44CanalCenterPlaza,Suite400•Alexandria,VA22314•(703)739-0800•Fax(703)739-1060•www.abiworld.org ProskauerinNewYork. RichardJ.Corbi Proskauer;NewYork rcorbi@proskauer.com BankruptcyandRestructuringGroupof RichardCorbiisanassociateinthe J OURNAL A M E R I C A N B A N K R U P T C Y I N S T I T U T E The Essential Resource for Today’s Busy Insolvency Professional Does Family Medical Leave Act Liability Attach to Purchasers of Chapter 11 Debtors? Contributing Editor: for the full amount of lost wages. 16 The About the Author district court held that Dollar Tree was not a “successor in interest” under the FMLA and granted summary judgment to Dollar Tree. 17 T he Ninth Circuit Court of Appeals in Sullivan v. Dollar Tree Stores FMLA, Related DOL Regulations Inc. 1 affirmed a district court’s as an assistant manager for the soon-to- The FMLA entitles an “eligible granting of summary judgment to be-opened Dollar Tree store at the former employee” to take family or medical Dollar Tree Stores Inc. by holding that Factory 2-U Pasco location. 8 Sullivan’s leave for several reasons, including Dollar Tree was not the “successor in employment between the closing of the caring for a close relative. 18 “Eligible interest” to former chapter 11 debtor, Factory 2-U store and the opening of the employee” means an employee who has Factory 2-U Stores Inc., for purposes of Dollar Tree store was continuous because been employed for at least 12 months Family and Medical Leave Act of 1993 she trained at a pre-existing nearby Dollar by the employer with respect to whom (FMLA) liability. 2 Tree store and assisted in the preparatory leave is requested. 19 The term “employ- work. 9 Dollar Tree hired only Sullivan er” “includes…any successor in interest Background and one other person from the Factory of an employer.” 20 Factory 2-U was a retail store that 2-U store to work at the Pasco store. 10 Because Sullivan challenged a deni- sold discount clothing with more than Sullivan worked at the Dollar Tree al of leave that occurred several months 200 stores located in the western United store from September 2004 to May short of her one-year anniversary with States including Pasco, Wash., where the 2005. In May 2005, Sullivan’s mother Dollar Tree, Sullivan relied on the “suc- plaintiff, Christina Sullivan, was the full- experienced health problems, 11 and cessor in interest” provision for relief. 21 time store manager. 3 In 2004, Factory 2-U filed for chapter 11, and in September Code to Code 2004, the bankruptcy court approved the sale of Factory 2-U’s leasehold on the Pasco store to Dollar Tree Stores Inc., 4 a retail store that sells various merchandise Dollar Tree granted Sullivan some The FMLA does not define “successor for under $1. Dollar Tree only purchased unpaid leave to care for her mother, in interest,” but the DOL has issued a the existing leasehold on the Factory 2-U but not the entire amount that Sullivan regulation that sets forth eight factors to store and no other assets. 5 At the end of requested. 12 The court’s description of determine whether an employer is cov- September 2004, Factory 2-U closed its the record on this point was unclear, ered because it is a successor in inter- Pasco store and the Dollar Tree store but Sullivan either quit or was fired in est, 22 which include: “(1) substantial con- opened four weeks later. 6 During the late May or June 2005. 13 Sullivan con- tinuity of the same business operations; four-week interim period, Dollar Tree tacted the Department of Labor (DOL), (2) use of the same plant; (3) continuity built out the Pasco location by remodel- which eventually concluded that Dollar of the work force; (4) similarity of jobs ing the interior to support a Dollar Tree Tree violated the FMLA. 14 Sullivan was and working conditions; (5) similarity of store and set up a team to prepare the reinstated, received a partial amount, supervisory personnel; (6) similarity in inventory, stock the shelves and perform $5,000 of the $20,000 in lost wages machinery, equipment and production other preparatory work. 7 that she requested, and began work in methods; (7) similarity of products or In September 2004, Sullivan filled April 2006. 15 Sullivan eventually quit services; and (8) the ability of the prede- out an employment application at the in December 2006 and filed an action cessor to provide relief.” 23 Dollar Tree, which eventually hired her 8 Id . 16 Id . 1 623 F.3d 770 (9th Cir. 2010). 9 Id . 17 Id . 2 Sullivan , 623 F.3d at 787. 10 Id . 18 Id . at 780 (citing 29 U.S.C. § 2612(a)(1)). 3 Id . at 775. 11 Id . 19 Id . (citing 29 U.S.C. § 2612(2)(A)). 4 Id . 12 Id . 20 Id . (quoting 29 U.S.C. § 2611(4)(A)(ii)(II)). 5 Id . 13 Id . 21 Id . at 780. 6 Id . 14 Id . 22 Id . 7 Id . 15 Id . at 776. 23 Id . at 780-81 (quoting 29 C.F.R. § 825.107)).
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