A $5 million lawsuit has been filed over the closure this week of the Koffee Kup Bakery in Burlington and its subsidiary, Vermont Bread Co. in Brattleboro, alleging the company did not give proper notice to the 500 employees who lost their jobs.
Matthew Chaney, an employee of Vermont Bread Co., filed the lawsuit Thursday in federal court in Rutland on his behalf, with hopes of expanding it into a class-action suit representing “similarly situated employees” terminated Monday with no notice.
The lawsuit alleges the company failed to provide the employees 60 days advance written notice as required by the federal Worker Adjustment and Retraining Notification Act, known in shorthand as the WARN Act.
According to the lawsuit, the company employed and terminated about 500 workers at its operations in Burlington, Brattleboro and a bakery in Connecticut.
The Burlington facility employed 156 people and 91 worked at the Brattleboro plant, according to a notice filed with the Vermont Department of Labor.
In a section of the lawsuit labeled “Demand,” the filing stated $5 million. The legal action is seeking 60 days of wages and benefits, including contributions to retirement accounts, for all of the roughly 500 terminated workers.
Defendants in the lawsuit include Koffee Kup Bakery, a company that started in 1940 delivering bread by horse-drawn wagon; Vermont Bread Co., a subsidiary; and American Industrial Acquisition Corp., which on April 1 acquired a majority of the shares of the Koffee Kup business.*
Stuart Miller, an attorney representing Chaney, said Friday that he has spoken with between 15 and 20 employees and most of them had received no notice of the closing before Monday.
Miller said his law firm, Lankenau & Miller in New York City, specializes in class-action cases brought under the WARN Act. He called the case involving Koffee Kup one of the most “egregious” and “strange” he has seen.
Asked how he arrived at the $5 million figure, Miller said it was an estimate based on 500 employees receiving salary and benefits over a 60-day period.
“It’s a ballpark number right now,” he said.
Miller said since the company was purchased only weeks ago, he questioned whether the buyer’s motivation all along was to shutter the business.
“If somebody buys out the company and then fires all the employees several weeks later, it certainly gives the appearance that was the intention all along,” he said. The purchaser may have wanted to buy the name, the machinery, “but just didn’t want the employees.”
The lawsuit seeks certification as a class action.
“In the last 20 years, I have never had a case that wasn’t certified,” Miller said. “I don’t think that will be an issue whatsoever.”
Calls to American Industrial Acquisition Corp. were not immediately returned Friday.
The WARN Act requires employers with 100 or more workers to provide 60 days notice of a plant closing and mass layoffs of 50 of more workers at a single site, according to the U.S. Department of Labor.
“WARN makes certain exceptions to the requirements when layoffs occur due to unforeseeable business circumstances, faltering companies, and natural disasters,” the U.S. Department of Labor website stated.
The lawsuit filed this week stated that one factor that must be determined is whether “unforeseeable business circumstances” applies in this case.
Koffee Kup suffered “substantial financial losses” over each of the past four years, according to a release about the closing issued earlier this week by Jeff Sands of Dorset Partners, a financial adviser to the owner.
The statement added, “In the last six months the company was unable to find a new investor/operator who was willing to commit the resources necessary to bring the company back to health.”
Then, late last week, according to a notice provided to the state Monday, the company’s lenders were at the door to immediately collect on unpaid loans and would no longer extend the credit to cover company expenses and keep the business afloat.
The notice stated that the company was unable to provide notice earlier because of the uncertainty about whether the company would succeed in its efforts to stay in business. Earlier notice could have jeopardized those efforts, the notice stated.
According to the Vermont Department of Labor, it received formal notification the company was ceasing operations on Monday, the day of the closure.
The state’s Notice of Potential Layoff Act calls on employers to notify the state 45 days before closure and to inform municipalities and affected employees 30 days before closure.
“In specific instances,” state Labor Commissioner Michael Harrington said in a statement, “employers may qualify for an exemption to the prior notice clause.”
“The Department of Labor’s legal team is currently reviewing the notices that were provided and have already been in contact with (Koffee Kup Bakery) to determine whether the company complied with the provisions of the act,” Harrington said.
On Friday, speaking at Gov. Phil Scott’s regular news conference, Harrington said the exemptions include a good-faith effort to try to “salvage” the business, in which release of information about the possibility of closure could harm those efforts.
He said the department is giving formal notice to the company that it did not comply with the timeline and needs to provide additional information.
“It really depends on what occurred on the days, the weeks, the months leading up to the notice,” Harrington said. “It will be up to them to show us they made a good-faith effort.”
*Editor’s note: AIAC has been described as the buyer of Koffee Kup Bakery by court-appointed receiver Ronald Teplitsky’s counsel, Nolan Heller Kauffman LLP, and Koffee Kup’s financial adviser, G2 Capital Advisors. However, AIAC said in June that it served only as a transaction broker for a third-party buyer it has declined to identify.
