Robert Phason v. Meridian Rail Corp .

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-2842
R OBERT P HASON , et al.,
Plaintiffs-Appellants,
v.
M ERIDIAN R AIL C ORP .,
Defendant-Appellee.
____________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 04 C 5845—James F. Holderman, Chief Judge.
____________
A RGUED F EBRUARY 15, 2007—D ECIDED M ARCH 15, 2007
____________
Before E ASTERBROOK , Chief Judge, and P OSNER and
K ANNE , Circuit Judges.
E ASTERBROOK , Chief Judge. On the last day of 2003,
Meridian Rail Corp. notified its staff that it was clos-
ing its operations in Chicago Heights, Illinois, effective
immediately, and invited them to apply for jobs with NAE
Nortrak, Inc., which had agreed to buy the assets. Nortrak
itself had issued such an invitation in mid-December,
when Nortrak and Meridian shook hands on the deal. For
reasons that this record does not illuminate, however, the
transaction did not close until January 8, 2004, after
Meridian had severed all ties to the former workers.
That delay precipitated this suit under the Worker
Adjustment and Retraining Notification Act of 1988, 29

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2 No. 06-2842
U.S.C. §§ 2101-09, which requires 60 days’ notice before
an employer that has 100 or more workers at one location
(as Meridian did) subjects 50 or more of them to “employ-
ment loss.” The district court concluded that the Act does
not apply because Nortrak eventually hired all but 40 to 45
of the workers (including those on layoff who had
reemployment rights under a collective bargaining agree-
ment). 2006 U.S. Dist. L EXIS 27003 (N.D. Ill. May 8, 2006).
The exact number who sought but did not find work at
Nortrak is disputed but fewer than 50 on any calculation,
so we need not pursue that issue. But plaintiffs main-
tain on appeal that the right question is how many people
lost their jobs on December 31, 2003, rather than the
difference between that number and how many found work
later. And if December 31 is the right time, then the
number unambiguously exceeds 50.
Plaintiffs’ theory is simple: One statutory trigger is a
“plant closing,” which 29 U.S.C. §2101(a)(2) defines as any
“permanent or temporary” shutdown that “results in an
employment loss at the single site of employment during
any 30-day period for 50 or more employees”. Section
2101(a)(6) then provides:
subject to subsection (b), the term “employment
loss” means (A) an employment termination, other
than a discharge for cause, voluntary departure, or
retirement, (B) a layoff exceeding 6 months, or (C)
a reduction in hours of work of more than 50
percent during each month of any 6-month pe-
riod[.]
The chain of references sends us to subsection (b)(1), the
last sentence of which reads:
Notwithstanding any other provision of this Act,
any person who is an employee of the seller (other
than a part-time employee) as of the effective date
of the sale shall be considered an employee of the

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No. 06-2842 3
purchaser immediately after the effective date of
the sale.
This sentence is the linchpin of Meridian’s position. It
sold the plant to Nortrak, and as Nortrak soon hired many
of the workers (leaving fewer than 50 disappointed appli-
cants), no “employment loss” occurred. Although the
transaction was accomplished by a sale of assets rather
than a merger or sale of securities, Smullin v. Mity
Enterprises, Inc., 420 F.3d 836 (8th Cir. 2005), holds that
the form of the transaction does not matter when a plant
is sold as a going concern. Cf. Oil, Chemical & Atomic
Workers v. Uno-Ven Co., 170 F.3d 779, 783-84 (7th Cir.
1999).
Plaintiffs have the better of this argument, because a
handshake is not a “sale” of a business. This sale closed on
January 8, 2004, more than a week after Meridian let
almost all of its employees go. Meridian tells us that it
retained a handful of workers during the first week of
January to take inventory (though plaintiffs say other-
wise); no matter who is right on that issue, almost all
were done with Meridian’s employ at the end of 2003. On
December 31, 2003, an “employment termination” within
the meaning of §2101(a)(6)(A) occurred, and as more than
50 workers lost their jobs that day a statutory “plant
closing” likewise took place.
It is enough that §2101(a)(6)(A) is satisfied. Meridian
supplied the district court with elaborate calculations
demonstrating that §2101(a)(6)(C) was not satisfied, given
the number of people Nortrak hired. But what of that?
An “employment loss” occurs when any one of the subsec-
tions applies. “You’re fired, but you have prospects of
catching on with someone else real soon now” is a “termina-
tion” under subsection (A).
For the purpose of §2101(b)(1), the “effective date” of the
sale was January 8, 2004. Any employee of Meridian on

