Saturday, April 13, 2002

Wilkinson employees lose class-action claim

Bookstore workers might now make case for fraud

The Associated Press

        LEXINGTON — Former employees of Wallace's Bookstores do not meet the requirements for a class action in their claims for unused vacation pay and other benefits they were owed when the Lexington company went into bankruptcy last year, a judge has ruled.

        U.S. Bankruptcy Judge William S. Howard ruled Thursday that only individual claims filed before the Jan. 14 deadline could be considered for payment. The judge also said the benefits were accrued before Wallace's filed for reorganization, so the employees will be paid the same percentage of their claims as other Wallace's creditors.

        The company, founded in 1962 by former Gov. Wallace Wilkinson, followed Mr. Wilkinson into bankruptcy more than 13 months ago.

        Wallace's, which had 1,800 employees, estimates the amount it owes at $675,000, although employee claims “greatly” exceed that total, said Tim Robinson, attorney for the company.

        Judge Howard's rulings came at the end of a two-hour hearing in which an attorney for the employees argued that they should receive 100 percent of their benefits because the company committed fraud after it filed for bankruptcy in February 2001.

        Wallace's promised its employees that they would be paid in full for all unused vacation time if they stayed with the company while it reorganized, said attorney Chris Miller, who represents 112 Wallace's employees.

        The company had no intention of paying the benefits, Mr. Miller said, and might have known that bankruptcy law would have prevented some of the payments.

        If the request for a class-action designation was denied, “we are going to file 112 fraud lawsuits in this court,” Mr. Miller said. “Where else can we go?”

        Wallace's attorneys denied the fraud allegation, which was not decided by Judge Howard Thursday.

        They argued that the employees earned the benefits before the bankruptcy, so they had to be considered along with all other pre-bankruptcy claims.

        Benefits earned after the bankruptcy filing had been paid in full, Mr. Robinson said.

        About 30 employees had inadvertently been paid benefits earned before the filing and they will be asked to refund the money to the company, he said.

        Even if Wallace's lied to its employees, said Wallace's attorney Michael Glassman, there was no way to tell whether all 1,800 employees at 90 stores in 26 states heard the lies or believed them enough to stay with the company.

        “The nature of the debtor's (Wallace's) business and the way it was spread out makes that highly unlikely,” Mr. Glassman said.

        Unless all former employees could be interviewed to determine what they heard and how many heard the same thing, there was no way to fit them into a group to qualify for class-action status, Mr. Glassman said.

        Judge Howard agreed.

        He also said each of the former employees had twice been sent claims forms and notified of deadlines for filing individual claims for back benefits.

        “If they fail to do so (file claims), it's not the fault of the debtor (Wallace's) in this case,” Judge Howard said. The original claims deadline had been extended by more than two months to give employees more time to file, he said.


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- Wilkinson employees lose class-action claim