CHICAGO — A federal judge won’t let the owners of a closed Melrose Park hospital end a lawsuit accusing them of failing to provide sufficient notice of the shutdown to employees.
In an opinion filed July 15, U.S. District Judge Sharon Coleman rejected Pipeline Health Systems’ motion to dismiss the complaint of a group of Westlake Hospital workers who alleged the company violated the Worker Adjustment and Retraining Notification Act (WARN) in using bankruptcy protection to close the hospital.
Attorney Ari Scharg and the firm of Edelson P.C., of Chicago, filed the class action complaint Sept. 11 in federal court. The complaint alleged Pipeline didn’t provide the required 60-day notice to 549 employees in accordance with the WARN act. Plaintiffs named in the lawsuit include Shellye Pechulis, Anna Marie Falcone and Jodie Holich.
In arguing for dismissal, Pipeline said it wasn’t responsible for the decision to terminate employment — assigning that role to the bankruptcy trustee — and further doesn’t qualify as an employer, but nonetheless did comply with WARN obligations.
Coleman rejected the primary argument, noting the plaintiffs’ allegations assert the decision to initiate bankruptcy proceedings under Chapter 7, generally used for liquidation, made them “aware that the result would be closing of the hospital and termination of its employees. Several courts around the country have recognized the potential for WARN liability under similar circumstances."
She likewise said Pipeline can’t skirt its role as an employer, which it said didn’t apply following filing of the bankruptcy petition. Coleman wrote that Pipeline’s “reliance on cases involving the liquidating fiduciary exception to support its argument are unavailing.” She further said the employees claimed Pipeline was an employer under WARN Act’s single employer test, and the company didn’t challenge whether those allegations are sufficient.
The hospital gave notice on April 9, 2019, it would close between June 9-June 23. That didn’t happen, and the bankruptcy trustee on August 19 — 57 days from April 9 — told workers their positions were terminated as of August 16.
Coleman said she didn’t consider whether the August 19 notice qualified because the workers adequately alleged it was insufficient on the timeline alone. The judge said the prevailing factor is that Pipeline Health directed Pipeline-Westlake to file for bankruptcy on August 6, and the trustee didn’t notify employees for another 13 days, which doesn’t comply with a requirement stating ‘additional notice of a postponement of a plant closing or mass layoff must be given to the relevant parties 'as soon as possible.’ ”
Furthermore, Coleman wrote, “Pipeline Health provides no excuse for why it did not send notices to the hospital’s employees when it made the decision that the hospital will be liquidated. Courts have found that even shorter delays qualify as a failure to send notice ‘as soon as possible.’ ”
Pipeline also wanted Coleman to dismiss workers’ claims under the Illinois Wage Payment and Collection Act. While Coleman wrote that the employees need to better prove Pipeline’s level of control over the hospital during the relevant time, “they have alleged enough facts to get past the motion to dismiss.”
Pipeline has been represented in the federal WARN action by attorney Richard Patrick Darke, and others with the firm of Duane Morris LLP, of Chicago.
The litigation over the alleged WARN Act violations is just one part in a multi-prong legal assault on Pipeline helmed by the Edelson firm over the Westlake Hospital closure.
Since early last year, Edelson attorneys have represented the village of Melrose Park in contentious litigation that has stretched from Cook County Circuit Court to bankruptcy court in Delaware, and back to Chicago. That legal action has been joined by the Cook County State's Attorney's Office. They have accused Pipeline and its executives of violating state law and misleading state and local government authorities by moving to close the hospital shortly after purchasing it early in 2019.
Initially, Edelson and Melrose Park sought to force the hospital to remain open, even though Pipeline claimed the hospital was losing millions of dollars a month. The village said the hospital was required to serve its mostly low-income population, and so should remain open.
However, Pipeline managed to file for bankruptcy on behalf of the corporate subsidiary that operated Westlake, and the bankruptcy trustee agreed that Westlake's finances were sufficiently poor to require it to close.
Edelson and the village, however, has since won approval to continue their lawsuit against Pipeline and some of its affiliates, provided they do not attempt to secure a court order to reopen the hospital. That litigation remains pending in Cook County court.