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Group of former Bayou Steel employees sue plant owners

8 months 1 week 30 minutes ago Friday, May 22 2020 May 22, 2020 May 22, 2020 5:27 AM May 22, 2020 in News
Source: The Advocate
Bayou Steel Photo: Google Maps

LAPLACE - Five men who were once employed by a local steelworks plant are suing the company's owners after the plant abruptly laid off more than 300 workers in 2019. 

According to The Advocate, the former Bayou Steel employees are filing the lawsuit because they believe the plant's owners deliberately reneged on an employment contract without warning before shutting the plant down.

Ronnie Millet, Troy Fleming, Jarrod Nabor, Davarian Ursin, and Charles Ziegeler were operators and supervisors at Bayou Steel, a 40 year old plant that specialized in recycling scrap steel.

In September of 2019 their lives were upended when the plant filed for bankruptcy and laid off 376 workers at its LaPlace location.

The company had been forced to file for Chapter 11 by its beneficial owner, the Connecticut-based hedge fund Black Diamond Capital Management and eventually, even more 100 employees were laid off at three other operations around the country.

The five who filed the lawsuit allege that the abrupt dismissing of so many workers could have been avoided, as Black Diamond and its owner, Stephen Deckoff negotiated a new employment contract with steelworkers in bad faith, knowing for some time before it signed the contract in late September that it planned to shut the plant just a few days later.

"Several weeks prior to the closing of the Louisiana facility, members of the senior Black Diamond management team, including Stephen Deckhoff, founder and managing principal of Black Diamond, visited the Louisiana facility and conducted closed-door meetings with Alton Davis," the plant's chief operating officer at that time, the lawsuit alleges.

"The purpose of the visit by Stephen Deckhoff and the Black Diamond management team was to finalize the plans for closing of the Louisiana facility, including terminating the plaintiffs and class members with no prior notice whatsoever," which would be a violation of federal labor law, the suit further alleges.

The lawsuit also recounts testimony given by Alton Davis in bankruptcy court in Delaware at the end of last year, stating that Bayou Steel had been running down its inventory of scrap steel for months in anticipation of declaring bankruptcy.

The Advocate reports that neither Deckhoff nor any other representative of Black Diamond responded to requests for comment about the allegations. 

Attorneys for the plaintiffs expect more former workers to join the class action suit, which is seeking 60 days of pay as well as benefits.

Brent Barriere, a lawyer at Fishman Haygood who is a spokesman for the six law firms that are representing the plaintiffs, said that the owners of Bayou Steel must have known when the plant's management signed a new employment contract with the United Steelworkers at the end of the previous week that they planned to shut it down.

"It is inconceivable they didn't know when they reached an agreement on the Friday that they were going to fire them all on the Monday," Barriere asserts.

Black Diamond is a $9 billion hedge fund that specializes in buying the debt of companies that are in financial trouble in order to profit either from the resuscitation of the businesses or by selling off their assets at a profit. Firms like Black Diamond typically have both an equity interest in a company and are major lenders to it, as was the case with its involvement in Bayou Steel.

It first acquired Bayou Steel in 2003 for about $185 million, including about $30 million in debt, after the steelmaker had fallen on hard times. It sold it five years later to Arcelor Mittal for $475 million and then bought it back again at a steep discount in 2016 — the price was undisclosed, but Arcelor Mittal declared losses on Bayou Steel and some smaller U.S. assets totaling $262 million that year.

In the years before bankruptcy, Black Diamond cut costs, including reducing the workforce by about one-third.

When it was forced into Chapter 11 bankruptcy — an attempt to restructure its debt and keep the company going — Bayou Steel owed up to $100 million to around 2,000 creditors, including local suppliers and service providers, and had less than $50,000 in liquid assets available.

That means creditors such as Bank of America Corp and SunTrust Banks Inc were first in line to claim whatever assets were available.

They were owed a total of $39 million. This is in addition to the fact that Black Diamond had a first lien on the real estate owned by Bayou Steel and second lien on proceeds of other assets above $39 million.

The main assets of the company were sold in January for $28 million to Liberty Steel Group, a unit of a conglomerate owned by British-Indian industrialist Sanjeev Gupta, leaving little for most of Bayou Steel's creditors.

David Delaneuville, the United Steelworkers representative who negotiated the Bayou Steel contract last year, said he hopes the former workers are able to recoup their back pay and benefits. But he said he doesn't hold out much hope based on previous experience in trying to recoup employment debts from companies that have declared bankruptcy.

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