Race Discrimination Settlement Subject to Bankruptcy Claims

There are many parts of the law that impact firefighters. A decision handed down last Friday by the US Bankruptcy Court for the Middle District of Florida shows that even bankruptcy law has a role to play. The story begins with a Jacksonville firefighter, Terrance Holmes, who filed a voluntary petition for bankruptcy in 2014.

Bankruptcy is a process by which someone who cannot pay their bills, can obtain relief from those to whom money is owed. Holmes filed for protection under Chapter 7, which requires liquidation of the debtor’s assets, and payment of the proceeds to the creditors. Thereafter, the debtor emerges from the bankruptcy debt free. Note – this explanation is an oversimplification of what actually occurs, but hopefully it is enough so those not familiar with the process understand the big picture.

Under any type of bankruptcy, particularly Chapter 7, all of the debtor’s assets on the date the bankruptcy petition is filed, are placed into what is referred to as the bankruptcy estate. The estate includes assets that the debtor like Holmes is aware of, such as real estate, bank accounts, and cars. As we will see, the estate also includes those assets the debtor is not aware of.

As explained by the court

• On April 23, 2012, the United States Department of Justice filed a complaint in the United States District Court against the City of Jacksonville alleging that the City, through the Jacksonville Fire Rescue Department, used written examinations to promote for the position of lieutenant (among other positions) that resulted in a disparate impact on African American candidates.  
• The complaint also alleged that the examinations were not job related for the positions in question and did not otherwise meet the requirements of Title VII of the Civil Rights Act of 1964.
• On February 5, 2019, the District Court entered a Consent Decree in the District Court Action. The Consent Decree explained the following process by which JFRD screened and selected candidates for promotions between 2004 and 2011.
• Broadly speaking, the Consent Decree provided for monetary relief, promotions, and pension adjustments to specified employees/former employees of JFRD. The Consent Decree defines a “Claimant” as “any African American candidate who sat for one of the following examinations [including the 2011 lieutenant examination] and who was not promoted from that examination.
• The Debtor is an African American man who has been employed by JFRD since 2003. In 2005, the Debtor took an examination to be promoted from firefighter to engineer.
• The Debtor scored above an 80% on the examination and was promoted to engineer in 2006.
• The Debtor took examinations to be promoted from engineer to lieutenant in 2011, 2014, and 2017.
• Although the Debtor earned a score of at least 70 on the 2011 and 2014 examinations, he was not promoted.
• The Debtor testified that the 2017 promotional examination qualified him, pursuant to the Consent Decree, to be promoted to the position of lieutenant.
• In September of 2019, the Debtor was promoted to lieutenant.
• As a result of the Consent Decree, the Debtor was also entitled to receive $9,630.78.
• On October 22, 2019, after the deduction of taxes, the Debtor received $6,193.86.
• When the Debtor filed his bankruptcy petition, he was not aware of the District Court Action.
• The Debtor became aware of the District Court Action in 2018 when the City notified him of it.
• The Trustee argues the Funds are property of the Debtor’s bankruptcy estate and seeks turnover of the Funds.
• The Debtor argues the Funds are not property of his bankruptcy estate because his interest in the Funds did not “manifest” until the entry of the Approval Order on June 10, 2019.
• The Debtor asserts that he had no interest in the lawsuit at the time he filed his bankruptcy petition because he was not eligible to be a member of the class, for whom the District Court Action sought relief, until he took the 2017 promotional examination and went “unselected.”
• The Court concludes that the Debtor became entitled to the Funds when he took the lieutenant promotional examination in 2011 and was not promoted based on that examination-a sequence of events that occurred prior to the filing of the Debtor’s bankruptcy petition.
• The Debtor would have received the Funds regardless of whether he took another promotional examination after 2011 or was even still employed by JFRD at the time of the Consent Decree.
• Therefore, whether the Debtor became entitled to receive a promotion to lieutenant as a result of the 2017 examination (which occurred after the filing of his bankruptcy petition) or as a result of an examination he took prior to the filing of his bankruptcy petition, is irrelevant to his entitlement to the Funds.
• The Debtor’s entitlement to the Funds is sufficiently rooted in his pre-bankruptcy past, and the Funds are property of his bankruptcy estate.

Here is a copy of the decision: