Halkias v. General Dynamics ( 1998 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
NO. 97-10334
JOHN HALKIAS, ET AL.,
Plaintiffs
DAWN DEE BRYANT; BARRY JACKSON,
Plaintiffs-Appellants
VERSUS
GENERAL DYNAMICS CORPORATION,
Defendant-Appellee
JAMES ANTHONY CUREINGTON,
Plaintiff
VERSUS
GENERAL DYNAMICS CORPORATION,
Defendant
Appeal from the United States District Court
For the Northern District of Texas
April 1, 1998
Before JOLLY, DUHE’ and PARKER, Circuit Judges.
ROBERT M. PARKER, Circuit Judge:
I.
FACTS & PROCEDURAL HISTORY
On January 13, 1988, General Dynamics and McDonnell Douglas
Corporation were awarded a contract by the United States Navy to
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jointly develop a new generation of carrier-based, medium attack
aircraft to be known as the A-12 “Avenger”. The contract contained
several provisions reflecting a concern for the abusive cost
overruns of the past. Costs between the target price of $4.4
billion and the ceiling price of $4.8 billion would be shared by
the government and the contractors (60% by the government and 40%
by the contractors). All costs over the ceiling price would be
absorbed by the contractors.
By May, 1990, the A-12 contractors had incurred substantial
unforeseen production difficulties and by its own estimate, General
Dynamics concluded that the cost of completion would be $700
million more than planned. On June 13, 1990, the contractors
notified the Navy that the costs of completion would overrun the
contract ceiling by an amount that the contractors could not
absorb. Throughout the remainder of 1990 production continued
amidst various attempts to restructure the contract, which did
result in a new delivery schedule. However, the Navy would not
agree to change the contract ceiling price. Meanwhile, the threat
of contract cancellation loomed overhead.
On December 14, 1990, the Secretary of Defense directed the
Navy to show cause by January 4, 1991, why the A-12 contract should
not be canceled. Later that same day, General Dynamics received
informal notice of the Secretary’s show cause order. On December
17, 1990, the Navy gave the contractors notice that their
performance on the A-12 contract was “unsatisfactory” and that
unless specified conditions were met by January 2, 1991, the
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contract might be terminated. On December 20, 1990, General
Dynamics issued a special bulletin to all of its employees
notifying them that the A-12 contract was in jeopardy and promising
to provide notices the next day to each individual employee who
might lose his or her job. As promised, on December 21, 1990,
General Dynamic sent out individual notices to all potentially
affected employees, providing official but conditional notification
that they might be terminated in the event that the A-12 contract
were canceled. On January 7, 1991, Secretary Cheney announced his
decision to terminate the A-12 contract effective immediately. As
a result General Dynamics immediately began laying off affected
employees. Approximately 2000 non-union salaried employees were
laid off from General Dynamics’ Fort Worth, Texas, and Tulsa,
Oklahoma, facilities.
On November 24, 1992, Plaintiff John Halkias filed suit under
the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§
2101-2109 (1988)(the “WARN” act), claiming that General Dynamics
had failed to comply with the Act’s sixty-day notice requirement.
The district court certified a class of non-union salaried
employees and designated John Halkias as class representative. On
June 24, 1993, the district court granted General Dynamics’ Fed. R.
Civ. P. 12(c) motion to dismiss holding that the six-month statute
of limitations of the National Labor Relations Act, 29 U.S.C. §
160(b), was applicable to actions under the WARN Act, and Plaintiff
appealed to this Court. On July 11, 1995, this Court reversed the
district court and remanded the case following North Star Steel v.
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Thomas, ___ U.S. ___, 115 S. Ct. 1927, 132 L. Ed. 2d 27 (1995),
which held that state law rather than the NLRA provided the
relevant statute of limitations for actions under the WARN Act.
Halkias v. General Dynamics Corp., 56 F.3d 27 (5th Cir. 1995).1
On October 3, 1995, the district court determined that the
Texas four-year statute of limitations for actions for debt, Tex.
Civ. Prac. & Rem. Code Ann. § 16.004(a)(3)(Vernon 1986), was the
most analogous to actions under the WARN Act and denied General
Dynamics’ Rule 12(c) motion. Since this holding was at odds with
a holding by the district court for the western district of Texas,
the district court granted General Dynamics the right to take an
interlocutory appeal on October 6, 1995, which invitation General
Dynamics accepted. Over one year later, on October 22, 1996,
following the decision in Staudt v. Glastron, Inc., 92 F.3d 312(5th Cir. 1996), this Court affirmed the district court’s ruling
concerning the statute of limitations and remanded the case.
