The opinion of the court was delivered by: Gerry, Chief Judge:
These consolidated actions arise out of the May 22, 1989
closing of the Atlantis Casino Hotel in Atlantic City, New
Jersey. Presently before the court is defendants' motion for
summary judgment. The issue presented by this motion, one of
first impression, is whether an employer may be subject to
liability under the Worker Adjustment and Retraining
Notification Act (WARN), 29 U.S.C. § 2101 et seq. (West
Supp. 1991), for failing to provide employees with the sixty
days advance notice of closing required under that act, where
the closing was ordered by a state regulatory agency. For the
reasons set forth below, we hold that under the facts of this
case, defendants did not "order a plant closing" within the
meaning of 29 U.S.C. § 2102. Accordingly, defendants'
motion will be granted.
Although this court has previously set forth some of the
relevant facts of this case in considering defendants'
respective motions to dismiss, see Finkler v. Elsinore Shore
Associates, 725 F. Supp. 828 (D.N.J. 1989); Hotel Employees
Restaurant Employees International Union Local 54 v. Elsinore
Shore Associates, 724 F. Supp. 333 (D.N.J. 1989), we will set
forth below the pertinent facts for the purposes of this
Defendants Elsinore Shore Corporation (Elsinore), a Nevada
corporation, and other related entities*fn1 are the partners
of Elsinore Shore Associates (ESA), a New Jersey partnership
that owned and operated the Atlantis Hotel Casino (the
Atlantis) in Atlantic City, New Jersey. As of May 17, 1989,
defendants employed approximately 1,800 employees at the
Atlantis. The plaintiffs are former employees of the Atlantis
and their representative union.
Casino gambling in New Jersey is authorized and heavily
regulated under the provisions of the Casino Control Act (the
Act), N.J.Stat.Ann. § 5:12-1 et seq. (West 1988). General
responsibility for implementing the Act is vested in the Casino
Control Commission (the Commission). Id. § 5:12-63. Among other
powers and responsibilities, the Commission adjudicates all
applications for license and registration under the Act, as
well as petitions for suspension, revocation or renewal. The
Division of Gaming Enforcement (DGE) of the New Jersey
Department of Law and Public Safety serves as an investigatory
and enforcement body for all proceedings before the Commission,
and prosecutes all proceedings for violations of the Act. Id. §
An applicant seeking a license to operate a casino must meet
strict requirements under the Act, such as ownership or
long-term lease of a hotel at which the casino will operate,
and incorporation and maintenance
of all operating accounts in New Jersey. Id. § 5:12-82.
Additionally, every applicant must establish by clear and
convincing evidence his or her financial stability, integrity
and responsibility, and must agree to inspection of all
financial records by the Commission or DGE. Id. § 5:12-84. The
applicant must establish the personal and financial integrity
of all financial backers, investors, mortgagees, bond holders
and holders of debt which bear any relation to the casino. Id.
Further, the applicant must demonstrate that it can create and
maintain a successful, efficient casino operation which will
not adversely affect current casino operations or overall
environmental conditions. Id.
Licenses are issued for a one year period, may be renewed
for a period of one year for the first two renewal periods,
and generally are renewed for a period of two years
thereafter. Id. § 5:12-88. Where a casino license is revoked or
suspended, the Commission may appoint a conservator to take
possession and control of the licensee's property in order to
preserve the assets and to attempt to continue to operate the
casino on a sound and businesslike basis. Id. § 5:12-130.2.
Once appointed, the conservator is vested with the title of all
the property of the former licensee relating to the casino and
hotel, subject to any valid liens, claims and encumbrances. Id.
§ 5:12-130.2(a). The conservator is afforded broad powers,
subject to modification by the Commission. Id. §
Plaintiffs depict a detailed account of financial difficulty
experienced by defendants since 1985 which ultimately led to
the casino's demise in 1989. In 1984, the name of the casino
was changed from Playboy Hotel & Casino to Atlantis Casino
Hotel. That year the Atlantis realized an operating profit of
$14.2 million. Trouble began in 1985, however, allegedly due
to increased competition and low name recognition. In 1985
defendants' gross revenues decreased by 9.2% and the Atlantis
experienced a net operating loss of $8.2 million.
Consequently, in November, 1985 a creditor filed an
involuntary petition under Chapter 11 of the Bankruptcy Code
against Elsub.*fn2 Shortly thereafter, EAC filed a voluntary
petition for reorganization of ESA under Chapter 11.
The Commission renewed ESA's license for a one-year period
in April, 1986. However, possibly as a result of the Chapter
11 proceedings, the Commission imposed numerous requirements
on defendants. For example, ESA was required to maintain a
cash balance of at least $3 million for casino operations, and
ESA was required to submit monthly balance sheets, statements
of income, statements of cash flow, and changes in components
of working capital. Additionally, ESA was required to prepare
daily operating reports and cash reports for the Commission
and the DGE. The Commission also required ESA and Elsinore to
immediately notify the Commission and the DGE of any change in
the conditions of or use of any credit lines, and to maintain
necessary accounts to satisfy payroll and related employee
Revenues at ESA decreased by 19.4% for the twelve months
ending December 31, 1986. The Commission renewed ESA's
license, again for a one-year period, in April, 1987, and
imposed substantially the same conditions as were imposed the
previous year. On July 24, 1987, EFC, ENJ, EAC and Elsub all
filed voluntary petitions under Chapter 11 to facilitate the
reorganization of ESA.
