A whistleblower case that was precluded by the ruling of a bankruptcy court judge has been given new life by a New York federal court judge. In March 2012, Hawker Beechcraft filed for Chapter 11 bankruptcy protection. When Hawker Beechcraft Corp. went through the bankruptcy process, it had a 2.3 billion dollar False Claims Act case pending against it. The action was based upon allegations that the company had used defective parts in manufacturing planes that were subsequently sold to the U.S. government.
The bankruptcy judge ruled that the claims did not satisfy the stringent requirements for exemptions of some types of debts that prevented them from being written off in the reorganization plan. However, the recent federal court ruling now gives the whistleblowers the chance to argue their case in bankruptcy court, even though a bankruptcy exit plan is in place, the company emerged from bankruptcy in 2013, and Hawker Beechcraft now has been sold to Textron Inc.
Two former employees of a subcontractor to Hawker Beechcraft, TECT Aerospace Inc., are going to be able to argue that they are entitled to recover on behalf of the government for defective plane parts in planes that were purchased by the U.S. government. The False Claims Act provides private citizens with the right to bring actions based on wrongdoing done to the U.S. government. In the matter of Hawker Beechcraft, the planes with defective parts were purchased by the U.S. Navy and Air Force, thereby involving fraudulent actions impacting government entities. This case involves possible penalties up to 2.3 billion dollars. When an action like this is brought, the private citizen who initiated the case gets a portion of the damages that ultimately are awarded. This action proved to be very complicated because of the bankruptcy of Hawker Beechcraft.
After the Hawker Beechcraft bankruptcy was filed, the bankruptcy judge ruled that there was nothing about the False Claims Act action and the potential monetary award that justified it being exempt from the write off of debts in bankruptcy. There are very few exceptions to this rule, which include student loans, child-support payments, and damages awards arising out of drunk driving injuries. The bankruptcy judge determined that the claims did not fit within the narrow loophole. The two claimants asserted that the dismissal of their whistleblower lawsuit was improper based on the fact that it was grounded in allegations of government contracting fraud. A New York judge now has agreed with them and they will get a second chance at recovering for the fraudulent actions of Hawker Beechcraft.
The recent decision by Judge P. Kevin Castel grants whistleblowers the right to argue their claims in bankruptcy court. However, it by no means guarantees them a recovery, merely gets them in the door.
Whistleblower laws are intended to encourage private citizens to hold companies accountable for wrongdoing while offering protection from retaliation. However, there are times when the companies do retaliate against the employees for stepping up and doing the right thing. If you have been terminated or demoted because you reported a problem, the experienced and hardworking attorneys at Barrett Law PLLC will develop a legal strategy based on the unique needs of your case. To schedule a free initial consultation, call us at (800) 707-9577. Our commitment to our clients means that we only get paid if we recover the compensation that you deserve.