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MF Brokerage Trustee Seeks to Dismiss Suit Over Back Pay

March 5 (Bloomberg) -- MF Global Inc.’s shouldn’t face a lawsuit by former employees demanding back pay because the usual rules of notice only apply to employers, not liquidators, a trustee unwinding the estate said.

James Giddens, the trustee overseeing the liquidation of the failed brokerage, asked a judge in Manhattan bankruptcy court today that lawsuits seeking back pay from the company be dismissed. The Worker Adjustment Training and Notification, or WARN act, doesn’t apply to the notice that dismissed 1,066 employees after MF Global filed for bankruptcy, Giddens said.

“The Trustee here is not operating a business enterprise in any recognized commercial sense,” and therefore is a liquidator, not an employer under both federal and New York state law, lawyers for Giddens wrote.

MF Global Holdings Ltd. and its broker-dealer face lawsuits from former employees who said they were terminated without cause and seek to recover 60 days’ wages and benefits. The WARN act requires an employer to give notice of plant closings or mass layoffs.

The MF Global parent sought bankruptcy court protection Oct. 31 after making bets on European sovereign debt and getting margin calls. The firm listed liabilities of $39.7 billion and assets of $41 billion in Chapter 11 papers. The Securities Investor Protection Corp. sued the broker-dealer the same day to put it in liquidation.

The brokerage case is In re MF Global Inc., 11-ap-2790, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The employee suit is Thielmann and Desparois v. MF Global Finance USA, 11-02880, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Tiffany Kary in New York at tkary@bloomberg.net; Linda Sandler in New York at lsandler@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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