In the Circuit City Stores Inc. bankruptcy case, a Richmond U.S. District Court says 27 former employees who say they are entitled to payment for unused paid time off upon termination of employment are entitled to a priority claim. Debtors' evidence established that immediately prior to the petition date, debtors discontinued their practice of paying money for unused paid time off at termination. Debtors claimed they subsequently informed all employees of the change in the paid time off policy. The court finds that debtors' communication of this change was confusing and perhaps misleading. Therefore, with regard to the claimants who timely responded to the omnibus objection, debtors' objections are overruled. The court concludes the responding claimants are entitled to a priority claim in accordance with 507(a)(4)(A). In support of their contention that employees were aware of and clearly understood the change in debtors' practice regarding paid time off, debtors introduced evidence that 20,516 employees used paid time off during the post-petition period at a total cost of nearly $9.5 million. While this indicates that debtors honored their paid time off policy in accordance with the court's granting the wage order, it fails to demonstrate that these employees in fact knew that the pre-petition practice had changed and that they used their paid time off while employed post-petition because they understood they would not have that opportunity to use it once their employment terminated. It certainly does not evidence that the changes made to the paid time off policy immediately prior to the petition date had been effectively communicated to the employees outside the December Memo or the January Memo. The fact that 519 claimants filed proofs of claim seeking to be paid for accrued, unused paid time off suggests to the contrary that a substantial number of employees were either unaware of or confused by the change in policy.

Circuit City Stores Inc. reported earnings results for the period from November 10, 2008 to June 30, 2009. For the period, the company reported operating loss of $1,440.221 million and net loss of $1,792.912 million on net sales of $3,200.966 million. The company reported net cash provided by operating activities of $720.351 million and purchases of property and equipment of $748,000 for during the period. The company reported earnings results for the month ended June 30, 2009. For the month, the company reported operating loss of $421.754 million and net loss of $424.022 million. The company reported net cash used in operating activities of $5.517 million for the month of June 2009. During June 2009, the company recorded a non-cash impairment charge of $417.1 million related to its investment in its Canadian subsidiary.

Circuit City Stores Inc. reported operating results for the month ended April 30, 2009 and for the period from November 10, 2008 to April 30, 2009. For the month ended April 30, 2009, the company reported a loss before reorganization items, GAAP reversals and income taxes and operating loss of $170.8 million and net loss of $181.0 million. The net cash used in operating activities for the period was $1.820 million. For the period from November 10, 2008 to April 30, 2009, the company reported operating loss of $1,021.9 million, loss before reorganization items, GAAP reversals and income taxes of $1,046.6 million and net loss of $1,303.5 million on net sales of $3,200.9 million. The net cash provided by operating activities for the period was $720.6 million. The company invested $0.748 million for the purchases of property and equipment in the period from November 10, 2008 to April 30, 2009. The company recorded a non-cash impairment charge of $334.6 million during the period between November 10, 2008 and April 30, 2009. The charge was primarily related to long-lived assets at the company's stores.