Ien v. TransCare Corporation et al

0UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------X
In re: 	:
: 	Chapter 7
TRANSCARE CORP., et al., 	: 	Case No. 16-10407 (SMB)
:
Debtors. 	: 	(Jointly Administered)
---------------------------------------------------------------X
SHAMEEKA IEN on behalf of herself and all 	:
Others similarly situated, 	:
Plaintiff, 	: 	Adv. Proc. No. 16-1033
:
--against-- 	:
:
TRANSCARE CORP., TRANSCARE 	:
NEW YORK, INC., TRANSCARE ML, INC., TC 	:
AMBULANCE GROUP, INC., TRANSCARE 	:
MANAGEMENT SERVICES, INC., TCBA 	:
AMBULANCE, INC., TC BILLING AND 	:
SERVICES CORP., TRANSCARE MARYLAND, :
INC., TC AMBULANCE NORTH, INC., 	:
TRANSCARE HARFORD COUNTY, INC., 	:
LYNN TILTON, ARK CLO 2001-1 LIMITED, 	:
ARK INVESTMENT PARTNERS II, L.P., 	:
PATRIARCH PARTNERS, LLC, and 	:
PATRIARCH PARTNERS III, LLC, 	:
:
Defendants. 	:
---------------------------------------------------------------X
JOSEPH PENA, MICHELLE ESCOBAR, and 	:
MERCEDES TAVAREZ, on behalf of themselves 	:
and others similarly, 	: 	Adv. Proc. No. 16-1048
Plaintiffs, 	:
:
--against— 	:
:
TRANSCARE CORP., TRANSCARE 	:
NEW YORK, INC., TRANSCARE ML, INC., TC 	:
AMBULANCE GROUP, INC., TRANSCARE 	:
MANAGEMENT SERVICES, INC., TCBA 	:
AMBULANCE, INC., TC BILLING AND 	:
SERVICES CORP., TRANSCARE MARYLAND 	:
INC., TC AMBULANCE NORTH, INC., 	:
TRANSCARE HARFORD COUNTY, INC., 	:
PATRIARCH PARTNERS, LLC, PATRIARCH 	:
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PARTNERS III, LLC, ARK CLO 2001-1 	:
LIMITED, ARK INVESTMENT PARTNERS 	:
II, L.P., and ARK INVESTMENT GP II, LLC, 	:
:
Defendants. 	:
---------------------------------------------------------------X
MEMORANDUM DECISION GRANTING MOTION TO DISMISS SUBSEQUENTLY
FILED ADVERSARY PROCEEDING AND APPOINTING INTERIM CLASS COUNSEL
A P P E A R A N C E S:
OUTTEN & GOLDEN LLP
Attorneys for Shameeka Ien
3 Park Avenue, 29th Floor
New York, NY 10016
Jack A. Raisner, Esq.
René S. Roupinian, Esq.
Of Counsel
CARY KANE LLP
Attorneys for Pena Plaintiffs
1350 Broadway, Suite 1400
New York, NY 10018
Larry Cary, Esq.
Tara Jensen, Esq.
Liz Vladeck, Esq.
Of Counsel
PROSKAUER ROSE LLP
Attorneys for Defendants
Eleven Times Square
New York, NY 10036
Irena M. Goldstein, Esq.
Kathleen M. McKenna, Esq.
Of Counsel
LAMONICA HERBST & MANISCALCO, LLP
Attorneys for Salvatore LaMonica, Chapter 7 Trustee
3305 Jerusalem Avenue
Wantagh, NY 11793
Holly R. Holecek, Esq.
Of Counsel
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STUART M. BERNSTEIN
United States Bankruptcy Judge:
Shameeka Ien, the plaintiff in class action adversary proceeding no. 16-1033 (the “Ien
Proceeding”) brought under the federal and New York Worker Adjustment and Retraining
Notification Acts, 29 U.S.C. §§ 2101 et seq. (the “WARN Act”), and New York Labor Law §
860 et seq., moved to dismiss the subsequently filed class action adversary proceeding no. 16-
1048 (the “Pena Proceeding”), or alternatively, consolidate the Pena Proceeding with her earlier
action. Ien also moved to appoint her counsel, Outten & Golden LLP (“Outten & Golden”), as
interim class counsel under Rule 23(g)(3) of the Federal Rules of Civil Procedure, made
applicable to this adversary proceeding by Rule 7023 of the Federal Rules of Bankruptcy
Procedure. For the reasons that follow, the Court grants the motion to dismiss the Pena
Proceeding and appoints Outten & Golden as interim class counsel.
