Opinion
No. CV 86-201.
September 14, 1987.
Discrimination — Employment — Private Employer — Termination. — Under Section 525(b) of the Bankruptcy Code, a private employer's firing of an employee is unlawful if the employee's filing for bankruptcy played a "significant role" in the termination. Stated another way, the firing is unlawfully discriminatory if it would not have occurred "but for" the bankruptcy.
See Sec. 525(b) at ¶ 9245.
This case was tried before the Court on September 10, 1987. Plaintiff, Mary Beatrice Bell, alleges that defendants terminated her employment with them solely because she filed a wage earner petition (Chapter 13 of Title 11, U.S.C.), in violation of 11 U.S.C. § 525. Plaintiff has also alleged that defendants violated 11 U.S.C. § 362 when they caused her automobile and fire insurance policies to be cancelled. Defendants deny that plaintiff was fired solely because she filed a petition in bankruptcy, but admit having violated 11 U.S.C. § 362.
Having heard the testimony and reviewed the exhibits, the Court makes the following findings of fact and conclusions of law:
FINDINGS OF FACT
1. Plaintiff was employed by defendant in 1974 and was terminated on March 20, 1986.
2. Plaintiff was employed by defendant Sanford-Corbitt-Bruker, Inc. for twelve years. Her primary responsibilities were to rate insurance policies and to quote the rates to clients.
3. Defendant Sanford-Corbitt-Bruker, Inc. is a small insurance agency. It has operated with five to six employees. It's personnel policies and procedures are informal, and the employees constitute a close knit group.
4. There were shortcomings in the work performance of plaintiff. During the plaintiff's final year of employment she was frequently absent or tardy. The plaintiff made numerous errors in rating insurance policies. Her attitude was unsatisfactory, and she was occasionally rude to clients.
5. The shortcomings in plaintiff's work performance were tolerated by defendants, and she was kept on as an employee.
6. During plaintiff's last year of employment with defendants, she was distracted from her duties by personal matters. Plaintiff's nephew, the nephew's wife, and their baby had moved in with plaintiff. Plaintiff's concerns for, and obligations to, her family interfered with her work duties. Plaintiff was further distracted by financial difficulties that led her to file a bankruptcy petition.
7. Plaintiff's work performance deteriorated during the course of the year preceding her termination. Nevertheless, defendants continued to tolerate her work performance and kept her on as an employee.
8. Davenport Bruker, an officer of the company and the son of defendant W. Cason Bruker, wanted to fire plaintiff as early as August 1985. Having worked for large insurance companies in Atlanta, Davenport Bruker was sensitive to the importance of documenting grounds for discharge. Davenport Bruker began to keep a record of plaintiff's absences, tardiness and rating errors.
9. Davenport Bruker tried, on several occasions, to persuade his father to fire plaintiff. Mr. Bruker, Sr. refused to fire plaintiff, and the defendants continued to tolerate plaintiff's substandard work performance.
10. The defendants did not formally evaluate plaintiff's work performance on a regular basis. They did, however, bring errors to her attention when such errors occured, and encouraged her to improve her work performance.
11. I credit the testimony of Mabel Cleveland and of Mr. Bruker, Sr., both of whom testified that, on one occasion when plaintiff called to ask for two days off, Mr. Bruker warned plaintiff that her excessive absences were jeopardizing her job.
12. During the fall of 1985, and early in 1986, Davenport Bruker continued to encourage his father to fire plaintiff. Mr. Bruker, Sr., however, persisted in refusing to fire plaintiff. Davenport Bruker deferred to his father's decision, and plaintiff was kept on as an employee. Davenport Bruker continued, nevertheless, to keep a record of plaintiff's absences and work errors.
13. Mr. Bruker, Sr. had a generous and tolerant attitude toward his employees. This is demonstrated by his having advanced money to plaintiff to pay her electric bill on one occasion. It was also the policy of defendants to gradutitously advance premiums for the insurance policies of their employees. Further, Mr. Bruker resisted his son's urgings to fire the plaintiff, an employee of twelve years, even though the quality of plaintiff's work had in fact worsened.
14. A former partner of Mr. Bruker, Sr. filed bankruptcy in 1982. As a result, Mr. Bruker lost $133,000.
15. I credit the testimony of plaintiff that, subsequent to the bankruptcy of Mr. Bruker, Sr.'s former partner, Mr. Bruker, Sr. made a statement to the effect that if any of his employees filed for bankruptcy, he would fire them.
