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Jun. 1, 2001
Long Court Fight Ends in Win for Cheated Employee
A Prunedale man's 18-year court fight to recover his unpaid wages has finally panned out, but it took a trip through California state courts, federal bankruptcy courts and ultimately the 9th U.S. Circuit Court of Appeals.
A Prunedale man's 18-year court fight to recover his unpaid wages has finally panned out, but it took a trip through California state courts, federal bankruptcy courts and ultimately the 9th U.S. Circuit Court of Appeals.
In the process, the federal appeals court recently ruled that an employer's failure to pay wages may survive the customary discharge of debts in a bankruptcy if the failure to pay included a tort of "willful and malicious injury" by the debtor. In re Jercich, 2001 Daily Journal D.A.R. 823.
Wage claimants ordinarily fall third in line among creditors in a bankruptcy and can claim only up to $4,300 for wages within 90 days of the bankruptcy, said Thomas R. Duffy, of Duffy & Guenther in Monterey.
Duffy maintains that the Bankruptcy Appellate Panel struck out in a new direction recently, holding that the tort must be independent of a disputed contract to be a non-dischargeable debt.
In this case, James Petralia, a former real estate loan salesman for a Carmel loan broker, George Jercich, sued in 1983 contending Jercich failed to pay him commissions on loan sales, or paid months late. Petralia quit and sought to recover wages, penalties and punitive damages for his losses.
Montery Superior Court Judge Robert O'Farrell ruled Jercich used the employee funds from his company for personal use, "including a horse ranch," and found his behavior was "willful and amounted to oppression" under California state law.
Petralia was awarded $54,000, including $20,000 in punitive damages, later upheld by the 6th District Court of Appeal in San Jose in 1986. But that was only the beginning.
Jercich filed Chapter 7 bankruptcy and eventually the bankruptcy court ruled Petralia would have to show his former boss had intentionally harmed him. Lacking that, the debt would be discharged.
Jercich represented himself successfully at each stage in the process, except for the 9th Circuit. There he hired a lawyer, but lost the appeal. Now he says he intends to seek reconsideration by the full appeals court, but has no lawyer to help him.
Jercich complained that the state court finding that his actions toward Petralia were "oppressive" was later redefined as "malicious" by the courts.
The 9th Circuit avoided getting into an area of the dischargability fight that has split the circuits. There is still a question of whether a creditor must prove conduct was both willful and malicious, or simply that it was one or the other.
The appeals court found in a footnote that the court's standard for maliciousness survives the Supreme Court's decision in Kawaauhau v. Geiger, 523 U.S. 57 (1998), but a 5th Circuit ruling has gone another way, In re Million, 156 F.3d 606.
- From staff and wire reports
In the process, the federal appeals court recently ruled that an employer's failure to pay wages may survive the customary discharge of debts in a bankruptcy if the failure to pay included a tort of "willful and malicious injury" by the debtor. In re Jercich, 2001 Daily Journal D.A.R. 823.
Wage claimants ordinarily fall third in line among creditors in a bankruptcy and can claim only up to $4,300 for wages within 90 days of the bankruptcy, said Thomas R. Duffy, of Duffy & Guenther in Monterey.
Duffy maintains that the Bankruptcy Appellate Panel struck out in a new direction recently, holding that the tort must be independent of a disputed contract to be a non-dischargeable debt.
In this case, James Petralia, a former real estate loan salesman for a Carmel loan broker, George Jercich, sued in 1983 contending Jercich failed to pay him commissions on loan sales, or paid months late. Petralia quit and sought to recover wages, penalties and punitive damages for his losses.
Montery Superior Court Judge Robert O'Farrell ruled Jercich used the employee funds from his company for personal use, "including a horse ranch," and found his behavior was "willful and amounted to oppression" under California state law.
Petralia was awarded $54,000, including $20,000 in punitive damages, later upheld by the 6th District Court of Appeal in San Jose in 1986. But that was only the beginning.
Jercich filed Chapter 7 bankruptcy and eventually the bankruptcy court ruled Petralia would have to show his former boss had intentionally harmed him. Lacking that, the debt would be discharged.
Jercich represented himself successfully at each stage in the process, except for the 9th Circuit. There he hired a lawyer, but lost the appeal. Now he says he intends to seek reconsideration by the full appeals court, but has no lawyer to help him.
Jercich complained that the state court finding that his actions toward Petralia were "oppressive" was later redefined as "malicious" by the courts.
The 9th Circuit avoided getting into an area of the dischargability fight that has split the circuits. There is still a question of whether a creditor must prove conduct was both willful and malicious, or simply that it was one or the other.
The appeals court found in a footnote that the court's standard for maliciousness survives the Supreme Court's decision in Kawaauhau v. Geiger, 523 U.S. 57 (1998), but a 5th Circuit ruling has gone another way, In re Million, 156 F.3d 606.
- From staff and wire reports
#300757
Sherri Salzman
Daily Journal Staff Writer
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