Halkias v. General Dynamics Corp., 101 F.3d 698 (5th Cir.
1996)(table).
On December 12, 1996, the district court issued a scheduling
order establishing July 31, 1997, as the deadline for completion of
discovery. On January 16, 1997, General Dynamics filed its motion
for summary judgment, arguing that sixty-day advance written notice
was not required in this case, because the layoffs were “caused by
business circumstances that were not reasonably foreseeable as of
1
During the pendency of this appeal, Plaintiff John Halkias passed
away, and on remand his widow, Billie Halkias, was substituted as Plaintiff
and Appellant Dawn Dee Bryant was substituted as class representative.
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the time that notice would have been required.” 29 U.S.C. §
2102(b)(2)(A). In response Appellants sought to have General
Dynamics’ motion for summary judgment continued so that more
discovery might be conducted in accordance with Fed. R. Civ. P.
56(f) . That motion was denied. The motion for summary judgment
was fully briefed, and on March 5, 1997, the district court granted
it. Plaintiffs-Appellants have taken this appeal raising the
following issues:
1. Did the district court err by refusing to continue General
Dynamics’ motion for summary judgment so that additional discovery
might be conducted in accordance with Fed. R. Civ. P. 56(f)?
2. Did the district court err by granting General Dynamics’
motion for summary judgment?
II.
LAW & ANALYSIS
A.
The WARN Act
The WARN Act provides that:
“[a]n employer shall not order a plant closing or mass
layoff until the end of a 60-day period after the
employer serves written notice of such an order ... to
each representative of the affected employees as of the
time of the notice, or if there is no such representative
at that time, to each affected employee....”
29 U.S.C. § 2102 (a)(1). However, the Act further provides that;
“[a]n employer may order a plant closing or mass layoff
before the conclusion of the 60-day period if the closing
or mass layoff is caused by business circumstances that
were not reasonably foreseeable as of the time that
notice would have been required ... An employer relying
on this subsection shall give as much notice as is
practicable and at that time shall give a brief statement
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of the basis for reducing the notification period.”
29 U.S.C. § 2102 (b)(2)(A) & (b)(3)(emphasis added). This case
centers around the proof in support of and against the proposition
that General Dynamics should have reasonably foreseen the impending
contract cancellation and therefore cannot avail itself of the
exception in § 2102(b)(2)(A). This Court reviews a district court
decision to grant summary judgment de novo, applying the same
standard as the district court. Wynn v. Washington National
Insurance Company, 122 F.3d 266, 268 (5th Cir. 1997), citing
Bodenheimer v. PPG Indus., Inc., 5 F.3d 955, 956 (5th Cir. 1993).
General Dynamics argues that the cancellation of the A-12
contract and the resultant layoffs did not become reasonably
foreseeable until December 14, 1990, at the earliest if at all,
when General Dynamics learned through informal channels that
Secretary Cheney had issued an order to the Navy requiring it to
show cause why the A-12 program should not be terminated. General
Dynamics argues that from December 14 until official notice was
given to all affected employees on December 21, 1990, it acted with
due diligence in an attempt to identify those employees who would
be affected and to prepare the appropriate notices in compliance
with § 2102 (b)(3). General Dynamics argues that it reasonably
believed that the program would not be terminated, in spite of
serious cost overruns and a projected production delay of 22
months, because both the Navy and Secretary Cheney still expressed
very high support for the program.
Appellant argues that General Dynamics knew or should have
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known that the A-12 contract would be canceled. As evidence that
the cancellation was reasonably foreseeable, Appellant offered the
testimony of its expert, Dr. Lawrence Korb, in another WARN Act
case arising out of these layoffs, wherein Dr. Korb testified that
General Dynamics knew as early as October, 1990, that if it did not
pass the Defense Acquisition Board’s review in December, 1990, the
project would not go forward.2 Appellant also offered various
minutes from General Dynamics’ board of directors meetings wherein
the A-12 project and its possible termination were discussed.
