Hunt & Associates P.C.

Successor Liability of Businesses for Unpaid Wages in Oregon – The Court Sees What it Wants to See

It’s often entertaining to watch kids rationalize their way to preordained conclusions.  When a court tries to reason its way to the outcome it wants, the sight is at best merely painful and more often embarrassing.  The Oregon Supreme Court’s opinion in Blachana, LLC v. Bureau of Labor and Industries, 354 Or 676 (2014) is an illustration of such result driven reasoning that’s not only painful and embarrassing but, unfortunately, wrong and unfair as well.

In Blachana the court interpreted a state statute to impose liability on a company for the unpaid wages a wholly different company owed to its employees.  The Oregon Bureau of Labor and Industries (“BOLI”) had paid those wages from Oregon’s Wage Security Fund maintained for that purpose pursuant to ORS 652.414(1).  In the case BOLI was seeking reimbursement for the wages it had paid and statutory penalties against Blachana LLC as a successor to the original employer.

The court’s opinion in the case begins with the factual misstatement that:  “The employees had worked for NW Sportsbar Inc. (NW Sportsbar) before that corporation went out of business and surrendered its property and the business to Blachana.”  Id. at 678.  In fact, another company, “CPU”, had taken back the business assets it had sold to NW Sportsbar just 16 months after its sale.  After CPU’s repossession of the business assets it sold, one of CPU’s principals formed Blachana, LLC as a limited liability company to conduct the same business operations on the premises that NW Sportsbar, CPU, and several antecedent entities had run on those premises over the past 50 years.

The court relied on two Oregon statutes, ORS 652.310(1) and 652.414(3) to impose liability for NW Sportsbar’s unpaid wages and statutory penalties on Blachana as a “successor” because BOLI had determined that it was “essentially the same business” regardless of the fact that there was no identity of ownership and the business assets had only been acquired by repossession due to NW Sportsbar’s default on its contractual obligations to CPU and its principals.  In this particular case the court’s conclusion essentially makes the seller of a business who takes back the sold assets on their buyer’s default the successor of that defaulting buyer responsible for the debts of the same debtor that stiffed them.   In short, the court now adds insult to injury.

The court’s opinion is riddled with supposition, projection and fantasy with statements justifying its strained statutory interpretation such as “The legislature may have intended to include. . . “; “. . . such an entity might . . . obtain the business property of the predecessor by repossession, or it might obtain the predecessor’s stock or legal interest in the business . . .”; the legislature could have considered it appropriate . . .”; “[t]he legislature could have reasoned . . . “; “it may have intended to ensure that. . .  ,” which all appear in a single paragraph.  Id. at 693.  After saying that it doesn’t even need such speculations to reach its conclusion, the court then says that it reaches just the conclusion that it used such fantasies to justify.  Ibid. 

The court’s opinion ultimately makes no sense.  Its logic takes value from an established business name used in a particular location and increases the potential costs to a creditor trying to mitigate their damages from a buyer’s default in ways that are neither statutorily justified nor fair.

© 2/12/2014 Lawrence B. Hunt of Hunt & Associates, P.C.  All rights reserved.

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