Casino revenue decreased substantially again in 1987. On
March 25, 1988, ESA's accountants, Laventhol and Horwath,
issued its statement of ESA's operations for calendar years
1985 through 1987, and noted that as of December 31, 1987,
current liabilities exceeded current assets by $270,623,000.
It stated that ESA was in default on substantially all of its
debt and concluded that "these factors, among others, indicate
that the partnership may be unable to continue in existence."
See, Exhibit 11 of Plaintiffs' Appendix to its Memorandum in
Opposition, at 1673 [hereinafter "P.Ex."]. In spite of these
difficulties, on September
30, 1988, the debtors were discharged from bankruptcy under an
approved plan of reorganization.
The casino's financial condition continued to deteriorate in
1988. Although revenues increased, ESA reported a net loss of
$26,672,111. In April, 1988, the Commission renewed ESA's
license, but only for one year although it was eligible for a
two-year license. The Commission continued the conditions
imposed the previous year, in addition to imposing new
requirements. For example, the Commission ordered that the
license hearing would automatically be reopened should ESA's
cash position fall below $6 million for five working days.
Additionally, it required Elsinore to make additional funding
available to ESA if working capital fell below $7 million.
Beginning January 17, 1989, the DGE began monitoring ESA's
cash position on a daily basis. On several occasions, ESA's
accounts fell below the required levels.
ESA filed an application for its 1989 license renewal on
December 15, 1988. On March 13, 1989, the Commission's
Division of Financial Evaluation and Control issued a report
which concluded that ESA had not demonstrated adequate
financial stability. The Commission conducted various hearings
between March 27, 1989 and May 16, 1989 to determine whether
to renew ESA's casino license and to determine whether a
conservator should be appointed. At the April 3, 1989 hearing,
counsel for the Atlantis testified that ESA intended to sell
the casino, preferably within sixty days. See, P.Ex. 25, at
390-91. ESA therefore opposed the appointment of a conservator
since, in their view, this would make it difficult to sell the
casino as a going concern. Alternatively, counsel testified, if
no buyer could be found within the sixty day period, the
company intended to dispose of the casino by auction in order
to satisfy creditors. Id., at 301. Jeanne Hood, the President
and Chief Executive Officer of Elsinore, testified that a sale
was imminent, and noted that it was well known that Elsinore
did not have the resources to make the Atlantis "a very
profitable, viable property." P.Ex. 26, at 610-11.
On April 7, 1989 the Commission voted not to renew ESA's
license and appointed Joseph M. Nolan as conservator. The
Commission thereafter conducted hearings to determine what
powers, duties and responsibilities were appropriate for the
conservator. Chairman Read stated that the conservator need
not undertake many of the activities authorized under the Act,
and that the conservator "should, in the spirit of limiting
the problems of transition, exercise restraints." P.Ex. 30, at
990. The Commission's Order, dated April 19, 1989, provides
that "the regular and normal operations of the casino hotel
shall be conducted by ESA under the general guidance and
oversight, but without specific review or approval of the
conservator, pending the sale of the casino hotel. . . ."
D.Ex. B, at 2. The conservator was authorized to assess and
monitor ESA's financial situation and to report to the
Commission if ESA could no longer remain financially viable.
ESA was required to make all books and records available to
the conservator, and was prohibited from taking any
significant actions, including sale of the property, without
first notifying the conservator. The conservator, in turn, was
authorized to sell the property subject to prior approval of
the Commission. Id., at 3. As this court previously observed,
[i]t appears that the Commission implemented a
system of checks and balances, pending the sale
of the Atlantis, in order to assure that
defendants met minimum regulatory standards,
without unduly disrupting day to day operations.
The checks and balances served to curb any major
action on the part of the defendants and the
Conservator, but the daily operation was handled
Finkler v. Elsinore Shore Associates, 725 F. Supp. at 832.
The defendants had been negotiating for the sale of the
Atlantis with Donald Trump shortly before the Commission's
Order was issued. On April 15, 1989 Atlantis and Trump issued
a joint press release announcing that Elsinore and Trump had
entered into a purchase agreement. The release stated that,
according to Jeanne Hood, the casino operation at the Atlantis
would be closed in the near future. P.Ex. 17, at 491. In fact,
section 7.05 of the Purchase and Sale Agreement dated April
14, 1989, provides that "Seller intends, and is presently
taking steps, to close the casino located in the Hotel and
discontinue all gambling and gaming activities in the Hotel on
or before the expiration of [the] due diligence period granted
to Purchaser. . . ." P.Ex. 1, at 25.*fn3 In a memo to
employees outlining the implications of the sale to ...