Norman B. Newman, solely as Liquidating Trustee of the World Marketing Liquidating Trust v. Crane, Heyman, Simon, Welch & ClarMEMORANDUMN.D. Ill.April 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-cv-6978 v. District Judge Thomas M. Durkin Magistrate Judge Susan E. Cox CRANE, HEYMAN, SIMON, WELCH & CLAR, Defendant. TRUSTEE’S MEMORANDUM IN SUPPORT OF MOTION FOR PARTIAL SUMMARY JUDGMENT Norman B. Newman, the liquidating trustee (the “Trustee”) of the World Marketing Liquidating Trust established in the Chapter 11 bankruptcy cases of World Marketing Chicago, LLC and its co-debtors (collectively, “World Marketing”), moves for partial summary judgment under Federal Rule of Civil Procedure 56(a) and respectfully requests that the Court render judgment on Defendant Crane, Heyman, Simon, Welch & Clar’s Second, Third, and Fourth Affirmative Defenses. Each defense is contingent on certain exceptions to liability under the WARN Act being viable. The evidence establishes that, as a matter of law, none was viable. INTRODUCTION 1. The Trustee files this motion because there is no genuine issue of material fact regarding the Second, Third, or Fourth Affirmative Defenses pleaded in the Answer of Defendant Crane, Heyman, Simon, Welch & Clar (“Defendant”). The Trustee respectfully submits that the Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 1 of 17 PageID #:701 2 Court should grant this motion now because doing so will (a) streamline fact and expert discovery, (b) shorten trial, and (c) avoid the jury confusion that would otherwise result if Defendant were permitted to litigate the irrelevant and inaccurate theories underlying these untenable defenses. Indeed, these affirmative defenses are the only thing giving those theories a pretext of relevance. Without them, discovery wraps earlier, contested issues evaporate, and trial shortens by days. 2. Each of these affirmative defenses alleges that the Trustee caused the damages that he seeks to recover from Defendant. Defendant’s argument goes like this. In this malpractice lawsuit, the Trustee alleges that Defendant failed to advise its clients on the applicability and risks of violating 29 U.S.C. § 2101, et seq. (the “WARN Act”), which led to a class action based on WARN Act violations that the Trustee defended and lost. Defendant’s Second, Third, and Fourth Affirmative Defenses allege that the Trustee lost because he mishandled viable defenses based on certain exceptions to the WARN Act, namely the Faltering Company, Unforeseen Business Circumstances, and Liquidating Fiduciary exceptions to WARN Act liability. If, however, these exceptions were not viable as a matter of law, then there is no genuine issue of material fact regarding the affirmative defenses, and they should be dismissed. 3. These WARN Act exceptions were not viable as a matter of law. The Faltering Company and Unforeseen Business Circumstances exceptions were not viable because World Marketing did not timely provide terminated employees with a notice containing the information required by the WARN Act and the related regulations. And the Liquidating Fiduciary exception was not viable because, prior to the Trustee’s appointment, Defendant caused World Marketing to make various statements, take various positions, and obtain various forms of relief during its bankruptcy case that were incompatible with World Marketing’s qualifying as a liquidating Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 2 of 17 PageID #:702 3 fiduciary. Defendant’s actions therefore rendered these three exceptions not viable long before the Trustee became involved, and no amount of discovery can change that. 4. Because the exceptions were not viable and because Defendant’s Second, Third, and Fourth Affirmative Defenses are contingent on them being viable, the Trustee respectfully requests that the Court enter judgment against Defendant on those three affirmative defenses. BACKGROUND A. World Marketing Retains Defendant to Help It Prepare for Bankruptcy. 