Summary of a Recent
Judicial
Development in
Bankruptcy
Certifying a Sub-Class of Priority Claimants in Bankruptcy
Walt McCarterNational AgLaw Center Research Associate
Summary of Decision
In In re Casimiro, No. 05-19558-B-7, 2008 WL 4411015 (Bankr. E.D. Cal. Sept. 29, 2008), the United States Bankruptcy Court for the Eastern District of California refused to certify a sub-class of 11 U.S.C. § 507(a)(4) priority plaintiff claimants until the district court granted certification to the main class of plaintiffs in the pending original class action suit.
Background
Casimiro's business contracted to provide farm labor services to grape growers. Id. at *1. After his farm laborer employees brought a class action suit against him to recover alleged unpaid wages and violations of various state laws, he filed for Chapter 13 bankruptcy and the plaintiffs became unsecured creditors. Id. at *1-2. The named class plaintiffs filed a priority claim pursuant to 11 U.S.C. § 507(a)(4) (for wages and other claims earned within 120 days before the filing of the bankruptcy petition or cessation of the debtor's business, whichever occurred first) on behalf of the class, which if allowed would take priority over other general unsecured claims. Id. at *2.
Analysis and Holdings
The issue presented was whether the claimants could certify a "claimant class" compromised of those entitled to a priority claim (those employees who worked for Casimiro within 180 days before he filed bankruptcy or closed his business). Id. at *4. The court approved a settlement for the named priority claimants, but refused to certify a priority claimant class because the related litigation in the district court was pending and the plaintiff class had not yet been certified in that case, so it would be premature to certify a priority claimant sub-class before the district court certified the priority class. Id. at *5-6. The court stated that when and if the plaintiff class was certified by the district court, the plaintiffs could resubmit their priority claim. Id. at *6.
The case was decided on September 29, 2008.