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4 No. 06-2842
that date “shall be considered an employee of the pur-
chaser”. The number of workers Meridian employed at the
Chicago Heights plant on January 8, 2004, was zero.
Section 2101(b)(1) therefore cannot avoid the classifica-
tion of the events as an “employment loss.”
We appreciate Meridian’s dissatisfaction with this literal
application of the statute. If the sale was a done deal as
of December 2003, why should it matter that the transac-
tion did not close until January 8, 2004? Nortrak alerted
the workers in mid-December to the impending change
of ownership; they were no less able to plan (and no less
well off economically) than if the sale had closed then—and
plaintiffs concede that if it had closed on or before Decem-
ber 31, 2003, then they would have no case under the Act.
One potential answer is that many a “done deal” turns
out not to be “done” after all. Getting from informal
agreement to a signature (and cash in hand) has been
an insuperable gap for business transactions too numer-
ous to count, and the larger the transaction the greater
the gap. The sale of a business can’t be said to be “done”
until everyone has signed on the dotted line and all
required payments have been made. (The number of
suits in which people try to enforce handshakes after
bargaining collapses attests to this. See, e.g., PFT
Roberson, Inc. v. Volvo Trucks North America, Inc., 420
F.3d 728 (7th Cir. 2005); Central Illinois Light Co. v.
Consolidation Coal Co., 349 F.3d 488, 492 (7th Cir. 2003);
Mays v. Trump Indiana, Inc., 255 F.3d 351, 358 (7th Cir.
2001); Skycom Corp. v. Telstar Corp., 813 F.2d 810, 815-16
(7th Cir. 1987).) The WARN Act does not require em-
ployees to take business risks; employees’ entitlements
depend on events as they are, rather than as employers
hope they will turn out.
Another answer is that trying to look through form to
“business realities” complicates analysis that is sup-

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No. 06-2842 5
posed to be simple. The statute draws a lot of bright lines;
it is really nothing but lines. It applies, for example,
only if the employer has 100 or more workers at a given
facility; one worker fewer and the Act drops out, though as
a practical matter 99 and 100 are identical—and from
any given employee’s perspective it matters little how
many others worked at the same plant. An “employment
loss” occurs only when 50 or more workers lose their
jobs; again one fewer and the Act drops out, even though
the difference between 49 and 50 is not economically
significant to a given worker.
When §2101(a)(6)(C) is invoked, it is necessary to show
“a reduction in hours of work of more than 50 percent
during each month of any 6-month period.” Why not 40%,
or 50% during five of the six months rather than all
six? None of these distinctions is inevitable; all are arbi-
trary. But using sharp lines makes the Act easier to
administer. Bright lines must be enforced consistently or
they won’t work. If employees can lose because of a
difference between 99 and 100 workers that seems incon-
sequential, employers likewise must lose when what
seems an inconsequential difference (the closing date)
comes out the employees’ way. Otherwise courts have
put a thumb on the scale.
Justice Holmes was fond of remarking that the law
often distinguishes between cases that seem indistin-
guishable, but fall (if barely) on opposite sides of a line.
See, e.g., United States v. Wurzbach, 280 U.S. 396, 399
(1930) (“Whenever the law draws a line there will be cases
very near each other on opposite sides. The precise
course of the line may be uncertain, but no one can come
near it without knowing that he does so”); Louisville &
Nashville R.R. v. United States, 242 U.S. 60, 74 (1916)
(“the very meaning of a line in the law is that right and
wrong touch each other and that anyone may get as close

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6 No. 06-2842
to the line as he can if he keeps on the right side”). The
WARN Act draws several of these lines. Delayed closing
put Meridian on the wrong side of one.
Meridian observes that a few decisions, of which Gonza-
les v. AMR Service Corp., 68 F.3d 1529 (2d Cir. 1995), is
a good example, announce that they are following a
“practical, effects-driven analysis” (id. at 1531)—which
Meridian takes as license to replace the statute’s actual
language with some other approach that better serves
goals that Members of Congress may have sought to
achieve. We understand Gonzales and similar decisions
(Smullin, 420 F.3d at 839, is another example) as describ-
ing the Act’s rules: instead of looking at employers’ intent,
the statute examines consequences, such as whether 50
or more employees lost their jobs. None of these decisions
holds that a court may replace one of the concrete rules
in the statute with a standard the judges think preferable.
The judgment is reversed, and the case is remanded with
instructions to award the plaintiffs a remedy appropriate
under §2104(a). The district court also will need to take
another look at the question whether a class should be
certified, a subject it thought unimportant given its view
that the plaintiffs’ claim lacked merit.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—3-15-07

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