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Personal Liability for Unpaid Wages in Bankruptcy

Last week, a bankruptcy court in New York found an individual executive personally responsible to pay the wages of the former employees of TransCare Corp, an ambulance firm that filed for bankruptcy in early 2016. Under New York law, executives can be held personally liable for wages. The court found that Lynn Tilton, the sole member of TransCare’s board and the head of the private equity firm Patriarch Partners LLC which was participating in the turnaround of TransCare, was, “in economic reality, the person who made critical decisions for TransCare and who was responsible for the ambulance company workers’ wages under state law.”

As the COVID-19 related bankruptcies continue to pile up, we can expect to see similar claims in the years to come. Most Side A DIC D&O policies do not contain wage related exclusions, although care should be taken to make sure that the definition of Loss and the other terms and conditions of the policy do not hinder response to these types of employment matters.

Will Congress Give Companies Immunity?

According to Law360, over 1,000 pandemic related lawsuits have already been filed by customers and employees against businesses in the US. As the economy begins to open up again, companies are worried about the continued influx of litigation. Congress is considering coming to their rescue by granting a “yet to be determined” immunity from certain COVID-19 related litigation.

A commercial litigation partner with Hughes Hubbard & Reed LLP in NYC noted that “companies aren’t vying for blanket immunity from such suits, ‘which could allow bad behavior to go unpunished,” but are simply asking for a ‘safe harbor’ incentive to reopen without the fear of litigation… ‘If companies do everything right and follow all the guidelines, they ought to be open with some reasonable assurance that they are not going to be sued for every coronavirus case that can be connected to their businesses’”.

According to another attorney, Peter Gould of Squire Patton Boggs LLP, “businesses are going to be reluctant to reopen unless there is more certainty regarding legal exposure. ‘Even if they are acting with the best intentions and good faith, is that risk [of reopening] outweighed by the risk of litigation?...The fact that a case or claim might not be viable may not be enough because they are still potentially facing these claims, and dealing with them will be a cost of doing business.’”

On the other side of the fence is the argument that immunity would allow companies to slack off on their basic obligations to maintain a safe working/shopping/entertaining environment.

The one thing that is abundantly clear is that tailored immunity or no immunity at all, we are looking at years and years of COVID-19 related litigation. And the question remains, can companies and individuals financially survive protracted litigation?

Happy Belated Mother’s Day!

Happy belated Mother’s Day to all of you moms out there. We hope that your day was a special one. As you have no doubt seen, there are hundreds of news and opinion pieces in the press focusing on what “mothering” looks like during this crisis. My number one takeaway from the experts, my friends who are moms and my own experience is that mothers are approaching “superhero” status.

Young working moms are now taking conference calls in their kitchens, with one baby on their hip and one in a high chair, while the dog barks and a sink of dirty dishes piles up. Moms with elementary and middle school kids are doing their best to balance work and homeschooling. (If any of you understand the way kids do math nowadays, please let me know. It sends me over the edge!)

I am lucky to have three teenagers who are pretty independent kids. That said, my mothering skills have been tested, and I haven’t always responded in the best way. But on this Mother’s Day, I was given an opportunity to show up big time for my oldest daughter whose boyfriend chose mid-day Mother’s Day (seriously!?!) to break up with her. (Do you remember high school relationships? And how all-encompassing and hard they could be? Add in Snapchat, Instagram, Tik Tok and VSCO and BOOM, overwhelmed 17-year old.) So just like most everything else we are experiencing during this pandemic, Mother’s Day was not what it has been in the past. Instead of a yummy brunch out on the town with my three favorite people followed by an afternoon of pampering, the restaurant and spa remained closed and my afternoon and evening were filled with tears and deep breaths and really long hugs and more tears….all the way up until the clock ticked 12:00 am to Monday.

But I showed up! Just like each of you are doing. Day in and day out. When we fail to live up to our pre-COVID-19 mothering standards, we have to remember to give ourselves some grace. Maybe the dishwasher will not get filled tonight. Maybe your third grader doesn’t finish that worksheet because you just can’t look at another worksheet. Maybe you have to drop everything and just sit and wipe away tears. Grace. Grace. Grace. No doubt we will continue to show up when it matters most…when our kids need us the most. Because that’s what moms do.

Sources:

Peg Brickley, Lynn Tilton Held Responsible for Unpaid Wages at Failed Ambulance Company, The Wall Street Journal, May 8, 2020.

Alex Wolf, TransCare Trustee’s Claims Against Tilton Going to Trial, Law360, March 28, 2019.

Gavin Souter, Restaurant Sues Insurer, Brokers Over COVID-19 Coverage, Business Insurance, April 30, 2020.

Y. Peter Kang, Congress Set for Fight Over COVID-19 Business Immunity, Law360, May 11, 2020.



CARRIE O’NEIL, ESQ.

Senior Vice President & Claims Counsel

carrie.oneil@cacspecialty.com

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