Racusin v. American Wagering, Inc. (In Re American Wagering, Inc.)

**Employee Wins $2.3 Million in Contract Dispute During Company Bankruptcy** This case involved an employee named Racusin who had a contract dispute with his employer, American Wagering, Inc., while the company was going through bankruptcy proceedings. The key issue was whether Racusin's claim for money owed to him should be treated as a lower-priority debt (subordinated) under bankruptcy law, which would have meant he might receive little or no payment. The court ruled in favor of Racusin, awarding him $2.31 million in damages. The Ninth Circuit Court of Appeals determined that his claim arose from a breach of his employment contract, not from buying or selling company securities. This distinction was crucial because claims related to securities transactions are typically given lower priority in bankruptcy cases, while contract breach claims maintain higher priority status. This ruling matters for workers because it protects employees' contract rights even when their employer goes bankrupt. It establishes that employment-related claims won't automatically be downgraded to lower-priority status simply because they involve a company in financial trouble. Workers with valid contract claims against bankrupt employers may still have a strong chance of recovering money owed to them.