Musicland former managers' request for class certification denied

By Caroline Salls

Pittsburgh, March 14 - Two Musicland Holding Corp. former store managers' request for court approval of certification of a class to allow class action plaintiffs to participate in the company's asset distribution process was denied Wednesday by the U.S. Bankruptcy Court for the Southern District of New York.

In his opinion, judge Stuart M. Bernstein said the introduction into the mix of a $1.26 million priority wage claim, at this time, would extend Musicland's Chapter 11 proceedings indefinitely.

Specifically, Bernstein said Musicland or its official committee of unsecured creditors would first have to litigate the legal issue of whether the in-store managers are eligible for overtime pay under California law.

If they lost, they would then have to examine each potential priority overtime claim and litigate to reduce those that could not be supported.

Bernstein said the company's other creditors - who filed timely claims - would have to await the results of those disputes before they knew whether the company's plan could be confirmed and whether distributions would be made.

In addition, Bernstein said the two former managers were the only two members of their class that filed a claim against Musicland.

As previously reported, the class action suit alleges that Musicland owes the plaintiffs nearly $15 million in overtime pay.

Musicland, a Minnetonka, Minn., specialty retailer of pre-recorded entertainment software products, filed for bankruptcy on Jan. 12, 2006. Its Chapter 11 case number is 06-10064.

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