RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 17a0188p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
DEBI MCKINNEY, on behalf of herself and all others ┐
similarly situated, │
Plaintiff-Appellant, │
│
> No. 16-3895
v. │
│
│
│
CARLTON MANOR NURSING & REHABILITATION │
CENTER, INC., et al., │
Defendants, │
│
│
SOVRAN MANAGEMENT COMPANY, LLC,
│
Defendant-Appellee. ┘
Appeal from the United States District Court
for the Southern District of Ohio at Columbus.
No. 2:14-cv-00279—Algenon L. Marbley, District Judge.
Argued: August 2, 2017
Decided and Filed: August 18, 2017
Before: SILER, SUTTON, and WHITE, Circuit Judges.
_________________
COUNSEL
ARGUED: Samuel Heldman, THE GARDNER FIRM, Washington, D.C., for Appellant. ON
BRIEF: Samuel Heldman, THE GARDNER FIRM, Washington, D.C., for Appellant. Mary E.
Olsen, M. Vance McCrary, THE GARDNER FIRM, Mobile, Alabama, Kenneth R. Cookson,
KEGLER BROWN HILL & RITTER, Columbus, Ohio, for Appellant.
No. 16-3895 McKinney v. Carlton Manor, et al. Page 2
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OPINION
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SUTTON, Circuit Judge. After the Ohio Department of Health cited Carlton Manor
Nursing & Rehabilitation Center for health and safety violations, the nursing home hired Sovran
Management Company to help turn things around. When that did not work, the nursing home
closed its doors for good. Debi McKinney, a former worker at the nursing home, claims that
Sovran owes the nursing home’s employees back pay under the Worker Adjustment and
Retraining Notification Act, which requires “employer[s]” to give their employees 60 days’
notice before they “order” the closing of a company. 29 U.S.C. § 2102. The district court ruled
as a matter of law for Sovran. We affirm.
Most nursing homes seek reimbursement from Medicare or Medicaid for their services.
In return, they must comply with federal health and safety regulations. Both programs represent
a form of cooperative federalism, as they are funded by federal and state money and the
regulations are enforced by federal and state officials. In July 2013, the Ohio Department of
Health cited Carlton Manor for failing to meet 27 of those regulations. It ordered the nursing
home to come into compliance by January 2014, with the warning that it would lose its status as
a Medicare and Medicaid provider if it did not. The nursing home hired Sovran, a management
consultant for nursing homes, to help correct the problems.
By January 2014, the nursing home had resolved 26 of the deficiencies. Yet the 27th, the
physical structure of the building, proved more difficult to fix. In consultation with Sovran, the
nursing home presented the Department with a 12-month plan to repair the building. That was
not enough. In mid-January, the Department rejected the plan and began the process of revoking
the nursing home’s operating license. The nursing home closed soon after.
Carlton Manor gave little notice to its employees about the closure. In response,
McKinney filed this putative class action against the nursing home and Sovran under the Worker
Adjustment and Retraining Notification Act, called WARN by those who like acronyms. The
Act requires employers to give employees 60 days’ notice before they close a plant. 29 U.S.C.
No. 16-3895 McKinney v. Carlton Manor, et al. Page 3
§ 2102. Carlton Manor defaulted, and the court entered a judgment against it. That did not do
the employees much good, because the nursing home had no assets for the employees to collect.
That left Sovran, the only solvent defendant in the case. But that did not help either. The district
court concluded that Sovran was not liable under the Act because the nursing home, not Sovran,
was the employer, and the nursing home, not Sovran, decided to close the facility. As a result,
the district court reasoned, Sovran had no obligation to warn the nursing home workers of the
closing. It granted summary judgment for Sovran and thus had no need to rule on McKinney’s
class certification motion.
This case begins and largely ends with the words of the Act. Section 2102 says: “An
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” on its employees. 29 U.S.C. § 2102. Section
2104 adds: “Any employer who orders a plant closing or mass layoff in violation of section
2102 of this title shall be liable to each aggrieved employee who suffers an employment loss as a
result of such closing or layoff for” back pay and benefits. 29 U.S.C. § 2104.
Only “employer[s]” that “order” a plant closing face regulation by the Act or liability
under it. That makes considerable sense. The purpose of the Act is to encourage employers to
give their employees notice before closing a company. The entity in the best position to warn
employees about a closing is the employer, who runs the company and who decides to close it.
And the entity from whom the employees will most acutely appreciate any warning about a
closing is the employer. There’s no dispute that Carlton Manor, not Sovran, employed these
individuals, and Carlton Manor, not Sovran, made the final decision to close the nursing home.
That means Sovran does not fit naturally within the terms of the Act. See Administaff Cos. v.
Tow, 337 F.3d 454, 456 (5th Cir. 2003).
Even so, McKinney maintains, the Act’s regulations offer two other paths for imposing
liability on Sovran—either because Sovran and Carlton Manor were in reality a “single
employer” of McKinney or were “separate employers” of McKinney. Appellant’s Br. 11, 15.
The Act’s regulations appear to contemplate each theory of liabililty, and no one challenges their
validity here. “Under existing legal rules,” they say, “independent contractors and subsidiaries[,]
which are wholly or partially owned by a parent company[,] are treated as separate employers or
No. 16-3895 McKinney v. Carlton Manor, et al. Page 4
as a part of the parent or contracting company depending upon the degree of their independence
from the parent.” 20 C.F.R. § 639.3(a)(2). “Some of the factors to be considered in making this
determination,” the regulation adds, “are (i) common ownership, (ii) common directors and/or
officers, (iii) de facto exercise of control, (iv) unity of personnel policies emanating from a
common source, and (v) the dependency of operations.” Id.