5. On September 10, 2015, World Marketing’s lender swept its bank accounts, threatening its survival.1 By September 16, 2015, Defendant was preparing World Marketing’s bankruptcy filings.2 6. Although World Marketing continued to seek additional funding in an effort to avoid bankruptcy, by September 23, 2015, everyone agreed that bankruptcy was inevitable.3 World Marketing executives and consultants began identifying employees to be terminated in the bankruptcy and began crafting the termination notice to be used (the “Termination Notice”).4 As Defendant was preparing World Marketing’s bankruptcy filings, World Marketing asked it to comment on the Termination Notice.5 Defendant did so, instructing that references in the Termination Notice to World Marketing’s “liquidation” should be removed.6 1 See Statement of Undisputed Material Facts (“UF”) No. 1. 2 UF Nos. 2-4. 3 UF Nos. 5-7. 4 UF Nos. 8-10. 5 UF Nos. 9-10. 6 UF No. 10. Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 3 of 17 PageID #:703 4 7. It is undisputed that while preparing World Marketing’s bankruptcy filings, Defendant learned that each World Marketing entity employed more than 100 people and intended to terminate more than 50 employees after filing for bankruptcy.7 B. Defendant Did Not Advise World Marketing of Its Duties Under the WARN Act or the Risks of Violating Those Duties. 8. The WARN Act applies to “any business enterprise that employs . . . 100 or more employees, excluding part-time employees.”8 It prohibits those employers from ordering a “plant closing” or “mass layoff” without first giving affected employees at least 60-days written notice.9 Federal regulations require that such a notice (a “WARN Notice”) contain, at a minimum, information regarding (a) “whether the planned action is expected to be permanent or temporary,” (b) the “expected date when the individual employee will be separated,” and (c) “whether or not bumping rights exist.”10 9. Employers may give less than 60-days notice if one of the following exceptions in the WARN Act applies: (a) the “Faltering Company” exception; or (b) the “Unforeseen Business Circumstances” exception.11 In either case, the employer must still provide its employees the information required by federal regulations plus “as much notice as is practicable and . . . a brief statement of the basis for reducing the notification period.”12 If an employer fails to do so, it is liable to terminated employees for benefits and “back pay for each day of the violation.”13 7 UF Nos. 11-12. 8 29 U.S.C. § 2101(a)(1)(A). 9 See id. § 2102(a). 10 See 20 C.F.R. § 639.7. 11 The Faltering Company and Unforeseen Business Circumstances exceptions are located at 29 U.S.C. §§ 2102(b)(1) and 2102(b)(2)(A), respectively. 12 Id. § 2102(b)(3). 13 Id. § 2104(1)(A), (B). Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 4 of 17 PageID #:704 5 10. Although Defendant commented on the Termination Notice and prepared bankruptcy filings contemplating the layoff of hundreds of employees, Defendant never advised World Marketing about the obligations or risks of the WARN Act.14 And because Defendant knew all the relevant facts regarding World Marketing’s size and its planned layoffs,15 Defendant knew or should have known that the WARN Act applied to World Marketing and should have advised World Marketing of the WARN Act’s requirements, the need to send a WARN Notice, and the penalties for not doing so. It is undisputed that Defendant did no such thing.16 C. Under Defendant’s Guidance, World Marketing Terminated Hundreds of Employees but Continued Operating as a Going Concern. 11. On the morning of World Marketing’s bankruptcy, its President, Tyrone Jeffcoat, emailed Defendant and others an extensive “Proposed Communication Plan,” which explained that Mr. Jeffcoat would synchronize the termination of hundreds of World Marketing employees with the bankruptcy filings.17 Three minutes after Defendant finished filing World Marketing’s bankruptcy petitions, Mr. Jeffcoat sent emails to every World Marketing employee with a World Marketing email address,18 announcing that World Marketing had filed for bankruptcy and would only retain a “small number” of them.19 Mr. Jeffcoat attached an “FAQ” sheet with additional information, including salary and benefits information.20 It is undisputed that that these actions 14 See UF Nos. 8-12, 18. 