A U.S. District Court judge in South Carolina has issued an order that the person she put in charge of the remaining assets of King Mill's parent company is the best and legally entitled person to oversee what happens.

Meanwhile, a U.S. Bankruptcy Court judge in Georgia has ordered a trustee to take control of the financial situation involving Spartan International, King Mill's parent company, and all of its creditors, including 48 former King Mill employees seeking two months of wages and medical insurance benefits.

The former Augusta mill's ex-employees, however, now face possible jail time and fines unless they dismiss their petition for Spartan's involuntary bankruptcy. They will comply with the South Carolina's judge demand to drop that petition, a demand backed Monday with the promise of contempt-of-court sanctions, a source close to the case said Tuesday.

The conflict began when Spartan closed King Mill and five other mills May 4 - leaving 1,200 employees without jobs and, employees said, without the federally required 60-day notice. According to legal experts, the convoluted legal storythat spans two states might not end with compliance with the South Carolina judge's Monday demand.

Even if the former King Mill employees ask Judge John S. Dalis to dismiss their bankruptcy petition, the judge wouldn't just close the case, Augusta bankruptcy attorney Scott Klosinski explained.

Before the judge could close the case, the U.S. bankruptcy law requires, the court would have to notify all Spartan creditors, who have a right to object and to ask that the bankruptcy process continue, Mr. Klosinski said.

''They can't just dismiss this case,'' he said about the judges.

That's what U.S. District Judge Margaret Seymour, who is presiding over a civil lawsuit involving one Spartan creditor, has directed King Mill employees to do or face contempt-of-court sanctions.

''It's a fascinating case,'' said Mr. Klosinski, who has practiced bankruptcy law for 14 years and has experience in involuntary-bankruptcy petitions and has served as a trustee in such cases.

The tale of King Mill's legal travails began when General Electric Capital Corp. filed a breach-of-contract suit against Spartan on May 17 in U.S. District Court in Spartanburg, S.C. GE contends Spartan owes it $65 million, and GE's attorneys persuaded Judge Seymour to appoint a receiver to oversee Spartan's assets.

Augusta attorney John ''Jack'' Long filed an involuntary bankruptcy petition May 31, saying it was the only chance that former employees had to get wages medical insurance benefits for a two-month period.

On Friday, Judge Dalis ruled in Augusta's U.S. Bankruptcy Court that the former employees had shown an ''exceptionally high need'' for the appointment of a trustee to preserve Spartan's assets. He noted in his order that the bankruptcy trustee is not prohibited from working because of Judge Seymour's case.

In her order Monday, Judge Seymour wrote the receiver she appointed to oversee Spartan was uniquely qualified and experienced in the liquidation of textile mills and in the industry, attributes the bankruptcy trustee lacks.

A civil court receiver and a U.S. bankruptcy trustee have similar duties and obligations, Mr. Klosinski said, but a bankruptcy trustee has much more power and authority.

In bankruptcy court, all creditors have the right to comment or object to such issues as the sale of assets, including the sale of King Mill by the South Carolina receiver, Mr. Klosinski said. The trustee also has the right to go back in time to review and possibly nullify financial dealings, he said.

There's another matter to consider, Mr. Klosinski said: Filing for bankruptcy is a constitutional right that a court cannot take away. The former King Mill employees could appeal Judge Seymour's order, he said.

The former King Mill workers also could file a federal lawsuit under the Federal Worker Adjustment and Retraining Notification Act, which requires any company with 100 or more full-time workers to give employees at least 60 days' notice of closing.

''The WARN Act is not so much about the closing of a plant ... as adequate notice,'' said Mark Fancher, the senior staff attorney with National Lawyers Guild/Maurice and Jane Sugar Law Center for Economic and Social Justice, the nonprofit organization that the Georgia Department of Labor advises former employees to contact.

The law was enacted in 1989, but Congress didn't give any state or federal agency enforcement power, Mr. Fancher said. The law enables only former employees to file suit in federal court.

If successful in convincing a judge that no legal exception existed for a company's failure to give 60 days' notice to employees before closing, a company can be forced to pay the employees 60 days' worth of salary and benefits, Mr. Fancher said.

When a company closes in a financially distressed situation, there might not be money for former employees to recover and a lawsuit would be pointless, Mr. Fancher said. But a corporate bankruptcy doesn't automatically mean the former employees don't stand a chance to recover pay and benefits, he said.

Reach Sandy Hodson at (706) 823-3226 or shodson@augustachronicle.com.