New Wins Suit for Labor Department
The state’s court-appointed trustee for the Wins of California case filed a complaint on April 2 against the U.S. Department of Labor (DOL) and is seeking full control over monies collected as accounts receivable by the department. A hearing date has been set for June 20 in San Francisco.
Lynn Schoenmann said she is seeking control over a “lock box” of money that was set up by the DOL to reimburse 240 Wins employees who went unpaid for three months before the state shut down the San Francisco-based manufacturer’s operations last August. The DOL established the lock box last October in an attempt to set aside money that would be used solely to reimburse workers for lost wages, according to Tino Serrano, a DOL spokesman.
Schoenmann said that the DOL was supposed to turn that money over to the bankruptcy court earlier this year, when Wins owners Jimmy Quan, Anna Wong and Suzy Wong filed for bankruptcy protection under Chapter 7.
“After consulting with my counsel we determined that the money in the lock box should be property of the state’s bankruptcy court because it comes from the company’s accounts receivable and should be turned over to the bankruptcy court in order to pay off the company’s debt,” Schoenmann said.
If Schoenmann is granted control over the monies collected by the DOL, Wins employees will be placed on a list that includes the Internal Revenue Service (which joins the DOL in its motion to file a public lien against the company in order to prevent the sale of property and other assets) and G.E. Capital Corp., among other creditors who are trying to stake their claim in the bankruptcy estate.
Schoenmann maintains that the workers involved in the Wins case will take priority over the other creditors, although they are not likely to be the first paid under the U.S. Bankruptcy Code. At press time, Schoenmann had declined to name which creditor would be the first creditor paid.
“The Wins case is complicated because of the relationship between the overlapping complicated claims that are all going to have to be sorted out,” said an attorney for the U.S. Trustees Office in San Francisco who wished to remain anonymous. “But [Schoenmann] is very skillful and will try to maximize the company’s assets in order to get the creditors paid and do that as quickly as possible.”
Wins employees’ problems are far from being resolved, according to apparel industry consultant Paul Gill (who previously served as executive director for the now-defunct compliance-monitoring organization Made By The Bay), who added that Schoenmann’s effort to consolidate Wins’ assets will only push a resolution date back even further.
The DOL tried to negotiate with the IRS to help the workers get paid in a reasonable time period, Gill said, but their efforts were halted by other creditors’ demands for payoff.
The issue is particularly complicated because Wins owners operated several apparel companies, but only Wins of California and Wins Fashions are included in the bankruptcy.
“[The Wins case] highlights the severe problems inherent in bankruptcies that involve workers who are employed by subcontractors,” Gill said. “There ought to be a presumption that an unpaid worker should be compensated from the proceeds of the products made by his or her labor.”
Schoenmann said she is currently investigating whether or not Wins and its other apparel holdings operated as separate corporate entities. She said she is trying to draw an estimate on all of Wins’ assets.
“I don’t know if my decision to seek control over all of Wins’ assets is going to create a delay in payment to the workers,” Schoenmann explained. “But I do think this decision will maximize the amount of recovery for the workers since [the bankruptcy court] is in a position to be more efficient in the collection of all the company’s receivables.”
