In re Hechinger Inv. Co. of Delaware
| Decision Date | 25 July 2002 |
| Docket Number | No. 01-2018.,01-2018. |
| Citation | 298 F.3d 219 |
| Parties | In re HECHINGER INVESTMENT COMPANY OF DELAWARE, Debtor. Former Employees of Builders Square Retail Stores v. Hechinger Investment Company of Delaware, Patricia A. Staiano, Trustee. Edmund Adams, Vera L. Addison, Paul Ambrose, Mary Jo-Andrews, Kok Ang, Richard C. Athey, Chris Ausse, Carl F. Baker, William C. Barnes, Sharon Baum, Lois J. Bednarski, William F. Behl, Janet E. Bell, J. Brian Bird, Cheryl Blackburn, Denise Booker, Ruth A. Borling, Carol Ann Bosley, Myra Bowyer, Wallace E. Boykin Jr., Jim Brearley, Richard Brimer, Yvonne D. Brooks, Shari L. Brown, John H. Brown, William Brundies, Ella Ruth Bryant, Daniel Bucel, Blanche Bulley, Kathleen Bush, Charles Cahlik, Jeffery S. Cajka, Ronald T. Caldwell, Dianne Calloway, Chester A. Capron III, Kevin L. Carpenter, James Caswell, Sandra Cicak, Bradley Clark, Thomas A. Clay, Mary Jo Cleary, William Cogar, Tricia L. Cole, Stephanie Covington, Wanda Cruz, Linda Csensich, Kenneth E. Curtis, Karen Cusano, Michael J. D'Onofrio, Yvonne Dagy, Sabrina Davis, Richard C. Davis, Richard R. DeJean, Eugene DeMarco, Susan L. Dennison, Arthur J. Derk, Martin Disque, Virginia Donnnenwirth, Margaret Drechney, Michael E. Dubay, Thomas P. Dudley, Thomas E. Dumski, Clarence Eacott, Barbara L. Erwin, Jeffrey F. Evans, Daniel W. Fava Jr., Sandra Fazzini, Debbie Felix, Kenneth M. Ferrence, Carl P. Fetsko, Lori A. Fetsko, Michael W. Fletcher, Gary W. Flint, Matt Forkapa, Karen E. Foster, Troy K. Fowler, Donald E. Fowler, Jennifer J. Frank, Robert W. Frazier, Kathleen Frederick, Patricia Galderio, Daniel E. Gallagher, David A. Gansel, John R. Gardner, Brenda C. Getz, Bonnie K. Gorski, James P. Gourley, Sandra L. Grace, Robyn C. Green, David D. Gregory, Sharon Grimm, Vivian Grimsley, Debra Gullickson, Joann M. Hale, Joseph L. Hall Sr., James L. Harris, John F. Hausen, Donna Hazelip, Kenneth R. Heizer, Dale A. Heppner, David Hercules, John J. Hereshko, Tracy Hill, Patricia A. Holt, Imre Horvath, Kim Hricko, Dana M. Hudson, Donna J. Huelsman, William S. Hundsdorf, Todd L. Huston, Peggy A. Huwig, Michael Kelly Irwin, Tracy Jablonske, Frederick Jacobs, Nancy J. Jessel, Madelyn Johanyak, Marlene Johns, George F. Johns, Ralph Johnson, William L. Jones, Ronald W. Kammer, Thomas P. Kanesky, Marie T. Kerg, Thomas Kilroy, Gerald O. King, Melissa Kinsinger, Gloria Kinzig, John Kirby, Alice M. Kissner, LeRoy N. Kline, Richard L. Klotz III, Francis M. Kovach Jr., Clarence J. Krejci, Cynthia C. Lacek, Kirk W. Lambert, Joseph E. Lamp, Bob Largent, Patricia A. Latshaw, Grover E. Lawrence, Frank D. Leatherman, Roselynn Leone, Wayne E. Lindblom, Devon D. Logan, Mark Logan, Vickie L. Lohr, Samuel Lopez, Lourdes Lopez, Marc Madden, Debra A. Magpoc, Mary Kay Maihle, Fred Martz, Terrie Mast, Sharon Mauro, Frederick McCloud, Michael G. McConnell, Norman E. McFeeders, Robert C. Mehaffie, Sharon A. Meredith, Lana L. Mieyal, Vincent Miller, Richard Miller, LaDonna Miller, Patricia A. Millman, John L. Minute, Laverne K. Miozzi, Patricia Mitchell, Ann Moody, Michelle K. Morgan, Alan R. Moriarty, Cathy J. Moulin, Steven W. Murray, Mark R. Muska, Phillip E. Nelson, Kenneth P. Nemeth, Marlin Nester, Lori Nimnicht, Joseph H. O'Neill, Karen M. Oakley, Marcia E. Orr, Charles R. Owens, Roger E. Paden, Harold L. Pair, Albert Parker, Marilyn J. Parks, Pravin A. Patel, Terry L. Peoples, Lisa Pettit, Holly K. Phipps, Kenneth Phipps, Robert H. Pierson, Gregory J. Plasity, Joanne M. Pratt, Cheryl Priebe, Margaret A. Pullin, Thomas D. Purtell, Maxine Rak, Jeffrey E. Randall, Brittany E. Reed, Kathy L. Reed, Jeff Reed, Lance Reep, Debra V. Rhoad, Betty J. Riley, Thomas R. Rister, Angus R. Robinson, Jerry L. Rose, Daniel J. Ross, Scott Roten, Robin Roy, Debra Rumbaugh, Linda L. Runchey, Theresa E. Sabatino, Peggy Sawyers, Willie J. Scott, Daniel A. Sedlak, Patrick V. Seymour, Christopher