16. In January of 1986, plaintiff filed a voluntary petition under Chapter 13 of Title 11 in the United States Bankruptcy Court for the District of South Carolina.
17. Defendant W. Cason Bruker stated that at one time it was his policy not to hire anyone who had ever declared bankruptcy. He has reconsidered and reversed that policy in the course of this litigation.
18. In her bankruptcy petition, plaintiff listed the defendants as creditors because she owed the insurance premiums that defendants had advanced on her behalf.
19. The defendants received notice of plaintiff's petition in bankruptcy on March 17, 1986.
20. I credit the plaintiff's testimony regarding the circumstances of her discharge: The day after defendants received notice of plaintiff's bankruptcy, Mr. Brucker, Sr. told plaintiff that she would be fired for filing the bankruptcy petition. Plaintiff explained to him that the petition was necessitated by a loan company's threat to sue her. Mr. Bruker, Sr. said that that was no excuse. Later that day, plaintiff inquired of Mr. Bruker, Sr. whether he wanted her to leave. He said he would have to work her official firing into his schedule.
21. On March 20, three days after having received notice of the plaintiff's bankruptcy, the defendants officially discharged plaintiff. She was paid through March 31.
22. When plaintiff applied for unemployment insurance benefits, she stated on her application that the reason for her firing was the filing of her bankruptcy petition. The plaintiff made this statement without knowledge of the protections afforded by 11 U.S.C. § 525(b).
23. After the discharge, the defendants caused plaintiff's fire and auto insurance to be cancelled, and credited the refund on the premiums they had advanced to plaintiff's account. Plaintiff owned $965.00 to defendants for insurance premiums advanced.
24. Plaintiff was unable to obtain unemployment insurance during the periods subsequent to her termination because the unemployment office accepted defendant's averment that plaintiff was fired for excessive absences and work errors.
25. Plaintiff was unable to find employment with another insurance agency. She worked briefly at Fuel City, then quit, and later found employment at Domino's Pizza. She continues to work for Domino's Pizza.
26. After her discharge, plaintiff was unable to meet scheduled payments pursuant to her bankruptcy petition, and was forced to turn to friends and family for help in meeting the expenses of living.
27. Plaintiff suffered significant emotional distress as a result of her discharge.
CONCLUSIONS OF LAW
1. Title 11 U.S.C. § 525(b) provides that a private employer may not terminate the employment of an individual who is a debtor solely because the debtor filed a petition in bankruptcy. Section 525(b) was added by Congress in a 1984 amendment to the Bankruptcy Code. There has been very little case law under the statute. For purposes of the case sun judice, the Court must construe the term "solely," a word of some ambiguity.
2. The Court's construction of the term solely is determinative of whether there has been a violation of § 525. If "solely" means that the adverse action would have been taken even if the plaintiff had been an ideal employee in all other respects, then the plaintiff has not met her burden of proof. If, however, "solely" prescribes a "but-for" analysis, then the plaintiff has proven her case.
3. The Bankruptcy Reform Act of 1978 directed the judiciary to fill in statutory interstices so as to "continue to mark the contours of the anti-discrimination provision in pursuit of sound bankruptcy policy." H.R. Rep. No. 595, 95th Cong., 1st Sess. 367 (1977); S.Rep. No. 989, 95th Cong., 2d Sess. 81 (1978).
The 1978 Act only prohibited discrimination by public entities. The expectation that the judiciary would gap-fill in accordance with Bankruptcy policy is equally applicable, however, to the 1984 amendment.
4. It is the policy of the Bankruptcy Act to rehabilitate, and provide with a fresh start, debtors who avail themselves of the Act's protections.
5. It would be virtually impossible for a bankrupt to prove that her employer fired her due only to bankruptcy, and without having considered any other factors in reaching the decision. To interpret "solely" as requiring a bankrupt to prove this scenario would conflict with the policies of the Bankruptcy Act.
6. In In Re Metro Transportation, 64 B.R. 968 (Bkrtcy. E.D.Pa. 1986), the bankruptcy court stated that the policies of the Bankruptcy Act require that "solely" be given a broad construction. That court would have found an adverse action, concerning which a bankruptcy filing appears to have played a significant role, to be violative of § 525.
