In re the Hyman Companies

497 B.R. 465, 2013 WL 3866491, 2013 Bankr. LEXIS 3111, 58 Bankr. Ct. Dec. (CRR) 85
CourtUnited States Bankruptcy Court, E.D. Pennsylvania
DecidedJuly 24, 2013
DocketNo. 09-20523REF
StatusPublished
Cited by1 cases

This text of 497 B.R. 465 (In re the Hyman Companies) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re the Hyman Companies, 497 B.R. 465, 2013 WL 3866491, 2013 Bankr. LEXIS 3111, 58 Bankr. Ct. Dec. (CRR) 85 (Pa. 2013).

Opinion

MEMORANDUM OPINION (1) OVERRULING IN PART AND SUSTAINING IN PART DEBTOR’S SUPPLEMENTAL OBJECTION TO ANSEL CLAIM AND (2) RESOLVING ANSEL’S MOTION TO DETERMINE DEBTOR’S OBJECTION TO CLAIM

RICHARD E. FEHLING, Bankruptcy Judge.

I. INTRODUCTION

After a day of hearing testimony and receiving exhibits and upon the filing by the parties of numerous pages of briefs with attachments, I will now decide this dispute. This case is based on the firing of Roberta Ansel by Debtor in retaliation for her complaining to government agencies that Debtor was cheating on its compensation to its employees. Ansel sued Debtor in Massachusetts state court because it wrongfully and unlawfully fired her. Ansel obtained a substantial award and judgment in Massachusetts earlier this year. She had filed a claim in this case before final resolution of the suit in Massachusetts, seeking a bit more than $410,000, asserting that about $292,000 of her claim was entitled to priority treatment. Her initial claim proved to be higher than her actual award of damages, which is more than $294,000.

Debtor had objected to Ansel’s initial claim, claiming nothing was actually owed to Ansel and, if something were owed, it was entitled to no priority. Debtor filed a Supplemental Objection to Ansel’s claim after the state court judgment was rendered. Debtor’s Supplemental Objection asserted two defenses: First, Ansel’s recovery is limited by Section 502(b)(7) and second, certain components of Ansel’s claim are barred by Section 15.1 of Debt- or’s confirmed plan of reorganization.

I find and conclude that (1) to the extent it is based on Section 502(b)(7) as a defense, Debtor’s Supplemental Objection to Roberta Ansel’s claim is barred by Debt- or’s two-year delay in raising its Supplemental Objection and (2) if I were to assume that Debtor is not time-barred from raising Section 502(b)(7), I also reject the Section 502(b)(7) defense in its Supplemental Objection on the equitable ground of laches. Finally, I conclude that Section 502(b)(7) is substantively inapplicable to reducing Ansel’s claim in any way.

[470]*470I also find and conclude that the portion of Debtor’s Supplemental Objection based on Section 15.1 of its confirmed plan of reorganization is not time-barred, but is not as wide-reaching as Debtor asserts. The confirmed plan of reorganization binds Debtor and all of its creditors, including Ansel. I will apply the limitations of Section 15.1 to Ansel’s claim and subtract post-petition interest, post-petition attorneys’ fees, and post-petition court costs from her claim. Because the evidence thus far presented provides me with no basis on which to distinguish between pre- and post-petition interest, attorneys’ fees, and court costs, I will require the parties to stipulate to the appropriate amounts or determine them through a hearing.

Disposing of the Supplemental Objection to Ansel’s claim effectively disposes of An-sel’s motion to determine objections to her claim as moot.

If and to the extent that some determination is made that I do not have the power to make a final decision of this matter involving an objection to a claim, the findings of fact and conclusions of law throughout my discussion in this Memorandum Opinion shall constitute my formal findings of fact and conclusions of law for any reviewing court.

II. PROCEDURAL BACKGROUND

Debtor filed its Chapter 11 petition on March 3, 2009. On June 22, 2009, Ansel filed her claim, in which she alleged that she held an unsecured claim against Debt- or in the total amount of $410,886, $292,036 of which she claimed was entitled to priority status as wages under Section 507(a)(4) of the Bankruptcy Code, 11 U.S.C. § 507(a)(4). Ansel’s claim was based on her wrongful discharge/statutory retaliation complaint that she had filed against Debtor in Massachusetts state court in 2005, before Debtor’s bankruptcy filing.1

Debtor timely filed its original objection to Ansel’s claim on January 26, 2011. Debtor’s initial objection raised two issues: (1) Under Massachusetts law, Ansel had no valid claim to the relief sought in the Massachusetts state court action; and (2) if Ansel had a claim, no portion of her claim was entitled to priority as wages under 11 U.S.C. § 507(a)(4). In its original objection, Debtor purported to reserve its right to file additional objections at a later date.

On July 5, 2011, I entered an Order through which I discretionarily abstained from hearing Debtor’s original objection to Ansel’s claim under Massachusetts law. I directed that the parties return to the Massachusetts state court to resolve the merits of her claim. I further noted that I could decide any alleged priority of Ansel’s claim under Section 507(a)(4) after the Massachusetts court ruled on the merits. Debtor mentioned nothing about holding or asserting an objection to Ansel’s claim based on the alternative grounds of Bank[471]*471ruptcy Code Section 502(b)(7) and Section 15.1 of Debtor’s Second Amended Plan, which was confirmed on December 29, 2010 (the “Plan”). Debtor moved for reconsideration of my July 5, 2011 decision, which I denied through my Order entered on September 27, 2011. Debtor then filed a motion to reopen the record and yet another motion for reconsideration of my September 27, 2011 decision, both of which I denied on November 3, 2011.

The jury in the Massachusetts court decided the underlying, substantive merits of Ansel’s claim by deciding in Ansel’s favor and awarding her damages for her wrongful discharge/statutory retaliation claim. Ansel then petitioned the Massachusetts judge for attorneys’ fees and costs as the prevailing plaintiff under Massachusetts statute, M.G.L. c. 149, § 150. The court entered judgment in Ansel’s favor on September 25, 2012 in the aggregate amount of $294,523.11, comprised of: (1) $60,000 damages; (2) interest from May 5, 2005 to September 25, 2012, in the amount of $53,260.74; (3) attorneys’ fees in the amount of $179,039; and (4) court costs in the amount of $2,223.37. Debtor elected not to appeal the judgment, which is therefore final.

Ansel has agreed to withdraw her request for priority status of any of her claim under Section 507(a)(4).2

On February 14, 2013, Debtor filed its Supplemental Objection to Ansel’s claim. Debtor raised the following two issues: (1) Ansel’s claim must be capped at the equivalent of one years’ wages (approximately $35,000) pursuant to Section 502(b)(7) of the Bankruptcy Code, 11 U.S.C. § 502(b)(7); and (2) Ansel is entitled to no post-petition interest, no attorneys’ fees, and no court costs by virtue of Section 15.1 of the Plan.3 Ansel responded by arguing that Debtor’s entire Supplemental Objection is barred because Debtor failed to file it until after expiration of the bar date for filing claim objections. Ansel also argued that Debtor’s Supplemental Objection should be overruled on equitable grounds. Finally, Ansel claimed that neither Section 502(b)(7) of the Bankruptcy Code nor Section 15.1 of Debtor’s Plan apply to her claim except that the latter prohibits her from recovering post-petition interest.

III.

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Bluebook (online)
497 B.R. 465, 2013 WL 3866491, 2013 Bankr. LEXIS 3111, 58 Bankr. Ct. Dec. (CRR) 85, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-the-hyman-companies-paeb-2013.