Ex-Worker Hits WL Homes With WARN Class Action

Law 360, Mike Cherney
October 16, 2009

A former employee of a subsidiary of bankrupt homebuilder WL Homes LLC has filed a putative class action alleging that about 100 employees were fired without the 60-day notification required by federal and state law.

Lyne Decuir filed the adversary proceeding Thursday in the U.S. Bankruptcy Court for the District of Delaware, seeking to recover the 60 days of wages and benefits the company owes to its employees by levying a first priority administrative claim against the bankruptcy estate of WL Homes, which did business as John Laing Homes.

The case is the latest allegations to be filed against the embattled homebuilder, which has also been accused by various homeowners associations for defective construction. Several groups have asked the bankruptcy court for relief from the automatic stay to sue the company for the faulty building.

Decuir’s complaint alleges that JLH Realty & Construction Inc., the WL Homes subsidiary, violated the federal Worker Adjustment and Retraining Notification Act and similar California state statutes.

The workers were laid off from an office in Irvine, Calif., on or around June 5, the same day WL Homes’ bankruptcy was converted from Chapter 11 to Chapter 7. It first filed for Chapter 11 bankruptcy protection in February.

“It was obviously suffering from economic problems, but that is not a defense under this law,” said Jack Raisner, an attorney for Decuir. “This law is meant to help employees who are going down in that kind of ship because the layoffs and plant closings generally don’t happen in happy economic times.”

The complaint did not specify a dollar amount because the plaintiff did not have all the payroll records, Raisner said. He said the employees never even got their final paychecks, though that should be paid by the bankruptcy trustee separately from the class action suit.

“The cut-and-run aspect of it is particularly troubling,” Raisner said. “Somebody’s taking the money and not even paying final paychecks.”

An attorney for WL Homes was not immediately available for comment on Friday.

In May, WL Homes’ creditors committee asked a federal judge to convert the real estate developer’s bankruptcy case to Chapter 7, saying its Chapter 11 proceeding was just a way for the parent company to free itself of liabilities at the creditors’ expense.

The case was converted despite WL Homes’ efforts to hold back the creditors rallying for the conversion.

WL Homes’ affiliated entities listed assets of $1.3 billion and liabilities of $977 million as of Nov. 30. In 2007, the company, one of the largest homebuilders in the U.S., sold nearly 1,400 homes and had nearly $1 billion in revenue, its law firm said.

But from Jan. 1 to Nov. 30 of last year, WL Homes sold only 560 homes and saw revenues plummet to $287 million, court documents said. Company officials attributed the poor performance to the downturn in the residential construction industry.

WL Homes is being represented by Pachulski Stang Ziehl & Jones LLP.

The employees are being represented by Outten & Golden LLP and Loizides PA.

The bankruptcy case is In re: WL Homes LLC, case number 09-10571, in the U.S. Bankruptcy Court for the District of Delaware.

–Additional reporting by Liz McKenzie, Pete Brush, Abigail Rubenstein and Brendan Pierson