Facts

Thomas Capizzi filed a class action against AWTR Liquidation Inc. f/k/a Rhythm and Hues Inc., under the Worker Adjustment and Retraining Notification Act and its California counterpart under the California Labor Code (the WARN Acts) in connection with AWTR's alleged failure to give 60 days' advance notice of termination.

Capizzi and Anthony Barcelo also filed a wage claim class action against the debtor for unpaid wages and 30 days of wage continuation penalties.

PLAINTIFFS' CONTENTIONS:
Plaintiffs contended that defendant failed to give terminated employees at least 60 days' advance notice of termination in violation of the WARN Acts. Plaintiffs contended that they were entitled to seek up to 60 days' pay and benefits, attorney fees, and that these damages should be entitled to administrative priority status under the Bankruptcy Code. In the class action wage claim, plaintiffs contended that they were not paid for all wages and earned vacation through the date of their termination.

DEFENDANT'S CONTENTIONS:
Defendant asserted various defenses. Defendant also contended that it was entitled to give less than 60 days' notice under the "faltering company" exception under the WARN Acts, and that the WARN Acts claims were not entitled to administrative priority status.

Damages

Under the WARN Acts, Plaintiffs sought 60 days' pay and benefits and attorneys' fees, in the approximate amount of $4,000,000. In the wage claim case,Plaintiffs sought unpaid earned compensation plus continued wages up to 30 days as penalties.

Result

The parties agreed to settle both lawsuits in mediation. Under the terms of the settlement agreement, AWTR agreed to provide $1 million in settlement funds as to the alleged WARN Acts violation. AWTR also agreed to settle the other action alleging California Labor Law violations by providing priority wage/benefit claim and allowed unsecured wage/benefit claims, which will be made as soon as practicable after a chapter 11 plan is confirmed.

Other Information

MEDIATOR: Hon. Mitchel Goldberg, ret. of Judicate West. BANKRUPTCY CASE FILING DATE: Feb. 13, 2013.