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Thursday, February 17, 2011

Ind. Decisions - 7th Circuit decided one Indiana case yesterday

In Whitely, et al. v. Moravec, et al. (SD Ind., Hamilton), a 6-page opinion, Chief Judge writes:

Plaintiffs worked for Waste Reduction, Inc., at its facilities in Indiana, until they were laid off in 2006. The next year Waste Reduction entered bankruptcy in Michigan. Plaintiffs filed claims for overdue wages and fringe benefits. Their wage claims were allowed and paid, but they remained dissatisfied. Indiana imposes penalties on employers that tarry in remitting wages, see Ind. Code §§ 22-2-5-2, 22- 2-9-4(b), and Waste Reduction did not have enough assets to satisfy the penalty claims in the bankruptcy. So the ex-employees filed suit in a state court of Indiana, demanding penalties—not from Waste Reduction (any claims against it belonged in the bankruptcy court) but against the ten shareholders who had the largest equity stakes in the firm.

Indiana does not require corporate investors to make good the firm’s debts unless the conditions for piercing the corporate veil have been satisfied. Ind. Code §23-1-26-3. Plaintiffs do not contend there is any basis for investors’ liability under Indiana law. But Waste Reduction was incorporated in New York, and the internal affairs doctrine designates a firm’s state of incorporation as the source of rules about whether investors are liable for its debts. See Restatement (Second) of Conflict of Laws §307; Ind. Code §23-1-49-5. New York requires some investors in privately held firms to guarantee employees’ wages and benefits. * * *

Plaintiffs want to combine the Indiana statute, which makes employers liable for penalties when they do not pay wages on time, with the New York statute, which makes some equity investors directly liable to workers for wages and benefits. Yet neither state passed such a hybrid law, which the district judge likened to a griffin or jackalope. (A griffin is a mythical creature, but a jackalope is the main character in the short film Boundin’ and therefore must exist. Surely Pixar would not mislead millions of children.) All laws are compromises. A court can’t combine the pro-worker features of disparate laws, while disregarding the statutes’ proemployer features. In Indiana the employer is liable for penalties, but investors do not stand behind corporate debts; in New York some investors can be liable, but only for wages and benefits. * * *

The district judge therefore correctly concluded that §630(a) does not make defendants liable for a penalty under Indiana law. AFFIRMED

Posted by Marcia Oddi on February 17, 2011 08:40 AM
Posted to Ind. (7th Cir.) Decisions