BACKGROUND
Prior to the commencement of the bankruptcy case, the Debtors1 operated an emergency
medical transportation business primarily under contracts with municipalities, counties and other
governmental agencies. (See Joint Administration Motion at ¶¶ 5-7 (ECF/Main Case Doc. # 7)). 2
On February 24, 2016, the Debtors filed voluntary petitions for relief under chapter 7, and
1 	The filing entities, hereafter referred to collectively as the “Debtors,” are: TransCare Corporation,
TransCare New York, Inc., TransCare ML, Inc., TC Ambulance Group, Inc., TransCare Management Services, Inc.,
TCBA Ambulance, Inc., TC Billing and Services Corporation, TransCare Westchester, Inc., TransCare Maryland,
Inc., TC Ambulance North, Inc. and TransCare Harford County, Inc. (Motion for the Entry of an Order, Pursuant to
11 U.S.C. §§ 105(a) and 721, Authorizing the Chapter 7 Trustee to Operate the Debtors’ Businesses and Pay
Certain Operating Expenses of these Estates, dated Feb. 26, 2016 (“Joint Administration Motion”), at 2-3
(ECF/Main Case Doc. # 7).)
2 	“ECF/Main Case Doc. #__” refers to documents filed on the docket of the main bankruptcy case, In re
TransCare Corporation, Case No. 16-10407 (SMB). “ECF/Ien Doc. #__” refers to documents filed in the Ien
Proceeding, Adv. Proc. No. 16-1033 (SMB), and “ECF/Pena Doc. #__” to documents filed in the Pena Proceeding,
Adv. Proc. No. 16-1048 (SMB).
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Salvatore LaMonica, Esq. was appointed as the interim chapter 7 trustee (the “Trustee”) on
February 25, 2016. (Id. at ¶¶ 2-3.) He subsequently became permanent trustee by operation of
law. See 11 U.S.C. § 702(d).
A. WARN Act Proceedings in the District Court and the Ien Complaint
Following the commencement of the Debtors’ bankruptcy cases, former employees of the
Debtors commenced three separate class action suits in the United States District Court against
certain non-debtor defendants under the federal and New York WARN Acts.3 With certain
exceptions, the WARN Acts prohibit mass terminations of employees without advance written
notice. See 29 U.S.C. § 2102(a); N.Y. LAB. LAW § 860-b(1) (McKinney’s 2015). Employers
who fail to give notice under the Acts may be liable for back pay and employee benefits. 29
U.S.C. § 2104(a)(1); N.Y. LAB. LAW § 860-g(1).
On March 1, 2016, Ien, a former employee of the Debtors, commenced the Ien
Proceeding on behalf of herself and a class of all similarly situated former employees of the
Debtors. (See Adversary Class Action Complaint, dated Mar. 1, 2016 (“Ien Complaint”)
(ECF/Ien Doc. # 1).) The Ien Complaint asserted federal and New York WARN Act claims and
claims for unpaid wages under New York, Pennsylvania and Maryland law. In addition to the
Debtors, the Ien Complaint named Patriarch Partners, LLC (“Patriarch Partners”), its founder
and CEO Lynn Tilton, and several direct or indirect subsidiaries of Patriarch Partners: ARK
3 	The three actions, all pending in the United States District Court for the Southern District of New York,
are: Gisinger v. Tilton, Case No. 16-cv-1564 (ER), Garcia v. Patriarch Partners, LLC, Case No. 16-cv-1596 (ER),
and Eisenstadt v. Patriarch Partners, LLC, Case No. 16-cv-2831 (ER). The defendants in Gisinger v. Tilton are
Lynn Tilton and Patriarch Partners, LLC. The defendants in Garcia v. Patriarch Partners, LLC and Eisenstadt v.
Patriarch Partners, LLC are Patriarch Partners, LLC and “XYZ Entities 1-10.”
