United Steel Workers of America Local 2660 v. United States Steel Corporation
Filing
52
ORDER denying 30 Plaintiff's Motion for Summary Judgment; and granting 27 Defendant's Motion for Summary Judgment (Written Opinion). Signed by Judge John R. Tunheim on August 16, 2011. (HAM)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
UNITED STEEL WORKERS OF AMERICA
LOCAL 2660,
Plaintiff,
v.
Civil No. 09-2223 (JRT/LIB)
MEMORANDUM OPINION
AND ORDER ON CROSS
SUMMARY JUDGMENT
MOTIONS
UNITED STATES STEEL CORPORATION,
Defendant.
M. Vance McCrary, David C. Tufts, J. Cecil Gardner, and Mary E. Olsen,
THE GARDNER LAW FIRM, PC, 210 South Washington Avenue,
Mobile AL 36602; Robert D. Metcalf, METCALF, KASPARI,
ENGDAHL & LAZARUS, PA, 1660 South Highway 100 Number 333,
Minneapolis, MN 55416-1573; Stuart J. Miller, LANKENAU &
MILLER, LLP, 132 Nassau Street, Suite 423, New York, NY 10038, for
plaintiff.
Bruce J. Douglas, LARKIN HOFFMAN DALY & LIDGREN LTD,
7900 Xerxes Avenue South, Suite 150, Minneapolis, MN 55431-1194, for
defendant.
This dispute stems from defendant United States Steel Corporation’s (“U.S.
Steel”) layoff of 313 workers, represented by plaintiff United Steelworkers of America,
Local 2660 (“plaintiff”), in the fall of 2008. The layoff fell within the parameters of the
WARN Act. 29 U.S.C. § 2101. U.S. Steel failed to provide sixty days of notice of the
layoff as required by § 2102(a) of the statute, but moved for summary judgment on the
affirmative defense of unforeseeable business circumstances. Plaintiff also moved for
summary judgment on the unforeseeable business circumstances defense and the defense
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of good faith. Because the Court finds unforeseeable the depth of the economic crisis
that triggered the layoffs, and the unprecedented high demand for steel just prior to the
economic downturn would have heavily factored into the decision to delay the plant
shutdown, U.S. Steel has shown it acted within the scope of commercially reasonable
business judgment. As a result, the Court grants U.S. Steel’s motion for summary
judgment.
BACKGROUND
U.S. Steel operates an iron ore plant in Keewatin, Minnesota (the “Keetac plant”).
(Decl. of John E. Skube ¶ 3, Dec. 1, 2010, Docket No 38.) The Keetac plant produces
iron pellets, ninety-seven percent of which are used at two of U.S. Steel’s thirteen
steelmaking facilities – Granite City Works and Great Lake Works. (Skube Decl. ¶ 8,
Docket No. 38.) Both facilities’ blast furnaces principally produce sheet steel for the
construction and automotive industries. (Decl. of John C. Price ¶¶ 12-13, Dec. 1, 2010,
Docket No. 37.) U.S. Steel measures its profitability on the utilization rate of the steel
that comes from its facilities. (Id. ¶ 11.) “It is generally accepted in the steel industry
that for integrated steel producers to operate efficiently and profitably, a rate of capacity
utilization in excess of 65% must be maintained on a sustained basis.” (Id.) In addition,
each individual blast furnace must operate at seventy-five percent capacity to maintain
profitability and produce an acceptable quality of steel. (Id. ¶ 14.) During times of lower
demand for steel, U.S. Steel typically would idle the blast furnace at a given facility while
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maintaining the actual operation of that facility, resulting in few, if any, layoffs. (Id.
¶ 15.)
In the first three quarters of 2008, U.S. Steel reported some of the highest sales
and net income in its history. (Id. ¶ 16.) As a result of this high demand for steel, U.S.
Steel was operating at near full capacity when the U.S. economy experienced a sudden
downturn in the fall of 2008. (Id. ¶ 20.) In response to the downturn, and the uncertainty
of demand for steel in the future, U.S. Steel planned to temporarily idle blast furnaces,
focusing on those facilities in need of maintenance or other capital investment, along with
other measures to reduce costs.
(Id. ¶ 29.)
As the economic crisis deepened in
November 2008, U.S. Steel initiated a complete idling of the facilities at Granite City
Works and Great Lake Works, not just the blast furnaces. (Id. ¶ 35.) As a result,
operations at the Keetac plant were also idled. (Id.) This idling resulted in the layoffs of
the workers represented by plaintiff.
