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Does Chapter 11 Shelter Schletter From Employee Wrath?

By Frank Andorka, Senior Correspondent

What Happened: Schletter’s bankruptcy just got more interesting to me, based on some public information a friend of mine shared with me.

  • Did you know that Schletter had been sued by its employees in the Western District of North Carolina – the same one in which they have field bankruptcy – after one of their employees fell prey to a W-2 phishing scam that caused the sharing of all the employees’ private information with some identity thieves?
  • Did you also know that in late March (full document below) the judge dismissed Schletter’s attempts to dismiss the resulting employees’ lawsuit and allowed it to go forward, with the looming prospect of treble damages hanging in the balance?
  • And then there’s that pesky WARN Act thing…..

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    Chapter 11
    SolarWakeup’s View:  My theory yesterday was that Schletter’s decision to declare Chapter 11 bankruptcy was that it was largely attributable to the tariffs on solar modules, aluminium and steel. Turns out that may not be the whole story (or even the primary one). Check out the March 26 ruling by a judge in North Carolina concerning Schletter’s legal liability in a W-2 phishing scam of which they became a victim.

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    The good folks at Lexology have the details:

    In that decision, called Curry v. Schletter Inc., Judge Martin Reidinger of the United States District Court for the Western District of North Carolina handed the employees a big win: a favorable ruling on a treble damages claim brought under N.C. Gen. Stat. § 75-1.1.

    In 2016 a Schletter employee was reeled in by a phishing scam. The employee emailed criminals W-2 tax form information for all of the company’s then-current employees. That information included names, addresses, social security numbers, and wage information—all in an unencrypted file.

    After discovering the incident, Schletter notified the affected employees and offered 24 months of credit monitoring and identity theft protection services. Unsatisfied with that response, the employees sued.

    Unsurprisingly – and I saw that without even the hint of snark – Schletter moved to have the lawsuit dismissed. Again, I’ll let the lawyers at Lexology explain it far better than I could:

    First, Schletter said, it hadn’t “intentionally” communicated anything to the criminals. Instead, it argued, the employee who fell victim to the scam meant to transmit the information internally and for a legitimate purpose, and thus lacked the requisite intent.

    Second, Schletter argued that it had not disclosed the employees’ information to the “general public,” but only to the cyber-criminal.

    Third, Schletter pointed to the rule that section 75-1.1 does not generally apply to employer-employee disputes. According to Schletter the claim for treble damages—which arose only because of their employment relationship with Schletter—was barred by this so-called “employment exemption” to section 75-1.1.

    What that decision did was open Schletter to treble damages six days after its German parent company had filed for insolvency (Germany’s version of Chapter 11 bankruptcy). There would be no help coming from the parent to bail them out if the lawsuit went forward and a jury found in favor of the employees.

    In those circumstances, combined with the pressures from the tariffs, Schletter may have decided to file Chapter 11 in an attempt to get out from under the lawsuit. But according to court records, there’s no indication the lawsuit over the phishing scam is going away.

    Moreover, Schletter may have opened itself up to another lawsuit when it failed to produce a WARN Act notification before suspending operations. A spokesman for the company says there are 120 employees in Shelby, North Carolina, which would make any attempt to close the headquarters without giving their employees 60 days notice of the closing.

    The spokesman did indicate there have been no layoffs yet – which I suppose could allow them to skirt the law for now – but if layoffs DO occur, the company has put itself in more legal jeopardy by not giving their employees the heads up.

    Stay tuned – this situation promises only to get more interesting as the process moves along. All I know is that my heart goes out to the 120 employees that will inevitably be affected by whatever the outcome in this tale is. They don’t deserve to have their futures held hostage like this, no matter what the reason.

    Here is the March 26 ruling against Schletter’s motion to dismiss its employees’ lawsuit:

    Curry-Opinion

    More:

    A North Carolina Federal Court Allows a Treble Damages Claim in Employee Data-Breach Lawsuit (Lexology)

    Schletter U.S. Files For Chapter 11

    Source: As Parent Company Struggles, Schletter Eyes Closing U.S. Operations

    We’re Happy For SolarWorld Employees – But That’s It

    Suniva Being Sold For Parts (Literally), Just Like We Said

    Schletter U.S. Files For Chapter 11

    By Frank Andorka, Senior Correspondent

    What Happened: Schletter’s U.S. subsidiary filed for Chapter 11 bankruptcy protection in the Western District of North Carolina, where the company’s headquarters are located.

