBC Defense and FC Defense, which would have Eliminated or Reduced the Notification Period ........13 B. The Termination Notice, FAQ, and Termination Information Constitute Adequate Notice under the Act. .............................................................................16 C. SF and Trustee Intentionally Lodged Incomplete Objections to the WARN Claim So That It Can Continue Benefitting Financially in the Form of Fees. .......................................................................................................................19 Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 2 of 31 PageID #:1267 ii D. The Bankruptcy Court’s Ruling on the LF Exception Was Based on an Incomplete Record and a Misinterpretation of the Exception ...............................19 E. Question of Fact Exists regarding CH’s Third Affirmative Defense for Contributory Negligence ........................................................................................22 CONCLUSION ..............................................................................................................................23 Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 3 of 31 PageID #:1268 iii TABLE OF AUTHORITIES Barth v. Reagan, 139 Ill. 2d 399, 564 N.E.2d 1196 (Ill. 1990) .................................................................................23 Carpenters Dist. Council v. Dillard Dep’t Stores, 15 F.3d 1275 (5th Cir. 1994) .........................................................................................................17 Carroll, et al., v. World Marketing Holdings, LLC, Case No. 2:17-cv-01309-LA (E.D. Wisc. 2017) ......................................................................9, 12 Carver v. Foresight Energy LP, No. 3:16-cv-3013, 2016 U.S. Dist. LEXIS 90665 (C.D. Ill. July 12, 2016)............................11, 22 Celotex Corp. v. Catrett, 477 U.S. 317 (1986) .......................................................................................................................11 Grayson v. O’Neill, 308 F.3d 808 (7th Cir. 2002) .........................................................................................................11 Hotel Emples. International Union Local 54 v. Elsinore Shore Associates, 173 F.3d 175 (3d Cir. 1999).....................................................................................................14, 15 In re MF Glob. Holdings Ltd., 481 B.R. 268 (Bankr. S.D.N.Y. 2012) .....................................................................................12, 22 In re Protected Vehicles, Inc., 392 B.R. 633 (Bankr. D.S.C. 2008) ...............................................................................................11 In re World Marketing Atlanta, LLC, Case No. 15-B-32975 (Bankr. N.D. Ill.) ........................................................................................ 22 In re World Marketing Chicago, LLC, et al, 15-B-32968 (Bankr. N.D. Ill.) ..........................................................................................................1 In re World Marketing Dallas, LLC, Case No. 15-B-32977 (Bankr. N.D. Ill.) ....................................................................................... 22 Jones, et al. v. Kayser-Roth Hosiery, Inc., 748 F. Supp. 1292 (E.D. Tenn. 1990) ........................................................................................... 16 Kalwaytis v. Preferred Meal Systems, Inc., 78 F.3d 117 (3d Cir. 1996).............................................................................................................17 Local 1239, International Brotherhood of Boilermakers v. Allsteel, Inc., 955 F. Supp. 78 (N.D. Ill. 1996) ....................................................................................................15 Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 4 of 31 PageID #:1269 iv Marques v. Telles Ranch, Inc., 867 F. Supp. 1438 (N.D. Cal. 1994), aff’d, 133 F.3d 927 (9th Cir. 1997) ....................................17 Mayol v. Summers, Watson & Kimpel, 223 Ill. App. 3d 794, 585 N.E.2d 1176 (Ill. App. 1992) ................................................................23 Mount v. LaSalle Bank of Lake View, 1998 U.S. Dist. LEXIS 10252, *11 (N.D. Ill. 1998) .................................................................9, 10 Official Comm. Of Unsecured Creditors of United Healthcare Sys., Inc. v. United Healthcare Sys., Inc. (In re United Healthcare Sys., Inc.), 200 F.3d 170 (3d Cir. 1999)...............................................................................................20, 21, 22 Pena v. American Meat Packing Corp., 362 F.3d 418 (7th Cir. 2004) .............................................................................................13, 16, 17 Roquet, et al. v. Arthur Andersen, LLP, 398 F.3d 585 (7th Cir. 2005) ...................................................................................................11, 13 Saxion v. Titan-C-Manufacturing, 86 F.3d 553, 561 (6th Cir. 1996) ...................................................................................................17 Schmelzer v. Office of Compliance, 155 F.3d 1364 (Fed. Cir. 1998) Smith v. Severn, 129 F.3d 419 (7th Cir. 1997) ...............................................................................18 Walsh v. Diamond (In re Century City Doctors Hospital, LLC), No. CC-09-1235-MkJaD, 2010 Bankr. LEXIS 5048 (B.A.P. 9th Cir. Oct. 29, 2010) .....................6 Watson. v. Michigan Indus. Holdings, Inc., 311 F.3d 760 (6th Cir. 2002) ...................................................................................................13, 14 Weisbuch v. County of Los Angeles, 119 F.3d 778 (9th Cir. 1997) ...........................................................................................................6 OTHER: 20 C.F.R. § 639.7 .....................................................................................................................17, 18 20 C.F.R. § 639.9(b)(1) ..................................................................................................................11 29 U.S.C. § 2102 ..................................................................................................................1, 10, 11 54 Fed. Reg. 16042, 16043 (1989) ................................................................................................17 Conference Report on H. R. 3, H. R. Report No. 100-576, Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 5 of 31 PageID #:1270 v 100th Congress, 2nd Session at p.1052 (April 20, 1988) ..............................................................16 FED. R. CIV. P. 56 .......................................................................................................................9, 11 Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 6 of 31 PageID #:1271 1 Defendant, CRANE, HEYMAN, SIMON WELCH & CLAR (“CH”), by its undersigned counsel, and for its Response Brief in Opposition to Trustee’s Motion for Partial Summary Judgment on CH’s Second, Third and Fourth Affirmative Defenses (“Motion”) states as follows: INTRODUCTION 1. CH was the Bankruptcy Court-approved counsel for debtors-in-possession World Marketing, LLC, World Marketing Atlanta, LLC, and World Marketing Dallas, LLC (collectively, “WM”) in the jointly administered bankruptcy case captioned In re World Marketing Chicago, LLC, et al, 15-B-32968 (Bankr. N.D. Ill.) (“Bankruptcy Case.”). In the Bankruptcy Case, former WM employees filed a claim under the WARN Act, 29 U.S.C. §2101, et seq. (“the Act”) stating that WM had failed to provide a WARN notice prior to their termination. 