United States v. Phillip Brumfield

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 11-3002
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United Steel Workers of America *
Local 2660, *
*
Appellant, * Appeal from the United States
* District Court for the
v. * District of Minnesota.
*
United States Steel Corporation, *
*
Appellee. *
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Submitted: May 16, 2012
Filed: July 2, 2012
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Before WOLLMAN, BEAM, and LOKEN, Circuit Judges.
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WOLLMAN, Circuit Judge.
United Steel Workers of America Local 2660 (the Union) appeals the district
court’s order granting United States Steel Corporation’s (U.S. Steel) motion for1
summary judgment and denying the Union’s motion for summary judgment on its
claim for damages under the Worker Adjustment and Retraining Notification Act (the
WARN Act), 29 U.S.C. §§ 2101-09. The Union contends that U.S. Steel failed to
provide required notice under the WARN Act prior to a mass layoff at a U.S. Steel
The Honorable John R. Tunheim, United States District Judge for the District1
of Minnesota.

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iron ore plant. Agreeing with the district court that an exception to the WARN Act
for unforeseeable business circumstances applies, we affirm.
I.
U.S. Steel operates an iron ore plant in Keewatin, Minnesota (the “Keetac
plant”). The Keetac plant produces iron pellets, 97 percent of which are used in the
steelmaking process at two of U.S. Steel’s thirteen steelmaking facilities – Granite
City Works, in Illinois, and Great Lakes Works, in Michigan. Granite City Works
and Great Lakes Works primarily produce steel for the construction and automotive
industries.
During the first three quarters of 2008, U.S. Steel reported some of the highest
sales and net income in its history, and it was operating near full capacity when the
economic downturn began in late 2008. In its initial response to the downturn, U.S.
Steel planned to temporarily idle blast furnaces at its steelmaking facilities, along
with other gradual methods to reduce costs. As the economic crisis deepened in
November 2008, however, U.S. Steel announced a complete idling of Granite City
Works and Great Lakes Works. As a result, U.S. Steel idled operations at the Keetac
plant and laid off 313 workers represented by the Union.
U.S. Steel developed the plan to implement the idling and layoffs on November
28 and 29, 2008. The Executive Management Committee approved the plan on
December 1, 2008, the Board of Directors and the Union were informed of the
decision on December 2, 2008, and a WARN Act notice was sent to the Union on
December 3, 2008, stating the following:
The purpose of this letter is to notify you regarding the layoff of certain
employees affected by the Company’s intention to temporarily idle the
operations at Keetac due to the recent major and unanticipated downturn
in the United States and global economy, and the resultant sharply lower
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demand for the plant’s products. . . . The information in this notice is
based upon the best information available to the Company as of this date
and is being provided as promptly as practicable in light of the
extraordinary and rapidly declining business circumstances.
App’x 0104-05. The layoff occurred between December 7 and 21, 2008. By
December 29, 2009, nearly all the laid-off workers had been recalled.
The Union filed a complaint for damages on August 25, 2009, alleging that
U.S. Steel had violated the WARN Act by failing to provide sixty days’ notice of the
mass layoff to the Union or affected employees, as required under the statute. U.S.
Steel moved for summary judgment, arguing that an exception to the WARN Act for
unforeseeable business circumstances applied. In support, U.S. Steel submitted
affidavits by John Price, who served as U.S. Steel’s Vice President of Supply Chain
Management in 2008, and John Skube, Manager of Employee Relations for U.S.
Steel’s Minnesota Ore Operations. Price attested that, during his forty years at U.S.
Steel, he had “never witnessed such a massive and precipitous drop in customer
orders as occurred during the latter part of 2008,” that U.S. Steel’s “traditional
methodology of relying on quarterly marketing and sales forecasts to load and
schedule our facilities proved inadequate during this period,” and that “[b]ased on the
accelerating deterioration in business conditions at the end of November, it was
evident that further reductions in operations . . . had to be accomplished immediately -
i.e., in early December . . . in the face of what was recognized - at that point - as an
unprecedented economic crisis.” Price Decl. ¶¶ 33-34. From July to early November
of 2008, U.S. Steel’s blast furnace capacity utilization rate dropped from 92 percent
to 52 percent, then to 46 percent by late November 2008. To operate profitably, a2
65 percent capacity utilization rate is necessary. The Union did not dispute the
evidence presented by U.S. Steel, but argued that U.S. Steel did not present sufficient
It is noteworthy that U.S. Steel’s ten-year strategic plan developed in July2
2008 predicted utilization rates above 90 percent through 2017.
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evidence to sustain its burden of proof on the unforeseeable business circumstances
exception.
In granting summary judgment to U.S. Steel, the district court concluded that
the exception for unforeseeable business circumstances applied; thus, sixty days’
notice was not required under the circumstances.
II.
“We review the district court’s grant of summary judgment de novo, applying
the same standards as the district court and viewing the evidence in the light most
favorable to the nonmoving party.” Zike v. Advance Am., Cash Advance Ctrs. of
Mo., Inc., 646 F.3d 504, 509 (8th Cir. 2011) (quoting Travelers Prop. Cas. Co. of Am.
v. Gen. Cas. Ins. Co., 465 F.3d 900, 903 (8th Cir. 2006)). “The court shall grant
summary judgment if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(a).
III.
Under the WARN Act, certain large employers who order a plant closing or
mass layoff must provide sixty days’ written notice to affected employees or their
union representatives, among others. 29 U.S.C. § 2102(a)(1). Various exceptions to
this requirement exist, operating as affirmative defenses. 29 U.S.C. § 2102(b); see
Loehrer v. McDonnell Douglas Corp., 98 F.3d 1056, 1060 (8th Cir. 1996). The
exception at issue in this case is the “unforeseeable business circumstances”
exception, which permits an employer to order a mass layoff before conclusion of the
sixty-day notice period if the layoff is “caused by business circumstances that were
not reasonably foreseeable as of the time that notice would have been required.” 29
U.S.C. § 2102(b)(2)(A). “An important indicator of a business circumstance that is
not reasonably foreseeable is that the circumstance is caused by some sudden,
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dramatic, and unexpected action or condition outside the employer’s control.” 20
C.F.R. § 639.9(b)(1). Examples of such circumstances that “might each be
considered” an unforeseeable business circumstance include “[a] government ordered
closing of an employment site that occurs without prior notice,” “[a] principal client’s
sudden and unexpected termination of a major contract with the employer, a strike at
a major supplier of the employer, and an unanticipated and dramatic major economic
downturn.” Id.
The “employer bears the burden of proof that conditions for the exceptions
have been met.” 20 C.F.R. § 639.9; see Loehrer, 98 F.3d at 1060 (noting that “the
employer bears the burden of proving the existence of conditions giving rise to the
exception”) (citations omitted). Although absolved from the sixty-day notice
requirement, an employer satisfying its burden of persuasion on an applicable
exception still “shall give as much notice [of the layoff] as is practicable and at that
time shall give a brief statement of the basis for reducing the notification period.” 29
U.S.C. § 2102(b)(3); see Burnsides v. MJ Optical, Inc., 128 F.3d 700, 704 (8th Cir.
1997) (noting that the “unforeseeable business circumstances defense still requires
employer to give as much notice of closing as practicable once causal event becomes
known”) (citation omitted).
A. Whether the Unforeseeable Business Circumstances Exception Applies
The parties agree that the layoff in question is subject to the provisions of the
WARN Act. The parties dispute, however, the applicability of the unforeseeable
business circumstances exception. The Union argues that U.S. Steel failed to present
sufficient evidence to sustain its burden of persuasion that the effects of the 2008
economic downturn on the steelmaking industry were an unforeseeable business
circumstance as of October 8, 2008, sixty days before the layoff began. The Union
contends that U.S. Steel failed to identify an event that occurred after October 8,
2008, that constituted an unforeseeable business circumstance, given that the general
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economic downturn was well-known by that date. The Union also argues that U.S.
Steel did not present any evidence of how similarly situated employers responded to
the economic conditions. The Union thus requests that the case be remanded for trial
to determine whether U.S. Steel encountered an unforeseeable business circumstance
and, if so, when such circumstance occurred and whether U.S. Steel provided notice
as soon as practicable after such circumstance occurred.
The test for determining whether business circumstances are not reasonably
foreseeable “focuses on an employer’s business judgment,” and an employer “must
exercise such commercially reasonable business judgment as would a similarly
situated employer in predicting the demands of its particular market.” 20
C.F.R. § 639.9(b)(2); Loehrer, 98 F.3d at 1061 (noting that “a company will be
excused from WARN liability if, when confronted with potentially devastating
occurrences, it reacts as would reasonable employers within its own market”)
(citation omitted). “The Department of Labor has indicated that the exception should
not be narrowly construed, that we apply an objective test to analyze the ‘commercial
reasonableness of the employer’s actions,’ and that ‘[e]ach claim of unforeseeable
business circumstances must be examined on its own merits . . . in terms of whether
the employer reasonably . . . could not foresee that the event would occur . . . .”
Gross v. Hale-Halsell Co., 554 F.3d 870, 875-76 (10th Cir. 2009) (quoting 54 Fed.
Reg. 16,042, 16,061-63 (Apr. 20, 1989) (codified at 20 C.F.R. pt. 639)). The
employer is not required “to accurately predict general economic conditions that also
may affect demand for its products or services.” 20 C.F.R. § 639.9(b)(2).