The plan to implement the idling was formulated on November 28 and 29, 2008
by U.S. Steel management. (Id.) The Executive Management Committee approved the
plan on December 1, 2008. (Id.) The Board of Directors and plaintiff were both notified
of the decision on December 2, 2008. (Id., Ex. 3; Skube Decl. ¶ 15, Docket No 38.) The
official WARN Act notice was sent on December 3, 2008 advising that “due to the recent
major and unanticipated downturn in the United States and global economy, and the
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resultant sharply lower demand for the plant’s products[,]” layoffs would occur.1 (Id.,
Ex. 1 at 1.) Between December 7 and 21, 2008, U.S. Steel laid off 313 employees at the
Keetac plant. (Id. ¶ 20.) On January 4, 2009, U.S. Steel recalled 145 of those employees
to a nearby plant although they were laid off again around March 1, 2009. (Id. ¶ 21.) By
December 29, 2009, all the laid off workers had been recalled. (Id. ¶ 22.) Both parties
agree as to the applicability of the WARN Act requirements to this layoff. Plaintiff
alleges U.S. Steel closed the Keetac plant in 2008 in a manner violative of the WARN
Act by failing to provide the sixty days notice required under the statute. (Compl. ¶¶ 1-6,
Docket. No. 1); 29 U.S.C. § 2102(a).
DISCUSSION
I.
STANDARD OF REVIEW
Summary judgment is appropriate where there are no genuine issues of material
fact and the moving party can demonstrate that it is entitled to judgment as a matter of
law. Fed. R. Civ. P. 56(c). A fact is material if it might affect the outcome of the suit,
and a dispute is genuine if the evidence is such that it could lead a reasonable jury to
return a verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A court considering a motion for summary judgment must view the facts in the
light most favorable to the non-moving party and give that party the benefit of all
1
Where employees are represented by a union, a WARN Act notice is sufficient if the
employer notifies the union instead of each represented worker. 29 U.S.C. § 2102(a)(1).
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reasonable inferences that can be drawn from those facts. Matsushita Elec. Indus. Co.,
Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
II.
WARN ACT
The WARN Act was enacted “to protect workers and their families . . . . WARN’s
notice period was designed to allow workers to adjust to the prospective loss of
employment, to seek and obtain alternative jobs and . . . to enter skill training or
retraining that will allow [them] to successfully compete in the job market.” Hotel Emps.
and Rest. Emps. Int’l Union Local 54 v. Elsinore Shore Assocs., 173 F.3d 175, 182 (3d
Cir. 1999) (alteration original) (internal quotation marks omitted) (citing 20 C.F.R.
§ 639.1(a) (1998)). Under the WARN Act, “certain large employers who order a plant
closing or mass layoff must provide sixty days advance written notice to, among others,
affected employees or their union representatives.”
Loehrer v. McDonnell Douglas
Corp., 98 F.3d 1056, 1060 (8th Cir. 1996). “The thrust of WARN is to give fair warning
in advance of prospective plant closings.” Elsinore Shore Assocs., 173 F.3d at 182.
However, Congress recognized that exceptions to this general rule were necessary
since “supplying generous advance notice would not be possible, or desirable, in all
cases.” Loehrer, 98 F.3d at 1060. U.S. Steel asserts that one such exception, the
unforeseeable business circumstances exception, applies and is a complete defense to its
failure to provide sixty days notice in this case. See 29 U.S.C. § 2102(b)(2)(A).
The unforeseen business circumstance exception is “a highly factual inquiry to be
assessed on a case by case basis.” Loehrer, 98 F.3d at 1060. The employer asserting the
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defense “bears the burden of proving that it applies.” Graphic Commc’ns Int’l Union,
Local 1B v. Bureau of Engraving, Inc., No. 01-1770, 2003 WL 21639146, at *4
(D. Minn. July 7, 2003) (citing Loehrer, 98 F.3d at 1060). Regulations on the exception
articulate:
An important indicator of a business circumstance that is not reasonably
foreseeable is that the circumstance is caused by some sudden, dramatic,
and unexpected action or condition outside the employer’s control. . . .
[A]n unanticipated and dramatic major economic downturn might . . .
be considered a business circumstance that is not reasonably
foreseeable. . . . The test for determining when business circumstances are
not reasonably foreseeable focuses on an employer’s business judgment.
The employer must exercise such commercially reasonable business
judgment as would a similarly situated employer in predicting the
demands of its particular market.
20 C.F.R. § 639.9(b) (emphasis added).
The Act still requires an employer to “give as much notice [of the closing] as is
practicable” and “a brief statement of the basis for reducing the notification period.” 29
U.S.C. § 2102(b)(3). However, it does not impose upon an employer a requirement to
provide sixty days of notice or continue in business to its detriment for the sixty day
notice period, simply because it is economically feasible or possible to do so. See Jurcev
v. Cent. Cmty. Hosp., 7 F.3d 618, 625 (7th Cir. 1993), cert. denied, 511 U.S. 1081 (1994);
Teamsters Nat. Freight Indus. Negotiating Comm. on Behalf of Howe v. Churchill Truck
Lines, Inc., 935 F. Supp. 1021, 1026 (W.D. Mo. 1996). Further, the Seventh Circuit has
noted that:
WARN Act defendants need not show that the circumstances which caused
a plant closing or mass layoff arose from out of the blue to qualify for the
exception. . . . [A] company, faced with [an] unprecedented cataclysmic
event, reasonably [may] need[] a little time to assess how things would
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shake out. And it [is] not unreasonable for [a] company to think it could
survive the carnage until . . . it ran up the white flag of surrender and gave
the bad news to its employees.
Roquet v. Arthur Andersen LLP, 398 F.3d 585, 590 (7th Cir. 2005) (citing cases where the
exception applied despite a dispute of foreseeability).
As a result, courts assessing whether an employer acting with commercially
reasonable judgment, do not apply the benefit of hindsight, rather the test is whether the
choice of the employer would have “raise[d] the eyebrows of any prudent
businessperson.” Loehrer, 98 F.3d at 1062. Courts addressing the applicability of the
unforeseen business exception analyze causation, foreseeability, and sufficiency of the
notice given. Causation is not disputed in this case.
A.
Foreseeability
Since the parties agree the layoffs were caused by the sudden economic downturn
of fall 2008, the operative question is when it was foreseeable that the downturn would
affect U.S. Steel such that it knew it would have to lay off workers. U.S. Steel initiated
the layoffs on December 7, 2008. What U.S. Steel knew sixty days before this date –
“the snapshot date” of October 8, 2008 – is determinative as to whether the shortened
notice period was permissible. While the decline in the automobile industry, discussions
of the economy in the presidential race, and the bursting of the housing bubble indicate
the economic downturn was well-known by that date (see Decl. of Bruce J. Douglas,
Dec. 1, 2010, Exs. B-D, Docket No. 39), it is not so obvious that the resultant dramatic
decrease in demand for steel was so evident. Notably, the government was considering
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the stimulus package2 and a potential bailout of the auto industry, making predictions on
the demand for steel uncertain. (See id., Exs. A, E.) Important to the disposition of this
case, U.S. Steel was also reporting one of the highest periods of demand for its products
in its history. As a result, U.S. Steel argues it was commercially reasonable for it to
believe temporarily idling the blast furnaces at its plants without actually closing the
facilities – its usual practice for handling such dips in demand – was a viable option to
weather the downturn.
In Loehrer v. McDonnell Douglas Corp., the Eighth Circuit addressed the scope of
the business judgment rule in upholding the district court’s grant of summary judgment to
an employer under the unforeseen business circumstances exception. The employer,
McDonnell Douglas, had a government contract to design and manufacture a new fighterbomber for the Navy. Loehrer, 98 F.3d at 1057. The contract was strained by higher
than expected costs and decreased commitment by the Navy to the new plane for the
better part of a year, yet McDonnell Douglas continued to work on the plane until the
moment the Navy officially cancelled the project. The district court found, and the
Eighth Circuit affirmed, that the corporation had “exercised reasonable business
judgment in continuing to believe that termination [of the contract] would not occur.” Id.
at 1059-60 (alteration in original).
The applicability of the unforeseen business
circumstances exception was deemed appropriate since “negotiations among the
contracting parties were progressing favorably toward the end of the year; indeed, the
2
Congress passed the American Recovery and Reinvestment Act of 2009 in February
2009. Pub. L. No. 111-5, 123 Stat. 115.
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[district] court expressly found that, until the last possible minute, the Government and
McDonnell Douglas undertook extraordinary measures in an attempt to save the
program.” Id. at 1061.
Further, “it is the probability of occurrence [not the possibility] that makes a
business circumstance ‘reasonably foreseeable’. . . .
A lesser standard would be
impracticable.” Halkias v. Gen. Dynamics Corp., 137 F.3d 333, 336 (5th Cir. 1998).
Here, while the negotiations were between the government and the auto industry, not the
government and defendant, clearly the outcome of those negotiations would have a
dramatic impact on the demand for steel. Given that the bailout was being discussed on
November 19, 2008, it was just as likely as not that it would be passed into law.