2. Trustee was tasked with defending WM against the WARN claim. Not coincidentally, Trustee was represented by the same law firm representing Trustee in this action. That same law firm that initially represented the Creditor’s Committee. Ultimately, the WARN claim was approved by the bankruptcy court, and Trustee settled for roughly $4.2 million. 3. Trustee’s claim alleges that CH failed to advise WM to timely provide a WARN notice to terminated employees. CH has filed an answer with various affirmative defenses. At issue on Trustee’s Motion are CH’s Second, Third and Fourth Affirmative Defenses, which primarily assert that Trustee lost its objection to the WARN claim because Trustee mishandled applicable and viable exceptions to the Act. Trustee did not submit any affidavits, did not seek to put on any witnesses, and did not present any evidence in support of these exceptions. As discussed below, Trustee and its counsel had a financial motive to mount an ineffective defense to the WARN claim, which explains Trustee’s otherwise inexplicable failure to properly assert exceptions under the Act. Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 7 of 31 PageID #:1272 2 4. Trustee’s Motion should be denied for two reasons. First, the Motion is premature and a deliberate attempt to preempt CH’s opportunity to conduct relevant fact discovery. 5. Second, should the Court rule on the merits, the Motion should be denied for the simple reason that CH’s affirmative defenses raise material questions of fact. FACTUAL BACKGROUND A. The Underlying Bankruptcy 6. On October 17, 2014, World Marketing Holdings, LLC (“Holdings”) entered into a credit agreement with its primary lender, Associated Bank (the “Bank”). Defendant’s Statement of Undisputed Material Facts (“Deft’s UF”) 1. Holdings was the parent company to WM. See Deft. UF 1. On July 10, 2015, the Bank sent a Notice of Default to Holdings and WM asserting that WM had violated the credit agreement. See Deft. UF 2. 7. Roughly two months after issuing the default letter, on September 10, 2015, the Bank swept WM’s bank accounts, leaving it desperately short of funds and threating its survival. See Deft. UF 3. As a result, on September 21, 2015, WM executed a forbearance agreement and continued to work with the Bank to arrange refinancing. Id. As part of the forbearance agreement, WM conceded to defaulting under the credit agreement, as set forth in the Bank’s July 10, 2015 letter. Id. 8. WM also took provisional steps in the event refinancing efforts were unsuccessful. On September 15, 2015, counsel for World Marketing Holdings, LLC1 -- Donald Allen, an attorney with the Milwaukee law firm, Mawicke & Goisman -- contacted CH attorney Jeffrey Dan for insight on WM’s options and possible representation should WM need to pursue bankruptcy, if in fact bankruptcy became necessary. See Deft. UF 4. 1 Robert W. Kraft is the Chief Financial Officer of World Marketing Holdings. Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 8 of 31 PageID #:1273 3 9. Between September 18 and September 25, 2015, WM continued to try to secure additional funding to avoid bankruptcy. See Deft. UF 5. However, at that point, WM had still not decided to file for bankruptcy. CH was only preparing documents if bankruptcy became necessary. Id. 10. Despite WM’s efforts to refinance, WM ran out of time under the Forbearance Agreement and the Bank was unwilling to provide WM additional time. See Deft. UF 6. As a result, around September 25, 2015, WM began discussing the possibility of filing bankruptcy and the decision to file bankruptcy was made between that date and September 28, 2015, the date of the bankruptcy filings. Id. 11. WM’s decision on exactly which employees to terminate was made on September 28, 2015. See Deft. UF 7. 12. On September 28, 2015, WM signed CH’s engagement letters, took official board action to authorize CH’s retention, and to authorize bankruptcy filings. See Deft. UF 8. 13. Also on Monday, September 28, 2015, beginning around 3 p.m CST, CH filed Chapter 11 bankruptcy petitions for each of the WM entities. See Deft. UF 8. On that same day and shortly after filing, having only determined which employees to terminate earlier that morning, Mr. Jeffcoat sent an email (“the Termination Notice”) to every WM employee with a WM email account announcing it had filed for bankruptcy, was “shutting down operations,” and would only retain a “small number” of employees. See Deft. UF 9. In addition to the email, designated WM leaders presented the information contained in the Termination Notice to employees, handed out copies of the FAQs and showed a video in Spanish (the “Presented Information”). See Deft. UF 10. Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 9 of 31 PageID #:1274 4 14. After the bankruptcy petitions were filed, the Bankruptcy Court approved CH’s retention as WM’s counsel, and CH continued to provide bankruptcy advice to WM. See Deft. UF. 11. On October 27, 2015, the Bankruptcy Court approved the retention of law firm Sugar Felsenthal Grais & Hammer LLP (“SF”) by the estate’s Creditors’ Committee (“Committee”). Id. 15. On October 21, 2015, WM’s former employees (“WARN Class”) filed a class action suit against WM seeking over $4 million in damages based upon the allegation that their terminations violated the Act. See Deft. UF. 12. In February 2016 the suit was converted into a disputed proof of claim in the Bankruptcy Case (“WARN Claim”). Id. B. Prior to CH’s Retention, WM Principals Discussed the WARN Act and Decided WM Did Not Need to Send a WARN Notice 16. Following the sweep of WM’s bank accounts, but prior to contacting CH for possible representation, WM principals discussed the Act and any purported obligations thereunder. See Deft. UF 13-17. In its preliminary discussions with WM, CH brought up the possible need to send a WARN Notice, but WM President and Chief Operating Officer James Tyrone Jeffcoat informed CH that WM had been advised that the Act did not apply and based on that advice WM had already determined it did not need to send a WARN notice. Id. C. Committee Counsel SF Becomes Counsel to the Liquidating Trustee and Intentionally Lodges Incomplete Objections to the WARN Claim. 