Tilton's Patriarch Partners Sued by Ex-TransCare Employees

Mar 3 2016 | 12:30am ET

Lynne Tilton’s Patriarch Partners was dealt twin doses of bad news this week as a group of former employees of its portfolio company TransCare sued the private equity firm, claiming it illegally fired them without cause in a bankruptcy proceeding, and a New York judge allowed part of an investor lawsuit linked to its infamous Zohar CLO pools to advance. 

The TranCare lawsuit was filed in federal court in Manhattan on Wednesday, according to a Bloomberg article, and seeks class-action status. The plaintiffs, who worked as EMTs in the metro areas in New York, Pennsylvania and Maryland, allege the company violated New York labor law requiring 60 days’ written notice to workers of termination, and that it has failed to pay wages and benefits. 

TransCare allegedly told hospital partners and the New York City Fire Department that it faced financial difficulties in the months ahead of its abrupt filing for bankruptcy court protection last week. The next day, TransCare reportedly notified employees that the firm would be closing and that they were being immediately terminated, according to the complaint. 

“Patriarch was the employer of TransCare’s employees and is liable for the violation” of New York state labor law, according to the lawsuit. 

At least 1,200 people have been affected by the closing, according to Bloomberg. In the suit, a plaintiff alleges that although in dire financial circumstances, the company continued to reassure employees that its business prospects were “positive” and even brought new EMTs aboard as recently as late January. 

However, TransCare’s financial woes were already well known to many of the local municipal governments and agencies that depended on the company for advanced life support services and medical transportation.

Also this week, a New York judge allowed part of a long-running case against Patriarch to go forward despite Tilton’s efforts to have it dismissed. The decision on Wednesday allows part of a $45 million lawsuit by German bank Norddeutsche Landesbank, an investor in Patriarch’s $2.5 billion Zohar CLO pools, to proceed. 

Meanwhile, the SEC civil fraud charges against Patriarch and Tilton, filed at the end of March 2015 and alleging lack of disclosure about the poor performance of the assets held within the pools, is still stayed pending resolution of Tilton’s claims that the SEC’s use of administrative law proceedings in such cases is unconstitutional. 

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