The economic crisis of late 2008, when coupled with the dramatic decline in
customer orders at U.S. Steel, constituted an unforeseeable business circumstance
under the WARN Act. The dispute here centers on when that circumstance occurred.
The Union correctly notes that the general economic crisis commenced prior to
October 8, 2008, the sixtieth day before the layoff. U.S. Steel counters that the
resultant sharply reduced demand for steel was not clear until late November 2008,
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when it became apparent that the operational approach that had served U.S. Steel well
in previous downturns was insufficient to combat “the dire circumstances faced by
the entire industry world-wide.” Price Decl. ¶¶ 29-30. These circumstances, in U.S.
Steel’s business judgment, “presented factors that had to be dealt with immediately
to simply protect survival.” Price Decl. ¶¶ 29-30.3
The operative inquiry is when it became foreseeable that the downturn would
affect U.S. Steel to such a dire extent. “[I]t is the probability of occurrence [not the
mere possibility] that makes a business circumstance ‘reasonably foreseeable.’”
Halkias v. Gen. Dynamics Corp., 137 F.3d 333, 336 (5th Cir. 1998); Roquet v. Arthur
Andersen LLP, 398 F.3d 585, 589 (7th Cir. 2005) (same). On the one hand, various
evidence demonstrates that U.S. Steel was aware, significantly prior to issuing the
WARN Act notice, that the economic downturn would reduce demand for its
products. Notably, on October 28, 2008, U.S. Steel issued its end-of-quarter press
release for the third quarter of 2008, in which its Chairman and CEO John Surma
stated that:
The volatile global economic climate is having significant negative
effects on our business and our forward view is limited because of low
order backlogs and short leadtimes. We expect a decline in fourth
quarter results mainly due to softening demand and prices for flat-rolled
products in North America and Europe, and we expect to continue to
operate at reduced production levels, corresponding with customer order
rates.
Historically, U.S. Steel’s business planners had created the next calendar3
year’s operating plan and steel demand forecasts during the fourth quarter of the
preceding year. Because of the clouded economic outlook during the fourth quarter
of 2008, however, the 2009 business planning process was repeated four times (once
each in October, November, and December of 2008, and in January of 2009).
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App’x 0069-70. The concerns expressed in the press release were validated by a
November 4, 2008, New York Times article in the record, which reported that
automobile sales in the United States plummeted in October of 2008 “to levels not
seen in the auto industry in 25 years.” Bill Vlasic & Nick Bunkley, “Automakers
Report Grim October Sales,” N.Y. Times, Nov. 4, 2008.
Knowledge of an economic downturn alone, however, does not bar application
of the unforeseeable business circumstances exception. See Loehrer, 98 F.3d at 1062;
Gross, 554 F.3d at 876-77. “Rather, an objective focus is required–whether a
‘similarly situated employer in the exercise of commercially reasonable business
judgment would have foreseen’” the plunging demand for steel. Gross, 554 F.3d at
877 (quoting Hotel Employees & Rest. Employees Int’l Union Local 54 v. Elsinore
Shore Assocs., 173 F.3d 175, 186 (3d Cir. 1999)). In this inquiry, “we consider the
facts and circumstances that led to the [layoffs] in light of the history of the business
and of the industry in which that business operated.” Id. (quoting Elsinore Shore, 173
F.3d at 186) (alteration in original).
Nothing in the record suggests that the extent of the economic downturn and
its effects on the steel industry were probable anytime before late November 2008,
much less sixty days before the layoff began. To the contrary, Price attested that the
decline in demand, which U.S. Steel’s traditional methodology had not forecasted,
resulted in late November in capacity utilization rates that were unprecedented in both
the steel industry generally as well as in the history of the century-old company. For
U.S. Steel, this crisis culminated in the accelerating deterioration of its business
conditions at the end of November, at that point making evident the necessity of an
immediate reduction in force.
The undisputed evidence in the record demonstrates that the abbreviated
WARN Act notice given by U.S. Steel was caused by an unanticipated and dramatic
major economic downturn, the depth of which was not fully apparent until late
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November 2008. By then, demand for U.S. Steel’s products—which had been at
historically high levels through the first three quarters of 2008—was in a “free fall.”
Price Decl. ¶ 30. Prior to planning the layoff on November 28 and 29, 2008, U.S.
Steel had been implementing less drastic measures—based on past history during
downturns—in response to the events during the fall of 2008. In other words, it was
fighting to keep the Keetac plant afloat, and “the WARN Act is not intended to deter
companies from fighting to stay afloat.” Roquet, 398 F.3d at 589 (citing Watson v.