15 See UF Nos. 11-12. 16 See UF Nos. 18-19. 17 See UF No. 13; see also App. at 70-71. 18 Not every employee had a World Marketing email address. See UF No. 16. 19 See UF Nos. 14-15; see also App. at 104 (copy of Mr. Jeffcoat’s email to some employees). 20 See App. at 105. Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 5 of 17 PageID #:705 6 terminated hundreds of World Marketing employees (the “Layoffs”).21 It is also undisputed that World Marketing never provided a written WARN Notice to its employees prior to the Layoffs.22 12. The bankruptcy petitions that Defendant drafted and filed on World Marketing’s behalf sought relief under Chapter 11 of the Bankruptcy Code, making World Marketing a debtor- in-possession.23 By default, a debtor-in-possession continues operations “for the benefit of creditors” under 11 U.S.C. § 1108.24 The remaining employees at World Marketing did just that, operating the business while also preparing it for a potential sale under 11 U.S.C. § 363 as a going concern.25 World Marketing’s bankruptcy docket records these efforts in several places, including the motions that Defendant drafted for World Marketing seeking court permission to use cash collateral, to make payroll, and to conduct the (unsuccessful) going-concern sale.26 These public statements also comport with the internal conversations that took place between World Marketing personnel and Defendant during this time.27 D. World Marketing’s Employees File a Lawsuit, and Its Defense Fell to the Trustee. 13. The bankruptcy court appointed the Official Committee of Unsecured Creditors (the “Committee”) in World Marketing’s bankruptcy case on October 15, 2015.28 The Committee 21 See UF No. 17. 22 See UF No. 20; see also UF No. 21. 23 See App. at 98-103 (copy of filing receipts). 24 In re World Mktg. Chicago, LLC, 564 B.R. 587, 600 (Bankr. N.D. Ill. 2017) (Barnes, J.). 25 See id. at 603 (referring to World Marketing’s efforts to execute a “going concern sale of the Debtors’ business”). 26 See id. at 602-03. They are also recorded in the Summary of Cash Receipts and Cash Disbursements that Defendant filed on World Marketing’s behalf. See, e.g., App. at 178-93. 27 See UF Nos. 22-24. 28 See UF No. 25. Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 6 of 17 PageID #:706 7 then hired Sugar Felsenthal Grais & Helsinger LLP (“Sugar Felsenthal”) to serve as its counsel.29 Less than a week later, three former its employees (the “WARN Plaintiffs”) filed an adversary proceeding against World Marketing as a putative class action (the “WARN Claim”).30 The WARN Plaintiffs alleged that World Marketing violated the WARN Act by terminating employees on September 28, 2015 without serving a WARN Notice.31 14. In late 2015, World Marketing and the Committee struck a deal with the WARN Plaintiffs, pursuant to which they dismissed their adversary proceeding and re-filed the WARN Claim in the bankruptcy case as a class proof of claim.32 The WARN Claim was still pending when the bankruptcy court entered its order confirming World Marketing’s Revised Third Amended Plan of Liquidation (the “Plan”) on July 1, 2016.33 Pursuant to the Plan and its related Liquidating Trust Agreement, the bankruptcy court appointed the Trustee to manage the liquidating trust assets and obligations, which included defending against the WARN Claim.34 The Trustee subsequently retained Sugar Felsenthal as his counsel.35 15. When the WARN Plaintiffs asked the bankruptcy court to allow the WARN Claim in August 2016, the Trustee objected and opposed the motion.36 In support, the Trustee argued that the Liquidating Fiduciary exception excused World Marketing from having to issue a WARN 29 See id. 30 See UF No. 26. 31 See App. at 112-23. 32 See UF No. 30. 33 See UF Nos. 31-32. 34 See UF No. 32. 35 See UF No. 33. 36 See UF Nos. 34-36. Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 7 of 17 PageID #:707 8 Notice prior to the Layoffs.37 The bankruptcy court disagreed, holding that even under the broadest understanding of the exception, the indisputable facts established that World Marketing was not a liquidating fiduciary.38 The bankruptcy court therefore allowed the WARN Claim, albeit in an amount to be liquidated in a subsequent evidentiary proceeding.39 16. The Trustee appealed the bankruptcy court’s decision,40 but after analyzing the potential costs and benefits of pursuing the appeal, the Trustee chose in his reasonable business judgment to dismiss the appeal and settle the WARN Claim for an amount less than what the WARN Plaintiffs were seeking.41 The Trustee then filed a motion pursuant to Federal Rule of Bankruptcy Procedure 9019 seeking the bankruptcy court’s approval of this settlement, and on February 28, 2018, the bankruptcy court granted the Trustee’s motion, finding that the settlement was “negotiated at arm’s-length and in good faith” and was “fair and equitable and in the best interest of the Parties.”42 STANDARD OF REVIEW 17. “[C]ourts in the Northern District of Illinois routinely entertain motions for partial summary judgment” where a party “seeks judgment on a complete affirmative defense.”43 The 37 See UF Nos. 35-36; App. at 358-61 (copy of Trustee’s written objection). 38 See UF No. 37; see also In re World Mktg. Chicago, LLC, 564 B.R. 587, 601-03 (Bankr. N.D. Ill. 2017) (published version of bankruptcy court’s relevant reasoning) 39 See UF No. 37; App. at 426. 40 See UF No. 38. 41 See UF No. 39. 42 See UF Nos. 40-41; App. at 471-72. 43 Rubin v. Islamic Republic of Iran, 408 F. Supp. 2d 549, 552 (N.D. Ill. 2005). Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 8 of 17 PageID #:708 9 purpose of such a motion is to “frame and narrow the triable issues if the court finds that such an order would be helpful to the progress of the litigation.”44 18. Partial summary judgment “is appropriate ‘if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law’” on the challenged issue or defense.45 Where, like here, a plaintiff seeks partial summary judgment on an affirmative defense, “[t]he burden of proof is on the defendant,” who “must present ‘evidence sufficient to withstand summary judgment.’”46 Else, the motion must be granted. ARGUMENT 19. Defendant’s Second, Third, and Fourth Affirmative Defenses depend on the Faltering Company, Unforeseen Business Circumstances, or Liquidating Fiduciary exception being a viable defense to the WARN Claim. Because of Defendant’s actions before and after the Layoffs, however, none of those exceptions was viable, and no amount of discovery can change that. Thus, the Trustee is entitled to judgment on those defenses now as a matter of law. A. As a Matter of Law, the Faltering Company and Unforeseen Business Circumstances Exceptions Were Not Viable Because the Termination Notice Was Insufficient. 20. The parties agree that the events leading up to the Layoffs should have qualified World Marketing for the Faltering Company and the Unforeseen Business Circumstances exceptions to the WARN Act.47 That is, World Marketing would have been able to avoid WARN 44 Id. (internal quotations omitted). 45 FameFlynet, Inc. v. Jasmine Enters., Inc., 344 F. Supp. 3d 906, 910 (N.D. Ill. 2018) (Durkin, J.) (quoting FED. R. CIV. P. 56(a)). 46 Id. (quoting Chicago Bd. of Educ. v. Substance, Inc., 354 F.3d 624, 629 (7th Cir. 2003)). 47 See 20 C.F.R. § 639.9. Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 9 of 17 PageID #:709 10 liability had it issued a WARN Notice with the required contents prior to the Layoffs or as soon as practicable thereafter.48 Unfortunately, it did not.49 21. Despite Defendant’s reviewing and commenting on World Marketing’s Termination Notice, that notice—even when considered with other materials provided to terminated employees—was insufficient under the WARN Act. None of the various written communications sent to employees on or around September 28, 2015 contained requisite information such as: (a) a statement as to 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. All this information must be included in the WARN Notice.50 World Marketing also failed to provide a notice to the relevant state agencies, as required under 20 C.F.R. § 639.7(e).51 22. Moreover, World Marketing’s ability to promptly deliver the Termination Notice and related communications to most or all employees shortly after filing the bankruptcy petitions establishes that there was no practicable impediment to serving them with a WARN Notice at or around the same time. 48 The WARN Act does not expressly provide for after-the-fact notice. See 29 U.S.C. § 2102(b). And although promulgating regulations seemingly contemplate after-the-fact notice, those same regulations— and the WARN Act itself—require that such notice be given “as soon as practicable.” 