The Colorado Court of Appeals issued its opinion in Ouray Sportswear, LLC v. Industrial Claim Appeals Office on Thursday, October 24, 2013.
Unemployment Insurance—Bankruptcy—Successor Entity.
Petitioner Ouray Sportswear, LLC (employer) sought review of a final order of the Industrial Claim Appeals Office (Panel). The order was set aside.
In April 2007, Ski Country Imports, Inc. and Ouray Sportswear Wyoming, Inc. (collectively, debtor) filed for bankruptcy. As part of the bankruptcy proceeding, employer, through a related entity called Jalex Holdings, LLC (Jalex), purchased substantially all of debtor’s assets. In May 2007, the U.S. Bankruptcy Court for the District of Colorado issued an order approving Jalex’s purchase of debtor’s assets. The order expressly provided that the purchase was free and clear of any and all liens, claims, charges, and encumbrances.
In June 2012, a deputy for the Colorado Department of Labor and Employment (Department) issued a liability determination concluding that debtor’s entire unemployment insurance account (which included the unpaid premiums) would transfer to employer because employer was a successor entity to debtor under CRS § 8-76-104(1)(a). The hearing officer affirmed the deputy’ ruling, and the Panel affirmed a hearing officer’s decision that employer is a “successor” entity for unemployment taxation purposes under § 8-76-104(1)(a), because it purchased substantially all of the assets of two businesses.
Employer contended that the Panel erred in affirming the hearing officer’s determination that it is a successor entity under § 8-76-104(1)(a). The bankruptcy court’s order effectively precluded the Department and the Panel from treating employer as a statutory successor entity. Therefore, the Panel’s order holding that employer is a successor entity to debtor under § 8-76-104(l)(a) conflicts with, and is therefore preempted by, the bankruptcy court’s prior order issued pursuant to 11 USC § 363(f). Consequently the Panel’s order was set aside.
Summary and full case available here.