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The Bankruptcy StrategistFeaturesBankruptcyLJN Newsletters

<b><I>AE Liquidation</I></b>: WARN Act Comfort for Debtors Attempting a 363 Sale, or Just the 'Putin Exception'?

By Russell C. Silberglied and Katherine M. Devanney

In In re AE Liquidation, 2017 WL 3319963 (3d Cir. Aug. 4, 2017) (the Third Circuit Opinion or AE Liquidation), the U.S. Court of Appeals for the Third Circuit held that a WARN Act notice only must be given when mass layoffs are probable, not when merely foreseeable. As a result, a debtor that was attempting to effectuate a going concern sale under Bankruptcy Code Section 363 was not liable for failing to give a WARN Act notice until the day it determined it could no longer wait for approvals from the buyer to close. The case can be viewed as providing assurance to debtors that they can attempt a going concern sale without having to provide a potentially damaging “conditional” WARN Act notice.

But the facts of the case are quite unusual. The final approvals from the buyer had to be provided by none other than Russian Prime Minister Vladimir Putin. He stalled, so the approvals were not obtained. Was the court simply reluctant to hold a company accountable for the actions of the Russian dictator, or can the opinion be read more broadly? The authors conclude that, as unusual as it is to encounter Vladimir Putin in a Section 363 sale, AE Liquidation need not be read so narrowly.

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