Leonard v. McMorris

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
FEB 26 2003
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT

RALPH T. LEONARD; RUSSELL K.
MYERS; PAUL E. ENZMAN; JOHN R.
KLAAS; MICHAEL E. HOGAN; IVAN
ROTH; JOHN R. TOWNER; RONALD
COFFIN; ALVIN G. LARCH; PAUL R.
BISHOP; ERVIN RHOADES; HENRY
ALLEN PRICHARD; RALPH NELSON;
DARRELL O. PORTER; LARRY
JACKS; LEANN SANDOVAL;
JENNIFER CLAIR; MERLE W.
KIESEL; RYAN TARONE; CYNTHIA
GARCIA; YVONNE CARSTEN; RENE
EASTER; DARLENE NICHOLAS;
LARRY L. WEICKUM; ANTHONY A.
SANCHEZ; TODD STROH; WILLIAM
J. CRACKEL; GENE DUTTON; GUY No. 00-1324
COOK; RICK LONG; TOM GARDNER;
DENNIS CRAIG; CLIFFORD ELROD;
VIRGIL EGGLESTON; JAMES
GOERIG; DOUG HANEVIK; DONALD
KNEEBONE; GREG COLE; TONY
KMOCH; FRANK HILL; MICHAEL
LUXNER; CREED HUFF; TERRY
HARVEY; ROBERT WAGENKNECHT;
STEVEN G. LARGHE; RICHARD
ECHTENKAMP; MELVIN G. TETER;
TYLER U. IUNGERICH; RONALD F.
COOLEY; DAVID CAPSHAW;
CHARLES BLEAKLEY; LARRY
JONES; TED SCHWARTZ; and EVAN
HOWARD,

Plaintiffs - Appellees,
 v.

JERRY D. McMORRIS; HAROLD R.
ROTH; GEORGE R. ROBERGE; JAMES
R. FEEHAN; MIKE HAMPTON;
LESTER SMITH; NEAL BARKLEY;
ROBERT CLINE; CAL WOLFE, and
TERRY JENSEN,

Defendants - Appellants,

COLORADO ASSOCIATION OF
COMMERCE AND INDUSTRY;
INTERNATIONAL BROTHERHOOD
OF TEAMSTERS,

Amici Curiae.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 99-N-1306)

James E. Scarboro (Timothy R. Macdonald with him on the briefs), Arnold & Porter,
Denver, Colorado, for the Defendants-Appellants.

Evan S. Lipstein, Law Offices of Evan S. Lipstein PC, Lakewood, Colorado (Michael B.
Levy, Law Offices of Evan S. Lipstein PC, Lakewood, Colorado; Kip B. Shuman and
Jeffrey A. Berens, Dyer & Shuman, LLP, Denver, Colorado, with him on the brief), for
the Plaintiffs-Appellees.

John R. Webb, Holme Roberts & Owen LLP, Denver, Colorado, for the Colorado
Association of Commerce and Industry, Amicus Curiae; Frederick Perillo and Jill M.
Hartley, Previant, Goldberg, Uelmen, Gratz, Miller & Brueggeman S.C., Milwaukee,
Wisconsin, for the International Brotherhood of Teamsters, Amicus Curiae.

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Before TACHA, Chief Judge, GARTH* and BRISCOE, Circuit Judges.

BRISCOE, Circuit Judge.

Plaintiffs, former employees of a now bankrupt corporation, brought this action

against the officers of the corporation to recover wages and benefits not received as a

result of the Chapter 11 filing. Plaintiffs assert their claims under the Colorado Wage

Claim Act, Colo. Rev. Stat. § 8-4-101 et seq. (1999). Defendants filed this interlocutory

appeal from the district court’s grant of plaintiffs’ motion for summary judgment on the

issue of liability.

The facts of this case are not in dispute and are set out in Leonard v. McMorris,

106 F. Supp. 2d 1098, 1104-05 (D. Colo. 2000):

Defendants Jerry D. McMorris, Harold R. Roth, George R. Roberge,
James R. Feehan, Neal Barkley, Robert Cline, Cal Wolfe, and Terry Jensen
are corporate officers of NationsWay Transport Service, Inc.
(“NationsWay”). NationsWay was one of the largest privately held trucking
companies in the United States.
As of May 1999, NationsWay had more than 3200 employees in
forty-three different States. Of these employees, more than 2000 were
members of eighty-nine different local unions that have 144 different
collective bargaining agreements (hereinafter, “CBA” or “CBAs”) with
NationsWay. The eighty-nine local unions are affiliated with the
International Brotherhood of Teamsters, Chauffeurs, Warehousemen and
Helpers of America (“Teamsters”), which has its own nationwide CBA with
NationsWay entitled the National Master Freight Agreement (“National

*
Honorable Leonard I. Garth, United States Circuit Judge, United States Court of
Appeals for the Third Circuit, sitting by designation.

