In re Organized Maintenance, Inc.
| Decision Date | 22 March 1985 |
| Docket Number | Adv. No. 184-0185.,Bankruptcy No. 184-41031-21 |
| Citation | 47 BR 791 |
| Parties | In re ORGANIZED MAINTENANCE, INC., Debtor. ORGANIZED MAINTENANCE, INC., Plaintiff, v. Ford B. FORD, Acting Secretary of Labor, and E. Earl Thomas, Deputy Chief Judge, Office of Administrative Law Judges, Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
Lewis W. Siegal, New York City, for Organized Maintenance, Inc.
Raymond J. Dearie, U.S. Atty., E.D.N.Y., Brooklyn, N.Y., for Ford B. Ford and E. Earl Thomas.
The issue before the Court, raised by the defendants' Motion to Dismiss is whether an administrative proceeding brought by the Secretary of Labor to enforce the Service Contract Act of 1965, 41 U.S.C. § 351 et seq. () is automatically stayed by 11 U.S.C. § 362, when a petition is filed under Title 11, and, if not, whether it is subject to stay by the Bankruptcy Court pursuant to 11 U.S.C. § 105.
Organized Maintenance, Inc., ("OMI") filed for relief under Chapter 11 of Title 11 on June 21, 1984. The complaint in this proceeding was filed on October 29, 1984.
The defendants are Ford B. Ford who was Acting Secretary of Labor at the time and E. Earl Thomas, Deputy Chief Judge of the Office of Administrative Law Judges of the United States Department of Labor.
The complaint alleges that OMI is a small minority-owned business engaged in rendering janitorial services; that it suffered substantial cash flow problems due to the escalating operating costs of a government contract, and, as a result, was forced to file a Chapter 11 petition in order to reorganize and rehabilitate itself; that around September 23, 1983, the Department of Labor ("DOL") commenced an administrative proceeding against OMI pursuant to 41 U.S.C. § 351, alleging certain violations involving the under-payment of various fringe benefits; that a hearing on the complaint was held on April 16, 1984, at which OMI was not represented by counsel because of its lack of financial resources; that the proceeding is still pending; that it seeks to debar OMI from all government contracts for a period of three years; that if that occurred, OMI would be unable to successfully rehabilitate and reorganize itself; that if OMI is forced to prosecute an appeal from an adverse decision, the costs of such an appeal would substantially diminish OMI's ability to reorganize.
The relief asked for in the complaint is a declaration that the pending administrative proceeding is automatically stayed pursuant to 11 U.S.C. § 362(a), or, if § 362(a) be determined to be inapplicable, then that a temporary and permanent injunction be issued against the entry of a decision in the proceeding pursuant to 11 U.S.C. Section 105.
The defendants after answering the complaint, have now moved for an Order pursuant to Bankruptcy Rule 7012 and FRCP 12(c) to dismiss the complaint on the grounds that the Court "lacks subject matter jurisdiction, and plaintiff fails to state a claim upon which relief can be granted."1 Thus, the very narrow issue presented for decision is whether the complaint herein, whatever construction is given it, either fails to state a cause of action or states one outside the jurisdiction of the Court. As the Second Circuit noted in George C. Frey Ready Mixed Concrete v. Pine Hill Concrete Mix Corp., 554 F.2d 551, 553, (2d Cir.1977) (footnote omitted).
"For purpose of this motion, we may look only at the pleading with all of `the well-pleaded material facts alleged in the complaint . . . taken as admitted.\' Gumer v. Shearson, Hammill & Co., 516 F.2d 283, 286 (2d Cir.1974), and the complaint should not be dismissed `unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.\' Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957)."
The Government claims that the exceptions to the automatic stay contained in § 362(b)(4) and § 362(b)(5) by their own terms, place the pending DOL proceeding outside the scope of the stay, and, therefore, the complaint must be dismissed. With respect to the alternative request for injunctive relief, the Government contends that no discretionary relief is available under 11 U.S.C. § 105(a), because no assets of the estate are threatened.
No doubt, the Government has been compelled to take this position by the fact that despite the filing of the Chapter 11 proceeding and in the face of the specific request for a declaration that § 362(a) applies, a decision has been rendered in the administrative proceeding pending when the petition was filed. Deputy Chief Judge E. Earl Thomas, who decided the case, did not overlook the bankruptcy proceeding, rather he held that the automatic stay did not apply. In re Matter of Raymond J. Donovan, Secretary of Labor v. Organized Maintenance, Inc., U.S. Dept. of Labor, Case No. 83-SCA-124 (Dec. 4, 1984). To quote his opinion:
The first issue to be decided is whether § 362(a) applies. If it does, then it becomes academic whether or not this Court should exercise its discretion under 11 U.S.C. § 105 to stay further steps by the Secretary of Labor to enforce the decision that was rendered subsequent to the filing of the Chapter 11 petition herein.
We start out with the principle that actions taken in violation of the automatic stay are void. Borg-Warner Acceptance Corp. v. Hall, 685 F.2d 1306, 1308 (11th Cir.1982), and cases there cited. If, as the debtors contend, § 362(a) is applicable to the proceeding brought under the 41 U.S.C. § 352, then the decision rendered subsequent to the filing of the petition herein is null and void.
Subsection (a) of Section 362 reads in part:
Subsection (b) provides insofar as pertinent:
The position of the Government necessarily has to be that an administrative proceeding is brought to enforce the Secretary of Labor's "police or regulatory power."
The "Service Contract Act of 1965" is one of a series of acts, of which the Walsh-Healey Public Contracts Act was the first, setting up labor standards for government contractors.
The Senate Report described the legislation as follows:
The statute is simple in its organization. Section 351 contains the provisions with respect to wages, fringe benefits, etc., which must be included within any contract with the United States. Section 352 provides that in the event the contract terms required by § 351 are not respected, the contractor becomes liable for a sum equal to the amount due any employee and so much of the money as is due the contractor may be withheld and paid such employees directly by the Federal agency involved. In the event that amount provides insufficient to cover the under-payments, § 354(b) authorizes the United States to bring an action against the contractor in any court of competent jurisdiction and to recover the difference for the ultimate benefit of the underpaid employees. In addition, § 354(a) authorizes the Controller General to distribute to agencies of the United States, names of persons found to have violated the Chapter and prohibits any contract being awarded such persons for three years after the date after a firm is so listed in such publication. Section 353 authorizes the Secretary of Labor to enforce the Chapter; to "issue orders, hold hearings, and make decisions based upon findings...
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