20 C.F.R. § 639.9; see also 29 U.S.C. § 2012(b)(3). The Trustee has not found a single instance of a court blessing a delay longer than eight days. Indeed, a court in this district has held that 10 days is too long. See Local 1239, Int’l B’hood of Boilermakers, Iron Shipbuilders, Blacksmiths, Forgers & Helpers v. AllSteel, Inc., No. 94- CV-3552, 1995 WL 348028, at *4 (N.D. Ill. June 7, 1995). Here, it is undisputed that no WARN Notice issued within 10 days of the Layoffs. See UF Nos. 25, 34 [check if still accurate. 49 See UF Nos. 18-21. 50 See 20 C.F.R. §§ 639.7(d), 639.9. 51 See UF No. 21. Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 10 of 17 PageID #:710 11 23. Numerous courts have held that serving a WARN Notice is a condition precedent to claiming these statutory exceptions.52 Because World Marketing—while being advised by Defendant—did not serve one, neither the Faltering Company exception nor the Unforeseen Business Circumstances exception was a viable defense to the WARN Claim. Those exceptions were therefore not available to the Trustee when defending against the WARN Claim and cannot support Defendant’s Second, Third, or Fourth Affirmative Defenses. B. As a Matter of Law, the Liquidating Fiduciary Exception Was Not Viable Because World Marketing Represented that It Was Operating as a Going Concern. 24. Whereas the Faltering Company and Unforeseen Business Circumstances exceptions were not viable because of what Defendant did before the Layoffs (i.e., fail to advise World Marketing to issue a WARN Notice), the Liquidating Fiduciary exception was not viable because of Defendant’s express actions after the Layoffs. Namely, the Trustee could not successfully invoke the Liquidating Fiduciary exception to defeat the WARN Claim because, as the bankruptcy court concluded, statements in the bankruptcy filings that Defendant authored prohibited the Trustee from arguing that World Marketing was a liquidating fiduciary.53 25. In the Second, Third, and Fourth Affirmative Defenses, Defendant faults the Trustee for “fail[ing] to present proof of the ‘liquidating fiduciary exception’” and for “inexplicably waiv[ing] this defense” by not appealing the bankruptcy court’s decision that 52See Torres v. Niche, Inc., No. 12-CV-12059, 2013 WL 6655415, at *2 (D. Mass. Dec. 18, 2013); Weekes- Walker v. Macon Cnty. Greyhound Park, 877 F. Supp. 2d 1192, 1206 (M.D. Ala. 2012); Grimmer v. Lord Day & Lord, 937 F. Supp. 255, 257 (S.D.N.Y. 1996); D’Amico v. Tweeter Opco, LLC (In re Tweeter Opco, LLC), 453 B.R. 534, 547 (Bankr. D. Del. 2011). 53 See In re World Mktg. Chicago, LLC, 564 B.R. 587, 602-03 (Bankr. N.D. Ill. 2017) (Barnes, J.) (holding that Trustee could not invoke liquidating fiduciary exception because World Marketing had “ability to operate the debtor’s business” and because World Marketing repeatedly sought relief tied to reorganizing, not liquidating). Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 11 of 17 PageID #:711 12 overruled his objection to the WARN Claim.54 Defendant cannot raise a genuine issue of material fact on this defense, however, because regardless of what other evidence the Trustee might have introduced, World Marketing had already sought and obtained bankruptcy court relief by representing that it was reorganizing, not liquidating. 