In DeGroot v. Nebraska Book Company, Inc., Judge John M. Gerrard of the U.S. District Court for the District of Nebraska ruled that Mountain Ridge Capital, an asset-based lender, did not exercise enough control over Nebraska Book Company to be considered a "employer" under the WARN Act. However, the court denied summary judgment for Concise Capital Management, Nebraska Book's parent company and sole owner, finding a material dispute over whether Concise so thoroughly controlled the subsidiary that it assumed its employment liabilities.
Nebraska Book, a wholesale textbook distributor and technology services provider, shut down its operations on March 1, 2023. The company issued a WARN notice to its 242 employees on February 27, terminating most staff immediately and leaving at least 126 employees without the full 60 days of notice or their accrued paid time off.
The plaintiffs, former employees Christopher Degroot and Steven Showalter, sued Nebraska Book, its parent Concise Capital Management ("Concise"), and its lender Mountain Ridge SPV I d/b/a Mountain Ridge Capital. The suit alleged violations of the WARN Act and the Nebraska Wage Payment and Collection Act, arguing that Concise and Mountain Ridge were effectively employers due to their financial control over the distributor's operations.
The court rejected Concise's argument that the Supreme Court's decision in Loper Bright Enterprises v. Raimondo eliminated deference to Department of Labor regulations regarding corporate liability. Judge Gerrard held that the WARN Act's employer definition and the DOL's five-factor test for parent-subsidiary relationships are grounded in longstanding common-law alter-ego and veil-piercing principles, which Congress is presumed to have legislated with knowledge of.
Regarding Mountain Ridge, the court applied Eighth Circuit precedent from Adams v. Erwin Weller Co. to determine that the lender's control over Nebraska Book's cash receipts and expense approvals was limited to protecting its security interest in the company's accounts receivable. The court found no evidence that Mountain Ridge assumed responsibility for the overall management of Nebraska Book's business, granting its motion for summary judgment and terminating it as a party.
Concise's liability turned on whether it operated Nebraska Book as a single entity or allowed the subsidiary to maintain independent corporate identity. The court noted that while Concise and Nebraska Book shared no personnel policies or employees, they shared ownership and directors. The record contained conflicting evidence about whether Thomas Krasner, a Concise principal who sat on Nebraska Book's board, was acting in the interests of the parent company or the subsidiary when he pushed for liquidation.
Because a reasonable factfinder could conclude that Concise exercised full control over Nebraska Book's day-to-day management and liquidation decisions, summary judgment was inappropriate. The court emphasized that if Concise controlled the company to the degree alleged, it could not invoke the WARN Act's "faltering company" exception, as Concise itself was solvent and had the financial capacity to keep Nebraska Book operating for an additional 60 days.
The court also denied summary judgment on the plaintiffs' claims under the Nebraska Wage Payment and Collection Act, predicting that state law permits recovery against a de facto employer but leaving the factual determination of whether Concise or Mountain Ridge qualified as such to a jury.
Judge Gerrard denied the plaintiffs' motion for summary judgment in part, denied Concise's motion for summary judgment, and granted Mountain Ridge's motion. The court also partially denied the plaintiffs' motion to exclude Concise's expert, Daniel Dooley, allowing his testimony on whether board conduct was consistent with corporate norms while striking his legal conclusion that Concise was not a joint employer.