Heller Ehrman LLP

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	) Bankruptcy Case
) No. 08-32514DM
HELLER EHRMAN LLP, 	)
)
Debtor. 	) Chapter 11
___________________________________)
MEMORANDUM DECISION ON OBJECTION TO PROOF OF CLAIM
AND MOTION FOR SUMMARY JUDGMENT
On October 22, 2010, the court heard the objection of Heller
Ehrman LLP (“Debtor”) to the proof of claim (No. 718) filed by
Robert Borton (“Borton”) in the amount of $21,666.66, of which
$10,833.33 is asserted as a priority claim under 11 U.S.C.
§ 507(a)(4).
Debtor appeared and was represented by Gail S. Greenwood,
Esq., one of its attorneys; Borton appeared and was represented by
Michael St. James, Esq., his attorney.
For the reasons stated below, Borton’s claim No. 718 will be
allowed as a priority claim in the amount of $10,833.33; the
balance of his claim, in the same amount, will the subject of
further proceedings.
Borton asserts statutory priority based upon Debtor’s failure
to give him thirty days notice of termination as contemplated in
Signed and Filed: October 27, 2010
________________________________________
DENNIS MONTALI
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
October 28, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 08-32514 Doc# 1830 Filed: 10/27/10 Entered: 10/28/10 16:10:41 Page 1 of
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paragraph 6(b) of a Retirement Agreement among Borton, Debtor, and
Heller Ehrman White & McAuliffe, a Professional Corporation, dated
as of December 1, 2004.
Although Borton received a Notice of Closing Of Operations on
September 26, 2008, from Debtor, that notice informed him that
Debtor would cease operations on or about November 28, 2008.
Notwithstanding that notice, Borton’s employment was terminated on
October 24, 2008. 	The court does not believe that the September
26, 2008, notice satisfies the thirty day notice requirement of
the Retirement Agreement. 	Thus, the court agrees with Borton that
the abrupt termination without thirty days notice amounts to
severance pay in lieu of notice, and agrees with the authorities
cited by Borton that his claim for unpaid severance pay is
entitled to priority under the Bankruptcy Code. 	See Borton’s
Response To Objection To Claim, 9:11-27.
Because of this determination, the question of when Debtor
ceased its operations becomes moot as Borton’s termination
occurred within 180 days of the cessation of business and the
filing under Chapter 11 on December 28, 2008, regardless of which
came earlier.
Borton contends that he is entitled to “waiting time”
penalties under California Labor Code § 203(a) (“Section 203(a)”).
He contends that he is entitled to an unsecured claim in the
amount of $10,833.33 because Debtor did not pay him his severance
pay when it terminated his services.
Debtor denies that its failure to pay the severance pay was
willful under Section 203(a). 	It offers no facts to support its
denial of willfulness, a point that Borton contends entitles him
Case: 08-32514 Doc# 1830 Filed: 10/27/10 Entered: 10/28/10 16:10:41 Page 2 of
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to summary judgment as a matter of law.
The trouble with Borton’s argument is that he has offered no
facts to show that Debtor’s failure to pay was indeed willful. 	At
oral argument his counsel conceded that he had the burden of proof
on this issue. 	Instead, Borton contends that the only available
challenge to willfulness is a good faith dispute about liability.
Disputes about liability are dealt with to some extent in
California Labor Code § 13520, defining “willful” to occur when an
employer intentionally fails to pay wages to an employee, but
adding that a good faith dispute will preclude an imposition of
waiting time penalties. 	Borton then argues that a good faith
dispute occurs when an employer presents a defense which, based in
law or fact, would preclude any recovery.
The court believes the proper focus on these facts is to
determine whether the failure to pay was willful, since there does
not appear to be any dispute as to Borton’s entitlement to be
paid. 	That is an inherently factual inquiry that cannot be
resolved on summary judgment.
Based upon the foregoing, the court will have to set for
trial the question of whether Debtor’s failure to pay Borton’s
severance was willful. 	Because a claim for just over $10,000 will
probably receive between 20% and 60% on the dollar in this case,
the parties may find it sensible and practical to compromise this
remaining dispute between them rather than litigate over so small
an amount. 	If they are not able to, then counsel should meet and
confer about necessary discovery and then contact the court’s
courtroom depute (Ms. Lorena Parada, telephone 415-268-2323) to
set an evidentiary hearing on the remaining factual matter in
Case: 08-32514 Doc# 1830 Filed: 10/27/10 Entered: 10/28/10 16:10:41 Page 3 of
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dispute. 	At that time the court will issue a trial scheduling
order and proceed accordingly.
If Borton’s counsel desires an interlocutory order on the
priority portion of claim No. 718, he should serve and upload an
order that grants priority fo the reasons stated and in the amount
set forth in this Memorandum Decision.
**END OF MEMORANDUM DECISION**
Case: 08-32514 Doc# 1830 Filed: 10/27/10 Entered: 10/28/10 16:10:41 Page 4 of
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