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CLO 2001-1 Limited (“ARK CLO”), ARK Investment Partners II, L.P. (“ARK Investment”),
and Patriarch Partners III, LLC (“Patriarch III,” and collectively with Patriarch Partners, Tilton,
ARK CLO and ARK Investment, the “Ien Defendants”). It alleged that the Debtors and the Ien
Defendants were part of a single employer group, (Ien Complaint at ¶ 25), setting forth in some
detail the roadmap of ownership that connected the Debtors to the Ien Defendants as well as their
common management and joint operational structure. (Id. at ¶¶ 26-32, 50.) 	The Ien Complaint
also averred that the Tilton and Patriarch Partners exercised de facto control over the Debtors.
The Debtors did not have an independent CEO, and Patriarch Partners terminated the Debtors’
CEO in January 2016 and advertised an opening for the position on its website. (Id. at ¶¶ 37-39.)
It then installed Peter Wolf as the COO and the Carl Marks Advisory Group as the CFO of the
Debtors. However, W. Randall Jones, Jean Luc Pelissier and John Harrington, managing
directors at Patriarch Partners, and Michael Greenberg, a Patriarch Investment and Credit
Professional, oversaw the Debtors’ operations and finances, including exercising control over the
timing and payment of amounts to vendors and creditors. (Id. at ¶¶ 40- 42.) Patriarch Partners
demanded and the Debtors paid Patriarch Partners management fees and $400,000 in interest
payments each month ahead of other obligations such as payroll. (Id. at ¶ 45.)
The Debtors also depended on Patriarch Partners for their day to day financial support,
and Patriarch Partners did not permit the Debtors to obtain their own funding or attain
independent viability. (See id. at ¶¶ 51, 53, 54.) 	Patriarch Partners infused capital so that the
Debtors could make payroll and pay other expenses and reimbursed itself with interest taken
from the Debtors. (Id. at ¶ 46.) Patriarch Partners and Tilton decided to place the Debtors into
bankruptcy and planned to transfer the existing business into a new ambulance business called
“Transcendence.” (Id. at ¶ 47.) However, the plan did not come to fruition. (Id.) 	Patriarch
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Partners and Tilton then decided not to fund the Debtors’ payroll, which had been accruing since
February 14, 2016, with full knowledge that the Debtors had no other source for such funding.
(Id. at ¶ 48.) The decision not to fund payroll caused the filing of the chapter 7 cases, the
immediate shutdown of the Debtors’ operations, and the termination of approximately 1,700
employees. (Id. at ¶ 49.)
The Ien Defendants filed an answer to the Ien Complaint on April 22, 2016. (Answer to
Adversary Class Action Complaint, dated Apr. 22, 2016 (“Answer”) (ECF/Ien Doc. # 18).) The
Answer admitted that Tilton was “an owner and sole director of TransCare,” (id. at ¶ 25), but
denied that the Ien Defendants and the Debtors comprised a single employer group. (Id. at ¶¶
19-20, 25.) The Answer also asserted twenty eight affirmative defenses, including statutory
defenses under the federal and New York WARN Acts. (Id. at 17-20.)
B. The Pena Complaint
On April 1, 2016, Joseph Pena, Michelle Escobar and Mercedes Tavares (collectively, the
“Pena Plaintiffs”), also former employees of the Debtors, initiated the Pena Proceeding on behalf
of an identical class. (Adversary Proceeding Class Action Complaint, dated Apr. 1, 2016 (“Pena
Complaint”) (ECF/Pena Doc. # 1).) 	The Pena Complaint asserted federal and New York
WARN Act claims. Like the Ien Complaint, the Pena Complaint alleged that the Debtors failed
to give proper notice before terminating their employees, (id. at ¶¶ 161-62, 173-74), but did not
assert claims for unpaid wages under New York, Pennsylvania and Maryland law. The
defendants in the two adversary proceedings were identical with two exceptions: the Pena
Complaint named ARK Investment GP II LLC (“ARK GP”), but failed to join Tilton.
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Like the Ien Complaint, the Pena Complaint asserted that the Debtors and the Pena
Defendants constituted a single employer group and largely mirrored the allegations in the Ien
Complaint regarding the ownership and management of the Debtors. (See id. at ¶¶ 39-44.) The
Pena Complaint also alleged that Patriarch Partners terminated the Debtors’ CEO in January
2016 and advertised the opening on its website, (id. at ¶ 49), hired a restructuring advisory firm
to take over the Debtors’ CFO function, (id. at ¶ 50), and exerted control over the Debtors’
operations and finances through Pelissier, Jones and Greenberg.4 (Id. at ¶ 52.)
