Background
Bayou Steel operated a steel plant in LaPlace, Louisiana, and terminated three hundred employees in September two thousand nineteen without proper notice under the Worker Adjustment and Retraining Notification Act. Black Diamond Capital Management, a private equity firm that owned Bayou Steel through a subsidiary, was sued alongside the steel company. A previous appeal remanded the case for a bench trial to determine if Black Diamond specifically directed the plant’s closure. The district court found that while the closure was inevitable due to financial constraints, there was no evidence that Black Diamond specifically ordered the termination of the employees.
The court’s reasoning
The court reviewed the district court’s factual findings for clear error. It noted that every Black Diamond director testified that the board did not decide to close the plant. The record contained no direct evidence showing who made the decision to terminate the employees. The court found that the district court reasonably inferred that the independent directors made the ultimate decision to close the plant once it became inevitable without further loans. The court rejected the plaintiffs’ argument that circumstantial evidence of control was sufficient to prove specific direction, stating that the lack of direct evidence was glaring.
The dissent
What it means going forward
The decision reinforces that under the WARN Act, plaintiffs must provide direct evidence that a parent company or affiliate specifically directed an illegal employment practice to establish liability. It clarifies that a lender’s refusal to provide additional funds or general oversight does not automatically constitute specific direction of a plant closing.