17. On July 25, 2016, the Bankruptcy Court approved the Trustee’s retention of SF as counsel. See Deft. UF. 18. On October 4, 2016, Trustee through its counsel SF, filed an objection to the WARN Claim. Id. Trustee correctly asserted that there was no Act liability since WM fit squarely within the Liquidating Fiduciary (“LF”) exception. Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 10 of 31 PageID #:1275 5 18. Nevertheless, as detailed below, despite having alleged that WM was the quintessential liquidating fiduciary, Trustee oddly declined the Bankruptcy Court’s offer to proffer evidence to support the liquidating fiduciary defense. See Deft. UF 19. Even worse, Trustee inexplicably waived other WARN defenses completely by not even asserting them. When it ultimately allowed the WARN Claim as an administrative claim, the Bankruptcy Court specifically noted Trustee’s lapse on the first score and scolded Trustee on the latter. See Deft. UF 19, 27. Trustee’s failure to properly object to the WARN Claim led to Act liability, which Trustee now seeks to impose on CH. a. Trustee’s Counsel SF’s Inexplicable Failure to Proffer Proof to Support LF Exception. 19. On August 17, 2016, the WARN Class sought allowance of its claim as an administrative claim. See Deft. UF 20. On October 4, 2016 Trustee, through its counsel SF, objected on only one ground—the non-statutory “liquidating fiduciary” exception—and advanced none of the other well-known exceptions to Act liability. Id. Responding to Trustee’s assertion of the LF defense, the WARN Class stressed repeatedly and accurately that Trustee had failed to attach any proof to support his objection. See Deft. UF 20, 23. On October 18, 2016, the Bankruptcy Court led Trustee’s horse to water by suggesting that he may wish to argue that his objection required the submission of proof and could not be decided as a matter of law because it involved contested issues of fact: “And the parties can argue, frankly, that it’s not appropriate because there are issues of fact, material issues of fact that should be heard later.”2 Id. 2 This Court can take judicial notice of court documents filed in the underlying bankruptcy case. See, e.g., Walsh v. Diamond (In re Century City Doctors Hospital, LLC), No. CC-09-1235-MkJaD, 2010 Bankr. LEXIS 5048 (B.A.P. 9th Cir. Oct. 29, 2010) (“[C]ourt documents filed in an underlying bankruptcy case are subject to judicial notice in related adversary proceedings and district court lawsuits.”) (citing Weisbuch v. County of Los Angeles, 119 F.3d 778, 783 n. 1 (9th Cir. 1997)). Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 11 of 31 PageID #:1276 6 20. Trustee oddly did not take advantage of Judge Barnes’s suggestion to supplement the record. This was in spite of Trustee counsel Mr. Melickian admitting at the November 30, 2016 oral argument on the WARN Class Application that the Court’s decision required analysis of facts not in the record: I believe that there are probably facts that need to be developed, actually determined by the fact finder in this case, Your Honor, that aren’t on the record and really can’t be presented on the record in terms of the brief or the argument here and make this determination. Deft. UF 21-22. 21. Mr. Melickian’s statement to the court was accurate as there was plenty of evidence—not in the record—which demonstrated WM’s intent to liquidate. For example, Trustee failed to supplement the record with a key email from WM’s President Mr. Jeffcoat to WM employees, which contained the Termination Notice and stated that most employees were being terminated and that “we will need...a small number to help us shut down the operation and help our customers find new vendors.” See Deft. UF. 9. 22. Other evidence included proof that: WM communicated to employees that the bankruptcy filings were “likely the first step in what will likely be the end of the company”; WM had terminated hundreds of employees and retained only 59 “to help shut down operations”; WM employees stopped performing their usual duties; WM returned inventory to vendors; WM sold its equipment; and WM engaged in efforts undertaken to “help customers find new vendors.” See Deft. UF 9, 23. 23. Predictably, the WARN Class emphasized that Trustee chose “not include any attachments, no affidavits, no documents, no facts in support of the position that it’s taking...” and that “nothing that the trustee has put in the record” supports his LF defense. See Deft. UF Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 12 of 31 PageID #:1277 7 24. Foreshadowing the result, Judge Barnes noted, “But I’m not going beyond the record at this point. I don’t have those facts in front of me, all they are is some supporting allegations.” Id. 24. On February 24, 2017, the Bankruptcy Court allowed the Act Claim as an administrative claim and rejected Trustee’s unsupported objection. See Deft. UF 25. In a written opinion, the Bankruptcy Court held that Trustee failed to make a sufficient factual showing to establish application of the “liquidating fiduciary exception.” Id. In fact, Trustee failed to proffer any actual proof. See Deft. UF 18. For the LF exception to apply, Trustee had to demonstrate that Debtors were liquidating rather than reorganizing. See Deft. UF 25. Ultimately, the Bankruptcy Court held that the facts were unclear: “What the Debtors intended and what they were doing at the time of the termination of the WARN Class is, therefore, muddied at best.” Id. Because Trustee rested on his objection and did not submit proof, much less seek a trial on this issue, Trustee failed to un-“mudd[y]” the issue, and the Bankruptcy Court decided the issue on the papers that had been filed. Id. b. Trustee’s Counsel SF’s Inexplicable Waiver of Other Valid Act Exceptions. 