In re Napa Valley Physicians Plan

Memorandum on Objection to Claim

In this case, claimant Brigid Mulligan seeks allowance of an administrative claim in the amount of $74,632.00. She is the former CEO of a wholly-owned subsidiary of the debtor. The claim is for six months’ severance pay, based on a contract between Mulligan and the subsidiary entered into before the debtor filed its bankruptcy petition. The Chapter 7 trustee objects.

The court sees no basis in law or in equity for Mulligan’s claim. She only worked for a total of ten months, for which she was paid a handsome salary of over $11,000.00 per month. She now wants an additional six months’ pay for doing no work at all, based on a prepetition contract which was never assumed by the debtor. The debtor was not even a party to the contract.

The slim legal basis for the claim is Mulligan’s assertion that the debtor is liable for the salary of employees of its wholly-owned subsidiary. In support of this position, she cites a footnote in a Pennsylvania bankruptcy court case and a provision of the California Labor Code, neither of which remotely supports the assertion. In essence, Mulligan is seeking to pierce the corporate veil without any factual…