Can employees sue a CEO and board members of an organization for punitive damages after a Chapter 11 has been filed?

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Can employees sue a CEO and board members of an organization for punitive damages after a Chapter 11 has been filed?

The CEO and boards member were negligence in their finical practice. The state has a contract with the organization for the organization to deliver mental health services. We rendered the services and the state paid the organization money to pay its employees but the organization did not pay its staff. The agency had a contractual obligation to use the money the state paid them to pay the staff. All of us suffered emotional distress – some lost our homes, some were evicted, some of us had to discontinue our education. What can we do? Is the CEO exempt from losing wages because he works under a contract.

Asked on August 12, 2013 under Bankruptcy Law, Illinois

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

1) If the business was a corporation or LLC, you may not sue the CEO, board members or other officers/managers; you may only sue the business itself.

2) The employees may not sue for breach of contract if they were not themselves signatories or parties to the contract.

3) Employees may sue for unpaid wages if they did work for which they were not paid.

4) For either a breach of contract or unpaid wages claim, you may not recover emotional distress, punitive damages, or for things like eviction, foreclosure, etc. You can only sue for direct economic losses--i.e the unpaid wages, or any amounts owed under a contract.

5) If the claim or debt you are suing over arose before the Ch. 11 was filed, you most likely cannot bring it--though since bankruptcy is a complex subject, you are advised to consult with bankruptcy counsel in regards to this.


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