Single employer. These considerations do not show that Sovran and Carlton Manor were
in truth one entity, as opposed to two. Four of the factors do not remotely show that we should
treat Sovran and Carlton Manor as a single employer. There was no common ownership
between the two. The management consultant and the nursing home did not share any directors
or officers. The two companies kept their payrolls separate and did not share any personnel
policies. And no one disputes that Carlton Manor and Sovran operated two distinct businesses
that were not dependent on each other. See In re APA Transp. Corp. Consol. Litig., 541 F.3d
233, 245 (3d Cir. 2008) (finding no “dependency of operations” where one company continued
to operate without incident after the other folded).
One might argue that the management consultant as a practical matter exercised some
“control” over the company in view of the dire straits facing the nursing home. According to one
witness, for example, Sovran had authority to fire employees of the nursing home. But it’s not
clear that this is what “de facto control” means or that it is the kind of thing that would show that
the consultant and nursing home amounted to one employer. See Childress v. Darby Lumber,
Inc., 357 F.3d 1000, 1006 (9th Cir. 2004) (finding “de facto exercise of control” where
management of one company “would ultimately answer to higher management” of the
controlling company). The client in this independent contractor relationship remained the
nursing home, and Sovran remained the consultant. Either way, the outcome remains the same
because the other factors confirm that the two entities remained independent.
But don’t rush to judgment, warns McKinney. Even a 0 for 5 tally, or at best a 1 for 5
tally, does not tell the whole story. No one factor listed in the regulation is controlling, she
points out, and the statute’s remedial purpose should incline us to adopt a “flexible application to
specific circumstances as they arise.” Appellant’s Br. 17–18. To that end, the “overriding” issue
No. 16-3895 McKinney v. Carlton Manor, et al. Page 5
in her view is the “level of control” used by the independent contractor (here Sovran) in helping
the employer (here Carlton Manor). Id. at 21.
Overriding indeed. It may be true that no one factor in the regulations is dispositive. But
that does not help McKinney because she cannot meet any of the listed factors or at best partially
meets one of them. It may be true that the itemization of five factors does not prevent us from
considering other factors that could show that the two employers were one. But that option still
requires an articulation of distinct considerations, and she has not identified anything beyond the
listed factors. The abstract possibility of identifying other approaches to this question by itself
does not permit us to override the concrete approaches already mentioned.
Separate employers. The regulations refer not just to the possibility of treating two
nominally distinct entities as one entity but also to the possibility of treating each entity as a
distinct employer of the affected individual with independent duties under the Act. There is
plenty of overlap between the two concepts, as confirmed by the reality that the regulations list
the same five factors in addressing both of them. Just as some factors could unveil the lack of
independence between two entities—common ownership, common management, de facto
control of one entity over the other—those same factors also might show that the two entities
each employed the same individual.
But this potential path to liability does not help McKinney either. As just shown, the
regulations’ five factors, whether examined singly or taken together, do not show that Sovran
was a separate employer of McKinney. The one factor that might operate differently in this
setting—“de facto control”—does not change things. There is no evidence that Sovran hired
McKinney, fired McKinney, or otherwise treated her as one of its employees. All of the extant
evidence shows that Carlton Manor hired McKinney and ultimately fired her when the nursing
home closed. And no evidence shows that Sovran “ordered” the closing of the nursing home, as
required by the language of the statute.
Trying to avoid this conclusion, McKinney invokes cases in which employees of debt-
laden corporations sued their employers’ lenders under the Act. See Coppola v. Bear Stearns &
Co., 499 F.3d 144 (2d Cir. 2007); Pearson v. Component Tech. Corp., 247 F.3d 471 (3d Cir.
No. 16-3895 McKinney v. Carlton Manor, et al. Page 6
2001); Chauffeurs, Sales Drivers, Warehousemen & Helpers Union Local 572 v. Weslock Corp.,
66 F.3d 241 (9th Cir. 1995). In those cases, McKinney points out, the courts focused on “the
amount of ‘control’ that the lender exercised over the ‘ordinary operations’” of its borrower to
determine whether the lender should be liable to the borrower’s employees. Appellant’s Br. 19.
But those cases use the word “control” in the same sense that the regulations use the words “de
facto control” here—as a proxy for lack of independence. 20 C.F.R. § 639.3. They recognize
that, at least in the lender-borrower context, a lender may exercise such pervasive control over a
delinquent borrower’s business operations (say by exercising its rights under a loan agreement)
that the borrower is no longer “independent” of the lender. See Coppola, 499 F.3d at 148, 150
(lender may exercise such control over the borrower as to become the debtor’s “agent, partner, or
alter ego” or “the de facto owner of an ongoing business”); Pearson, 247 F.3d at 478 (the “nature
and degree of control possessed by the [lender] over the [borrower]” might make it appropriate
to “pierce the veil” under the Act).
Comparison is the thief of happiness, it’s sometimes said. But comparisons between
cases are all we have in law and are at the heart of most legal disputes. McKinney’s comparison
hurts rather than helps her cause. A lender-borrower relationship, in which the loan agreement
allows the lender to take control of a borrower who cannot repay a loan, offers a poor analogy to
a consultant-consultee relationship that is arm’s length from beginning to end. Sovran offered
management advice to Carlton Manor at the nursing home’s behest and did not become the
owner of the nursing home in the process. The consulting arrangement allowed the nursing
home to ask Sovran to leave at any time. And it allowed the management consultant to leave as
well, which is just what it did after helping Carlton Manor make the necessary arrangements to
shut down the nursing home.
For these reasons, we affirm.