The Pena Complaint also repeated the allegations relating to Patriarch Partners’ financial
control over the Debtors. It alleged that the Debtors received funding for payroll and other
expenses from Patriarch Partners, (id. at ¶¶ 53, 64), Patriarch Partners received monthly
management fees and interest payments, which were paid ahead of other obligations, (id. at ¶
63), Patriarch Partners did not allow the Debtors to obtain operational funds independently, (id.
at ¶ 70), and the mass termination of the Debtors’ employees resulted from Patriarch Partners’
decision to stop funding for the Debtors. (Id. at ¶ 75.) The Pena Complaint further alleged that
Patriarch Partners, the Debtors’ COO and the Carl Marks Advisory Firm attempted to spin off
some of the Debtors’ more profitable divisions by creating two new entities to continue the
Debtors’ operations and conducting a strict foreclosure of certain of the Debtors’ assets,
including their vehicles, contracts and certifications for operation. (Id. at ¶¶ 84, 86.)
The Pena Complaint went into detail about the amount of control Tilton and Patriarch
Partners exercised over the Debtors and the extent to which the Debtors were dependent on
Tilton and Patriarch Partners. In January 2016, the Debtors narrowly avoided a shutdown
4 	The Pena Complaint, however, omitted any reference to John Harrington.
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because of Patriarch Partners’ failure to provide or obtain funding to make a workers’
compensation insurance payment. (Id. at ¶¶ 54, 79-81.) The Debtors also missed payroll three
times in 2015 due to Patriarch Partners’ decision not to provide or obtain the necessary funds.
(Id. at ¶¶ 55, 76-78.) Patriarch Partners controlled the timing and amounts of payments to
creditors and vendors and held approval authority over equipment expenses. (Id. at ¶¶ 56, 65.)
In November 2015, Patriarch Partners refused to allow the Debtors’ CEO to purchase a new
ambulance, which was necessary to meet the 911 division’s contractual obligations. (Id. at ¶¶
57, 65-69.) Patriarch Partners also refused to entertain an offer from a competitor to purchase
the Debtors’ paratransit contract with the Metropolitan Transit Authority (the “MTA”), which
had been arranged by the Debtors in order to raise operational funds. The sale would have
generated a large amount of revenue because the Debtors had secured a five-year, $130 million
extension of its contract in July 2015. (Id. at ¶ 71.) Members of Patriarch Partners also attended,
participated in and led meetings and conference calls with the Debtors’ contractual partners
regarding the maintenance and renewal of service contracts and with Wells Fargo Bank, N.A
regarding funding requests. (Id. at ¶ 58.) Finally, Patriarch Partners decided not to fund the
Debtors payroll and placed the Debtors in bankruptcy. (Id. at ¶¶ 119, 129.)
The Pena Complaint also sought to undercut the anticipated defenses. For example, it
alleged that the Debtors’ “demise was neither sudden nor unexpected.” (Id. at ¶ 89.) In the
months leading up to the bankruptcy, the Debtors experienced a number of serious financial
crises that could have resulted in immediate shutdown and termination of their employees. The
Pena Defendants, therefore, had ample opportunity to give advance notice to employees in
accordance with the WARN Acts. (Id. at ¶ 90.) These crises included the Debtors’ failure to
make payroll on three separate occasions in 2015, (id. at ¶¶ 91-98), the near shutdown of
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operations in January 2016 due to the Debtors’ missed workers’ compensation payment, (id. at
¶¶ 99-103), and the loss of contracts with municipalities and hospitals beginning in January
2016. (Id. at ¶¶ 104-10.)
Furthermore, the Pena Defendants had already made the decision in January 2016 to shut
down certain of the Debtors’ divisions and transferred certain operations to two entities
incorporated in Delaware on February 10, 2016. (Id. at ¶¶ 106, 114.) Transcendence Transit,
Inc. was created in order to acquire the Debtors’ Pittsburgh and Hudson Valley ambulance
divisions, (id. at ¶ 112), and Transcendence Transit II, Inc. was created to acquire the Debtors’
New York City paratransit division. (Id. at ¶ 113.) The remaining divisions were to be shut
down and liquidated through a chapter 7 bankruptcy. (Id. at ¶ 115.) Pelissier, one of Patriarch
Partners’ managing directors, informed the Hudson Valley division that it would continue
operations and that Tilton was committed to investing $10 million into its operations. (Id. at ¶
116.) Jones, another managing director, directed an officer of the Debtors to communicate to the
MTA that the paratransit division was not being shut down and that its operations would
continue through the new entity. (Id. at ¶ 117.) Notwithstanding these forewarnings, the
Debtors’ employees were not given any advance notice that they would lose their jobs. (Id. at ¶¶
130-31.)
