Cordero v. State Auto Sales, Inc.
In 1981, the Sixth Circuit Court of Appeals issued its decision in In Re: Mansfield Tire and Rubber Company, which continues to be good law and stands for the principle that the administration of workers' compensation claims by a state agency are a valid exercise of the government's police or regulatory powers and, therefore, were exempt from the automatic stay provisions of the bankruptcy code, 11 U.S.C. §362. The trial commissioner found the following facts. Rafael Cordero suffered a compensable thumb injury and lost wages. He had a 15 percent permanent partial disability rating and unpaid medical bills. The respondent-employer, State Auto Sales, Inc., was uninsured for workers' compensation. The commissioner took administrative notice of the employer's petition under chapter 7 and a Bankruptcy Court order lifting the automatic stay in favor of Cordero noting it was modifying the stay to permit recovery from the Second Injury Fund. The trial commissioner levied an award directly against the fund. The fund appealed arguing that it was strictly limited in its statutory authority and absent an award against the employer it could not take further action. The Compensation Review Board found error and remanded the matter to the commissioner to assess initial liability for the award to the respondent with the Fund responsible pursuant to statute for any benefits due the claimant that the respondent is unable to pay. Reading the Bankruptcy Court's order in the context of the Mansfield Tire decision, it was clear that while the commission may not be able to enforce an order against the assets of the bankrupt employer, it was not barred from issuing an order. The plain language of the Bankruptcy Court's order permits the trial commissioner to take actions "to the extent necessary" to pursue recovery against the fund. Presumably, by citing C.G.S. §31-355 in its order, the Bankruptcy Court was aware that this statute requires an award to be levied and unpaid for the fund to administer the claim. An appropriate reading of relevant precedent and plain meaning of the Bankruptcy Court order would enable an order to issue against the employer with enforcement stayed barring further order.