Former King Mill employees and their attorney won the second round of their battle to continue the employees' canceled health benefits Thursday when U.S. District Bankruptcy Judge John S. Dalis ordered the appointment of an interim trustee to hear their case.
The third round will begin at 9 a.m. Saturday in U.S. District Court in Augusta when the issue of whether the employee benefits should come before the claims of General Electric Capital Corp., creditor to J.P. King Manufacturing's parent company, Spartan International.
Judge Dalis did not limit the question to whether money from Spartan's assets should be used to extend the employees' health insurance coverage for 60 days, as required by federal labor law when no notice of termination is given. The debate will encompass whether the employees should also be paid for the days no notice was given.
The judge said he expects the interim trustee to tell him Saturday whose interests should come first.
Judge Dalis said the appointment of an interim trustee is necessary to protect Spartan's assets.
"The evidence before me indicates there may be substantial accounts receivable," he said. "The location of these accounts receivable is unclear."
Testimony in Wednesday's hearing indicated Spartan has $25 million in accounts receivable.
The judge ruled that the bankruptcy would take priority over a receivership.
Judge Dalis noted that Peter Tourtellot, the receiver appointed to oversee the sale of Spartan's assets, had sold King Mill, valued for taxes at $23 million, for $4.1 million without benefit of an independent appraisal or public notice.
The judge said that while Mr. Tourtellot was doing what he thought was best in liquidating Spartan assets, bankruptcy trustees "don't act like that." Before liquidation in bankruptcy cases, parties are given notice and there are opportunities to bid on assets, he said.
King Mill was sold to its largest customer, Standard Textile, on May 31 for $4.1 million. The Augusta Canal Authority bought the land and the building for $200,000.
Since he was appointed receiver May 22, Mr. Tourtellot and his two associates have been paid $41,000, he testified Wednesday.
Last-minute efforts to torpedo the bankruptcy court's jurisdiction failed. During Thursday's hearing, Mr. Tourtellot's lawyer, Michael M. Beal, presented Judge Dalis with a temporary restraining order signed by U.S. District Judge Margaret B. Seymour of the Spartanburg Division. The order directed the employees to take no further action in the case until 5 p.m. Monday.
Judge Dalis recessed the court to research whether he was bound by the order and decided he was not.
As Spartan's major creditor, GE has been collecting proceeds from assets through a receiver for Spartan. Spartan never filed for bankruptcy protection but shut down all six of its mills May 4, leaving 1,200 people out of work and without health insurance.
Many employees say they are in dire straits with no jobs and huge medical bills.
Betty Cushman, 59, who worked at King Mill for 29 years, attended the hearing with copies of bills from her husband's March operation and treatment. The bill from University Hospital is $33,608, and one from Walton Rehab is $11,687. Another visit to the emergency room in April left them with a $11,484 bill.
Mrs. Cushman, like other former King Mill employees, said she cannot get help from the Department of Family and Children's Services. She said she had no hope of ever paying the bills.
"I'll have to file bankruptcy because they ain't taking my house," she said.
Mrs. Cushman said she had applied for her old job with Standard Textile but has not been called back.
John B. Long, of the law firm of Tucker, Everitt, Long, Brewton & Lanier, is arguing the complaint on behalf of Mrs. Cushman and 50 other former employees.
Reach Sylvia Cooper at (706) 823-3228 or firstname.lastname@example.org.