A petition by former King Mill employees seeking the continuation of health benefits cleared its first hurdle in federal court when U.S. District Bankruptcy Judge S. John Dalis ruled against a motion to dismiss the complaint Wednesday.
Attorneys for General Electric Capital Corp., the creditor of King Mill's parent company, Spartan International, requested the dismissal. Attorney Brian C. Walsh, of the King & Spalding law firm, argued that most of the Spartanburg, S.C.-based company's assets are in South Carolina - not Georgia - making Augusta an inappropriate venue.
As Spartan's major creditor, GE has been collecting proceeds from assets through a receiver for the financially devastated Spartan. Spartan never filed for bankruptcy protection but shut down all six of its mills May 4, throwing 1,200 people out of work and leaving them with no health insurance.
The original debt on Spartan's revolving line of credit was $65 million. That debt has been reduced to $35 million, according to court testimony.
Judge Dalis ruled to keep Augusta as the venue to hear the employees' complaint.
Jack Long, of Tucker, Everitt, Long, Brewton & Lanier, is arguing the complaint on behalf of about 50 former employees seeking to have their benefits extended for 60 days. Mr. Long said the employees should have had the option to extend their health coverage for two months after the mill's shutdown.
King Mill was sold to its largest customer, Standard Textile, on May 31 for $4.1 million. The Augusta Canal Authority bought the real estate for $200,000.
Standard Textile did not buy the property because of environmental concerns, said Peter Tourtellot, the receiver appointed to oversee the sale of Spartan's assets.
Mr. Tourtellot said he understood there was a landfill on the property.
As of Jan. 1, 2000, the mill's machines, equipment and land were valued for tax purposes at $20 million, according to Richmond County Chief Tax Appraiser Sonny Reece.
Mr. Long asked Mr. Tourtellot whether any appraisals were done on the property other than GE's before it was sold. Mr. Tourtellot said no.
Although GE lawyers argued that most of Spartan's assets were in South Carolina, they could not give the court evidence as to specific values on specific properties.
Judge Dalis said the only evidence he had as to the company's assets was testimony concerning the total - $60 million - from Mr. Tourtellot.
Mr. Tourtellot testified he got his information from the company's balance sheets but did not know whether it had been audited.
Mr. Tourtellot said the textile industry is ailing and growing worse every day and that he had no doubt selling King Mill was the best thing to do.
Mr. Long contended that King Mill in Augusta and King Finishing Co. in Screven County were worth more than Spartan properties in South Carolina, making Augusta the proper venue for the hearing.
King Finishing Co.'s real estate was valued for taxes at $10 million and the equipment at $16 million, according to Screven County tax records.
Former plant Manager Franklin Rachels testified that King Mill was "the most modern plant in the world" and was running full speed when he retired for medical reasons in September.
"None of the plants in Spartanburg can compare with it," he said. "King Mill had the highest efficiency - 95 percent - and the lowest absenteeism. It was the cleanest plant. Our people knew times were tough. Our people really buckled down and went to work.
"I was surprised when it closed. Wham! And I don't understand how GE pushed our people out."
King Mill produced 60 to 70 percent of the hospital blankets made in the United States, he said.
King Mill's problems were brought about by poor management, not the employees, Mr. Rachels said.
Former employees testified about hardships they have encountered since losing their health insurance.
Peggy Lynn Collett, the wife of former King Mill employee Virgil Collett, testified that their 11-year-old daughter, Brittany, was diagnosed with cancer three years ago and was scheduled for follow-up studies May 26.
Mr. Collett had to have gallbladder surgery recently and owes $21,000 in medical bills for that, she said.
Willie Spivey, a 40-year employee at the mill who lost a hand there in 1964, testified that a prescription for high-blood pressure medicine that cost him $40 for a three-month supply when he had insurance now costs $92 for a one-month supply. He takes three kinds of blood-pressure medicine in addition to insulin, he said.
Judge Dalis has not ruled whether an interim trustee will be appointed to begin administering the health benefits again. He might do so in today's continuation of the hearing, which will begin at 5 p.m.
The interim trustee would decide whether GE holds enough assets to warrant paying the benefits.
Staff Writer Eric Williamson contributed to this article.
Reach Sylvia Cooper at (706) 823-3228 or email@example.com.