La Mode files for bankruptcy

Defunct garment firm La Mode Inc. has filed a bankruptcy petition before a California court.

La Mode is seeking a bankruptcy declaration under Chapter 7 of the Bankruptcy Code, which involves the liquidation of assets to pay off creditors to the extent possible and to free itself as debtor so it can start anew.

As of press time, though, it was not clear as to which assets of the company have been declared for liquidation. A copy of the bankruptcy petition was unavailable as of press time.

La Mode’s attorney on Saipan, Richard W. Pierce, said the bankruptcy petition was filed earlier this week at the bankruptcy court in Los Angeles.

“I don’t think there are many assets. That’s why you file a bankruptcy [petition] because the assets are not sufficient to pay off all creditors,” Pierce said.

La Mode’s creditors include the Commonwealth government, according to Pierce. Others are local suppliers and vendors, and some workers, he added.

La Mode ceased its Saipan operations on April 25. It has an affiliate company in California, Golf Apparel Brands Inc.

Earlier this month, some 121 workers filed a lawsuit against La Mode, alleging illegal termination of employment, unpaid wages and overtime and illegal wage deductions or kickbacks.

The workers are seeking a multi-million-dollar judgment against La Mode and its owners, Edward and Barry Kahn. The workers also impleaded Golf Apparel Brands Inc. as defendant, saying that both companies operated as single employer.

The workers claimed that La Mode failed to provide 60-day advance notices to them about mass layoff as required by the Worker Adjustment and Retraining Notification Act.

Their lawyer, Joe Hill, asked the court to impose a civil penalty of $500 for each day of alleged WARN Act violation on each worker. He added that the terminations violated most of the workers’ employment contracts.

Hill also said some of the workers were required by La Mode’s agents in China to pay substantial sums of money as recruitment fees as a condition of employment. La Mode allegedly required some of the workers to pay for employment processing fees and medical expenses in violation of the Nonresident Workers Act and in breach of their employment contracts.

Hill also said some of the workers were required to work more than 40 hours per workweek without paying them overtime in violation of the Fair Labor Standards Act. He said the company failed to compensate the workers for all regular and overtime hours worked each week.

He said that the workers received paychecks below the minimum wage for certain pay periods when La Mode made unauthorized deductions for employment processing fees, which violated not only the NWA but also the Minimum Wage and Hour Act and the Alien Labor Rules and Regulations.

Hill said the defendants should be made to pay the workers the amounts of unauthorized deductions plus damages. He also said the defendants should pay for costs of repatriation of the workers to their respective countries of origin.

La Mode has resigned from the monitoring program of the Garment Oversight Board, which came to existence after Saipan’s U.S. District Court approved a $20-million settlement agreement in consolidated class actions by thousands of garment workers against manufacturers and other apparel companies.

La Mode’s resignation came about following the GOB’s decision to have a special inspection to monitor the company’s compliance with settlement conditions.