Arthur Andersen, Wins One, Finally
by Michael Fox
Prior to the spring of 2002 few things probably seemed more secure than a job at Arthur Andersen, one of the worlds largest and at the time most successful accounting firms. But the ill winds of Enron were blowing and soon were to bring not only it down, but Andersen as well For an abbreviated version of the facts that led to the endgame for AA, you can check out today's decision in Roquet v. Arthur Andersen, LLP (7th Cir. 2/9/05) [pdf].
The necessity for replaying those painful days was a WARN Act claim brought by employees who first received notice of lay-offs on April 8, 2002, approximately 3 weeks after the firm itself was indicted by the DOJ for its Enron related actions. The legality of that indictment will soon be determined by the Supreme Court, but the practical impact has long been felt. Still Andersen was able to salvage some pride today, and save a little coin for the creditors, as a divided 7th Circuit holds that Anderson could avail itself of an exception to the WARN Act for "business circumstances that were not reasonably foreseeable as of the time that the notice would have been required."
In a vigorous dissent, Judge Wood argues that the majority was, without saying so, holding that under this exception it was an all or nothing rule, if you did not have to give notice on the 60th day before the layoff, then no notice was required. Judge Wood would have required that it be given as soon as the loss was foreseeable, a date she would peg at 38 days before the notice was actually given (although she would have voted to remand the matter to the district court for a final determination.) The all or nothing rule she argues would be contrary to the rule in the 8th Circuit, as well as the 3rd and 5th.
I think Judge Wood is right as a matter of law, but loses this one on a factual basis as the Court majority believed that the date the notice was given was early enough under the circumstances.
While I am sure that those charged with making the decision on the WARN Act issue for Andersen are pleased that their judgment call (if in fact it was a conscious decision) was validated; for a company long gone, I doubt that there will be much in the way of rejoicing.