C. The Motion to Dismiss or Consolidate
On April 6, 2016, Ien filed a motion to appoint her attorneys, Outten & Golden, as
interim class counsel and to dismiss the Pena Proceeding, or alternatively, consolidate it with the
Ien Proceeding. (Motion Pursuant to Fed. R. Bankr. P. 7023(g) [sic] for Appointment of Interim
Class Counsel, dated Apr. 6, 2016 (“Dismissal Motion”) (ECF/Pena Doc. # 4); see also
Plaintiff’s Memorandum of Law in Support of Motion Pursuant to Fed. R. Bankr. P. 7023(g)
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[sic] for Appointment of Interim Class Counsel, dated Apr. 6, 2016 (“Moving Memo”), at 1
(ECF/Pena Doc. # 5).) 5 Ien argued that appointment of interim class counsel would promote
efficient management of the action, (Moving Memo at 8), and that Outten & Golden was best
able to represent the interests of the class because it had done a significant amount of work in the
case, possessed a great amount of experience and knowledge regarding WARN Act litigation,
and was capable of committing necessary resources to litigate the case. (Id. at 9-15.)6
Ien also contended that the Pena Proceeding was duplicative of her proceeding and that
other bankruptcy courts had dismissed later class actions in similar circumstances, notably in
Thielmann v. MF Global Holdings Ltd. (In re MF Global Holdings, Ltd.), 464 B.R. 619 (Bankr.
S.D.N.Y. 2012), and Frye v. Dig. Domain Media Grp. Inc. (In re Dig. Domain Media Grp. Inc.),
Adv. Nos. 12-50843 (BLS) & 12-50874 (BLS), 2012 WL 6135353 (Bankr. D. Del. Dec. 7,
2012). (Moving Memo at 15.) If the Court did not dismiss the Pena Proceeding, Ien asked that it
be consolidated with her proceeding for the sake of economy of administration. (Moving Memo
at 16-17.)
The Pena Plaintiffs opposed the Dismissal Motion and argued instead that the Court
should consolidate the two proceedings7 and appoint Outten & Golden and Cary Kane LLP
5 	The Dismissal Motion and Moving Memo were also filed in the Ien Proceeding. (ECF/Ien Doc. ## 11, 12.)
6 	Ien also submitted the declaration of Jack Raisner, Esq., a partner at Outten & Golden, in support of the
motion. (Declaration of Jack A. Raisner in Support of Plaintiff’s Motion for Appointment Interim Class Counsel
Pursuant to Fed. R. Bankr. P. 7023(g) [sic], dated Apr. 6, 2016 (“Raisner Declaration”) (ECF/Pena Doc. # 5-2).)
Raisner detailed his firm’s extensive experience as plaintiff’s counsel in WARN Act litigation, including class
action adversary proceedings. (Id. at ¶¶ 32, 35.)
7 	See Pena Plaintiffs’ Objection to Ien Plaintiff’s Motion Pursuant to Fed. R. Bankr. P. 7023(g) for
Dismissal of Pena’s Complaint and Appointment of Outten & Golden as Interim Class Counsel, and in Support of
Pena Plaintiff’s Cross-Motion Pursuant to Rules 42(a) and 23(g) for Consolidation of Related Actions and for the
Appointment of Cary Kane and Outten & Golden as Co-Interim Class Counsel, dated Apr. 19, 2016 (ECF/Pena
Doc. # 8); Pena Plaintiffs’ Memorandum of Law Objecting to Ien Plaintiff’s Motion Pursuant to Fed. R. Bankr. P.
7023(g) for Dismissal of Pena’s Complaint and Appointment of Outten & Golden as Interim Class Counsel, and in
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(“Cary Kane”), counsel for the Pena Plaintiffs, as co-interim class counsel. (Opposition Memo at
14-15.) In the main, the Pena Plaintiffs claimed that their action was not duplicative of the Ien
Proceeding and the allegations in the Pena Complaint “significantly strengthen[ed]” the class
claims in several ways: (i) they weakened the defendants’ ability to rely on two statutory
defenses, the “faltering company” and “unforeseen business circumstances” defenses, (id. at 11-
12), (ii) they provided stronger groundwork for establishing single employer liability, (id. at 13),
and (iii) the Pena Complaint added ARK GP as a defendant, thereby increasing the potential
pool for recovery. (Id. at 14.) The Pena Plaintiffs also maintained that Cary Kane was “ready
and willing to serve as interim class counsel” if the Court were inclined to appoint a single firm.
