144 F.3d 712 (10th Cir. 1998), 97-7102, In re Southern Star Foods

Docket Nº:97-7102.
Citation:144 F.3d 712
Party Name:CJ C.A.R. 2571, 15 Colo. Bankr. Ct. Rep. 260 In re SOUTHERN STAR FOODS, INC., Debtor, STATE INSURANCE FUND, Appellant, v. SOUTHERN STAR FOODS, INC.; Kenneth G.M. Mather, Trustee, Appellee.
Case Date:May 21, 1998
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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Page 712

144 F.3d 712 (10th Cir. 1998)

CJ C.A.R. 2571,

15 Colo. Bankr. Ct. Rep. 260

In re SOUTHERN STAR FOODS, INC., Debtor,

STATE INSURANCE FUND, Appellant,

v.

SOUTHERN STAR FOODS, INC.; Kenneth G.M. Mather, Trustee, Appellee.

No. 97-7102.

United States Court of Appeals, Tenth Circuit

May 21, 1998

Page 713

Steven J. Adams and Mary C. Coulson, Gardere & Wynne, L.L.P., Tulsa, OK (Rodney Hayes, Oklahoma City, OK, of counsel), for Appellant.

Kenneth G.M. Mather and Pamela H. Goldberg, Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Tulsa, OK, for Appellee.

Before BRORBY, BARRETT and BRISCOE, Circuit Judges.

BRISCOE, Circuit Judge.

Appellant, the State Insurance Fund (Fund), appeals from the Bankruptcy Appellate Panel (BAP) decision that its claim for unpaid workers' compensation insurance premiums is not entitled to priority status under 11 U.S.C. § 507(a)(4) in the Chapter 7 bankruptcy of the debtor, Southern Star Foods. 1 See State Ins. Fund v. Mather (In re Southern Star Foods, Inc.), 210 B.R. 838 (10th Cir.BAP 1997). This appeal presents a purely legal question, which we review de novo. See Broitman v. Kirkland (In re Kirkland), 86 F.3d 172, 174 (10th Cir.1996). We affirm.

Southern Star contracted with the Fund to provide workers' compensation insurance coverage. On November 17, 1994, the insurance was canceled. At the time the coverage was canceled, Southern Star owed the Fund hundreds of thousands of dollars in unpaid premiums. When an involuntary petition in bankruptcy was filed against Southern Star on December 23, 1994, the Fund claimed priority status for their unsecured creditors' claim under § 507(a)(4), in the amount of $186,898.27. 2 The trustee objected to the

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Fund's claim of priority status, and the Bankruptcy Court sustained the objection, finding that § 507(a)(4) did not give priority status to a claim for unpaid workers' compensation premiums. The Fund appealed the decision to the BAP, which affirmed the denial of priority status under § 507(a)(4) in a very thorough and well-reasoned opinion.

The relevant portion of § 507(a)(4) provides:

(a) The following expenses and claims have priority in the following order;

(4) Fourth, allowed unsecured claims for contributions to an employee benefit plan--

(A) arising from services rendered within 180 days before the date of the filing of the petition or the date of the cessation of the debtor's business, whichever occurs first; but only

(B) for each such plan, to the extent of--

(I) the number of employees covered by each such plan multiplied by $4,000; less

(ii) the aggregate amount paid to such employees under paragraph (3) of this subsection, plus the aggregate amount paid by the estate on behalf of such employees to any other employee benefit plan. 3

The position of the parties in this appeal is simple and straightforward. The Fund argues that the unpaid workers' compensation insurance premiums owed to it by Southern Star are contributions to an employee benefit plan within the meaning of § 507(a)(4), and are, therefore, entitled to priority status. The trustee argues that they are not.

We begin our analysis with the premise that the overriding objective in bankruptcy cases is equal distribution of the debtor's limited resources among its creditors. See Isaac v. Temex Energy, Inc. (In re Amarex, Inc.), 853 F.2d 1526, 1530 (10th Cir.1988). To that end, statutory priorities must be narrowly construed. See id.

The Bankruptcy Code does not define "contributions to an employee benefit plan." The Fund urges us to look to the Employee Retirement Income Security Act of 1974 (ERISA) and apply the definition of "employee benefit plan" set forth in that statute to § 507(a)(4). We decline to read the ERISA definition of "employee benefit plan" into the Bankruptcy Code. We agree with the Eighth Circuit that " '[t]he ERISA definition and associated court guidelines were designed to effectuate the purpose of ERISA, not the Bankruptcy Code.' " Employers Ins. of Wausau, Inc. v. Ramette (In re HLM Corp.), 62 F.3d 224, 226 (8th Cir.1995) (quoting Employers Ins. of Wausau, Inc. v. Ramette (In re HLM Corp.), 183 B.R. 852, 855 (D.Minn.1994)); accord In re The Montaldo Corp., 207 B.R. 112, 115 (Bankr.M.D.N.C.1997); Official Labor Creditors Comm. v. Jet Florida Sys., Inc. (In re Jet Florida Sys., Inc.), 80 B.R. 544, 547 (S.D.Fla.1987); see also United...

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