Appeals court upholds $2 million judgment against Celadon

Appeals court upholds $2 million judgment against Celadon

Truckload giant responsible under WARN Act in Continental Express deal

Truckload giant Celadon, which has a history of adding trucks, drivers, and customers through strategic “asset purchases” of other carriers, will have to pay more than $2 million in back wages and benefits to displaced workers from a 2008 deal.

The U.S. Court of Appeals for the Eighth Circuit ruled this week that Celadon Trucking Services, in its $24.1 million purchase of Continental Express, bought the Little Rock-based fleet as a “going concern,” and not only for the tractors and trailers, as Celadon argued in its appeal. The difference is that the court’s analysis makes Celadon liable for damages under the Worker Adjustment and Retraining Notification (WARN) Act.

In March 2015, an Arkansas district court awarded $2.15 million to a class of more than 400 former Continental Express employees who claimed they were not given the 60 days’ notice before termination, as required by the WARN Act. Of that judgment, $1.67 million was allotted to 368 former Continental drivers.

At the time of the sale, Dec. 4, 2008, Continental had 658 employees and Celadon agreed to offer employment to all of Continental's qualified drivers. Ultimately, Celadon offered employment to 201 Continental employees. The remaining employees were terminated between Dec.  5 and Dec. 17.

In its appeal, Celadon points to language in the Asset Purchase Agreement (APA) that specifically holds the seller responsible for sending the WARN Act notices, as well as to language specifying the assets included in the purchase, and to exclusions such as Continental's "cash and cash equivalents," "customer accounts receivables," "real estate," and "goodwill relating to the Business other than the Purchased Assets."

And, as an assets-only purchase, the buyer is not responsible for WARN Act compliance, Celadon argued.

But the appeals court pointed to other provisions in the APA that demonstrate “Celadon's interest included much more than the maintenance of ‘Continental's trucks and trailers’—it included Continental's active business,” the decision reads. “Continental sold its trucking business as a going concern to Celadon. Nothing in the APA alters that fact. Indeed, the APA clarifies the matter.”

Consequently, responsibility to provide notice passed from Continental to Celadon at the time of the sale, the appeals court affirmed.

On the procedural points of the appeal, the higher court ruled that Celadon had “a full and fair opportunity” to contest class certification. In approving the notice to potential class members, the district court noted that the employees addressed the objections that Celadon had raised and Celadon did not file any additional objections. After receiving the attention and consideration of the district court on this issue, “principles of fair adjudication” require Celadon to provide good reason before the district court revisits the issue. The appeals court was satisfied that the district court considered Celadon’s reasons and “found them wanting.”

Additionally, the district court did not abuse its discretion in certifying the class nor in refusing to decertify the class, as Celadon argued in the appeal.

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