26. The Liquidating Fiduciary exception comes from the following passage in the Department of Labor’s commentary on the WARN Act regulations: 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.55 As the bankruptcy court noted when overruling the Trustee’s objection to the WARN Claim, the relevant language suggests that a debtor-in-possession (like World Marketing) is not a liquidating fiduciary unless its “sole function in the bankruptcy process is to liquidate a failed business.”56 27. That was not World Marketing’s sole function, as confirmed by the filings that Defendant authored and submitted on World Marketing’s behalf. Indeed, the bankruptcy court catalogued World Marketing’s numerous post-petition statements that it “was reorganizing, not liquidating.”57 These included representations in World Marketing’s motions seeking to use cash collateral that cash “was necessary ‘to continue to operate its business and manage its financial affairs, and effectuate an effective plan of reorganization’” and that, without cash, World Marketing would “be unable to continue to operate its business.”58 Other filings that Defendant 54 Answer [Docket No. 64] at 12. 55 Worker Adjustment and Retraining Notification, 54 Fed. Reg. 16,042, 16,061-63 (Apr. 20, 1989). 56 In re World Mktg., 564 B.R. at 598 (quoting 54 Fed. Reg. 16,045 (1989)). 57 Id. at 602. 58 Id. (emphasis in original) (quoting World Marketing bankruptcy filings). Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 12 of 17 PageID #:712 13 made on World Marketing’s behalf continued to insist that, post-bankruptcy, World Marketing was “‘operating its business’” and that if the bankruptcy court denied the relief sought, it would “‘jeopardize [World Marketing’s] ability to reorganize.’”59 That is, when advocating on World Marketing’s behalf, Defendant consistently warned the bankruptcy court and all parties-in-interest that if the relief sought were denied, World Marketing would be forced to liquidate. As the bankruptcy court highlighted, this conduct was “inconsistent with liquidation.”60 28. In other words, no matter the evidence the Trustee could have conjured, he could not undo what World Marketing had previously done (under Defendant’s guidance) to obtain relief from the bankruptcy court.61 As the bankruptcy court concluded, “to allow [World Marketing] to act publicly in one manner and privately in another, yet maintain the protections that might have been lost if their private actions were made public, would be abhorrent.”62 29. Thus, even if the Seventh Circuit were to recognize a liquidating fiduciary exception to the WARN Act (which it has not), the representations that Defendant made on World Marketing’s behalf and the actions that Defendant had World Marketing take eviscerated its viability here. Accordingly, there is no genuine issue of material fact concerning the viability of the Liquidating Fiduciary exception, and no amount of discovery can change that. As such, the Liquidating Fiduciary exception therefore cannot serve as a basis to support Defendant’s Second, Third, or Fourth Affirmative Defense. 59 Id. (quoting World Marketing filings). 60 Id. at 603. 61 See MB Fin. Bank, N.A. v. Patel, No. 10-cv-6566, 2012 WL 346456, at *6 (N.D. Ill. Feb. 1, 2012) (granting summary judgment based on judicial estoppel because “the bankruptcy court relied upon the representations” made in connection with a cash collateral order and “when a party prevails on one legal or factual ground in a lawsuit, that party cannot later repudiate that ground in subsequent litigation” (quoting Urbania v. Cent. States, Se. & Sw. Areas Pension Fund, 421 F.3d 580, 589 (7th Cir. 2005))). 62 Id. Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 13 of 17 PageID #:713 14 C. As a Matter of Law, Defendant Cannot Prove Contributory Negligence. 30. Defendant labels its Third Affirmative Defense “Negligence of Plaintiff” and alleges that its client, World Marketing, acted negligently both when it “instruct[ed] defendant that the WARN Act did not apply” and also “through the conduct of its agent.”63 Both theories fail. 31. Regarding World Marketing’s alleged instructions about the WARN Act, “an attorney’s liability for failing to advise a client of the foreseeable risks attendant to a given course of legal action . . . is predicated upon the client’s exposure to a risk that the client did not knowingly and voluntarily assume.”64 It is undisputed that Defendant did not advise World Marketing about the WARN Act or the risks attendant to terminating its employees without issuing a WARN Notice.65 Thus, even assuming, arguendo, that World Marketing instructed Defendant that the WARN Act did not apply, it was incumbent on Defendant to correct its clients’ misunderstanding, and it is undisputed that Defendant did no such thing. 