Liquidating fiduciary exception to warn
Under the factoring agreement, CIT advanced funds equal to 80 percent of Flexible Flyer's receivables. However, late in 2000, the company entered into a factoring arrangement with CIT Group Commercial Systems, LLC ("CIT"). 2102(a) provides that: [a]n employer shall not order a plant closing or mass layoff until the end of a 60-day period after the employer serves written notice of such an order ‒ (1) to each representative of the affected employees as of the time of the notice or, if there is no such representative at that time, to each affected employee. 2101(a)(3) as a reduction in the workforce that is not the result of a plant closing and results in an employment loss at a single site of employment during any 30-day period of a specified percentage or aggregate number of employees. Retailers also informed Flexible Flyer that they would be deferring purchases of millions of dollars' worth of products. In August 2005, Flexible Flyer consulted professionals to explore a range of options, including divestiture of unprofitable divisions and a bankruptcy filing. The company notified its employees in April 2005 of possible layoffs in the affected division. That same day, the company informed its employees (by means of an abridged WARN notification) that it would be terminating business operations, resulting in company-wide layoffs.
Some states have enacted laws similar to WARN that impose enhanced employee-notification requirements. Management took steps to triage the damage and remained optimistic that the company could weather the storm, especially in light of a bankruptcy filing by Flexible Flyer's primary competitor in the U. Soon afterward, CIT reduced its credit line by cutting advances to 50 percent of receivables. However, the issue was apparently never raised in either the bankruptcy or appellate courts. The debtor in Flexible Flyer may also have been exempt from the 60-day WARN notification requirement as a liquidating fiduciary, especially given that the company never attempted to reorganize in chapter 11 instead of shutting down immediately upon the bankruptcy filing.Despite the increasing prominence of pre-packaged or pre-negotiated chapter 11 cases in recent years, not every bankruptcy filing by or against a company is a carefully planned event orchestrated over a period of months or even years to achieve a workable reorganization, sale, or liquidation strategy. Sometimes, unanticipated circumstances precipitate a bankruptcy filing.