In re Zilog, Inc.
| Citation | 450 F.3d 996 |
| Decision Date | 15 June 2006 |
| Docket Number | No. 04-15794.,No. 04-15787.,04-15787.,04-15794. |
| Parties | In re ZILOG, INC.; In re Zilog Mod III, Inc., Debtors, Zilog, Inc., Plaintiff-Appellee, v. Rose Marie Corning; Selena Robert; Margie Cleverdon, Defendants-Appellants. In re Zilog, Inc.; In re Zilog Mod III, Inc., Debtors, Zilog, Inc., Plaintiff-Appellee, v. Rose Marie Corning; Selena Robert; Margie Cleverdon, Defendants-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Eric S. Rossman, Rossman Law Group, PLLC, Boise, ID, and Ruth Elin Auerbach, Glassberg, Pollak & Associates, San Francisco, CA, for the defendants-appellants.
Richard Levin and Kurt Ramlo, Skadden, Arps, Slate, Meagher & Flom LLP, Los Angeles, CA, for the debtors/plaintiff-appellee.
Appeal from the United States District Court for the Northern District of California; Jeremy Fogel, District Judge, Presiding. D.C. Nos. CV-03-02704-JF, 02-51144-MM, CV-03-02705-JF, 02-5286.
Before KOZINSKI and SILVERMAN, Circuit Judges, and ROGER T. BENITEZ,* District Judge.
This case shows once again why it's important for lawyers representing a bankruptcy debtor to turn square corners.
In June 2001, ZiLOG, Inc. announced that it would close one of its Idaho plants, effective December 31, 2001. To retain employees through the plant closure, ZiLOG offered certain employees one-time retention bonuses. Rose Marie Corning, Selena Robert and Margie Cleverdon (collectively, "the women") were among the employees who accepted the offer.
In December 2001, ZiLOG notified the women that it had rescinded the retention bonus agreements because the women would not, after all, lose their jobs at the end of the year. In January 2002, Corning and Robert learned that three male engineers would receive retention bonuses. Corning and Robert claim, however, that not until "late April or early May, 2002," did they learn that those same three male employees had been paid bonuses even though they were not laid off. Cleverdon claims that she did not learn this until mid-June 2002.
Prior to this time, on February 28, 2002, ZiLOG and a related entity had filed for bankruptcy in the Northern District of California. ZiLOG employees received an email soon afterward from the company's general counsel explaining that they would receive proof of claim forms from the bankruptcy court. The employees were instructed that
Around this same time, the women received a notice from the bankruptcy court explaining that the deadline for filing proofs of claims that had accrued prior to the bankruptcy filing was April 19, 2002. The women did not file proofs of claim prior to the deadline.
The bankruptcy court confirmed ZiLOG's plan of reorganization on April 30 of that year, and the reorganization became effective on May 13. The bankruptcy court's April 30 confirmation order— mirroring ZiLOG's reorganization plan— provided that "[o]n the Effective Date, the Debtors shall be discharged of all liability for payment of any Claims incurred before the Effective Date, to the fullest extent provided by Bankruptcy Code § 1141, except that any liability imposed by or assumed under the Plan shall not be discharged." The confirmation order also provided that "July 1, 2002, is the deadline for filing a request for payment of an administrative expense arising from February 28, 2002 through April 30, 2002." The women received written notice of the plan's confirmation.
Pursuant to 11 U.S.C. § 524(a)(2), confirmation of a plan "operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor." Id.; see also id. § 1141(d)(1). Notwithstanding the discharge injunction, the women subsequently filed an action in Idaho state court (the "Idaho action") alleging contract, tort and statutory claims based on ZiLOG's failure to pay the promised retention bonuses. The complaint did not allege sex discrimination.
In response to this filing, ZiLOG initiated an adversary proceeding in the Northern District of California Bankruptcy Court, and sought to enjoin the Idaho action, arguing that those claims had been discharged in bankruptcy. Shortly after commencement of this adversary proceeding, the women and ZiLOG stipulated that the women would stay the Idaho action until the bankruptcy court entered a judgment in the adversary. The bankruptcy court approved this stipulation and it was entered into the record.