32. Regarding the “conduct of [World Marketing’s] agent,” Defendant is presumably referring to Sugar Felsenthal in its role as counsel to the Committee. This theory fails for three reasons. First, in a chapter 11 case, neither the Committee nor its counsel is the debtor’s agent.66 Second, the Committee did not exist (or have counsel) until 17 days after the Layoffs.67 And third, the Illinois Supreme Court has made clear that “[a]n attorney cannot avoid his professional obligations to a client by the simple device of delegating work to others.”68 Thus, anything that 63 Answer [Docket No. 64] at 13, 14. 64 Metrick v. Chatz, 639 N.E.2d 198, 202 (Ill. App. Ct. 1994). 65 UF Nos. 18-19. 66 See 11 U.S.C. § 1103(b) (“An attorney . . . employed to represent [the Committee] may not, while employed by such committee, represent any other entity having an adverse interest in connection with the case.”). 67 See UF No. 25. 68 In re Weinberg, 518 N.E.2d 1037, 1040 (Ill. 1988). Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 14 of 17 PageID #:714 15 Sugar Felsenthal did or failed to do while counsel for the Committee could not, as a matter of law, relieve Defendant of either its professional obligations to World Marketing or its liability for violating those professional obligations. 33. Finally, even if the Third Affirmative Defense is attempting to blame the Trustee himself for the WARN Liability, that too fails as a matter of law. The Trustee was not appointed until well after Defendant approved the Termination Notice, well after Defendant oversaw the Layoffs, well after the WARN Claim had been filed, and well after World Marketing and the Committee began to litigate the WARN Claim.69 And while defending against the WARN Claim ultimately fell to the Trustee, he was unable—for the reasons stated above—to prevail because he did not have a viable Faltering Company, Unforeseen Business Circumstances, or Liquidating Fiduciary exception to invoke, thanks to the express actions of Defendant and World Marketing prior to his appointment. Defendant cannot blame the Trustee for losing the unwinnable hand that Defendant dealt him. 34. There is therefore no genuine issue of material fact regarding Sugar Felsenthal’s conduct as counsel for the Committee, Sugar Felsenthal’s conduct in defense of the WARN Claim, or the Trustee’s failing to prevail against the WARN Claim. The Trustee is thus entitled to judgment as a matter of law on Defendant’s Second, Third, and Fourth Affirmative Defenses. CONCLUSION For the reasons explained, the Trustee respectfully requests partial summary judgment on Defendant’s Second, Third, and Fourth Affirmative Defenses and a finding by the Court that as a matter of law, the Faltering Company exception, the Unforeseen Business Circumstances exception, and the Liquidating Fiduciary exception were not viable defenses to the WARN Claim. 69 UF Nos. 9-10, 13-14, 26, 30, 32-33. Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 15 of 17 PageID #:715 Dated: April 10, 2019 Respectfully Submitted, By: /s/ Brandon V. Lewis 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) SUGAR FELSENTHAL 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 Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 16 of 17 PageID #:716 CERTIFICATE OF SERVICE I certify that on April 10, 2019, I electronically filed the foregoing Memorandum in Support of the Trustee’s Motion for Partial Summary Judgment with the Clerk of the Court using CM/ECF, which will send a notification of this filing to all counsel and parties of record. /s/ Brandon V. Lewis Brandon V. Lewis Case: 1:17-cv-06978 Document #: 93 Filed: 04/10/19 Page 17 of 17 PageID #:717