25. Trustee also intentionally and bafflingly failed to raise other exceptions to the Act, thereby waiving them. Deft. UF 26. Significantly, on multiple occasions, Trustee noted that, in addition to the LF defense, he had other defenses to liability but did not advance them. Id. Without seeking leave of court or citing any legal support whatsoever for its decision to limit its objection to the LF expectation, Trustee baldly averred that it “reserves the right to raise additional defenses to liability... should the need arise.” Id. 26. The Bankruptcy Court took note of this when it allowed the WARN Claim as an administrative claim. See Deft. UF 27. The Court deliberately admonished Trustee for Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 13 of 31 PageID #:1278 8 raising just one ground for his objection while purporting to reserve the right to assert others defenses later: There is no question that all aspects of the Class Claim but amount of liability were before the court, and the court did not authorize the Trustee to respond only in part to the matters fully before the court. As the court has not ordered otherwise, the Trustee’s choice to defend only in part means that it must forego its other defenses. Id. 27. As a direct result of Trustee and SF’s failure, Judge Barnes ruled that Trustee had waived any exceptions to the Act and thus never reached the merits of those exceptions. D. SF’s Appeal, Settlement of the WARN Claim and Abandonment of the Appeal 28. On March 13, 2017, the Trustee appealed the Bankruptcy Court’s decision.3 See Deft. UF 28. However, in October 2017, Trustee settled with the WARN plaintiffs for nearly 100% of its claim. Id. On October 25, 2017, Trustee moved for approval of a settlement with the WARN Class, providing for the payment of $4,217,850.79 as an administrative claim, which the Bankruptcy Court approved on November 15, 2017. Id. On February 28, 2018, the Bankruptcy Court entered an order approving the settlement between the Trustee and the WARN Class. Id. 29. Shortly before the settlement, on September 27, 2017, SF filed the instant complaint on behalf of the Trustee alleging that CH committed malpractice by failing to cause WM to timely issue a WARN Notice, i.e. the same notice that Trustee had previously represented to the bankruptcy court was not required because WM “was the very definition of a liquidating fiduciary.” Deft. UF 29. E. Ongoing and Related Litigation 3 The Trustee has inexplicably refused to provide communications between the WARN Plaintiffs and the Trustee between March and October 2017. Because their production of documents was only made recently, CH has not yet sought to compel those communications. Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 14 of 31 PageID #:1279 9 30. In addition to this lawsuit, there is ongoing and related litigation occurring in the Northern District of Illinois Bankruptcy Court and in the Eastern District of Wisconsin that may affect the litigation in this case. See Deft. UF 16, 30-32. On the same day Trustee filed the legal malpractice claim, it filed an adversary proceeding No. 17-00499 in the Bankruptcy Case. In the adversary proceeding, the Trustee asserts claims against Mr. Kraft, among others, for failing to issue a WARN notice. See Deft. 16. On September 26, 2017, the WARN Class filed a lawsuit against Holdings and Blue Streak Holdings LLC4 for violation of the Act. See Carroll, et al., v. World Marketing Holdings, LLC, Case No. 2:17-cv-01309-LA (E.D. Wisc. 2017) (“Wisconsin Litigation”).5 The claims asserted in the Wisconsin Litigation are identical to those asserted against WM in the Bankruptcy. STANDARD FOR SUMMARY JUDGMENT Summary judgment should be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and the movant is entitled judgment as a matter of law. FED. R. CIV. P. 56. All reasonable inferences are viewed in the light most favorable to the party opposing the motion. Mount v. LaSalle Bank of Lake View, 1998 U.S. Dist. LEXIS 10252, *11 (N.D. Ill. 1998). There exists a genuine issue of material fact if a reasonable jury could return a verdict for the non-moving party. Mount, 1998 U.S. Dist. LEXIS at *11 (citing Smith v. Severn, 129 F.3d 419, 426 (7th Cir. 1997)). THE WARN ACT 4 Blue Streak Holdings LLC is the managing member of Holdings. See Deft. UF 30, f.6. 5 The plaintiffs in both the Wisconsin Litigation and the WARN Claim against WM are identical and represented by the same counsel. Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 15 of 31 PageID #:1280 10 31. Subject to applicable exceptions, the Act prohibits those employers from ordering a “plant closing” or “mass layoff” without first giving “affected employees”6 at least 60-days written notice. 29 U.S.C. § 2102(a). 32. A non-statutory exception to the Act is called the “Liquidating Fiduciary.” The LF exception comes from the Department of Labor’s (“DOL”) commentary on the Act regulations. Specifically, “DOL agrees that a fiduciary whose sole function in the bankruptcy process is to liquidate a failed business for the benefit of creditors does not succeed to the notice obligations of the former employer because the fiduciary is not operating a “business enterprise” in the normal commercial sense.” 54 Fed. Reg. 16,042, 16,061-63 (Apr. 20, 10989). 33. There are also two statutory exceptions to the Act that apply to WM which would have reduced or eliminated the notification period. Specifically, employers may give less than 60-days notice (or sometimes none at all) if one of the following exceptions in the Act applies: (a) the Faltering Company exception (“FC”); or (b) the Unforeseen Business Circumstances exception (“UBC”). Id. §§ 2102(b)(1) and 2102(b)(2)(A). 34. The FC exception allows an employer to provide less than 60-days notice (or sometimes none) if the employer is actively seeking capital or business which, if obtained, would enable that employer to avoid or to postpone the shutdown. 29 U.S.C.S § 2102(b). 35. The UBC exception applies where the closing or mass lay off 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). An unforeseen business circumstance is generally “caused by some sudden, dramatic, and unexpected action or condition outside the employer’s control.” 20 C.F.R. § 639.9(b)(1). Where the UBC exception applies, “the Act’s 60- 6 “Affected employees” means employees who may reasonably be expected to experience an employment loss as a consequence of a proposed plant closing or mass layoff by their employer.” 20 C.F.R. § 639.9(a)(5). Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 16 of 31 PageID #:1281 11 day notice obligation is eliminated or reduced to a shorter term.” Roquet, et al. v. Arthur Andersen, LLP, 398 F.3d 585, 586 (7th Cir. 2005) (citation omitted). ARGUMENT I. Plaintiff’s Motion For Partial Summary Judgment Is Premature Because Necessary Discovery Remains 36. Pursuant to Federal Rule of Civil Procedure 56(d), if a nonmovant “shows it cannot present facts essential to justify its opposition, the court may: (1) defer considering the motion or deny it; (2) allow time to obtain affidavits or declarations or to take discovery; or (3) issue any other appropriate order.” FED. R. CIV. P. 56(d). 37. As the Seventh Circuit has recognized, “[s]ummary judgment should not be entered until the party opposing the motion has had a fair opportunity to conduct discovery as may be necessary to meet the factual basis for the motion.” Grayson v. O’Neill, 308 F.3d 808, 815 (7th Cir. 2002) (internal quotations omitted). Under Supreme Court precedent, summary judgment is appropriate, only “after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (emphasis added). 