(Id.) However, because the Pena Plaintiffs were seeking consolidation of the two actions and
given Outten & Golden’s experience in WARN Act litigation, the Pena Plaintiffs sought
appointment as co-interim counsel. (Id. at 14-15.) The Pena Plaintiffs contended that a co-
interim class counsel structure could benefit the class, with Outten & Golden contributing its
WARN litigation expertise and Cary Kane bringing its extensive fact investigation to the table.
(Id. at 19.)
Ien replied that the case was neither so large nor sufficiently complex to warrant the
appointment of multiple firms as interim class counsel. (Plaintiff’s Reply Memorandum of Law
in Support of Motion Pursuant to Fed. R. Bankr. P. 7023(g) [sic] for Appointment as Interim
Class Counsel, dated Apr. 26, 2016 (“Reply”), at 3, 12 (ECF/Pena Doc. # 11).) Ien also disputed
the efficacy of pleading additional factual allegations in a complaint in order to defeat
Support of Pena Plaintiff’s Cross Motion Pursuant to Rules 42(a) and 23(g) for Consolidation of Related Actions
and for the Appointment of Cary Kane and Outten & Golden as Co-Interim Class Counsel, dated Apr. 19, 2016
(“Opposition Memo”), at 6-7 (ECF/Pena Doc. # 9).
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affirmative defenses, (id. at 9), and contended that consolidation was unnecessary and wasteful
because the Ien Defendants had already filed an answer to the Ien Complaint. (Id. at 14.)
DISCUSSION
A. Dismissal of the Pena Action
A trial court has broad discretion to determine whether consolidation of actions sharing
common questions of law and fact is appropriate. Johnson v. Celotex Corp., 899 F.2d 1281,
1284 (2d Cir. 1990). This power comes from the court’s inherent authority to “control
disposition of the causes on its docket with economy of time and effort for itself, for counsel and
for litigants.” MF Global, 464 B.R. at 623 (Bankr. S.D.N.Y. 2012) (quoting Lester-Krebs, Inc.
v. Geffen Records, Inc., 85 Civ. 6320, 1985 WL 4270, at *2 (S.D.N.Y. Dec. 4, 1985)); accord
Curtis v. Citibank, N.A., 226 F.3d 133, 138 (2d Cir. 2000). Rule 42 of the Federal Rules of Civil
Procedure, made applicable to adversary proceedings by Rule 7042 of the Federal Rules of
Bankruptcy Procedure, governs consolidation of adversary proceedings. Rule 42 provides in
relevant part:
(a) 	Consolidation. If actions before the court involve a common question of
law or fact, the court may:
(1) 	join for hearing or trial any or all matters at issue in the actions;
(2) 	consolidate the actions; or
(3) 	issue any other orders to avoid unnecessary cost or delay.
When exercising its discretion, the court must weigh the risk of prejudice and confusion
against the risk of inconsistent adjudication of common factual and legal issues, the burden
posed by multiple actions on the parties, witnesses and judicial resources, the length of time
required to conclude multiple actions, and the relative expense of multiple trials. Celotex, 899
F.2d at 1285 (citing Hendrix v. Raybestos-Manhattan, Inc., 776 F.2d 1492 (11th Cir. 1985)).
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In addition to the power to consolidate multiple cases, the court also has the discretion,
pursuant to the “general power to administer its docket,” to stay or dismiss a suit that is
duplicative of another federal court suit. Curtis, 226 F.3d at 138 (citing Colorado River Water
Conservation Dist. v. United States, 424 U.S. 800, 817 (1976)); Quinn v. Walgreen Co., 958 F.
