Bankruptcy Court Authorized to Determine Debtor’s Wage Act Liability

New York-based insolvency and restructuring partners Andrew Troop and Chris Mirick represented the creditor employees in the suit pro bono on behalf of Greater Boston Legal Services.

Troop explained that the ruling is important because it ensures that parties seeking to have a debt determined nondischargeable will have to try the merits of their claims only a single time. “The risk, had the ruling come out the other way, is that people like our clients — who are owed wages that they weren’t paid — would not only have to go through the process of determining in Bankruptcy Court whether the debt is nondischargeable, but may have had to go back to another court to fix the amount of the claims.”

Mirick noted, “Bankruptcy lawyers are generalists by nature, and you either have to be prepared to deal with the topics that arise or associate with counsel who can. Sometimes these actions go forward in Bankruptcy Court, and sometimes, if there’s already an action pending elsewhere, the Bankruptcy Court will let that go forward and proceed with the liquidation of that claim. But bankruptcy law is the last bastion of generalists.”

Mirick complimented the judge for upholding that it was appropriate to consolidate the creditor employees’ nondischargeability action with the debtor’s objections to the proofs of claims the employees had filed as to the debtor’s alleged Wage Act liability.

“The court’s finding that the facts and law [in the two matters] are overlapping if not identical makes sense,” he said. “If [the Bankruptcy Court] is going to be determining that a debt is nondischargeable, it should also be determining what the amount of the debt is. And in terms of efficiency and fairness, you only have to litigate the merits once instead of one time in Bankruptcy Court and potentially once somewhere else.”