HOLLY E. VANDERWULP, Complainant
USG INTERIORS INC., Respondent
This case grew out of a complaint, filed in October, 1999, alleging that respondent USG Interiors Inc. had discriminated against complainant Holly E. Vanderwulp on the basis of sex in regard to promotion, compensation and terms and conditions of employment. An Initial Determination was issued in March, 2000 finding probable cause to believe discrimination had occurred. Following two days of hearing held in 2000, an administrative law judge (ALJ) for the Equal Rights Division of the Department of Workforce Development issued a decision in March, 2001 finding that there had been no discrimination. The complainant timely petitioned for commission review.
On July 3, 2001, respondent's counsel filed with the commission and served on the complainant a "Notice Of Suggestion Of Pendency Of Bankruptcy And Automatic Stay Of Proceedings", asserting that respondent had filed a petition in Bankruptcy Court on June 25, 2001. A copy of an order which had been issued by the court on June 27, 2001 was also enclosed. That order confirmed the filing of the petition and confirmed and detailed the scope of the automatic stay of proceedings which was effectuated by the filing. On that basis, the commission informed both parties by letter that the case would be placed in abeyance pending further order by the Bankruptcy Court.
In the years that followed, the commission periodically contacted the parties to inquire into the status of the matter, and on each such occasion it was informed by respondent's counsel that the proceedings were still continuing and that the automatic stay of proceedings remained in effect. In addition, upon notifying the commission of this in March, 2006, respondent's counsel asserted that it had come to his attention that the complainant had never filed a claim with the Bankruptcy Court, that the time within which she could have done so had expired, and that as a result when the reorganization plan was finally approved by the Bankruptcy Court it would extinguish the complainant's claim.
In response to an April, 2007 inquiry from the commission as to the status of the matter, respondent's counsel informed the commission that the Bankruptcy Court had approved the reorganization plan on June 21, 2006, and that accordingly the complainant's claim against U.S.G. Interiors, Inc. was extinguished and could not proceed.
The commission requested further information from both parties addressing the question of whether the complainant had been provided notice of the commencement of the bankruptcy proceedings and of the necessity to file a claim in the matter and the procedures for doing so. The complainant responded by a letter which asserted that she did not receive notice nor was she requested to file a claim regarding her case from respondent's counsel or respondent in order to maintain or continue the case. The respondent's counsel responded to this by submitting (1) a copy of the service list filed in the bankruptcy proceedings, listing names and addresses of all creditors, which included the complainant; (2) a copy of a July 25, 2001 "Notice of Commencement of Chapter 11 Bankruptcy Case" providing detailed notice about the commencement of the bankruptcy proceeding and about the necessity of, and procedure for, filing a claim; and (3) an affidavit from the president of the noticing and claims company retained by the respondent in the bankruptcy proceeding, asserting that in July, 2001 she sent a copy of the Notice of Commencement to all the creditors listed on the service list.
Having carefully considered the contentions of the parties and the applicable law, and for the reasons described more fully in the attached MEMORANDUM OPINION, the commission concludes that the complainant's claim in this matter is barred by the final order of the Bankruptcy Court, and on that basis it makes the following:
The complaint in this matter is dismissed.
Dated and mailed July 19, 2007
vanderw . rpr : 110 :
/s/ James T. Flynn, Chairman
/s/ Robert Glaser, Commissioner
/s/ Ann L. Crump, Commissioner
Under the Bankruptcy Code, holders of disputed and unliquidated claims who fail to file timely proofs of claim are not deemed to have allowed claims against the Chapter 11 estate, and consequently are not entitled to receive a distribution under the reorganization plan. 11 U.S.C. § 502(a), B.R. 3003(c)(2). Such claims are discharged upon confirmation and are no longer obligations of the debtor. 11 U.S.C. § 1141(d)(1)(A). See, e.g., In re NutriBevco, Inc., Debtor, 117 B.R. 771 (US Bankruptcy Ct, SD NY, 1990).
In this case, there are several issues that bear on the question of whether the Bankruptcy Court's approval of the reorganization plan bars the complainant's claim against respondent. These are discussed below.
Adequacy of Notice -- If the complainant did not have adequate notice of the pendency of the bankruptcy proceedings and the need for the filing of a claim, it is possible that she might be entitled to the relief from the effect of the order confirming the reorganization plan.
While the complainant asserted in a recent letter to the commission that she was never provided with such notice, the commission is persuaded by the record here that she was.
The file shows that in June, 2001 the complainant was sent a copy of an order which had been issued by the Bankruptcy Court confirming the filing of the bankruptcy petition and confirming and detailing the scope of the automatic stay of proceedings which was effectuated by that filing. The commission also credits the evidence submitted by the respondent that a copy of the "Notice of Commencement of Chapter 11 Bankruptcy Case" was mailed to the complainant in July, 2001. This document provided detailed notice about the commencement of the bankruptcy proceeding and the necessity of and procedure for filing a claim. The documents were sent to the then current address of the complainant.
