September 12, 2012 / 5:33 PM / 6 years ago

MF Global trustees ask judge to dismiss employee lawsuit

NEW YORK (Reuters) - Trustees liquidating failed brokerage MF Global MFGLQ.PK argued on Wednesday that a lawsuit accusing them of firing employees without proper notice should be thrown out.

Lawyers for the trustees said at a court hearing that the firm was not subject to the Worker Adjustment and Retraining Notification Act, which requires employers to give notice of mass layoffs, because liquidating companies are not considered employers.

“This was a company that, within milliseconds of filing bankruptcy, was into a liquidation proceeding,” Robert Hertzberg, a lawyer for Louis Freeh, the trustee winding down the MF parent company, said at the hearing.

James Giddens, the trustee appointed to liquidate MF’s broker-dealer unit, has also asked for the case to be thrown out.

U.S. Bankruptcy Judge Martin Glenn declined to rule from the bench, requesting more information about where some of the plaintiffs worked and what they did.

A handful of MF Global employees filed the lawsuit last year, saying more than 1,000 workers were fired without warning shortly after the firm’s October bankruptcy filing.

MF Global collapsed over fears about its exposure to risky European debt. Its former chief executive, ex-New Jersey Governor Jon Corzine, stepped down on November 4, after regulators found a massive shortfall in the firm’s customer accounts. Giddens has since estimated that shortfall at $1.6 billion.

The employee lawsuit unites Giddens and Freeh as allies in a case that has more commonly cast them as adversaries. The pair represent different constituencies of MF Global creditors and customers, and have butted heads over how to allocate various pots of money.

Also on Wednesday, Judge Glenn delayed ruling on whether a $20 million dispute between Giddens and a unit of conglomerate Koch Industries KCHIN.UL will be heard in his court. Glenn wants to consider the matter simultaneously with a similar, $93.5 million dispute involving ConocoPhillips (COP.N).

Koch and Conoco, both former MF Global customers, have taken issue with efforts by Giddens to claw back the proceeds of letters of credit those firms put up as margin.

The companies say there’s nothing for Giddens to recover because MF Global never drew down on the letters. Giddens argues that letters used as margin should be treated as cash and distributed among all customers.

Koch and Conoco want the issue moved to federal district court.

Reporting By Nick Brown; Editing by Martha Graybow and Tim Dobbyn

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