THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, November 7, 1995 TAG: 9511070304
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 57 lines
A federal judge in Norfolk acted Monday to give former Jonathan Corp. employees a chance at getting repaid.
About 250 workers were not paid for their last week when the ship-repair firm shut down in June after running out of money to operate.
U.S. District Court Judge Rebecca Beach Smith issued a preliminary injunction ordering Jonathan to put $300,000 in an escrow account pending the outcome of a suit filed by a group of the former workers.
Since the ship-repair firm turned over all its assets to NationsBank in July, Smith brought the giant bank into the case, essentially ordering the bank to establish the escrow account with part of the proceeds from its October auction of Jonathan's assets. NationsBank took the assets after Jonathan defaulted on loans secured by those assets.
Smith said the workers had a good chance of showing that their wage claim should have been paid before the bank took Jonathan's assets to cover the $7 million it is owed.
If the workers prove their case, they would have a right to recover from NationsBank, she said. The action does not mean the laborers have won their case, it just protects the money that would be used to pay them if they do win.
In October, NationsBank auctioned Jonathan's assets, including the shipyard land on the Elizabeth River in Norfolk and all its equipment, for about $2.3 million, said James D. Tate, the NationsBank executive vice president who handled its loans to Jonathan.
NationsBank's lawyer Monroe Kelly III declined to comment on the judge's order.
``Justice was done,'' said Thomas F. Hennessy, lawyer for the 57 workers who sued. ``It's nice when the technicalities of the law can be used to reach a just result.''
The action extends a temporary restraining order that Smith issued last week in response to the workers' claim.
Jonathan had emerged from bankruptcy in February, but was unable to get enough work to sustain itself.
A dispute with Newport News Shipbuilding over payment for work Jonathan was doing at the giant yard killed the Norfolk-based ship repairer. Without payment on the invoices, Jonathan was unable to borrow against its NationsBank line of credit, which was secured by pending invoices.
``If the invoices had been paid, the paychecks would have been issued and the employees would have been paid,'' said C. Grigsby Scifres, Jonathan's lawyer. ``And Jonathan might still be in business.''
Newport News Shipbuilding has said it disputes those invoices, which now are owned by NationsBank. by CNB