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Morgan v. Affiliated Foods Southwest Inc.

United States District Court, E.D. Arkansas

April 26, 2016

BRENDA MORGAN, on behalf of herself and on behalf of all other persons similarly situated; and DONNA KELLETT, on behalf of herself and on behalf of all other persons similarly situated PLAINTIFFS



Affiliated Foods Southwest, Inc., filed a petition for bankruptcy on May 5, 2009. The present action began as an adversary proceeding in bankruptcy on July 10, 2009. The plaintiffs filed a class action complaint, alleging that Affiliated Foods violated the Worker Adjustment and Retraining Notification Act (WARN Act)[1] by failing to give employees at least sixty days advance notice of termination. To preserve the limited estate assets, the parties agreed to stay the adversary proceeding. The plaintiffs filed a motion to lift the stay on February 27, 2015, which the bankruptcy judge granted on April 27, 2015. Three days later, Affiliated Foods filed a motion to withdraw the reference pursuant to 28 U.S.C. § 157(d), Bankruptcy Rule 5011, and Local Rule 83.1(c). Affiliated Foods contended that this Court had no discretion but to withdraw the reference and that even if it had discretion, the bankruptcy court did not have the constitutional authority to enter a judgment on the plaintiffs’ WARN Act claim. The plaintiffs did not object to withdrawing the reference and the motion was granted. Now, the plaintiffs have filed a motion for class certification pursuant to Federal Rule of Civil Procedure 23. Affiliated Foods opposes class certification, arguing that the plaintiffs failed to satisfy the requirements of Rule 23(a) and Rule 23(b)(3). For the following reasons, the motion for class certification is granted.


Affiliated Foods is a wholesale food distribution company incorporated in Arkansas. It began to experience cash flow problems in 2008. To allay these problems, Affiliated Foods executives devised a check-kiting scheme to make it appear that it had sufficient funds to cover its expenses. U.S. Bank officials discovered the scheme in February 2009 and froze Affiliated Foods’s line of credit. Affiliated Foods was unable to continue its operations and on May 5, 2009, it began to terminate employees. Affiliated Foods initially filed a Chapter 11 reorganization bankruptcy but converted it to a Chapter 7 liquidation bankruptcy. As Affiliated Foods began liquidating its assets, employees who were not terminated on May 5 were terminated in stages.

As noted, the plaintiffs commenced this action on July 10, 2009 as an adversary proceeding in the bankruptcy case. Document #1, Morgan et al. v. Affiliated Foods Southwest, Inc. et. al., No. 4:09AP01176 (Bankr. E.D. Ark. July 10, 2009). The trustee sent notices of the right to file proofs of claim to approximately 400 Affiliated Foods employees on September 22, 2009, informing them that the bar-date was December 23, 2009. Document #978, In re Affiliated Foods, Southwest, Inc., No. 4:09BK13178 (Bankr. E.D. Ark. May 5, 2009). In November, the parties filed a joint stipulation with the bankruptcy court in the adversary proceeding stating that they had discussed the lack of assets in the estate and the unlikelihood that there would be any funds available to the putative class, assuming that it was successful in pursuing its WARN Act claim. Document #24, Morgan, No. 4:09AP01176. The parties stipulated:

In light of this uncertainty, and in an effort to conserve the already scarce assets of the estate, the Parties have stipulated to the entry of an Agreed Order staying this proceeding, as described below, to allow the Parties an opportunity to determine what, if any, additional assets will come into the estate.

On November 16, 2009, the bankruptcy court entered an order staying the action until either party moved for the stay to be lifted. Document #25, id. The plaintiffs moved to lift the stay on February 27, 2015. Document #29, id. Affiliated Foods then moved to withdraw the reference and open a new civil action in this Court. Document #36, id. The motion was granted and the action commenced in this court on May 27, 2015. Document #1. Today, the bankruptcy proceedings are ongoing but Affiliated Foods asserts that the trustee is near to finishing the administration of the estate and will soon be ready to make distributions. Document #19 at 3.