7. The Court views "significant role" to be consistent with a "but-for" analysis. The Court concludes that, if the defendant would not have fired plaintiff "but-for" the bankruptcy petition, the defendants have violated § 525(b).
8. The Court finds that Mr. Bruker, Sr. tolerated all of the shortcomings in plaintiff's work performance, and would have continued to tolerate them, despite his son's efforts to persuade him to fire plaintiff, if not for plaintiff's filing of a petition in bankruptcy. Mr. Bruker fired plaintiff when he did solely because she had filed a petition in bankruptcy.
9. It may be that Davenport Bruker would have eventually prevailed in his efforts to persuade his father to fire plaintiff for poor work performance. The Court can only speculate as to what would have happened. The Court finds that on the day that plaintiff was fired, Mr. Bruker, Sr. was tolerant of plaintiff's poor work performance and fired her solely because of the bankruptcy filing.
10. The Court, in the absence of authority in the context of § 525(b), concludes that burden of proof allocations for proving a discriminatory discharge due to bankruptcy should be framed by analogy to race, color, religion, sex, or national origin cases. See McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802-03 (1973). Hence, plaintiff, a member of the class protected under § 525(b), made out a prima facie case of discriminatory discharge, and it was up to the defendants to establish a legitimate, nondiscriminatory reason for their actions. The defendants established that plaintiff was a substandard employee whose performance had worsened; but, the evidence established that the defendants did not want to fire plaintiff for her poor work performance. Instead, it was the filing of a bankruptcy petition that resulted in plaintiff's discharge. This conclusion is supported by, inter alia, the defendants' continued toleration of plaintiff's shortcomings, Mr. Bruker, Sr.'s stated former policy of not hiring anyone who had declared bankruptcy, the fact that plaintiff was fired three days after defendants received notice of her bankruptcy, and the credible testimony of plaintiff that Mr. Bruker told her he was firing her for having declared bankruptcy. Thus, defendants violated 11 U.S.C. § 525(b).
11. The Court also concludes, as defendants have admitted, that in cancelling plaintiff's insurance policies, they violated the automatic stay imposed under 11 U.S.C. § 362. In re the Minoco Group of Companies, Inc., 799 F.2d 517 (9th Cir. 1986); A.H. Robins Co. v. Piccinin, 788 F.2d 994 (4th Cir. 1986).
12. Under 11 U.S.C. § 362(h), an individual injured by any willful violation of a stay shall recover actual damages, including costs and attorney's fees. In appropriate circumstances, punitive damages may also be assessed.
13. Defendants' violation of the stay was in good faith; it was not a willful violation. Defendants did not realize that the stay prohibited the cancellation of an insurance policy, the premiums for which they had advanced on plaintiff's behalf. Therefore, plaintiff cannot recover under § 362(h).
14. The plaintiff's damages from the violation of the stay were de minimis. Plaintiff's fire and auto insurance policies were cancelled, but plaintiff has failed to show that she suffered any loss which these policies would have covered. Plaintiff said she would not drive an uninsured vehicle, but she indicated that her car was not running anyway, and she did not have the money to repair it.
15. The defendants improperly retained a $139.00 refund, received when the plaintiff's insurance policies were cancelled. As creditors of a bankrupt, defendants' rights were limited to participation in the wage-earner plan; defendants were not entitled to apply the insurance refund to the plaintiff's account. This violation of § 362, however, was in good faith; the defendants had gratuitously advanced the premiums on plaintiff's behalf and believed that they were entitled to the refund notwithstanding the stay. Nevertheless, plaintiff is entitled to have the $139.00 returned to her. 11 U.S.C. § 105.
16. As a result of plaintiff's discharge, which was in violation of 11 U.S.C. § 525(b), plaintiff has suffered $5,500.00 damages in lost wages, and $5,000.00 damages for emotional distress.
17. Plaintiff is not entitled to recover any punitive damages.
18. Plaintiff is not entitled to recover attorney's fees. See In Re Begley, 41 B.R. 402, 408 n. 4 (E.D.Pa. 1984).
19. For the foregoing reasons, judgment is rendered for plaintiff and against defendants in the sum of $5,500.00 for loss of wages, $5,000.00 for emotional distress, and $139.00 as restitution for the improperly converted insurance premium refund. The total award is $10,639.