Richards Layton & Finger

AE Liquidation: WARN Act Comfort for Debtors Attempting a 363 Sale, or Just the 'Vladimir Putin Exception'?

October 2017

In In re AE Liquidation, 2017 WL 3319963 (3d Cir. Aug. 4, 2017) (the “Third Circuit Opinion” or “AE Liquidation”), the Third Circuit held that a WARN Act notice only must be given when mass layoffs are probable, not when merely foreseeable. As a result, a debtor that was attempting to effectuate a going concern sale under Bankruptcy Code Section 363 was not liable for failing to give a WARN Act notice until the day it determined it could no longer wait for approvals from the buyer to close. The case can be viewed as providing comfort to debtors that they can attempt a going concern sale without having to provide a potentially damaging “conditional” WARN Act notice.