Mich. Indus. Holdings, Inc., 311 F.3d 760, 765 (6th Cir. 2002)). Given the
juxtaposition between the unprecedented high demand for steel throughout most of
2008 and the unforeseeably precipitous drop in demand during the final quarter of
2008, U.S. Steel acted within the scope of commercially reasonable business
judgment when initially attempting to weather the storm before ultimately
concluding—upon realizing that its business was in a free fall—that an immediate
idling of the Keetac plant was necessary.4
Although the economic downturn was apparent well before December 3, 2008,
the resultant sharply decreased demand for steel was not. U.S. Steel presented
undisputed evidence that it “reasonably expected to weather the downturn in the
The Union erroneously contends that the unforeseeable business4
circumstances exception cannot apply because no momentous event occurred after
October 8, 2008, constituting the unforeseeable business circumstance. WARN Act
defendants, however, “need not show that the circumstances which caused a plant
closing or mass layoff arose from out of the blue to qualify for the exception.”
Roquet, 398 F.3d at 590 (citing Jurcev v. Cent. Cmty. Hosp., 7 F.3d 618, 626 (7th
Cir. 1993) (hospital entitled to the exception despite awareness of precarious financial
condition and potential loss of funding that ultimately led to its closing); Elsinore
Shore, 173 F.3d at 186 (casino owner entitled to exception where it could not be sure
if or when gaming commission would revoke its license); Loehrer, 98 F.3d at 1062
(defense contractor exempt from WARN Act despite being aware that government
might cancel fighter plane contract)).
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market as it had done many times in the past,” until the end of November of 2008.
Price Decl. ¶ 47. A company, “faced with [an] unprecedented cataclysmic event,
reasonably [may] need[] a little time to assess how things would shake out. And it
[i]s not unreasonable for the company to think it could survive the carnage until . . . .
it ran up the white flag of surrender and gave the bad news to its employees.”
Roquet, 398 F.3d at 590. The WARN Act does not impose upon an employer a
requirement to provide sixty days’ notice or continue in business to its detriment for
the sixty-day notice period simply because it is economically feasible or possible to
do so. See Loehrer, 98 F.3d at 1061-62 n.7 (citations omitted). This case certainly
is not analogous to the prototypical WARN Act violation of “a company that secretly
plotted for a long time to move its operation to Mexico and closed up shop without
any notice to its employees.” Roquet, 398 F.3d at 591. Rather, U.S. Steel thought it
could survive the economic downturn until the unprecedented effects on the steel
industry manifested themselves in late November 2008, thus requiring immediate
action in its commercially reasonable business judgment. In light of these5
circumstances, we conclude that U.S. Steel satisfied its burden of proving that the
conditions giving rise to the unforeseeable business circumstances exception have
been met.
The Union argues that U.S. Steel failed to present direct evidence of how5
similarly situated employers predicted demand in the particular market, as
contemplated by 20 C.F.R. § 639.9(b)(2) for determination of whether the employer
exercised commercially reasonable business judgment. Although U.S. Steel did not
present direct evidence of how any specific similarly situated employer predicted
demand in the steel market, it did consult the market forecasts of “various steel
industry analysts, including the International Iron and Steel Institute, World Steel
Dynamics, and the publishers of the Steel Business Briefing,” together with that of
Goldman Sachs. Price Decl. ¶ 18.
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B. Sufficiency of the Notice
The Union claims that U.S. Steel did not provide notice as soon as practicable
in this case. We have deemed notice sufficient when—after the causal event giving
rise to the layoff becomes known—the employer takes approximately one week to
discuss the unforeseen circumstances with business advisors and determine how to
respond before giving notice. Loehrer, 98 F.3d at 1057 (eight days); see also Gross,
554 F.3d at 878 (seven days). Here, the causal event became known no earlier than
November 28, 2008, when U.S. Steel began formulating its plan to idle Granite City
Works, Great Lakes Works, and the Keetac plant. Once the causal event became
known, U.S. Steel took a Thanksgiving holiday weekend to plan the layoffs and two
business days to seek approval from the Executive Management Committee and to
notify the Board of Directors and the Union. It then acted quickly in formally
delivering the unfortunate news to the affected employees the next day. Thus, we
conclude that U.S. Steel gave as much notice of the Keetac plant layoff as was
practicable.
The Union also challenges the sufficiency of the written notice, claiming that
the notice was deficient under the WARN Act’s requirement that the employer “shall
give a brief statement of the basis for reducing the notification period.” 29
U.S.C. § 2102(b)(3). The applicable Department of Labor regulations further require
that “[a]ll notice must be specific.” 20 C.F.R. § 639.7(a)(1). We conclude that U.S.
Steel’s notice satisfied these requirements. The notice discussed the underlying
factual events leading to a reduced notice period and thus provided the employees an
explanation of U.S. Steel’s difficulties and the rationale for the reduced notice period.
IV.
The judgment is affirmed.
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