Discrimination Claims Timely Filed But Barred by Bankruptcy Court Orders

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Cost v. Super Media, S.D.N.Y., No. 1:10-cv-04066-JGK, 10/1/12

  • Key Holding: Employment discrimination claims dismissed; timely filed but barred by bankruptcy court's orders.

  • Key Takeaway: EEOC right-to-sue letter does not resuscitate claims discharged by bankruptcy court.

By Stephanie M. Acree

A plaintiff's employment discrimination claims were dismissed because they were barred by the orders of a bankruptcy court, the U.S. District Court for the Southern District of New York held Oct. 1 (Cost v. Super Media, S.D.N.Y., No. 1:10-cv-04066-JGK, 10/1/12).

Judge John G. Koeltl found that the plaintiff's claims were not untimely filed, but that the bankruptcy court's plan confirmation order and order expunging the proof of claim for the plaintiff's alleged wrongful termination meant the claims were barred by the doctrine of res judicata.

Termination Letter
On April 17, 2007, Curtis Cost received a letter notifying him that he had been terminated from his job at Idearc Media Sales--East Co. The letter alleged that the termination was for “sale fraud/violating the [c]ompany's [c]ode of [b]usiness [c]onduct” and stated that the termination would be effective March 19, 2007.

In January 2008, Cost filed a complaint with the Equal Employment Opportunity Commission alleging that his former employer has subjected him to “continuous, racially-based harassment that culminated in his termination without just cause.” While Cost was awaiting a decision by the EEOC regarding his complaint, Idearc filed for Chapter 11 protection in Texas.

Disallowed and Expunged Claim
Idearc received a plan confirmation order on Dec. 22, 2009, which provided for the discharge and release of all claims against it. Prior to the confirmation, Cost filed a proof of claim with the bankruptcy court for $500,000 for his alleged wrongful termination. On Jan. 8, 2010, the EEOC issued a right-to-sue letter to Cost, which stated that he must file a lawsuit within 90 days of receipt of the notice or the right-to-sue would be lost.

However, Super Media (the post-bankruptcy name of Idearc) had objected to Cost's proof of claim, and on Feb. 9, 2010, the bankruptcy court “disallowed and expunged” Cost's claim in its entirety and ordered that Cost “receive no distribution from the [r]eorganized [d]ebtors' estate” based on his proof of claim.

On April 7, 2010, Cost filed an in forma pauperis (IFP) application and a pro se complaint in the district court against Super Media alleging violations of Title VII of the Civil Rights Act and of New York state law. The court authorized Cost to proceed IFP and he subsequently filed an amended complaint. Super Media then moved to dismiss the amended complaint.

Claims Not Time Barred
Super Media first argued that the Title VII claim was untimely filed and should therefore be dismissed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, but the court disagreed.

The court said that the “simultaneous delivery of both a request to proceed IFP and a complaint,” which Cost had filed within the 90 day window, tolls the 90 day statute of limitations in discrimination cases. Furthermore, the court said that “a pro se plaintiff's complaint is considered filed as of the date it is received by the Pro Se Office,” which also occurred within the 90 day window. Therefore the court held the Title VII claim was not time barred.

The court also found that Costs's state law discrimination claims were not time barred because he had three years from the date of his termination to file them. The court said Cost's state claims were also deemed filed when his pro se complaint was received by the Pro Se Office, which occurred within the three year window, and therefore those claims were also timely filed.

Claims Not Resuscitated
However, the court found that Cost's claims were precluded by the bankruptcy court's orders.

Pursuant to Section 1141 of the Bankruptcy Code, a plan confirmation discharges a debtor “of any debt that arose before the date of the confirmation.” Super Media's confirmation order provided that it would be discharged from all claims that arose prior to the Dec. 31, 2009, effective date of the plan.

The court said that in employment discrimination cases, a claim is deemed to arise “on the date the employee learns of the employer's discriminatory conduct.” The court said that in this case, Cost admitted that all his claims were based on discriminatory conduct that occurred well before the plan's effective date.

“The EEOC right-to-sue letter could not resuscitate claims that had already been discharged by the [b]ankruptcy [c]ourt,” the court said.

Predicate for Res Judicata
Furthermore, the court said, the bankruptcy court's order rejecting Cost's claims also precluded the claims from being heard.

“The [b]ankruptcy [c]ourt order sustaining the defendant's objections and expunging the plaintiff's proof of claim was a final judgment on the merits by a court of competent jurisdiction, and is a predicate for res judicata,” the court held.

Accordingly, the court dismissed the amended complaint.

By Stephanie M. Acree

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