38. Moreover, whether an exception to the Act applies is a fact intensive determination. Carver v. Foresight Energy LP, No. 3:16-cv-3013, 2016 U.S. Dist. LEXIS 90665 (C.D. Ill. July 12, 2016); see also In re Protected Vehicles, Inc., 392 B.R. 633, 636 (Bankr. D.S.C. 2008) (noting the three defenses to the notice requirement and stating “[w]hether a particular defense is available, as well as the determination of whether proper notice was provided, is fact intensive”); see also, In re MF Glob. Holdings Ltd., 481 B.R. 268, 278 (Bankr. Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 17 of 31 PageID #:1282 12 S.D.N.Y. 2012) (noting that the Act exceptions may be applicable in the case and that “these defenses are fact intensive and are thus not conducive to the motion to dismiss stage”). 39. Trustee’s Motion is premature and a deliberate attempt to deny Defendant the benefits of discovery relevant to the issues at hand. This is especially clear where Trustee has refused to produce relevant documents based upon unfounded objections. For example, Trustee has wrongfully asserted the attorney-client privilege over communications between SF and the WARN Class counsel, i.e. communications between attorneys of opposing parties! See Declaration of LeighAnn M. Thomas attached to CH’s Motion for Discovery Under Fed. R. Civ. P. 56(d) (“L. Thomas Declaration”). Communications pursuant to Rule 37 regarding this discovery dispute are still ongoing. Id. 40. In addition, the defendants in the ongoing and related Wisconsin Litigation reported that “they recently discovered numerous documents in the possession of a former employee.” See Carroll, et al., v. World Marketing Holdings, LLC, Case No. 2:17-cv-01309-LA (E.D. Wisc. 2017), Doc. 50. After multiple attempts, counsel for CH finally received those documents on June 6, 2019. Counsel for CH is currently reviewing the documents, which consist of over 11,590 pages and may be relevant to issues raised by Trustee’s Motion. See L. Thomas Declaration. 41. Finally, because of the tardy production of documents, CH has not yet had the ability to depose certain witnesses, including the Trustee, former and current attorneys at SF, and others. Id. 42. As a result of the foregoing, Trustee’s Motion is premature and absent discovery essential to allow a complete response. II. Trustee’s Motion For Partial Summary Judgment Should Be Denied Because There Are Genuine Questions of Material Fact. Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 18 of 31 PageID #:1283 13 A. Trustee Could Have and Should Have Raised the UBC Defense and FC Defense, which would have Eliminated or Reduced the Notification Period 43. Trustee asserts that the events leading up to the Layoffs should have qualified WM for the UBC and FC exceptions to the Act. Doc. 93, ¶ 20. Trustee contends that WM could have successfully invoked the UBC and FC exceptions only if it had issued a WARN Notice with the required contents prior to the Layoffs or as soon as practicable thereafter. Id. Trustee next argues that because CH waited over a month to cause WM to issue a WARN Notice, WM forfeited the exceptions. Trustee’s argument fails because the UBC and FC exceptions applied in this case such that they entirely eliminated the Notice requirement. 44. A plain reading of the Act shows that reduction of the notification period pursuant to the UBC (and FC) exceptions can include a complete elimination of the notice requirement when issuing advance notice was not practicable. In fact, the Seventh Circuit has specifically noted that “the required 60-day notice period may be reduced or eliminated if the closing was caused by ‘business circumstances that were not reasonably foreseeable as of the time that notice would have been required.’” (emphasis added). See Pena v. American Meat Packing Corp., 362 F.3d 418, 421-22 (7th Cir. 2004); Roquet, et al. v. Arthur Andersen, LLP, 398 F.3d 585, 586 (7th Cir. 2005) (citation omitted) (where the UBC exception applies, “the Act’s 60-day notice obligation is eliminated or reduced to a shorter term.”) (emphasis added). 45. Numerous courts have held that the UBC applied even where no WARN Notice was given. For example, in Watson. v. Michigan Indus. Holdings, Inc., 311 F.3d 760 (6th Cir. 2002), the Sixth Circuit affirmed the District Court’s ruling which granted summary judgment in favor of the employer under the UBC exception. There, the employer’s primary customer suddenly and unexpectedly refused to pay and stopped doing business with the employer. Id. at Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 19 of 31 PageID #:1284 14 762. As a result, the employer was forced to close the business and terminate employees. Id. No advanced WARN Notice was given to employees. In affirming the District Court’s ruling, the Sixth Circuit explained the employer “was excused from the WARN Act’s notice requirement under the [UBC] exception.” Id. at 766. 46. In Hotel Emples. International Union Local 54 v. Elsinore Shore Associates, 173 F.3d 175 (3d Cir. 1999), the Third Circuit affirmed the district court’s ruling which held the employer was excused from providing any WARN Notice under the UBC exception. There, on May 16, 1989 the Casino Control Commission ordered the employer, a casino, to close by 4:00 a.m. on May 22, 1989. Id. The casino terminated all employees on May 22, 1989 without ever issuing a WARN notice. The district court held that the failure to provide WARN notice was excused because in the exercise of commercially reasonable business judgment, the employer could not have foreseen the circumstances that caused the closing. Id. This was despite the six- day gap between the termination and the casino learning of the impending terminations. 47. Like Watson and Hotel Emples., the facts of this case cry out for an elimination of the WARN Notice requirement. Specifically, on September 10, 2015, the Bank swept WM’s accounts. See Deft. UF 2. From the date of the sweep, WM continued to work with the Bank to arrange refinancing. Deft. UF 5-6. 48. Contrary to Trustee’s claim that WM decided to file bankruptcy “no later than September 22 or 23, 2015,” (Doc. 94, ¶ 6), this issue remains a question of fact. As shown above, evidence indicates that the final decision was not made until sometime on or after September 25, 2015. See Deft. UF 7. Thus, by the time WM became aware of the impending layoffs, i.e., at most 3 days prior thereto, providing a WARN Notice to employees would have served no purpose. See Local 1239, International Brotherhood of Boilermakers v. Allsteel, Inc., Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 20 of 31 PageID #:1285 15 955 F. Supp. 78, 79 (N.D. Ill. 1996) (“The purpose of the WARN Act is to ensure that workers and their communities receive advance notice of the loss of employment so that they may begin the search for other employment or, if necessary, obtain training for another occupation.”); see also Hotel Emples,, 173 F.3d at 187 (finding that UBC exception applied and eliminated WARN notice requirement where unforeseen business circumstances occurred six days prior to layoffs).7 49. In fact, even the Trustee admits that WM was still finalizing the list of employees to be terminated on the morning of the bankruptcy filing, which means that WM had not yet determined who would be an “affected employee” under the Act and therefore could not have even sent a WARN notice prior to September 28, 2015. See Deft. UF 7 (On September 28, 2015, Mr. Jeffcoat emailed John Widmer, Jeff Dan, Kevin Seiberlich, Scott Frandle, Dan Wycklent, stating: “After a lot of thought over the weekend I made some pretty significant changes to the initial skeleton crews.”) (emphasis added.).8 50. A WARN notice on the day of the layoffs (or afterward) would have been utterly futile. WM could not even send a WARN notice because it was still determining which employees would be terminated. 