Appellant argued that those minutes showed that General Dynamics’
CEO Stanley Pace was aware of the cancellation of a similar
Lockheed aircraft project because of cost overruns and production
delays.
Before we may review the evidence, some clarification of the
precise question before this Court is in order. We must determine
whether the evidence before the district court supported a finding,
as a matter of law, that 60-days before the layoffs in this case
General Dynamics could not reasonably have foreseen the
cancellation of the A-12 contract which precipitated these layoffs.
Yet, the question of reasonable foreseeability begs another
question: by adopting “reasonable foreseeability” as a standard,
does the WARN Act envision the probability of an unforeseen
business circumstance (i.e. the contract cancellation) or instead
the mere possibility of such a circumstance? We can only conclude
2
The cited testimony of Dr. Korb was in International Association of
Machinists and Aerospace Workers, AFL-CIO v. General Dynamics Corp., 821
F. Supp. 1306 (E.D. Missouri 1993).
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that it is the probability of occurrence that makes a business
circumstance “reasonably foreseeable” and thereby forecloses use of
the § 2102(b)(2)(A) exception to the notice requirement. A lesser
standard would be impracticable. Since cancellation is a
possibility every time there is a cost overrun, defense contractors
like General Dynamics would be put to the needless task of
notifying employees of possible contract cancellation and
concomitant lay-offs every time there is a cost overrun, and
experience teaches us that there are invariably cost overruns,
which most often do not lead to contract cancellation.
B.
The Evidence
Having reviewed the summary judgment evidence closely, we must
conclude that the district court properly granted summary judgment.
There is no doubt that the evidence showed General Dynamics’ board
of directors knew of the possibility of contract cancellation and
mass lay-offs as early as June, 1990. In particular, as early as
June 6, 1990, minutes of the General Dynamics board of directors
meeting indicate that the board was aware of the likelihood of a
substantial cost overrun and production delay, that the Navy and
Department of Defense were aware of these problems and that General
Dynamics had begun negotiations with the Navy and Department of
Defense to restructure the contract.
At the August 1, 1990, meeting of the board of directors, the
Chairman of the board, Mr. Stanley Pace discussed with the board
members the recent experience of the Lockheed corporation in its
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development of an aircraft for the Navy. It was reported by Mr.
Pace that Lockheed had received insufficient assistance from the
Navy when it experienced the same sort of problems that General
Dynamics was experiencing with the A-12 program. Mr. Pace reported
that the Lockheed contract was eventually canceled and that
Lockheed’s experience might be indicative of what General Dynamics
could expect. On October 16, 1990, Mr. Pace again addressed the
board of directors regarding the A-12 contract. He indicated that
the program was due to be reviewed by the Defense Acquisition Board
(“DAB”) on December 7, 1990, and that the DAB would be considering
all aspects of the program, including termination of the contract.
Finally, on November 7, 1990, Mr. Pace informed the board that,
although recent congressional enactments did not cancel the
remaining options under the A-12 contract, those bills did allow
Secretary Cheney to take action to address the huge cost overruns
and production delays in the program.
Therefore, by November 7, 1990, it is clear that three
possibilities existed. Either the contract would be restructured,
the contract would be canceled, or General Dynamics would simply
default rather than absorb the cost overruns. The minutes of
various board meetings would support a jury’s conclusion that the
board was aware of the possibility that the contract would be
canceled. Nevertheless, the evidence in mitigation of the
potential for contract cancellation, precludes that possibility
from becoming a probability. As noted previously, the Navy and
Secretary Cheney had expressed their continuing support for the A-
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12 program up to the last minute. Given that unwavering support,
it seemed less than probable that the contract would be canceled.
Therefore, even if the evidence presented a good faith dispute as
to the possibility of contract cancellation, in the face of the
Navy’s and Secretary Cheney’s continuing support, no rational jury
could have concluded that contract cancellation was a foreseeable
probability until the last minute, i.e., December 14, 1990.
III.
CONCLUSION
Having concluded that summary judgment was appropriate, we
affirm. We do not reach the question of whether the district court
erred by refusing to allow further discovery before ruling on
General Dynamics’ motion for summary judgment. Appellants have not
demonstrated to this Court that further discovery would lead to any
evidence, which might raise the A-12 contract cancellation from a
possibility to a probability any sooner than December 14, 1990.
AFFIRMED.
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