  • By written consent of the company’s board of directors, Schletter is seeking protection from between 299 and 1,000 creditors.
  • The filing, signed by Schletter U.S. President and CEO Russell Schmit, confirms what SolarWakeup first reported on Monday, which was that the company was on the verge of closing.

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    Schletter

    SolarWakeup’s View:  We hate to say we told you so, but … oh, who are we kidding? We LOVE telling you we told you so. As SolarWakeup first reported rumors of on Monday, Schletter U.S. has now officially filed for Chapter 11 bankruptcy protection in the Western District of North Carolina.

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    The filing was signed by Schletter U.S. President and CEO Russell Schmit, is asking for protection from between 299 and 1,000 creditors, presumably including the one in the Google review referenced above that we brought you originally on Monday.

    The company’s three largest creditors are, in order:

  • Coilplus North Carolina, a flat-rolled steel processor, owed more than $3 million;
  • MI Metals, a Scottsdale, Arizona, based aluminum extruder, owed nearly $1.2 million; and
  • American Express, owed $838,837.

    • The bankruptcy of an industry stalwart like Schletter is certainly tragic, as is the potential loss of jobs. LinkedIn lists 120 employees for the racking company, though it’s not clear how many were located in the Shelby, N.C. headquarters. It should be noted that with no WARN Act notices have been filed by the company.

    The Worker Adjustment and Retraining Notification Act of 1988 (the “WARN Act”) is a U.S. labor law which protects employees, their families, and communities by requiring most employers with 100 or more employees to provide 60 calendar-day advance notification of plant closings and mass layoffs of employees, as defined in the Act.

    Based on other WARN filings from other companies in North Carolina, it appears Schletter should have filed a WARN notice.

    Schletter’s Germany parent company filed for bankruptcy in March.

    As I wrote on Monday:

    Schletter US may well be another casualty in the needless and mindless trade war the Trump Administration had declared on the world, starting with his announcement of tariffs on solar modules in January and followed by tariffs on steel and aluminum, all of which would have had deleterious effects on Schletter’s main business.

    The racking-and-mounting segment of the U.S. solar industry, of which Schletter USA was a part, spoke out as a group forcefully and often against the trade complaint brought by bankrupt solar module manufacturer Suniva and later joined by SolarWorld in an attempt to jack up their valuation in preparation for sale.

    Last week, SunPower announced it had purchased SolarWorld’s assets, and Suniva’s main creditor SQN Capital Management announced it was selling off all the company’s manufacturing equipment. So neither of the two combatants of the idiotic tariff battle are likely to exist in six months.

    But the effects of their ridiculous battle will be felt long into the future and, by all accounts, have claimed the employees of racking giant Schletter.

    UPDATE (12:15 PM, 4/25/2018):

    Schletter spokesman Sebastian Glaser responded to SolarWakeup inquiries about the current employees statuses and what’s next for the U.S. subsidiary:

    SolarWakeup: Could you tell us what is the current situation with the employees, how many have been affected and what they should expect next?

    Glaser: There are currently around 120 employees at Schletter, and so far there have been no redundancies. Please understand that I cannot give you any more details at this stage. We are still in the process of reviewing our operations during the proceedings which also includes HR planning. When we have a clearer picture in terms of HR, we will of course inform our employees first.

    SolarWakeup: With the sales process of the global Schletter business, do you expect to entertain acquisition offers of the business unit separately from the German parent company?

    Glaser: Our goal is to find an investor solution for the group and the investor process is making good progress. A few weeks after the start, several potential investors have handed in indicative bids already. Among the bidders, there are companies from the industry as well as financial investors. This pleasingly high investor interest clearly shows the strength of the Schletter brand.

    SolarWakeup will continue to monitor this situation and update the story as necessary.

    Here is Schletter’s full filing:

    SchletterBankrutpcyFiling

    More:

    We’re Happy For SolarWorld Employees – But That’s It

    Suniva Being Sold For Parts (Literally), Just Like We Said

    Source: As Parent Company Struggles, Schletter Eyes Closing U.S. Operations

    By Frank Andorka, Senior Correspondent

    What Happened:Sources close to the situation have told SolarWakeup that Schletter, the German solar racking company going through insolvency (what bankruptcy is called in Germany) at home, is close to closing its U.S. operations.