51. Thus, there is a genuine question of material fact whether a WARN Notice was required at all to invoke the UBC and FC exceptions. 52. Additionally, even if this Court finds that a WARN notice was required despite the UBC’s applicability, that does not end the analysis. Trustee still should have asserted the 7 A trier of fact may even find that WM’s mass layoffs became foreseeable on September 10, 2015, when the Bank conducted a sweep of WM’s accounts. If so, the jury could also find that WM had a duty to send a WARN notice as soon as practicable thereafter and that this duty was breached even before CH was retained 15 days later. Indeed, Trustee even asserts that it “has not found a single instance of a court blessing a delay longer than eight days.” Doc. 93, p. 10 n. 48. Under this scenario, CH could not be held legally liable for the WARN Claim. All of this, of course, is a question of fact. 8 Trustee seems to imply that WM could have avoided liability by sending a WARN notice post-termination. Doc. 93 at ¶ 20. Trustee acknowledges that the WARN Act “does not expressly provide for after-the-fact notice” but asserts that the regulations “seemingly contemplate after-the-fact notice.” Doc. 93, p. 10 n. 48. Trustee not only ignores the case law demonstrating that the notice requirement can be completely eliminated but also overlooks the fact that a post-termination WARN notice would serve zero purpose. Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 21 of 31 PageID #:1286 16 exception because it would have significantly limited WM’s potential WARN liability by reducing the notification period, regardless of whether WM issued a WARN Notice. 53. Trustee contends that by not issuing a notice, WM completely forfeited the benefits of the UBC exception. In other words, Trustee posits that the issuance of a WARN Notice is a prerequisite for the UBC exception to apply. Doc. 93, ¶ 20. The case law is clear that, under certain circumstances, the UBC exception can completely eliminate the notice requirement. See, e.g., Pena v. American Meat Packing Corp., 362 F.3d 418, 421-22 (7th Cir. 2004). In addition, Trustee’s understanding of the law is illogical. According to Trustee’s own interpretation of the facts, the mass layoffs were unforeseeable prior to September 22, 2015. Doc. 93, ¶ 6. Yet because WM did not issue a WARN notice, Trustee contends that WM was liable for all sixty days prior to the layoffs, even those days prior to September 22, 2015 when it would have been unreasonable to expect WM to issue a WARN notice. There is no basis for such a punitive and irrational application of the Act. 54. Rather the case law is clear that when the UBC exception applies, the WARN notification period is reduced or eliminated. If it is simply reduced and no WARN notice is sent, then the employer is only liable for that reduced period. See 29 U.S.C. § 2104 (an employer is liable for back pay for “each day of violation”); Jones, et al. v. Kayser-Roth Hosiery, Inc., 748 F. Supp. 1292 (E.D. Tenn. 1990). (holding that “‘each day of violation’ is limited to the requisite notice period”) (citing Conference Report on H. R. 3, H. R. Report No. 100-576, 100th Congress, 2nd Session at p.1052 (April 20, 1988); Pena, 362 F.3d at 421-22 (“the required 60- day notice period may be reduced or eliminated if the closing is caused” by an unforeseen business circumstance). Thus, had Trustee properly raised the UBC exception, the duty to give a Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 22 of 31 PageID #:1287 17 WARN notice 60 days in advance of the layoffs (i.e., July 30, 2015) would have been reduced (if not entirely eliminated) to the date WM reasonably knew the terminations were going to occur. 55. Because there is a genuine question of material fact whether the UBC and FC exceptions would have reduced to the notification period to the date the layoffs were reasonably foreseeable, Trustee’s summary judgment motion on these issues must be denied. B. The Termination Notice, FAQ, and Termination Information Constitute Adequate Notice under the Act. 56. In the event the Court finds that WM was not excused from issuing notice, the Termination Notice, the FAQ and the Presented Information provided to WM employees on September 28, 2015 constitutes adequate notice under the Act. See Deft. UF 9-10. That these communications did not strictly comply with all the technical requirements of WARN is not dispositive since “neither the Act nor the regulations suggest that defective notice is automatically to be treated as though no notice had been provided at all.” Saxion v. Titan-C- Manufacturing, 86 F.3d 553, 561 (6th Cir. 1996) (citation omitted). 57. 20 C.F.R. § 639.7(a)(4) specifically cautions that “it is not the intent of the regulations, that errors in the information provided in a notice that occur because events subsequently change or that are minor, inadvertent errors are to be the basis for finding a violation of WARN.” In its notice of final rulemaking, the DOL added that “technical violations of the notice requirements not intended to evade the purposes of WARN ought to be treated differently than either the failure to give notice or the giving of notice intended to evade the purposes of the Act.” 54 Fed. Reg. 16042, 16043 (1989). Minor errors, the notice explained, “should not be the basis for liability.” Id. at 16060; Schmelzer v. Office of Compliance, 155 F.3d 1364, 1368 (Fed. Cir. 1998). Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 23 of 31 PageID #:1288 18 58. Courts have held that DOL “regulations provide that technical deficiencies or omissions in notice do not invalidate notice or result in WARN liability.” Marques v. Telles Ranch, Inc., 867 F. Supp. 1438, 1445 (N.D. Cal. 1994), aff’d, 133 F.3d 927 (9th Cir. 1997) (citing Carpenters Dist. Council v. Dillard Dep’t Stores, 15 F.3d 1275, 1287 n.19 (5th Cir. 1994) (“Neither the regulations nor the Act itself addresses how the courts are to treat notices that are determined to be defective or inadequate.”); Kalwaytis v. Preferred Meal Systems, Inc., 78 F.3d 117, 121 (3d Cir. 1996) (stating that 20 C.F.R. § 639.7(a)(4) symbolizes the inherent “flexibility” of the notice requirements)). In rejecting a “strict compliance” approach to the notice requirements, courts have instead “looked to the purpose underlying the WARN Act and determined whether those purposes were satisfied under the circumstances by the notice that was given to the employees.” Schmelzer, 155 F.3d 1364, 1368 (citations omitted). In Schmelzer, the employer’s WARN notice did not comply with any of the four requirements outlined in 20 C.F.R. § 639.7(d). Id. Despite that fact, the court found that the notice was adequate and that the Plaintiff had suffered no prejudice as a result of the notice’s defects. Id. at 1369-1370. 59. Here, Trustee alleges the Termination Notice failed to include (a) a statement whether the planned action was expected to be permanent or temporary, or a statement to the effect that the entire plant would be closed; (b) the expected date when the plant closing or mass layoff would commence; (c) an indication whether or not bumping rights existed; or (d) a brief statement of the reason for reducing the notice period. Trustee’s Motion, Doc. 93 at ¶ 21. 60. Contrary to Trustee’s assertions, there are statements contained in the Termination Notice that support (a), (b) and (d). The Termination Notice specifically states “the filing, which occurred this morning in Chicago’s Federal Bankruptcy Court, is the first step in what will likely be the end of the company.” See Deft. 9. This statement satisfied (a) since it Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 24 of 31 PageID #:1289 19 showed the action was expected to be permanent; the “end of the company” is a permanent event. The Termination Notice notified employees that they were “terminated effective immediately.” This statement satisfied (b) as employees were notified that the layoffs commenced immediately. As for (d), the Termination Notice stated “the investment needed to operate the business fell short and the company ran out of money[,]” thereby explaining the reduction of the notice period. The only arguably missing item is bumping rights information. But like the notice in Schmelzer, the Termination Notice’s failure to address bumping rights did not prejudice the WARN Class. 61. At minimum, a genuine question of material fact exists as to whether the Termination Notice, the FAQ and Presentation Information constituted adequate notice under the Act. Thus, CH’s Second, Third and Fourth Affirmative Defenses are viable defenses and Trustee’s Motion should be denied. C. SF and Trustee Intentionally Lodged Incomplete Objections to the WARN Claim So That It Can Continue Benefitting Financially in the Form of Fees. 62. As stated above, CH’s affirmative defenses regarding the LF, UBC, and FC exceptions to the WARN Claim could and should have been properly asserted by Trustee. Why Trustee and SF so egregiously—despite multiple proddings from Judge Barnes—failed to mount a proper defense to the WARN Class’s massive claim seems curious until one realizes that they had a significant financial motive to not actually fight the claim. 63. When the WARN Class filed its application for payment on its claim on October 4, 2016, Trustee and SF were well aware that the Trust was never going to be able to pay out any funds to the WARN Class and would soon rut out of money. See Doc. 767, 939, 972, 991. With that in mind, SF and Trustee mounted a faux defense to the WARN Claim, understanding that the claim’s acceptance would: (1) result in a legal malpractice suit against CH; (2) allow SF to Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 25 of 31 PageID #:1290 20 obtain more legal fees by representing the Trustee in the suit; and (3) presumably allow Trustee to obtain a portion of any recovery from CH. In other words, Trustee and SF understood that by laying down their arms, they could create a potential pot of newfound money from CH. 64. It should therefore be no surprise that the Trustee has not pursued any legal malpractice claim against SF for its incompetent defense work since this was their plan all along. D. The Bankruptcy Court’s Ruling on the LF Exception Was Based on an Incomplete Record and a Misinterpretation of the Exception 65. On February 24, 2017, Judge Barnes ruled that the LF exception did not apply to WM. See Deft. UF 25. This ruling was erroneously based upon: (1) an incomplete record resulting from SF’s failure to proffer relevant evidence; and (2) Judge Barnes’ unjustifiably narrow interpretation of the exception. The acceptance of the WARN claim was therefore not caused by CH’s alleged negligence, and a question of fact on this issue exists. 66. In his ruling, Judge Barnes first noted that the LF exception only applies where the debtor’s “sole function must be to liquidate.” See Deft. UF 19. As a result, Judge Barnes reasoned that the liquidating fiduciary could never apply in a Chapter 11 case because bankruptcy law grants a Chapter 11 debtor power beyond liquidation, such as the “ability to operate the debtor’s business for the benefit of the creditors.” Id. As even Judge Barnes conceded, this extremely narrow interpretation of the exception has not been adopted by any other court. Id. 67. This interpretation conflicted with the Third Circuit’s United Healthcare case, which Judge Barnes acknowledged is the “leading authority on the issue.” Id.. In Official Comm. Of Unsecured Creditors of United Healthcare Sys., Inc. v. United Healthcare Sys., Inc. (In re United Healthcare Sys., Inc.), 200 F.3d 170, 178 (3d Cir. 1999), the Third Circuit applied Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 26 of 31 PageID #:1291 21 the LF exception in a Chapter 11 case, after the debtor-in-possession terminated its employees post-petition. 