Belson v. Olson Rug Co.

483 B.R. 660, 2012 WL 4738873, 2012 U.S. Dist. LEXIS 143885
CourtDistrict Court, N.D. Illinois
DecidedOctober 1, 2012
DocketNo. 12 C 4474
StatusPublished
Cited by9 cases

This text of 483 B.R. 660 (Belson v. Olson Rug Co.) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Belson v. Olson Rug Co., 483 B.R. 660, 2012 WL 4738873, 2012 U.S. Dist. LEXIS 143885 (N.D. Ill. 2012).

Opinion

MEMORANDUM OPINION AND ORDER

RUBEN CASTILLO, District Judge.

Appellant Bruce Belson (“Belson” or “Appellant”) brings this appeal from an order of the Bankruptcy Court sustaining the Debtor/Appellee Olson Rug Company’s (“Appellee”) Objection to Proof of Claim No. 21 Filed by Bruce Belson, which denied priority status to Appellant’s Claim [663]*663pursuant to 11 U.S.C. § 507(a)(4) and reduced the amount of Appellant’s Claim pursuant to 11 U.S.C. § 502(b)(7). The appeal is timely before this Court. For the reasons set forth herein, the decision of the Bankruptcy Court is affirmed.

RELEVANT FACTS

Belson was employed by Appellee as a salesman. (R. 5, Jt. Appellate Status Report at 1.) Belson was an “at-will” employee. (Id.) On March 12, 2007, Belson’s employment was terminated, effective March 19, 2007. (Id. at 2.) Belson filed a common law retaliatory discharge claim against Appellee in the Circuit Court of Cook County, styled Bruce Belson v. Olson Rug Company, Case No.2008 L 12622. (Id.) On May 13, 2011, Belson obtained a jury verdict of $350,865.51 against Appellee in Bruce Belson v. Olson Rug Company. (Id.) The jury’s award consisted of $156,875.51 in back pay; $43,990 in front pay; and $150,000 in damages for emotional distress. (Id.)

PROCEDURAL HISTORY

On July 15, 2011, Appellee filed a voluntary Chapter 11 bankruptcy petition. (Id.) On September 20, 2011, the Bankruptcy Court entered an order establishing October 13, 2011 as the deadline for creditors other than governmental units to file proofs of claim in this Chapter 11 case. (Id.) On October 12, 2011, Appellant filed a Proof of Claim for $356,229.13, representing the amount of the retaliatory discharge judgment plus interest accrued through the date of the Chapter 11 petition. (Id. at 3.) Appellant also claimed priority status on $11,725 of the judgment, asserting that such amount should be treated as wages, salaries, or commissions earned within 180 days of the filing of the bankruptcy petition pursuant to 11 U.S.C. § 507(a)(4). (Id.)

On February 21, 2012, the Bankruptcy Court entered an order that, among other things, confirmed the “Second Amended Chapter 11 Plan of Reorganization of Olson Rug Company Pursuant to Chapter 11 of the Bankruptcy Code” (the “Plan”). (Id.) Appellant is classified under the Plan as a general unsecured creditor. (Id.) Among other things, the Plan contemplates that, on the Effective Date, the Reorganized Debtor will contribute $29,000 to the Plan Escrow to satisfy the claims of general unsecured creditors, which amount will be supplemented by four annual payments of $10,000 to general unsecured creditors following the Effective Date, for a total payment of $69,000 to general unsecured creditors. (Id.) Appellant believes that, other than Appellant’s Claim, the total allowable general unsecured claims is $94,384.44. (Id.)

On March 5, 2012, Appellee filed the “Debtor Olson Rug Company’s Objection to Proof of Claim No. 21 Filed by Bruce Belson” (the “Objection”). (Id.) In the Objection, Appellee argued that no portion of Appellant’s judgment constituted wages, salaries, or commissions earned within 180 days of the filing of the bankruptcy petition, and thus no portion of the judgment should be entitled to priority status pursuant to 11 U.S.C. § 507(a)(4). (Id.) Appel-lee further argued that Appellant’s retaliatory discharge claim constituted a claim for damages “resulting from the termination of an employment contract” pursuant to 11 U.S.C. § 502(b)(7) and thus should be capped at one year’s pay in the amount of $49,193.12 (reflecting Appellant’s annual compensation at the time of his employment termination). (Id. at 3-4.) Appellee requested the entry of an order: (a) reclassifying the entire amount of the Claim as a “Class 7 Other General Unsecured Claim” under the Plan; and (b) reducing the aggregate allowable amount of [664]*664the Claim to, and capping it at, $49,193.12 pursuant to section 502(b)(7) of the Bankruptcy Code. (R. 7, Appellee’s Br. at 4-5.) On April 12, 2012, the Bankruptcy Court entered an order sustaining Appellee’s Objection in its entirety, thereby denying priority to Appellant’s Claim and capping it at $49,193.12. (R. 5, Jt. Appellate Status Report at 5.)

On April 26, 2012, Appellant filed a Notice of Appeal of the April 12, 2012 order of the Bankruptcy Court. (Id.) The appeal was docket by this Court on June 8, 2012. (R. 1, Appeal.) The jurisdiction of this Court to hear this appeal is invoked pursuant to 28 U.S.C. § 158(a)(1). (R. 6, Appellant’s Br. at 1; R. 7, Appellee’s Br. at 1.) Appellant timely filed his brief on June 22, 2012, (R. 6, Appellant’s Br.), and Appellee filed its response brief on July 6, 2012, (R. 7, Appellee’s Br.). Appellant filed his reply brief on July 16, 2012. (R. 10, Appellant’s Reply Br.)

The questions presented in this appeal are: (1) whether the Bankruptcy Court erred in finding that Appellant’s claim is not entitled to priority status pursuant to 11 U.S.C. § 507(a)(4); and (2) whether the Bankruptcy Court erred in finding that Appellant’s claim should be reduced pursuant to 11 U.S.C. § 502(b)(7). (R. 5, Jt. Appellate Status Report at 4.)

LEGAL STANDARD

The Court uses a dual standard of review of when adjudicating bankruptcy appeals. See Arrow Rd. Constr. Co. v. Bridgeview Bank Grp. (In re Brittwood Creek, LLC), 450 B.R. 769, 773 (N.D.Ill.2011). The bankruptcy court’s determinations of law are reviewed de novo while its findings of fact are reviewed for clear error. See Wiese v. Cmty. Bank of Cent. Wis., 552 F.3d 584, 588 (7th Cir.2009) (citing In re ABC-Naco, Inc., 483 F.3d 470, 472 (7th Cir.2007)). However, where the Bankruptcy Code commits a decision to the discretion of the bankruptcy court, that decision is only reviewed for an abuse of that discretion. See Wiese, 552 F.3d at 588 (citing In re Fortney, 36 F.3d 701, 707 (7th Cir.1994)).

There are no factual issues in dispute in this appeal and the only disputed issues on appeal are matters of law; namely, whether the Bankruptcy Court properly applied the law in sustaining Appellee’s Objection to Appellant’s Claim. (R. 7, Appellee’s Br. at 5.) Therefore, the Court reviews this appeal de novo. See Wiese, 552 F.3d at 588.

ANALYSIS

I.

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Cite This Page — Counsel Stack

Bluebook (online)
483 B.R. 660, 2012 WL 4738873, 2012 U.S. Dist. LEXIS 143885, Counsel Stack Legal Research, https://law.counselstack.com/opinion/belson-v-olson-rug-co-ilnd-2012.