Fisker Auto's Ch. 11 WARN Fight May Go To Trial, Judge Says

Law360 - Jeff Montgomery

Remnants of bankrupt electric car maker Fisker Automotive kicked up fresh sparks Wednesday, when a Delaware judge said the company and laid-off workers should consider dates for a trial in a dispute over first-in-line payment claims.

U.S. Bankruptcy Judge Kevin Gross made the point after arguments on a class of workers’ motion for summary judgement for their claim to first priority rights to a $1.9 million estate reserve to pay Worker Adjustment and Retraining Notification Act compensation.

“This case has been pending for 5½ years. I realize it has been a contentious process, but I’m hoping to get a trial date before I retire,” said Judge Gross, who recently announced his intent to leave the bench next year.

Timothy A. Miller of Valle Makoff LLP, counsel to Fisker successor Hybrid Tech Holdings LLC, told Judge Gross that Fisker’s operations continued well beyond the 180-day post-layoff maximum allowed for an employee class seeking priority status for WARN payments, ahead of other creditors.

Hybrid and FAH Liquidating Corp., Fisker’s post-confirmation estate company, made the point while arguing against the summary judgement motion filed on behalf of the workers, laid off on April 5, 2013. The employees sought a ruling that Fisker effectively ceased operations by Oct 2, 2013 — within the 180-day window — although the company’s Chapter 11 was delayed until Nov. 22 that year.

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Jack A. Raisner of Outten & Golden LLP, counsel to the 159 workers seeking WARN Act benefits, argued that Fisker’s business effectively folded far earlier, before the bankruptcy. The actual Chapter 11 filing was delayed, he said, after a lender agreed to fund the business week-to-week before taking the company in a bankruptcy stalking horse sale.

Prepetition operations and shutdowns were complicated by a Department of Energy proposal to sell a loan issued to Fisker under a program to promote new auto industry technologies.

“What was going on in the 180 days from April 5 to Oct. 2 is in the [Chapter 11] disclosure statement,” Raisner said. “The debtors said they effectuated a hibernating of the business, in order to preserve cash and limit expenses.”

Past WARN cases show that “cessation of business has to be given an expansive meaning,” Raisner said, “and expansive meaning meant treating wages as a priority.”

Raisner said Fisker employees were focused after the layoffs on winding down the company and preparing salvageable and viable parts of the business for the prospective buyer.

“They are sending a gift over the divide of bankruptcy, to whoever is catching the [DOE] loan, so they’ll have a business plan, and that would be helpful to the estate,” Raisner said. “There is no evidence that we have found that Fisker in September [2013] did anything along the lines of dealing with customers, sales or anything that resembled the work that Fisker did when it was operating.”

California-based Fisker was founded in 2007 to manufacture hybrid electric cars. Hybrid Tech agreed to pay $25 million in November 2013 for the carmaker's outstanding $169 million loan from the DOE.

Judge Gross said he would try to issue a ruling promptly, but also urged the two sides to prepare for a trial this summer if he denies the motion.

The class is represented by Jason A. Gibson, Frederick B. Rosner and Scott J. Leonhardt of the Rosner Law Group LLC, and Jack A. Raisner and Rene S. Roupinian of Outten & Golden LLP.

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The adversary case is Sven Etzelsberg et al. v. Fisker Automotive Holdings Inc. and Fisker Automotive Inc., case number 13-52517, in the U.S. Bankruptcy Court for the District of Delaware.

The bankruptcy case is In re: FAH Liquidating Corp, case number 13-13087, in the same venue.