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 Master CBA”). In addition, each of the eighty-nine local unions has entered
one or more supplemental agreements with NationsWay modifying the
National Master CBA. . . .
On February 11, 1999, the NationsWay board of directors executed a
resolution authorizing Roth and William Ward, a NationsWay senior vice
president, to execute a petition under Chapter 11 of the United States
Bankruptcy Code. On May 20, 1999, NationsWay filed a petition for
bankruptcy protection pursuant to Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the District of Arizona. Later that day,
NationsWay terminated the employment of most of its employees, including
the plaintiffs herein.
On June 7, 1999, plaintiffs filed their complaint in Denver County
District Court. On July 9, 1999, defendants removed the action to this
court. On August 11, 1999, plaintiffs filed an amended complaint. In the
amended complaint, plaintiffs allege that defendants were liable for those
wages which plaintiffs had earned at the time that their employment
terminated but were unpaid, pursuant to the Wage Act. On October 12,
1999, defendants filed their motion for summary judgment. Defendants
claim that they are entitled to summary judgment because the Wage Act
does not impose personal liability on individual corporate officers and, even
if it does, there can be no personal liability if the corporation is not subject
to liability by operation of the Bankruptcy Code. Defendants further argue
that, even if the Wage Act imposes liability upon them individually, the
Wage Act is preempted (1) by the Bankruptcy Code, and (2) by the Labor
Management Relations Act, 29 U.S.C. § 185(a) [hereinafter “LMRA”], for
those of the plaintiffs who are subject to NationsWay’s collective
bargaining agreements with the Teamsters. On January 13, 2000, plaintiffs
filed a cross-motion for partial summary judgment as to defendants’ liability
only. Plaintiffs contend that they are entitled to summary judgment as to
defendants’ liability under the Wage Act because: (1) the Wage Act
imposes personal liability for earned but unpaid wages upon corporate
officers; (2) plaintiffs’ claims are not preempted by the Bankruptcy Code;
(3) the LMRA does not preempt the Wage Act claims of those plaintiffs
who are subject to a collective bargaining agreement; and (4) none of the
other miscellaneous affirmative defenses which defendants assert bar
plaintiffs’ first claim.

(Internal record citations and footnotes omitted.) The district court granted plaintiffs’

motion for partial judgment with respect to defendants McMorris, Roth, Roberge, Feehan,

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Barkley, Cline, Wolfe, and Jensen as to liability under the Colorado Wage Act. The court

certified its order for interlocutory appeal, finding there was “substantial ground” for

difference of opinion on each of the controlling legal issues involved. App. II at 846.

While this appeal was pending, the NationsWay bankruptcy proceeded as a

Chapter 11 liquidation. On October 13, 2000, the bankruptcy court confirmed the

company’s Chapter 11 plan. Pursuant to the plan, the former employees are to receive

approximately $3.0 million in unpaid wages. However, plaintiffs seek additional amounts

covering accrued vacation pay, sick leave pay, holiday pay, and other non-wage

compensation, as well as a 50 percent penalty and attorney fees.

After finding a lack of precedent from the Colorado Supreme Court construing

individual officer liability under the Wage Claim Act, we certified the following

determinative questions under 10th Cir. R. 27.1:

1. Are officers of a now-bankrupt corporation individually liable for the
wages of the corporation’s former employees under the Colorado Wage
Claim Act, Colo. Rev. Stat. § 8-4-101 et seq. (1999)?

2. If so, are all officers individually liable due to mere status as officers or
must the officers have been high ranking or active decision-makers?

See Leonard v. McMorris, 272 F.3d 1295, 1295-96 (10th Cir. 2001). Upon acceptance of

the certified questions, the Colorado Supreme Court reframed the questions as follows:

1. Whether officers of a corporation are individually liable for the wages of
the corporation’s former employees under the Colorado Wage Claim Act,
Colo. Rev. Stat. § 8-4-101 et seq. (2001);

2. If so, whether all of the corporation’s officers are individually liable or

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 only the officers who have been high ranking or active decision-makers;

3. If so, whether the Colorado Wage Claim Act imposes personal liability
on officers when the corporation declares bankruptcy; and,

4. If so, whether the Colorado Wage Claim Act’s “good faith legal
justification” clause is a defense to the officer’s personal liability to former
employees under the Act when the corporation files for bankruptcy.

See Leonard v. McMorris, 2003 WL 231233 *1 (Colo. 2003) (en banc). The Colorado

Supreme Court then answered the first reframed question, holding “under Colorado’s

Wage Claim Act, the officers and agents of a corporation are not jointly and severally

liable for payment of employee wages and other compensation the corporation owes to its

employees under the employment contract and the Colorado Wage Claim Act.” Id.

(emphasis added). This response clearly answers the first question certified by this court

and moots our second question.

We REVERSE the district court’s summary judgment order and REMAND for

further proceedings consistent with the opinion of the Colorado Supreme Court.

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