The WARN Act states that a person seeking to hold an employer liable for an unlawful mass layoff “may sue either for such person or for other persons similarly situated, or both, in any district court of the United States for any district in which the violation is alleged to have occurred.” 29 U.S.C. § 2104(5). A valid WARN Act claim requires the presence of: (1) a mass layoff or plant closing as defined by the statute, conducted by (2) an employer who fired employees, (3) who, pursuant to the WARN Act, are entitled notice. 29 U.S.C. § 2102(a); 20 C.F.R. § 639.1(a). The named plaintiffs-Morgan and Kellett-seek to enforce the WARN Act’s mass-layoff provisions against Affiliated Foods through a class action on behalf of themselves and other former employees allegedly terminated without cause. The plaintiffs propose the following class definition:

All former employees of Defendant Affiliated Foods Southwest, Inc. (“AFS” or “Defendant”) who worked at or reported to the facility located as 12103 Interstate 30, Little Rock, Arkansas 72209 (the “Facility”) and who were terminated and/or laid off without cause on their part from their employment on or about May 5, 2009, or thereafter, as part of, or as the reasonably expected consequence of, the “mass layoff” or “plant closing” as defined by the Worker Adjustment and Retraining Notification (WARN) Act of 1988, 29 U.S.C. §§ 2101-2109 at the Defendant’s Facility, and who do not file a timely request to opt-out of the class.

Document #11 at 8.

Federal Rule of Civil Procedure 23 governs class actions. First, the putative class must meet all of the requirements of Rule 23(a). Then, the putative class must satisfy one of the three subsections of Rule 23(b). Affiliated Foods objects to certification based on each 23(a) requirement and United States Supreme Court precedent requires district courts to undertake a “rigorous analysis” to ensure that all requirements of Rule 23(a) have been met. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351, 131 S.Ct. 2541, 2551, 180 L.Ed.2d 374 (2011). The Rule 23(a) requirements for class certification are: (1) the putative class is so numerous that it makes joinder of all members impractical; (2) questions of law or fact are common to the class; (3) the class representatives’ claims or defenses are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. “A party seeking class certification must affirmatively demonstrate his compliance with the Rule-that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc.” Dukes, 564 U.S. at 350, 131 S.Ct. at 2551.

A. Numerosity

The plaintiffs seek to certify a class of approximately 500 former Affiliated Foods employees. Document #2 at 6, ¶ 24; Document #11-4, 5. The putative class must be so numerous that joinder of all members is impractical. Fed.R.Civ.P. 23(a)(1). “The numerosity requirement requires examination of the specific facts of each case and imposes no absolute limitations.” Gen. Tel. Co. of the Nw., Inc. v. Equal Emp’t Opportunity Comm’n, 446 U.S. 318, 330, 100 S.Ct. 1698, 1706, 64 L.Ed.2d 319 (1980). Several factors are relevant to whether the class is so numerous that joinder of all members is impracticable, such as the size of the class, the nature of the action, the size of the individual claims, and the inconvenience of trying individual suits. Paxton v. Union Nat. Bank, 688 F.2d 552, 559-60 (8th Cir. 1982).

First, the plaintiffs have offered a basis for the class size estimates provided by Kellett and Morgan. Document #11-4 at 3, ¶ 6; Document #11-5 at 3, ¶ 6. Documents filed under seal show that a potential class of more than 400 members exists. Document #26. The size of this class is a factor weighing in favor of finding that joinder of all members is impractical. See Day v. Celadon Trucking Serv., Inc., No. 4:09CV00031-SWW, 2010 WL 3270760 at *3 (E.D. Ark. Aug. 16, 2010) (finding a putative class of 449 former employees sufficient to satisfy the numerosity requirement in a WARN Act case); Alberts v. Nash Finch Co., 245 F.R.D. 399, 410 (D. Minn. 2007) (finding a putative class of 74 former employees sufficient to satisfy numerosity requirement in a WARN Act case); Johnson v. GMAC Mortg. Grp., Inc., 2006 WL 1071748 at *2 (N.D. Iowa April 20, 2006) (finding a putative class of 83 former employees sufficient to satisfy the numerosity in a WARN Act case). Second, application of the WARN Act hinges on whether an employer’s conduct affected a group of employees. Therefore, the nature of a WARN Act action[2] is a factor that militates in favor of an impracticability finding. See Alberts, 245 F.R.D. at 410. Third, the plaintiffs allege that the average claim for each potential class member is $10, 000 or less. Document #11 at 10. Kellett supports this allegation in her affidavit, stating that her claim is for $5, 280-excluding benefits-and Morgan states that her claim is for $10, 000-excluding benefits. Document #11-5; ...

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