68. In so holding, the court focused on the debtor’s “intent to liquidate,” thereby concentrating on the debtor’s actual conduct rather than the powers it could wield under the law. Specifically, the court noted that: the debtor “had discharged or transferred all of its patients and was no longer admitting new patients”; employees “were no longer engaged in their regular duties but instead were performing tasks solely designed to prepare [UH] for liquidation”; and the debtor “agreed to sell its assets and goodwill” to a third party simultaneous to its bankruptcy filing. Id. The court applied the exception despite the fact that debtor’s 1,300 employees continued to work on a daily basis for 16 days after the Chapter 11 petition was filed. Id. 69. While holding that United Healthcare misconstrued the LF exception, Judge Barnes nevertheless applied its analysis because “the result is the same in this case.” See Deft. UF 19. Applying the United Healthcare approach, Judge Barnes held that the exception still did not apply to WM since there was evidence indicating that WM intended to reorganize, rather than liquidate, when it filed bankruptcy. Id. 70. Specifically, Judge Barnes referred to a handful of pleadings filed by WM seeking relief from the bankruptcy court in order to effect a reorganization. Id. On that basis, Judge Barnes concluded that WM’s intent was “muddied at best” and thus insufficient as a matter of law to satisfy United Healthcare’s ‘intent to liquidate’ standard. Id. 71. What this ruling ignored, however, was the ample evidence indicating that WM’s intent was in fact to liquidate. For example, evidence showed that: WM communicated to employees that the bankruptcy filings were “likely the first step in what will likely be the end of the company”; WM had terminated hundreds of employees and retained only 59 “to help shut Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 27 of 31 PageID #:1292 22 down operations”; WM employees stopped performing their usual duties; WM returned inventory to vendors; WM sold its equipment; and WM engaged in efforts undertaken to “help customers find new vendors.” See Deft. UF 9, 23. 72. While SF attempted to reference some of this in its objection, Judge Barnes correctly disregarded these assertions since SF failed to provide any evidentiary support. See Deft. UF 24. 73. This evidence, had it been properly presented before Judge Barnes, clearly outweighed any formulaic pleadings filed by WM. Indeed, most of the pleadings referenced by Judge Barnes were requests for cash collateral, which were used to pay the skeletal employee staff left after the bankruptcy filing, whose main duties were to wind down the affairs of the company. See Doc. 4; In re World Marketing Atlanta, LLC, Case No. 15-B-32975 (Bankr. N.D. Ill.) Doc. 5; In re World Marketing Dallas, LLC, Case No. 15-B-32977 (Bankr. N.D. Ill.); see also Deft. UF 9. Furthermore, Judge Barnes referenced a Sale Motion filed by WM to sell the company. See Deft. UF 25. However, even this was consistent with the debtor in United HealthCare, which sold its assets and goodwill upon filing for bankruptcy. United Healthcare, 200 F.3d 170 at 178. 74. If properly presented, the evidence of WM’s intent to liquidate would have served to “unmuddy” the issue and, at minimum, created a question of fact as to whether the LF exception applied. See, e.g., Carver v. Foresight Energy LP, No. 3:16-cv-3013, 2016 U.S. Dist. LEXIS 90665 (C.D. Ill. July 12, 2016), citing In re MF Glob. Holdings Ltd., 481 B.R. 268, 278 (Bankr. S.D.N.Y. 2012) (defenses to the obligation to provide WARN Notice requires a fact intensive inquiry); see also United Healthcare, 200 F.3d 170 at 178 (applying LF exception even Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 28 of 31 PageID #:1293 23 where some evidence existed showing intent to continue operation of business, such as the debtor’s 1,300 employees continuing to work daily for 16 days after bankruptcy filing). 75. The issue of WM’s intent was and remains a question of fact. Thus, Trustee’s Motion should be denied. E. Question of Fact Exists regarding CH’s Third Affirmative Defense for Contributory Negligence 76. Beyond claims regarding the exceptions to the Act, CH’s third affirmative defense also asserts that prior to the bankruptcy filing, WM instructed CH not to address the WARN Act issue because WM had received legal advice from another attorney indicating that the Act did not apply. See CH’s Affirmative Defenses, Doc. 64, p. 13-14. CH argues that any injury suffered by WM was caused by this instruction. 77. In its Motion, Trustee argues that this theory fails a matter of law, asserting that, “[I]t was incumbent on Defendant to correct its clients’ misunderstanding.” Doc. 93, ¶ 31. Thus, even if WM instructed CH not to address the WARN Act issue since another attorney advised that it did not apply, Trustee maintains that CH had a duty to correct this allegedly inaccurate advice. 78. The third affirmative defense also raises the failure of Trustee and Trustee’s counsel with respect to the three exceptions to the WARN notice. As shown above, those failures were the cause of the injuries suffered by Plaintiff and therefore are affirmative defenses to the action. 79. This dispute, of course, is a question of fact wholly inappropriate for resolution on a summary judgment motion. Under Illinois law, a legal malpractice plaintiff must prove that the defendant attorney violated the standard of care, which “must generally be established through expert testimony.” Barth v. Reagan, 139 Ill. 2d 399, 407, 564 N.E.2d 1196, 1200 (Ill. Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 29 of 31 PageID #:1294 24 1990). Whether the defendant breached the standard of fact “is a question of fact.” Mayol v. Summers, Watson & Kimpel, 223 Ill. App. 3d 794, 806, 585 N.E.2d 1176, 1183 (Ill. App. 1992). 80. Here, Trustee fails to even present any expert testimony establishing the applicable standard of care. And even if it did, summary judgment would still be inappropriate because whether CH breached that standard of care is a question of fact. 81. As a result, summary judgment on this issue should be denied. CONCLUSION For the foregoing reasons, Defendant, CRANE, HEYMAN, SIMON, WELCH & CLAR, respectfully requests that this Court Deny Plaintiff’s Motion for Partial Summary Judgment on CH’s Second, Third, and Fourth Affirmative Defenses and grant any additional relief the Court deems just and proper. Dated: June 10, 2019 Joseph R. Marconi, ARDC #01760173 Ramses Jalapour, ARDC #6313128 LeighAnn M. Thomas, ARDC #6327687 Johnson & Bell, Ltd. 33 West Monroe Street, Suite 2700 Chicago, Illinois 60603 Tel: 312-372-0770 marconij@jbltd.com jalapourr@jbltd.com thomasl@jbltd.com Respectfully submitted, CRANE, HEYMAN, SIMON, WELCH & CLAR By: __/s/ Joseph R. Marconi One of Its Attorneys Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 30 of 31 PageID #:1295 25 CERTIFICATE OF SERVICE I hereby certify that on June 10, 2019, I served a copy of the foregoing on the following individuals by email: Eric D. Madden (admitted pro hac vice) Brandon V. Lewis (admitted pro hac vice) D. Benjamin Thomas (admitted pro hac vice) Reid Collins & Tsai LLP 1601 Elm Street, Suite 4250 Dallas, Texas 75201 Telephone: 214.420.8900 Facsimile: 214.420.8909 emadden@rctlegal.com blewis@rctlegal.com bthomas@rctlegal.com -and- Michael Brandess (6299158) SF Grais & Helsinger LLP 30 N. LaSalle St., Ste. 3000 Chicago, Illinois 60602 Telephone: 312.704.9400 Facsimile: 312.372.7951 mbrandess@SFGH.com Counsel for Plaintiff Norman B. Newman, solely as Liquidating Trustee of the World Marketing Liquidating Trust _/s/ Tula Kotsiovos __________________ Case: 1:17-cv-06978 Document #: 108 Filed: 06/10/19 Page 31 of 31 PageID #:1296