SPINNING A YARN.

• Author: Speizer, Irwin
• Position: Worker lawsuits involving Shelby Yarn led by idealistic lawyer

Max Gardner III dug up a novel approach to burying a business as payback for workers -- and his grandfather.

When Shelby Yarn Inc. shut down in January, 650 people lost their jobs. Mill closings are nothing new to North Carolina, but rather a ritual repeated since industrialists first harnessed streams to power looms and spindles. Then, as now, these ventures frequently fell victim to shifts in markets and economic conditions, shortages of capital, advances in technology and, perhaps as often as anything, mistakes made by their managers and owners.

As a textile town, Shelby, lying one county away from where Michael Schenck built the first cotton mill south of the Potomac in 1813, was no stranger to the phenomenon. But the hostility expressed by Shelby Yam's jobless workers was something unseen in most mill towns since the General Textile Strike of 1934, when the specter of class warfare loomed over much of the South. And it was directed at one man, Sidney Kosann, the septuagenarian who had come from New York to run Shelby Yarn.

State Rep. Debbie Clary, the Cherryville Republican whose district includes Cleveland County, got a lot of phone calls about him. Kosann, she was told, had raided the health-insurance fund to build himself a lake-front house, sticking them with more than $1 million in unpaid medical bills. He had taken a luxury cruise while the mill was going under, then scurried back to file for unemployment benefits. And he had insulted the whole town, calling the locals stupid. "My only thought was that one of those 'dumb' Southerners was going to float him up at Moss Lake," Clary says, referring to the reservoir where many of the city's affluent live and Kosann built his house. "There were a lot of slurs thrown around for awhile. As I was listening to it on my phone, I had a fear of it becoming extremely volatile before it ended."

Kosann retreated to New York. But before he did, a rumor started, one that would have far-ranging repercussions, leading to criminal investigations and a bankruptcy proceeding so rare that national experts say they have never heard of anything like it. A local lawyer was representing three workers facing personal bankruptcy. The lawyer is white. All three of the workers are black. When he began asking questions about Shelby Yarn, the lawyer says, three people told him they had heard from other people that Kosann had called him a name.

Nigger lover.

It's a phrase with a long, potent history in North Carolina. It was used against Frank Porter Graham in the virulent 1950 Democratic primary that lost the former president of the University of North Carolina his U.S. Senate seat. Thirty years before that, opponents of O. Max Gardner's bid for governor distributed a picture purporting to show him with his arms around a black woman and a white woman. Gardner had been one of the first mill owners in the state to hire blacks. He lost the Democratic primary to Cameron Morrison, who had begun his political career with the Red Shirts, white supremacists who kept blacks away from the polls in the elections of 1898 and 1900, which led to their disfranchisement. Gardner would become governor in 1929 and go on to establish the "Shelby Dynasty" and a place in the history books as one of the most-influential North Carolina politicians of the 20th century. He was, in addition to being an industrialist, a lawyer, a trade followed by the grandson who shares his name.

Yes, O. Max Gardner III admits, the rumor about Kosann's slur was just that, a rumor. At best, a third-hand rumor. No, there's no proof Kosann said it or any indication that he is a racist. Still, it was a powerful motivator. "It was something that caused me to get more ..." He pauses, hunting for the proper, measured word, then adds, "... energized."

Energy is something Gardner has lacked in recent years. Eight years ago, he was diagnosed with prostate cancer. Unable to work for months during treatment, he filed for personal bankruptcy. He then contracted a rare bacterial intestinal infection, Whipple's disease, which requires medication to control. A gaunt 6-footer with sunken cheeks behind a bristly, gray beard, Gardner, 55, says he has never regained his vigor. Shelby Yarn, he admits, is his comeback, a high-profile case with legs like his most famous one, another simple bankruptcy that evolved into a spectacular lawsuit.

In the late '80s, he filed personal bankruptcy for Marjorie White of Grover to reorganize a few thousand dollars of psychiatric bills from Duke University's medical center. He turned it into a juicy malpractice suit against Duke and Dr. Bernard Bressler, the psychiatrist White claimed had sex with her during therapy. The suit was settled in 1987 for an undisclosed sum.

Gardner, despite his blue-blooded lineage, fancies himself a defender of the underdog. As Clary notes, "When I first talked to one of the lawyers in town, saying...