Bankruptcy case arose from a dispute between William Phillips and Barry Wood over Phillips’ alleged ownership interest in Baldwin Broadcasting Company, which owned and operated two radio broadcast stations. Phillips contended that Baldwin was a partnership between he and Wood, while Wood contended that Phillips was an employee of Baldwin. Phillips sued Wood in state court over the ownership interests in Baldwin. In 2000, Wood filed a bankruptcy petition. While the bankruptcy proceeding was pending, a jury in the state court action returned a verdict in favor of Phillips, finding that he had a 40% partnership interest in Baldwin. The bankruptcy court ordered an auction of Wood’s assets, including the radio stations. In conjunction with the sale of the radio stations, Woods and Phillips entered into a settlement agreement, pursuant to which Phillips would receive a percentage of the proceeds from the sale of the stations, and Wood would dismiss his appeal of the jury verdict. On May 14, 2002, Wood entered into two asset purchase agreements to sell the radio stations. One day later, the bankruptcy court entered an order confirming Wood’s amended plan of reorganization, approving the asset purchase agreements, which incorporated the settlement agreement, and approving the sale of the radio stations. In the plan of reorganization, the bankruptcy court expressly stated that “[t]his Court retains jurisdiction to enforce and implement the terms and provisions of the Plan. . . .” After entering the settlement agreement, the parties failed to carry out its terms. As a result, Wood’s appeal proceeded, resulting in a reversal of the jury verdict. Wood subsequently moved the bankruptcy court to terminate the settlement agreement, which was scheduled for hearing on May 20, 2005. If you receive pay advices 60 days from an employer (even your own S-Corp.) prior to filing, they must be filed. I would note that I have a hearing in June on a Trustee’s Motion to Determine my client is not in compliance with 521(A)(1)(iv), asserting that all self-employed persons must file pay advices. His argument is that self-employed persons are their own employers.
Phillips contended that Wood and the other parties to the asset purchase agreements conspired to convince the bankruptcy court to set aside the settlement agreement so that Phillips would not receive a percentage of the proceeds of the sale of the radio stations; however, Phillips failed to raise this argument at the bankruptcy hearing. In September 2006, Phillips brought this action, claiming that Wood and the other parties to the asset purchase agreements had conspired to terminate the settlement agreement and tortiously interfered with the contractual agreement between Wood and Phillips. Trial court granted summary judgments in favor of the defendants, and Phillips appealed. A better approach may be that a self employed person is just that and leave employer out of it. I’ll be the labor lawyers could help us with these definitions.
The text of the statute states “”received within 60 days . . by the debtor from any employer of the debtor”
Congress clearly intended to limit this provision to debtors engaged in employer/ employee relationships, even if you are a W-2 employee of a closely held entity. However, if you are a 1099 or Schedule C person, there is no employer / employee relationship and, under the plain meaning rule, this statute does not apply.
The Alabama Supreme Court vacated the summary judgments, dismissed the appeal, and dismissed the action. The Court held that the trial court did not have subject matter jurisdiction to decide the disputes involved in this case because the bankruptcy court expressly retained jurisdiction to enforce and implement Wood’s plan of reorganization. Because the plan of organization specifically included all matters related to the settlement agreement and asset purchase agreements, the Court held that only the bankruptcy court had subject matter jurisdiction to decide this dispute.
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