Notes in the commission's files indicate that in April, 2006, the complainant spoke by telephone with the General Counsel for the commission about the contention which the respondent had then recently made, that the complainant had failed to timely file a claim in the bankruptcy proceeding and so would be barred from pursuing her complaint. Further notes in the commission's file reflect that in a telephone conversation with the commission's Office Management Supervisor a year later, in April, 2007, the complainant said that she had no recollection of having talked with the General Counsel a year before about her about possibly being foreclosed because she had not filed a claim with the bankruptcy court.
Considering the credible evidence that the respondent properly served the complainant with notice and information about the proceedings and the need to file a claim, and the indications that the complainant has on occasion failed to recall that she has received certain information about the status of the case, the commission is satisfied that the complainant was in fact provided the requisite notice of the need to file a claim in the bankruptcy proceeding in order to preserve her right to pursue her complaint against respondent.
WFEA Complaint as "Claim" -- The complaint in this matter must be considered barred if it is a "claim" as that term is used in the Bankruptcy Code, which provides:
11 U.S.C. § 101. Definitions. In this title the following definitions shall apply:
(5) The term "claim" means--
(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or
(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.
This definition can reach a claim based on an allegation of employment discrimination. See, e.g., Jaurdon v Cricket Communications, Inc. (CA 10, 2005) 412 F3d 1156, 44 BCD 259, 95 BNA FEP Cases 1711. Jaurdon arose out of a complaint alleging race discrimination and retaliation in violation of 42 U.S.C. §§ 1981 and 1985. (1) The plaintiff argued that this complaint was not covered as a "claim" in the bankruptcy proceedings, because since he had lost in the district court he was not owed any money by the employer at the time the bankruptcy proceedings were initiated and was thus not a "creditor" of the employer. The appeals court concluded that the definition of a "claim" under the Bankruptcy Code -- which included a right to payment, whether or not such right is contingent or disputed -- was broad enough to cover the plaintiff's discrimination claim.
There is some authority that a claim solely for equitable relief (such as a declaration of rights regarding a non-competition agreement) would not be a "claim" dischargeable in bankruptcy. In re Udell (CA7, 1994) 18 F3d 403, 30 CBC2d 1192, In re Cooper (BC WD Mo, 1985) 47 BR 842, 12 BCD 1135. If the only remedy allowed by law is non-monetary, the equitable remedy is not transformed into a bankruptcy "claim". In re Aslan (BC CD Cal, 1986) 65 BR 826, 15 BCD 136. However, an equitable claim will be considered a claim for bankruptcy purposes, subject to being discharged, if payment of a monetary remedy is an alternative which may be provided. Tekinsight.Com, Inc. v Stylesite Mktg., Inc. (2000, BC SD NY, 2000) 253 BR 503, 36 BCD 227.
In an employment discrimination claim under the Fair Employment Act, a monetary remedy is not an "alternative" which may be provided in lieu of equitable relief which would otherwise be available, but a free-standing remedy which is to be provided if entitlement to is shown, entirely apart from any other equitable relief (i.e., cease-and-desist order, reinstatement order) which may be due. In this case, the nature of the complainant's claim -- which included claims of discrimination in rate of pay -- would have created entitlement to a monetary remedy if proved. Therefore, it would be a "claim" within the meaning of the Bankruptcy Code.
'Willful and malicious injury' discharge exception -- The Bankruptcy Code provides an exception to the dischargeability of claims, for claims for "willful and malicious injury".
11 U.S.C § 523. Exceptions to discharge
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title [11 USCS § 727, 1141, 1228(a), 1228(b), or 1328(b)] does not discharge an individual debtor from any debt--
. . .
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity...
This exception is frequently cited in cases involving claims for sexual harassment.(2) It has sometimes been cited in cases involving other forms of employment discrimination as well. However, that exception can not be invoked here, because the provision is expressly limited in its application to "individual debtor[s]".
Since the exceptions to the possibility of discharge only apply to individual debtors, the issue of whether to except an employment discrimination claim from discharge arises only in cases involving a debtor who is an individual employer or where the debtor is held personally liable to the plaintiff.
Treatment of Employment Discrimination Claims in Bankruptcy, 56 U. Miami L. Rev. 601, April, 2002. The respondent in this case is a corporate entity, so the exception provided for in 11 U.S.C. § 523(a)(6) does not apply.
For all of the foregoing reasons the commission concludes that the complaint in this matter must be dismissed.
Attorney Keith J. Braskich
Davis & Campbell LLC
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(1)( Back ) In its general facts and procedural posture, Jaurdon was similar to the instant case. As here, the discrimination complaint in Jaurdon was rejected on the merits after trial, and the complainant appealed; the employer then filed for reorganization under Chapter 11 of the Bankruptcy Code while the appeal was pending, and the appellate tribunal put the matter in abeyance; the employer eventually informed the tribunal that the Bankruptcy Court had approved a reorganization plan, and asked that the complaint be dismissed on the grounds that the plaintiff had never filed a claim with the bankruptcy court; and the appellate tribunal requested evidence that the plaintiff had received the formal notice of pertinent bankruptcy proceeding deadlines in time to have filed the necessary claim, and based on what was submitted it concluded that sufficient notice had been provided.
(2)( Back ) See, e.g., Gaile Paulette Biggers v. Isaac's Lounge (LIRC, March 25, 1998), footnote 1.