Supp. 2d 533, 539 (S.D.N.Y. 2013); MF Global, 464 B.R. at 623. When determining whether to
dismiss a duplicative action, the court must “consider the equities of the situation.” Curtis, 226
F.3d at 138; MF Global, 464 B.R. at 623. 	A suit is duplicative if the “claims, parties, and
available relief do not significantly differ between the two actions.” Morency v. Village of
Lynbrook, 1 F. Supp. 3d 58, 62 (E.D.N.Y. 2014) (citing Serlin v. Arthur Andersen & Co., 3 F.3d
221, 223 (7th Cir. 1993)); James v. AT&T Corp., 334 F. Supp. 2d 410, 411 (S.D.N.Y. 2004)
(citing same). At the same time, the court must be careful “when dismissing a second suit
between the same parties as duplicative, not to be swayed by a rough resemblance between the
two suits without assuring itself…the claims asserted in both suits are the also the same.” Curtis,
226 F.3d at 136; MF Global, 464 B.R. at 623.
Although this rule is typically applied to non-class action litigation, it has also been
invoked in connection with multiple class action suits involving the same defendants and similar
claims. Quinn, 958 F. Supp. 2d at 539 (noting that rule applies where parties and claims in both
class actions are “identical or substantially similar”); Bukhari v. Deloitte & Touche LLP, No. 12
Civ. 4290 (PAE), 2012 WL 5904815, at *3 (S.D.N.Y. Nov. 26, 2012) (same); see also Lopez v.
Ferguson, 361 F. App’x 225, 226 (2d Cir. 2010) (dismissing subsequently filed class action as
duplicative of prior class action asserting same claims against a similar group of defendants). In
that the context, courts look for substantial similarity in the claims, defendants and putative
classes represented in each action. See Quinn, 958 F. Supp. 2d at 539-40 (finding no overlap
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between putative classes and claims asserted); Bukhari, 2012 WL 5904815, at *3-4 (same);
Pippins v. KPMG LLP, No. 11 Civ. 0377 (CM), 2011 WL 1143010, at *3-4 (S.D.N.Y. Mar. 21,
2011) (finding that putative classes and claims were substantially similar).
A comparison of the Ien and Pena Complaints demonstrates that they are largely
duplicative and share more than a “rough resemblance.” Both Ien and the Pena Plaintiffs purport
to represent the same class of former employees, the defendants in both actions are nearly
identical, and both complaints assert identical WARN Act claims. They diverge in two respects,
neither of which favors the Pena Plaintiffs. First, the Pena Plaintiffs joined ARK GP, an entity of
unknown worth which, they speculate, will make recovery more likely, (Opposition Memo at
14), but failed to join Lynn Tilton, the Debtors’ owner and sole shareholder and the CEO and
founder of Patriarch Partners.
Second, the Ien Complaint asserts claims for unpaid wages under New York, Maryland
and Pennsylvania law against the Ien Defendants; the Pena Complaint does not. The Pena
Plaintiffs explained that they omitted these claims because they were uncertain whether they
could assert the wage claims against the Debtors in an adversary proceeding as opposed to a
proof of claim. (Opposition Memo at 9.) As Ien points out, however, these claims cannot be
asserted against non-debtor defendants through a proof of claim and must be presented in a
complaint. (Reply at 10.) Furthermore, this chapter 7 case is currently a no-asset case.
According to the Notice of Chapter 7 Bankruptcy Case −− No Proof of Claim Deadline (Official
Form 309C) (ECF/Main Case Doc. # 20), “[n]o property appears to be available to pay creditors.
Therefore, please do not file a proof of claim now.” Thus, no proofs of claim may ever be filed
or paid.
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The Pena Plaintiffs’ “additional allegations” tending to undercut the affirmative defenses
also fail to supply a reason against dismissal. First, the Court must look to the claims, parties
and relief sought to determine whether a complaint is duplicative. Morency, 1 F. Supp. 3d at 62.
Second, the defendants answered the Ien Complaint and did not move to dismiss it for legal
insufficiency. Third, the validity of the affirmative defenses will be based on the evidence, not
the pleadings. The factual allegations in the Pena Complaint weaken the defendants’ affirmative
defenses only to the extent that they are supported by evidence to be adduced through pre-trial
discovery.
In short, there is no benefit to consolidating the Pena Proceeding with the Ien Proceeding
instead of dismissing it, and there is a downside to the former course. Consolidation would
require interim counsel to craft a consolidated class action complaint and require the defendants
to file an amended answer, all of which would serve to increase the cost and delay the resolution
of this action. Therefore, in the interest of judicial economy, the Court exercises its discretion
and dismisses the Pena Proceeding.
B. Designation of Interim Class Counsel
Rule 23(g)(3) permits the Court to appoint interim class counsel, see FED. R. CIV. P.
