Fifty-six employees who were stiffed of their last paycheck when a Chewelah, Wash., company closed in December 1991 may find out March 21 whether they’ll ever get paid.
After three years of legal gridlock, U.S. Bankruptcy Judge John Klobucher may choose then between two plans for the bankrupt L-Bar Products magnesium-waste recycling plant.
Klobucher seems to be leaning toward a plan that promises to repay the employees at the expense of other creditors. But some of the employees doubt they’ll ever get paid.
“We feel we’re being used as pawns in this game that the big boys play, and none of us understands what’s going on,” said former L-Bar laboratory technician Donna Boring.
Former receptionist Joyce Skiles said she was offended when L-Bar attorney Dan O’Rourke of Spokane offered the employees roughly 55 cents on the dollar in December 1993. O’Rourke proposed to let the employees split $50,000 even though the company owes them about $90,000.
“I worked for all my wages, and that makes me angry,” Skiles said.
O’Rourke himself already has collected $68,774 in fees and expenses from the bankruptcy estate, charging $155 an hour.
“The employees lost homes and the employees had to go on welfare and take food stamps to support their families,” the employees’ volunteer attorney, Rebecca Coufal, told Klobucher this week.
She said anger at L-Bar and its parent company, Reserve Industries of Albuquerque, N.M., is one of the main reasons the employees voted by a 3-1 ratio in favor of the liquidation plan being promoted by L-Bar’s largest creditor, Northwest Alloys.
“Administrative claims” by Northwest Alloys, several warehouse owners and the state Ecology Department would have a higher priority than the employees’ claims if approved. But Northwest Alloys, a subsidiary of Alcoa, is offering to let the workers take cuts in the cash line.
The Ecology Department also has agreed to step back because Northwest Alloys has accepted responsibility for a multimillion-dollar cleanup of the L-Bar site. The site was contaminated by waste from Northwest Alloys’ magnesium smelter at Addy, Wash.
Northwest Alloys attorney Bennett Young said the company is negotiating deals to pull the warehouse owners out of the queue, “so we’re not balancing the plan on the backs of the unpaid workers.”
But United Security Bank and companies that did work for L-Bar probably would lose money. The bankruptcy estate has about $142,000 plus some property of undetermined value in Oregon.
L-Bar’s plan calls for the employees and others to recover their money by reopening the plant to process dolomite and by winning a lawsuit against Northwest Alloys. L-Bar blames its collapse on an alleged breach of contract by Northwest Alloys.
In a summary of the plans, Klobucher said the lawsuit is “highly speculative” and probably would take years to deliver any cash even if it is successful. Another weakness in the L-Bar plan, he said, is its “highly optimistic” assumption that the company could persuade the Ecology Department to place its claims behind those of other creditors.
Even so, at a hearing this week, L-Bar attorney O’Rourke urged Klobucher to conduct a 15- to 20-day trial on the lawsuit in November before deciding which plan to accept. O’Rourke contended the Northwest Alloys plan doesn’t guarantee the employees would get their money.
Young offered to clarify the pledge to pay the workers, and said the bankruptcy could be settled immediately with a one-day hearing.
Klobucher seemed to be leaning toward the Northwest Alloys plan when he scheduled a March 21 hearing to make a decision. He invited Young to lead the hearing “on the assumption that his assertions are correct and he can complete it in a day.”