Orr v. Marcella (In re Marcella)

463 B.R. 212, 2011 Bankr. LEXIS 2622
CourtUnited States Bankruptcy Court, D. Connecticut
DecidedJuly 6, 2011
DocketBankruptcy No. 09-22876 (ASD); Adversary No. 10-02001
StatusPublished
Cited by19 cases

This text of 463 B.R. 212 (Orr v. Marcella (In re Marcella)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Connecticut primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Orr v. Marcella (In re Marcella), 463 B.R. 212, 2011 Bankr. LEXIS 2622 (Conn. 2011).

Opinion

MEMORANDUM OF DECISION ON COMPLAINT TO DETERMINE DISCHARGEABILITY

ALBERT S. DABROWSKI, Bankruptcy Judge.

I. INTRODUCTION

In this adversary proceeding the Plaintiff, Gillian Orr (hereafter, the “Plaintiff’), requests determinations of nondischarge-ability of debts under Bankruptcy Code § 523(a)(6) for damages, interest, costs, and attorney’s fees arising from the failure of Glenn Marcella (hereafter, the “Debt- or”) and/or his fitness club business, The Center Studio, Inc., to pay the Plaintiffs wages in connection with her employment. For the reasons set forth hereafter, the Court concludes that the Plaintiffs claims are dischargeable.

II. JURISDICTION

The United States District Court for the District of Connecticut has jurisdiction over the instant adversary proceeding by virtue of 28 U.S.C. § 1334(b); and this Court derives its authority to hear and determine this proceeding on reference from the District Court pursuant to 28 U.S.C. § 157(a), (b)(1) and the District Court’s General Order of Reference dated September 21, 1984. This is a “core proceeding” pursuant to 28 U.S.C. § 157(b)(2)(I).

III.FACTUAL AND PROCEDURAL BACKGROUND

The facts herein are gleaned from an evidentiary hearing held before the Court on January 25, 2011 (hereafter, the “Hearing”), a post-trial hearing held April 12, 2011 (hereafter, the “Post-Trial Hearing”), a stipulation between the parties, and the files and records of this case and proceeding. In March, 2007, the Plaintiff started working as an independent contractor instructing others in personal training and group exercise for The Center Studio, LLC, a Connecticut limited liability company owned by the Debtor. See, Stipulations of Fact, ECF No. 62, ¶¶ 1, 4-6. Around January 7, 2008, the Debtor dissolved The Center Studio, LLC and formed a new corporate entity in its place called The Center Studio, Inc. (hereafter, the “The Center Studio”), organized under Connecticut law with the Debtor as both owner and president. Id., ¶2, 4, 7. The Plaintiff continued working for the new business as a personal trainer and group exercise instructor, but around March 17, 2008, the Debtor “reclassified Plaintiff as [a salaried] employee” with the title of General Manager and an annual salary of $40,000, payable at the rate of $1,538.46 gross every two weeks. Id., ¶ 6-9; see also, Exhibit l.1

The Plaintiff worked for The Center Studio in that capacity until March 2009. During March 2009, the perfect storm of increased competition, a down economy, and dwindling revenue contributed to the Debtor’s inability to fully fund both the payroll obligations of The Center Studio [216]*216and other expenses2. On or about March 18, 2009, the Debtor wrote out a check payable to the Plaintiff in the amount of $1,176.32, the net salary for her employment from March 2, through March 15, 2009, but failed to give the check3 to the Plaintiff and informed her that he did not have enough money to cover it. Approximately five days later, the Debtor opened an account in his own name at Sovereign Bank with a deposit of $2,500. Exhibit M.

Notwithstanding the Debtor’s failure to pay her salary for employment from March 2, through March 15, 2009, the Plaintiff continued to work at The Center Studio for another two weeks, from March 16, to March 29, 2009, earning an additional .$1,176.84 in net income for that time period. At the end of March, 2009, the Debtor again wrote out a check4 payable to the Plaintiff, this time for the March 16 through March 29 pay period, but again refused to give the check to the Plaintiff citing a lack of funds to cover it.5

As of March 29, 2009, the Debtor owed the Plaintiff $3,076.92 in gross wages for the previous four weeks. At or near that same date he informed the Plaintiff that he was reclassifying her as an independent contractor, and proposed a plan (hereafter, the “Plan”) to the Plaintiff by which the arrearage attending her wages would be repaid.6 See, Stipulations of Fact, ¶ 11-13. Pursuant to the Plan, the Debtor proposed to permit the Plaintiff to retain the full fee she earned from conducting personal training sessions, rather than remitting a portion of each fee to the Debtor, which would partially offset the arrearage. Id., ¶ 13.

Attending the change in status from an employee to an independent contractor was the Plaintiffs realization that she needed to obtain her own liability insurance, which she previously had as an independent contractor but which had terminated when she became a salaried employee. The Plaintiff testified that a discounted rate on liability insurance was then available if she provided the State of Connecticut Department of Consumer Protection with the license number of her employer’s fitness center on the insurance application. When the Plaintiff requested the license number of The Center Studio from the Debtor, she was informed there was no such license, and the conversation escalated. Soon thereafter her employment was terminated.

The parties dispute the reasons for the Plaintiffs termination. The Plaintiff contends that she was retaliated against for inquiring about the license number. The Debtor contends that the Plaintiff was discharged because she was an independent contractor without liability insurance, who refused to teach a spinning (exercise) [217]*217class. To the limited extent the Debtor’s and Plaintiffs testimony is in conflict, as is the case regarding certain facts attending her termination, the Court, having observed the demeanor of these witnesses, specifically credits the testimony of the Debtor over that of the Plaintiff.

By April 29, 2009, the Plaintiff had made several unsuccessful requests for payment of unpaid wages. As previously noted, on or about March 23, 2009, the Debtor opened a new personal account at Sovereign Bank, and during April, 2009, several' deposits were made into that account including, $2,000, $450 and $2900, on April 9, 20, and 29, 2009, respectively. Exhibit M. However, the Hearing evidence was inconclusive as to the origin of those deposits. More specifically, the Debtor’s Schedule I, filed together with his wife as part of their joint bankruptcy petition, shows sufficient income from his spouse’s nursing job to adequately cover deposits made into the Debtor’s personal bank account at Sovereign Bank. In addition, the bank records of The Center Studio do not evidence the occurrence of a diversion of assets from that entity.

On April 29, 2009, the Plaintiff filed a Statement of Claim for Wages with the State of Connecticut Department of Labor. Receiving no response from the Debtor, the Plaintiff commenced a lawsuit7 against him in the Superior Court for the State of Connecticut alleging, inter alia, violations of the Connecticut Minimum Wage Act, Conn. Gen.Stat. § 31-71b, and retaliatory discharge under the Connecticut Unfair Trade Practices Act (“CUTPA”), Conn. Gen.Stat.

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Cite This Page — Counsel Stack

Bluebook (online)
463 B.R. 212, 2011 Bankr. LEXIS 2622, Counsel Stack Legal Research, https://law.counselstack.com/opinion/orr-v-marcella-in-re-marcella-ctb-2011.