23(g)(3) (“The court may designate interim counsel to act on behalf of a putative class before
determining whether to certify the action as a class action.”), and generally considers the same
factors used in determining the adequacy of class counsel upon certification under Rule
23(g)(1)(A). In re Mun. Derivatives Antitrust Litig., 252 F.R.D. 184, 186 (S.D.N.Y. 2008). Rule
23(g) states in relevant part:
(1) Appointing Class Counsel. Unless a statute provides otherwise, a court that
certifies a class must appoint class counsel. In appointing class counsel, the court:
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(A) must consider:
(i) the work counsel has done in identifying or investigating potential
claims in the action;
(ii) counsel’s experience in handling class actions, other complex
litigation, and the types of claims asserted in the action;
(iii) counsel’s knowledge of the applicable law; and
(iv) the resources that counsel will commit to representing the class;
(B) may consider any other matter pertinent to counsel's ability to fairly and
adequately represent the interests of the class
The Rule 23(g)(1) factors favor appointment of Outten & Golden as interim class
counsel.8 First, the firm has done significant work in identifying and investigating potential
claims in the action. The firm was contacted by potential clients following the commencement
of the Debtors’ bankruptcy case, (Raisner Declaration at ¶ 4), and its attorneys and paralegals
began interviewing former employees, including several accounting employees who had
witnessed Patriarch Partners’ day-to-day involvement in the Debtors’ operations. (Id. at ¶¶ 5-6.)
In addition, the firm researched records and reviewed materials relating to the relationship
between the Debtors and their ownership. (Id. at ¶ 7.) Following the filing of the Ien Complaint,
Outten & Golden started preliminary conversations with various interested parties, including the
New York State Assistant Attorney General, (id. at ¶ 11), officials at the New York State
Department of Labor, (id. at ¶ 12), and counsel for a transit workers’ union. (Id. at ¶ 13.) The
firm also engaged in conversations with the Trustee regarding the general condition of the estate
as well as details relating to unpaid wages, employees’ health care benefits and the 401(k) plan.
8 	The Pena Plaintiffs moved to appoint Cary Kane as co-interim class counsel in a consolidated proceeding.
(Opposition Memo at 14-15.) When more than one “adequate” applicant seeks appointment as interim class counsel,
the court must appoint the applicant that is “best able to represent the interests of the class.” See F ED. R. CIV. P.
23(g)(2); In re Bank of Am. Corp. Secs., Derivative & ERISA Litig., 258 F.R.D. 260, 272 (S.D.N.Y. 2009).
However, dismissal of the Pena Proceeding effectively moots the Pena Plaintiffs’ request to appoint Cary Kane as
co-counsel.
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(Id. at ¶ 15.) Finally, the firm had preliminary discussions with counsel to the defendants
regarding various substantive and procedural aspects of the case. (Id. at ¶ 19.)
Second, Outten & Golden has extensive experience in litigating WARN Act class actions,
a fact even Cary Kane conceded. It has filed over 100 WARN Act class actions in federal courts
since 2007, (id. at ¶ 29), and having served as plaintiff’s counsel in over 80 actions. (Id. at ¶ 32.)
Moreover, this experience includes WARN Act class action litigation in bankruptcy court. (Id.
at ¶ 35.)
Third, attorneys at Outten & Golden have extensive knowledge of applicable law and are
recognized authorities on the WARN Act. Outten & Golden attorneys have written numerous
articles and frequently lecture on WARN Act class action litigation. (Id. at ¶¶ 42-43.) Outten &
Golden attorneys have also testified before the United States Senate Health Education Labor and
Pensions Committee, (id. at ¶ 44), and are often cited in news publications such as the Wall
Street Journal and the New York Times. (Id. at ¶ 45.)
Fourth, the firm is able to commit substantial resources to representing the class. The
firm has over 50 attorneys practicing employment law, and the WARN Act practice group
includes two partners, an associate, a staff attorney and three paralegals. The firm also maintains
a website exclusively dedicated to the WARN Act. (Id. at ¶ 47.)
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Accordingly, the Dismissal Motion is granted and Outten & Golden is designated interim
class counsel. Ien is directed to settle separate orders on notice.
Dated: New York, New York
May 23, 2016
/s/ Stuart M. Bernstein______
STUART M. BERNSTEIN
United States Bankruptcy Judge
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