Labor chief Chao claims e-mail harassment

BANGOR – Although she believes she was harassed via e-mail, U.S. Secretary of Labor Elaine Chao on Monday halted her efforts to get a protection order against a Portland law firm that sent the letters.

Instead, Chao and the law firm, Marcus, Clegg and Mistretta, have decided to be nice to each other.

The e-mails were part of a legal feud over what should be paid first – the health care claims of workers at a bankrupt company or the law firm that is representing the broke manufacturer?

The Labor Department is siding with the workers.

In November 2000, Crowe Rope Industries LLC filed for Chapter 11 bankruptcy protection and hired Marcus, Clegg and Mistretta, a respected bankruptcy law firm, as its estate manager. By December 2001, the law firm had been paid $350,000 or 75 percent of its legal bill, according to documents filed in U.S. Bankruptcy Court.

But beginning in April 2001, Crowe Rope was having difficulty paying its health care claims even though it was deducting employee contributions from workers’ paychecks, according to Labor Department statements in court documents. The workers’ health care claims totaled $335,000.

In April 2002, Crowe Rope was converted to Chapter 7, or liquidation.

The Labor Department has been investigating Crowe Rope for possible violations of the Employee Retirement Income Security Act because of the way it was managing its health care plan.

On Aug. 31, the Labor Department asked a federal bankruptcy judge to order that Marcus, Clegg and Mistretta return its legal fees so that the money can be used to pay the employees’ health care claims.

The Labor Department cited numerous legal decisions that workers’ health care claims be given a higher priority than professional and legal fees, especially when there isn’t much money in the bankrupt estate to pay all of the bills.

“As seasoned bankruptcy attorneys, at least MC&M [Marcus, Clegg and Mistretta] understood that they were ‘gamblers’ and might not be paid,” wrote Kelly M. Lawson, a Labor Department attorney. “The same cannot be said of the rank and file employees of Crowe Rope, who believed in good faith that their health claims would in fact be covered.”

Marcus, Clegg and Mistretta disagreed with the Labor Department’s attempts to disgorge or be ordered to return its fees. It stated in court documents that the Labor Department did not prove that the health care claims totaled $335,000 and that the federal agency listed Central Maine Power Co. as one of Crowe Rope’s employees with a $34,000 outstanding health care claim.

The law firm wanted proof in the form of “tangible or intangible” documents as to the actual claims. The documents were to include books, letters, reports, handwritten notes, drawings, sketches, tapes, diaries, magazines, telegrams and circulars.

What ensued over the last two months was a heated exchange between Lawson and Michael Gartland, one of the attorneys representing Crowe Rope, that resulted in a Nov. 4 e-mail exchange that Chao and Lawson said they viewed as harassing. The Labor Department filed the e-mails in court.

“It appears clear to me that you are set on your path and have no desire to talk about any consensual resolution of disgorgement issues,” wrote Lawson on Nov. 4, adding that the bankruptcy court should decide the legal issues regarding the return of legal fees.

Gartland responded, “I think that you have finally got it in that MCM will never agree to pay even 1 penny to settle the DOL’s very infirm disgorgement motion. On second thought, we will agree to pay one penny (I have an extra one in my pocket and I hate pennies).”

Gartland then wrote that the law firm would not halt its pursuit of documents while awaiting a judge’s ruling on legal issues.

“I am going to work you to the bone between now and the trial in 4-6 weeks,” Gartland continued in the e-mail. “You might even be working on Thanksgiving Day just to respond to MCM’s discovery. I hope that you can run on less than 3 hours sleep per night like me because you are not going to get much of it between now and trial. Simply put, you have a loser of a case and MCM is going to kill it once and for all! (36 exclamation points). Now prepare for the battle of a lifetime (17 exclamation points).”

On Nov. 8, Chao and the Labor Department filed for a protection order from harassment via e-mail.

In a bankruptcy court hearing Monday, Lawson said the Labor Department and the law firm had settled its disputes and that some of the fees would be returned. Attorneys George Marcus and Sam Anderson represented the law firm during the hearing.

The agreement included an end to Chao’s request for a protection order. Lawson said the detailed agreement probably would be filed in bankruptcy court by the end of the day on Monday.

It had not been received by 5:30 p.m.