Additionally, the historically high demand for steel is a dispositive factor in this
case as the foreseeability of a drop in demand is often predicated on recent trends in the
particular business. In Graphic Communications International Union, the court noted
that “boxes and pallets and an exorbitant amount of work [were] sitting at [the]
warehouse” on the snapshot date, weighing towards the foreseeability of a drop in
demand for the company’s products. 2003 WL 21639146, at *4 (internal quotation
marks omitted). However, the court still found the cancellation of a certain major
contract unforeseeable until the moment the employer received notice of the cancellation.
Id. (finding WARN Act liability for the insufficiency of the notice despite the
applicability of the unforeseen business circumstances defense). In contrast here, not
only were the government negotiations ongoing on the snapshot date, but U.S. Steel had
just finished a record quarter for demand of its products.
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Therefore, the Court finds it was unforeseeable, as in Loehrer, that the
negotiations would fail until the moment they did in fact fail. (See Douglas Decl., Ex. D,
Docket No. 39 (New York Times article dated November 20, 2008, noting that the auto
industry bailout discussions had just reached an impasse).) Given that U.S. Steel was
balancing the unprecedented high demand for steel and the possibility of the government
bailout of the auto industry, the choice to delay plant closings would not have “raise[d]
the eyebrows of any prudent businessperson.” Loehrer, 98 F.3d at 1062. That a decline
in the historically high demand for steel was just a possibility at the snapshot date, and
up until late November 2008, entitles U.S. Steel to the benefit of the statutory exception.
B.
Sufficiency of Notice
Plaintiff argues that even if the unforeseen business circumstances exception was
available to U.S. Steel, the inadequacy of its notice of the layoffs serves to deprive it of
the defense. The WARN Act requires a “brief statement of the basis for reducing the
notification period.” 29 U.S.C. § 2102(b)(3). Courts assessing the sufficiency of the
notice in cases where employers claim the defense, note that “a company’s statement of
its basis for a shortened notice period should set forth the underlying factual events which
led to the shortened period, thereby allowing workers to understand the employer’s
situation and its reasons for shortening the notice period.” Alarcon v. Keller Indus., Inc.,
27 F.3d 386, 389 (9th Cir. 1994) (finding notice sufficient that stated the employer could
“find no one interested in supplying the necessary working capital to keep the company
operational”).
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Notices that simply recite the statutory language are considered insufficient.
Grimmer v. Lord Day & Lord, 937 F. Supp. 255, 257 (S.D.N.Y. 1996) (“By providing
that an employer must give a brief statement of the basis for the shortened notice,
Congress indicated that it intended something more than a citation to the statute or a
conclusory statement summarizing the statutory provision.”).
Similarly, allusory
statements that do not sufficiently define the factual underpinnings of the decision to lay
off employees are considered insufficient.
Childress v. Darby Lumber Inc., 126
F. Supp. 2d 1310, 1318 (D. Mont. 2001) (noting that that notice was inadequate as it only
stated that the company had “sustained tremendous losses” and that the company was
forced to make “some serious decisions”).
In the instant case, however, the notice stated the layoffs were “due to the recent
major and unanticipated downturn in the United States and global economy, and the
resultant sharply lower demand for the plant’s products.” (Skube Decl. Ex. 1 at 1,
Docket No. 38.) The Court finds this statement akin to the statement found sufficient in
Alarcon. Furthermore, the numerous newspaper articles in the record about the status of
the economy in fall 2008 indicate that the mention of the “recent major and unanticipated
downturn in the United States and global economy” was anything but allusory. As a
result, the Court finds the notice in this case sufficient.
C.
Good faith defense
Plaintiff moves for summary judgment on the defense of “good faith.”
The
WARN Act specifies that in cases where an employer is found to have violated the
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WARN Act but acted in good faith in an attempt to comply, the Court may limit the
damages. 29 U.S.C. § 2104(a)(4). “[T]he ‘good faith’ defense applies only after a
violation of the WARN Act has been established . . . .” Alberts v. Nash Finch Co., 245
F.R.D. 399, 408 (D. Minn. 2007). Since the Court finds U.S. Steel did not violate the
WARN Act, the issue is moot and the Court denies summary judgment on the motion.
The combination of very high demand for steel and, even when the economy
started crumbling, the widely anticipated bailout of the automobile industry are unique
factors in this case which cause the Court to find that the unforeseeable circumstances
exception to the WARN Act notice requirement applies. The Court grants summary
judgment to defendant.
ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1.
Defendant’s Motion for Summary Judgment [Docket No. 27] is
GRANTED.
2.
Plaintiff’s motion for Summary Judgment [Docket No. 30] is DENIED.
LET JUDGMENT BE ENTERED ACCORDINGLY.
DATED: August 16, 2011
at Minneapolis, Minnesota.
____________s/ John R. Tunheim___________
JOHN R. TUNHEIM
United States District Judge
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