Attorney General Accuses Koffee Kup’s Creditors of Attempting to “Recover” Employees’ PTO | Local News


BRATTLEBORO – Four months after its three bakeries closed by Koffee Kup, around 440 former employees are still waiting to receive their last balances of paid vacation.

In mid-July, Chittenden County Superior Court Judge Samuel Hoar authorized a payment of nearly $ 840,000 to employees, more than 90 of whom previously worked at Vermont Bread in Brattleboro, a subsidiary of Koffee Kup. .

However, the next day, when the receiver appointed to oversee Koffee Kup’s assets attempted to make the payment, a problem in the payroll software prevented him from doing so.

According to documents filed by the Vermont attorney general’s office, the receiver informed the judge that the case would be resolved by August 19.

But on August 16, attorneys for four of Koffee Kup’s creditors filed an involuntary bankruptcy petition in the U.S. District Court for the District of Vermont.

“As a result of the recent bankruptcy filing, the proceedings in state court, including the court order regarding the PTO payment, are suspended in accordance with the provisions of the bankruptcy code,” wrote Justin Heller , receiver’s lawyer, Ronald Teplitsky, in an email to the GA office. “As a result, we believe Ron is precluded from processing the PTO request unless the bankruptcy court changes the suspension to allow payment.”

On April 26, about 500 employees from Koffee Kup in Burlington, Vermont Bread in Brattleboro and Superior Baking in North Grosvenor Dale, Connecticut, arrived at work to find they no longer had jobs.

The employees received their last paychecks, but the money deposited with those checks for paid vacation balances was canceled, creating financial problems for many employees.

On June 8, the assets of Koffee Kup were purchased by Flowers Foods, which is based in Georgia and operates a distribution center in Brattleboro for Country Kitchen and other products. Although Flowers Foods has supported paying the rest of their money to former employees, she said she has no plans to restart operations at the three bakeries at this time.

Prior to authorizing payment of the PTO balances, Hoar approved a payment to KeyBank, the primary lender, of $ 7.6 million.

The purchase price has been kept confidential, but in addition to balances owed to former employees, other creditors are asking for money, including nearly $ 690,000 for Bernadino’s Bakery, $ 500,000 for Ryder Truck Rental, $ 660,000 for Lily Transportation, $ 176,000 for Hillcrest Bakery, and $ 275,000 for Eastern Packaging.

Eastern Packaging is not on the list of creditors applying for involuntary bankruptcy.

Lawyers for the four petitioners did not respond to an email request for comment.

On August 27, the attorney general’s office filed a motion to intervene or as a friend of the court, in favor of the former employees of Koffee Kup.

The petition notes that the creditors who filed the involuntary bankruptcy petition against Koffee Kup did not object to the payment of the paid vacation balances on July 14 and, in fact, “expressly agreed” to it.

Deputy Attorney General Justin Kolber, writing on behalf of Attorney General TJ Donovan, said the petition was an attempt to unfairly “recover” money belonging to former employees.

Kolber wrote that the AG’s office should be allowed to participate in bankruptcy proceedings because previous court rulings have stated that states have “an interest in ensuring that labor laws are fully respected and in protecting the “health and well-being – both physical and economic – of its residents in general.

“There is no doubt here that the claimant-creditors are attempting to affect the economic well-being of hundreds of Vermont employees, by delaying payment for the employee’s PTO, and worse, by apparently trying to recoup the PTO money pool for themselves, after agreeing to pay it, ”Kolber wrote.

And because creditors did not oppose the July 14 payment in state court, Kolber wrote, they should not now be allowed to oppose it in federal court by including it in the petition in involuntary bankruptcy.

“The PTO money left the station on July 15,” he wrote.

The Attorney General also maintains that the PTO amounts to a constructive trust in which the money already belongs to the employees and is no longer an asset of Koffee Kup.

The GA office asks the bankruptcy court to authorize the receiver to make the payment of the PTO balances because “the PTO belongs to the employees … [T]o Allowing the PTO to be placed back into a general pool of assets to be re-divided as part of the bankruptcy stay, after the PTO has already been pleaded, agreed upon and deemed necessary to pay now, could constitute a breach of the Duty loyalty of the receiver to employees.

Not only that, Kolber wrote, Vermont law requires payment for the PTO.

“The ordinary meaning of [state statutes] requires all employer’s debts to be discharged within seventy-two hours of termination, which includes accrued vacation, ”Kolber wrote, citing earlier rulings from state courts.

Koffee Kup separately requested a voluntary dissolution.

Linda Joy Sullivan, of Dorset, was appointed Dissolution Receiver following the July 14 hearing.

She wrote in an email to the Reformer that a dissolution is a liquidation and distribution of the remaining funds to unsecured creditors, which she will oversee.

“The involuntary bankruptcy as filed by the deemed creditors will be in federal court and request that the case be considered a Chapter 7, which will be a full liquidation of assets,” she wrote. “There will be hearings scheduled in the bankruptcy proceeding for the pleadings filed and we are awaiting the resolution to see how to proceed. “

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