Subsequently, the women filed complaints with the Idaho Human Rights Commission and the United States Equal Employment Opportunity Commission. Each of the verified complaints contained identical statements of fact, alleging that
[s]ometime after December 31, 2001, I learned that I would not be paid the promised retention bonus. That in late April or early May, 2002, I learned that male employees who had signed retention bonus agreements had been paid the retention bonuses and/ or rehired within a period of time that Zilog represented such individuals would not be rehired.
Several months later, the women filed affidavits in the bankruptcy court further detailing their allegations of discrimination. Corning and Robert claimed (consistent with their verified complaints) that they did not learn until "late April or early May, 2002," that the three male engineers who had received retention bonuses would not be laid off. During this same period, Corning and Robert allegedly learned that three male maintenance workers who had been laid off in January 2002 might be returning to ZiLOG but would not have to repay their retention bonuses.
Corning and Robert also claimed to have learned by late April or early May 2002 that a seventh male employee who had been paid a retention bonus was neither terminated nor was asked for a refund. (This was in contrast to a female employee who had apparently been retained, but was forced to return her bonus.) Finally, in "mid-June 2002," Corning and Robert allegedly learned that an eighth male employee had been rehired without being required to repay his retention bonus.
While Corning and Robert's affidavits to the bankruptcy court were consistent with their verified complaints to the Idaho Human Rights Commission and the EEOC, Cleverdon's was not. In her complaint to the Idaho Human Rights Commission, Cleverdon had alleged that she became aware of disparate treatment in late April or early May 2002. In her later affidavit to the bankruptcy court, however, Cleverdon claimed that she did not become aware of the disparate treatment until "approximately mid-June 2002," when she was informed of such by Corning and Robert.
Subsequently, the women moved to enter their untimely contract, tort and statutory claims into the bankruptcy proceedings under the equitable doctrine of excusable neglect. See Fed. R. Bankr. 9006(b)(1). They also requested payment of their sex discrimination claims as post-petition administrative expenses.1
The bankruptcy court granted summary judgment to ZiLOG, and held all of the women's claims barred by the bankruptcy confirmation order. Applying California Department of Health Services v. Jensen (In re Jensen), 995 F.2d 925 (9th Cir.1993) (per curiam), which held that a claim arises under the bankruptcy code once it is within the claimant's "fair contemplation," id. at 930, the bankruptcy court held that the women's sex discrimination claims 2 The bankruptcy court also found all of the women's other claims to be within their fair contemplation pre-petition, and thus barred because no proofs of claim were filed by the April 19 deadline. The bankruptcy court found no excusable neglect for the late filing of these claims, and held the women in contempt for willfully violating the discharge injunction. ZiLOG was awarded $20,000 in attorneys' fees.
The district court affirmed, holding that the bankruptcy court had made "explicit [factual] findings" that, by late April or early May 2002, Corning and Robert were aware that a number of male employees had received retention bonuses while remaining employed at ZiLOG. The district court held that the bankruptcy court's findings were not clearly erroneous, and that "the bankruptcy court did not err in finding that Corning's and Robert's gender discrimination claims were classified appropriately as pre-petition and thus barred by the May 13, 2003 bankruptcy discharge."3 (Emphasis added.)
The district court described the issue of when Cleverdon's sex discrimination claim arose as "closer." Citing the conflict between Cleverdon's complaint to the Idaho Human Rights Commission and her subsequent affidavit to the bankruptcy court, the district court affirmed the bankruptcy court's grant of summary judgment against Cleverdon: "In light of Cleverdon's conflicting statements, this Court cannot conclude that the bankruptcy court's factual determination that Cleverdon's claims were pre-petition [sic] and barred by the confirmation plan on May 13, 2003[sic] constituted clear error." (Emphasis added.)
The district court also affirmed the sanctions award, holding that "[a]bsent any affirmative act by Defendants to stay or dismiss the Idaho litigation, the bankruptcy court's finding that the continuing Idaho state proceedings were a willful violation of the discharge order was reasonable."4
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