Wage Law

Sandeep Baweja Withdraws

On Monday, Judge S. James Otero granted Sandeep Baweja's motion to withdraw as counsel for the class of employees from whom he took several million dollars in settlement money in the matter of Lubocki v. ZipRealty, Inc. In the order, Judge Otero expressly retains jurisdiction over Baweja.

On December 24, 2008, Baweja filed this Motion to Withdraw as Counsel for David Lubocki, et al. pursuant to California Rules of Professional Conduct 3-300 and 3-310. On December 30, 2008, this Court sent letters to Sal Hernandez, Assistant Director in Charge, FBI Los Angeles; Thomas P. O'Brien, United States Attorney; William J. Bratton, Chief of the Los Angeles Police Department; Steve Cooley, Los Angeles County District Attorney; Scott Drexel, Chief Trial Counsel of the State Bar of California; and the Standing Committee on Discipline for the Central District of California, notifying them of Baweja's admissions.

The order declares, quite matter-of-factly, that the court grants the motion because Baweja's interests are now adverse to his clients.

In secretly taking and investing $2.72 million of the class settlement funds, without notifying or seeking the permission of class members, Baweja acquired an interest adverse to his clients without their informed consent in violation of California Rule of Professional Conduct 3-300. See Connor, 791 P.2d at 317; Cal. R. Prof'l Conduct 3-300; Baweja Decl. ¶ 5. Because he currently owes his clients approximately $2 million, his own interests are likely to conflict with those of his clients and, thus, he cannot fulfill his duty of absolute and undivided loyalty to his clients.

Ernest J. Francheschi, Jr., who has not been accused of any wrongdoing, remains as class counsel "pending this Court's decision on any objection to his representation." The next status conference in the case is set for April 27.

We discussed the case in a post earlier this month, found at this link.

The WARN Act and the Faltering Business Exception

The federal Worker Adjustment and Retraining Notification Act ("WARN" Act) 29 USCA § 2101 et seq., requires certain employers to provide 60 days' advance notice of a "plant closing" or a "mass layoff" to affected employees and state and local government officials. 29 USCA § 2102(a); Hollowell v. Orleans Regional Hosp. LLC (5th Cir. 2000) 217 F.3d 379. An employer who conducts a closing or layoff without giving the required advance notice is liable for up to 60 days' pay and benefits to affected employees. Allen v. Sybase, Inc. (10th Cir. 2006) 468 F.3d 642.

The federal WARN Act has an exception called the "Faltering Company" exception. A faltering company "may order the shutdown of a single site of employment before the conclusion of the 60-day period if as of the time that notice would have been required: the employer was actively seeking capital or business which, if obtained, would have enabled the employer to avoid or postpone the shutdown; and the employer reasonably and in good faith believed that giving the required notice would have precluded ... obtaining the needed capital or business." 29 USCA § 2102(b)(1).

The DOL regulations provide that the employer must have been seeking financing or refinancing or additional business through a commercially reasonably method. 20 CFR § 639.9(a)(1). To prove the defense, the company must identify specific actions taken at that time to obtain financing or new business. Local 397, Int'l Union of Electronic, Elec., Salaried, Mach. & Furniture Workers, AFL-CIO v. Midwest Fasteners, Inc. (D.NJ 1990) 763 F.Supp. 78. There must have been a realistic opportunity to obtain the financing or business sought. 20 CFR § 639.9(a)(2). The financing or business sought would have been sufficient to enable the employer to avoid or postpone the shutdown and to keep the facility open for a reasonable period of time. 20 CFR § 639.9(a)(3). And the employer must be able to demonstrate objectively that it could have kept the facility open for a reasonable period of time with the amount of financing or new business sought. 20 CFR § 639.9(a)(2). The employer must have objectively and subjectively believed that a potential customer or source of financing would have been unwilling to provide the new business or capital if notice were given. 20 CFR § 639.9(a)(4); Childress v. Darby Lumber, Inc. (9th Cir. 2004) 357 F.3d 1000. The employer must show that, upon learning that the workplace would be closed, it promptly notified the employees and explained why it had not given earlier notice. Local 397, Int'l Union of Electronic, Elec., Salaried, Mach. & Furniture Workers, AFL-CIO v. Midwest Fasteners, Inc. (D. NJ 1990) 763 F.Supp. 78.

There is also an "Unforeseen Business Circumstances" exception, whereby an employer need not give the full 60 day notice if the closing was caused by a business circumstance that was not reasonably foreseeable as of the time notice would have been required. 29 USCA § 2102(b)(2)(A). However, where an unforeseen business circumstance prevents an employer from timely giving notice, the employer must give "as much notice as is practicable and at that time shall give a brief statement of the basis for reducing the notification period." 29 USCA § 2102(b)(3); Allen v. Sybase, Inc. (10th Cir. 2006) 468 F.3d 642. However, in one recent case, layoffs could be attributed to unforeseen business circumstances where the employer's lender bank gives numerous warnings that employer was at risk of losing credit, the market price of its product was depressed, and its operations had been losing money over a significant period of time. Childress v. Darby Lumber, Inc. (9th Cir. 2004) 357 F.3d 1000.

California law has a similar requirement, with similar defenses. Under Labor Code § 1400, most of the federal WARN Act requirements are also mandated under state law. Notice of a relocation or termination, but not a mass layoff, is excused where the employer furnishes records and affidavits and the Employment Development Department determines that (i) at the time notice was required, the employer was actively seeking capital or business that would have enabled it to avoid or postpone the relocation or termination; and (ii) the employer reasonably and in good faith believed that giving the 60 days' notice would preclude it from obtaining the needed capital or business. Labor Code § 1402.5.

Thelen Dissolving

Our spies tell us that Thelen, LLP's partners have been in a long meeting today to consider a recommendation from the firm's management that the firm dissolve and shut down operations by December 2008. The vote will remain open for some time, but it is expected that the partners will vote in favor of the dissolution. The firm was founded in 1924, and grew to more than 600 attorneys, before shrinking to its current number of approximately 400 lawyers. Thelen has an extensive employment defense practice, and one of our favorite cases was opposed by Thelen.

[Update: Law.com confirms it.]

[Update #2: Thelen confirms it.]

As wage & hour class action lawyers, we were drawn to this part of the press release:

Although not necessarily required, Thelen is seeking to pay its employees 60 days salary under federal and state WARN Acts. The firm is also seeking to pay all accrued vacation pay. The response to date from the bank is that it will fund employee salary through Nov. 30, but will not pay accrued vacation pay. Both of these issues are still under discussion.

There you have it - your daily dose of irony.