Disability Discrimination Claim Dischargeable in Bankruptcy

December 18, 2009 (PLANSPONSOR.com) - The 1st U.S. Circuit Court of Appeals has ruled that an Americans with Disabilities Act (ADA) discrimination claim against a company in bankruptcy should be treated like a dischargeable bankruptcy claim.

The National Law Journal reports that in the December 14 panel decision in Rederford v. U.S. Airways, Inc., Chief Judge Sandra Lynch affirmed the District of Rhode Island’s dismissal of Janelle Rederfor’s claims. Lynch wrote that the claim is within the bankruptcy court’s jurisdiction because both money damages and job reinstatement are remedies for wrongful termination.

Lynch noted, however, that allowing Rederford to limit her remedy to job reinstatement would have given her a preference over other creditors that had monetary damages claims or that agreed to accept money in lieu of equitable claims. “It would also thwart the finality of that [bankruptcy] proceeding and US Airways’ reorganization plan,” Lynch wrote, according to the National Law Journal.

Rederford had failed to respond to U.S. Airways’ objection to certain bankruptcy claims because she believed a notice sent to her meant that the company’s insurance would cover her claim. The bankruptcy court sustained U.S. Airway’s objections and confirmed the company’s reorganization plan in March 2003, and the Rhode Island Commission later dismissed Rederford’s charges.

Rederford filed the Rhode Island federal court case in May 2008, and the court granted U.S. Airway’s dismissal motion that November.

Rederford claimed she suffered from lupus, an inflammatory connective tissue disease, during most of her 24 years as a U.S. Airways employee. She filed an employment discrimination claim with the Rhode Island Human Rights Commission and the Equal Employment Opportunity Commission in April 2002, saying she was fired in January 2002 following a four-day absence for illness because she didn’t obtain a doctor’s certification requested by a supervisor.

After U.S. Airways filed for Chapter 11 bankruptcy protection in August 2002, Rederford’s case became part of the company’s bankruptcy case.

The 1st Circuit opinion is here.