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L-Bar Bankruptcy Proposal Scrapped Main Creditor Wants To Ensure Former Employees Get Paid First

Fri., April 21, 1995

The bankruptcy case of L-Bar Products of Chewelah, Wash., is back to square one after almost three years of legal wrangling and about $70,000 in legal fees.

However, an attorney said L-Bar’s largest creditor, Northwest Alloys, is considering paying about $90,000 in back wages that have been owed to 56 L-Bar employees since L-Bar closed in December 1991.

“I think consideration has and is being given to that,” Northwest Alloys attorney Bennett Young, of San Francisco, said Thursday. “That decision hasn’t been made yet.”

Spokane attorney Rebecca Coufal, who represents the employees without pay, welcomed the prospect: “That would be wonderful. Everybody would love it.”

Otherwise, the employees’ chances of being paid are highly uncertain. Previous offers to pay them under a pair of Chapter 11 bankruptcy reorganization plans were swept off the table after a recent telephone conference in which U.S. Bankruptcy Judge John Klobucher said he thought the company should be liquidated.

The case was assigned to trustee Bruce Boyden after L-Bar bowed to Klobucher and converted its bankruptcy to Chapter 7 liquidation. Starting from scratch Thursday, the attorneys asked a few perfunctory questions, traded a few barbs and went home.

“We are back at square one,” Young said. “I’ve told the trustee that we’re still willing to talk about something that makes sense, but I’m not saying we’re willing to do the deal that was on the table under our plan.”

Under that plan, the state Ecology Department and Northwest Alloys agreed to move the employees ahead of their multimillion-dollar claims. Northwest Alloys has liens on most of L-Bar’s property, and the Ecology Department holds both companies responsible for a giant environmental cleanup bill.

Northwest Alloys, a subsidiary of Alcoa, shipped state-designated “dangerous” waste material from its Addy, Wash., magnesium smelter to L-Bar for recycling. L-Bar’s efforts were largely unsuccessful, and Alloys remains at least partially responsible for cleaning up contamination at the L-Bar plant and warehouses around the region.

Ecology Department attorney Rebecca Todd couldn’t say whether the department is still willing to let the employees take cuts in the cash line, but “the Department of Ecology has empathy for where the employees find themselves.”

Todd said she hadn’t had a chance to study an obscure 1967 law cited by state Rep. Bob Morton, R-Orient. The law says state agencies must allow unpaid workers to recover up to $600 apiece before the agencies may collect from bankrupt companies. But the L-Bar employees are owed about three times that amount.

Coufal said most of the employees feel they have been used as pawns in the battle between Northwest Alloys and L-Bar, and believe they will never be paid.


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