  • Calls to company’s main number and to the marketing manager go directly to a generic voicemail.
  • Calls to the office and cell phones of the company’s vice president of sales reach recordings saying they have been disconnected.

    • Schletter

    SolarWakeup’s View:  Though there has been no official announcement, multiple sources close to troubled racking company Schletter say the U.S. subsidiary has closed its doors. Calls to U.S. headquarters’ main number and to the marketing manager go directly to generic voicemail, and calls to the office and cell phones of the company’s vice president of sales reach recordings saying they have been disconnected.

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    A Google search for the company turns up the follow question being asked of the company and one reply by someone who describes themselves as a former employee:

    Schletter

    It should be noted that with no WARN Act notices have been filed by the company.

    The Worker Adjustment and Retraining Notification Act of 1988 (the “WARN Act”) is a U.S. labor law which protects employees, their families, and communities by requiring most employers with 100 or more employees to provide 60 calendar-day advance notification of plant closings and mass layoffs of employees, as defined in the Act.

    Schletter’s Germany parent company filed for bankruptcy in March.

    Schletter US may well be another casualty in the needless and mindless trade war the Trump Administration had declared on the world, starting with his announcement of tariffs on solar modules in January and followed by tariffs on steel and aluminum, all of which would have had deleterious effects on Schletter’s main business.

    The racking-and-mounting segment of the U.S. solar industry, of which Schletter USA was a part, spoke out as a group forcefully and often against the trade complaint brought by bankrupt solar module manufacturer Suniva and later joined by SolarWorld in an attempt to jack up their valuation in preparation for sale.

    Last week, SunPower announced it had purchased SolarWorld’s assets, and Suniva’s main creditor SQN Capital Management announced it was selling off all the company’s manufacturing equipment. So neither of the two combatants of the idiotic tariff battle are likely to exist in six months.

    But the effects of their ridiculous battle will be felt long into the future and, by all accounts, have claimed the employees of racking giant Schletter.

    SolarWakeup will continue to monitor this situation and update the story as necessary.

    More:

    We’re Happy For SolarWorld Employees – But That’s It

    Suniva Being Sold For Parts (Literally), Just Like We Said

    Could Decade-Old Florida Report Finally Be Relevant? Let’s Hope So

    By Frank Andorka, Senior Correspondent

    What Happened:After languishing for a decade in relative obscurity, it might finally be time to dust off a Navigant Consulting report on the solar capacity of Florida, now that the Public Service Commission (FPSC) has made third-party leasing a reality.

  • The Florida report, prepared for the FPSC in 2008, reported that the state’s potential solar production could reach nearly 56 GWh annually by 2020.
  • While the goals of the Florida report are impossible to reach in the original timeframe, the mind boggles at how quickly Florida could transform itself into one of the leading solar states.

    • Florida report

    SolarWakeup’s View:  Well, 2020 is no longer a realistic goal, but the Florida report created for the state’s Public Service Commission gives a tantalizing glimpse into what the future of the solar industry could be.

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    At the request of FPSC, Navigant Consulting prepared a report concerning the amount of power the sun could produce for the Sunshine State, and the short answer was that it could potentially provide a lot – 56 GWh, in fact. The report also found that, had investor-owned utilities started investing in solar heavily 10 years ago, they could be providing 23% of their electricity generation from renewalbe (a goal Florida Power & Light seems to trying to make in three years ever since it lost its battle to scotch third-party solar development in 2016 – but I digress).

    Florida, thanks to the outsized influence of its electric utilities, has struggled to reach its full solar potential in the past. According to the Solar Energy Industries Association’s latest data, there is currently only 1.4 GW of solar capacity there.

    But last week’s decision to legalize third-party solar leasing, Navigant Consulting’s Florida report has suddenly become relevant. It will be interesting to see how quickly it rises to its well-deserved status as the real sunshine state.

    More:

    Florida Public Service Commission OKs Sunrun’s Petition – So It’s Full Speed Ahead

    Sunrun Could Start Operating In Florida In Earnest Within A Month

    Bonus:

    The full 311-page report:

    FL_Final_Report_2008_12_29