Shane, Seth Sherban, Joseph A. Sherbert Jr., Geraldine Shukait, Robert Sines, Barbara A. Slade, Steve Smith, Larry Smith, Elaine T. Snider, Theodore J. Snyder, Charity A. Spicer, James Staats, Michael J. Stauder, Sharlene Stevens, Shirley H. Stewart, Mark Stoughton, Barbara J. Stoughton, Norman J. Suplicki, Linda M. Swihart, Lynette Szymczyk, Darrell Tarver, Andrew S. Taylor, Patricia Taylor, Valerie A. Terry, Debra S. Thomas, Eric Thompson, Gary G. Tichy, Paul T. Tinch, Erik Toth, Nicolinna Travaglini, Roger Tubbs Jr., Patricia A. Turley, Judith M. Tyree, Kim VanBlaricum, Frank Villwock, Louise Walunis, Michael T. Ward, Donald Watson, Brian D. Watts, Susan Wendling, Lora R. Wheeler, Julie Wiencek, Gladys M. Wilders, Williams Williams, James W. Willis, Joseph P. Wilson, Brian C. Winland, John Yencho, Danena Young, Jimmie D. Young,<SMALL><SUP>*</SUP></SMALL> Appellants. |
| Court | U.S. Court of Appeals — Third Circuit |
Brain E. O'Connor (Argued), Julie O. Veit, Willkie Farr & Gallagher, New York City, Deborah E. Spivack, Mark D. Collins, Richards, Layton & Finger, P.A., Wilmington, DE, for appellee.
Lawrence E. Oscar, Alan S. Kopit, Julie K. Zurn (Argued), Hahn Loeser & Parks, LLP, Cleveland, OH, Robert D. Gary, Thomas R. Theado, Thomas A. Downie, Gary, Naegele & Theado, Lorain, OH, Morton Branzburgh, Klehr Harrison Harvey, Branzburgh & Ellers, LLP, Philadelphia, PA, Steven K. Kortanek, Klehr Harrison Harvey, Branzburgh & Ellers, LLP, Wilmington, DE, for appellants.
Before: ALITO, RENDELL, and HALL,1 Circuit Judges.
In this bankruptcy appeal, former employees of Hechinger Investment Company and related entities ("Hechinger") contest an order under which certain employee benefits are treated as administrative expenses only to the extent that they are attributable to employment services performed after Hechinger filed for relief under Chapter 11 of the Bankruptcy Code. For the reasons stated below, we affirm the order of the District Court.
Hechinger operated 206 general home improvement stores under a variety of names, including Hechinger, Builders Square, and Home Quarters Warehouse. Due to financial difficulties, Hechinger decided to close 34 of its Builders Square Stores in February of 1999. In order to liquidate the inventory of these stores, Hechinger held "going out of business" sales. Wishing to ensure that each store would retain experienced staff to run these sales, Hechinger offered two types of special benefits (hereinafter collectively "Stay-On Benefits"). First, Hechinger offered to increase the percentage of "BHQ Time" for which an employee would be paid on termination. Employees accumulated BHQ Time (a combination of vacation, sick, holiday, and personal days) at rates that varied based on length of service. Employees not participating in the Stay-On Benefits program, received payment for 50% of their BHQ time upon termination. Under the Stay-On Benefits program, however, employees were to be paid for 100% of this time. Second, participating employees were to receive severance pay in amounts that varied based on length of service with the company. Full-time employees who had completed at least nine months of continuous service as of the date of termination were eligible to receive one week of severance for each completed year of service, up to a maximum of 13 weeks. To be eligible to receive any of these enhanced benefits, however, an employee had to remain with the company until the employee's store was closed or the employee was released by the company.
On June 11, 1999, Hechinger voluntarily filed petitions for relief under Chapter 11 of the Bankruptcy Code. On August 3, 1999, employees of the 34 closing Builders Square stores ("employees") filed a motion in the United States Bankruptcy Court for the District of Delaware requesting immediate payment of benefits owed under the Stay-On Benefits plan as administrative expenses under 11 U.S.C. §§ 503(b)(1)(A), 507(a)(1), and 105.
The Bankruptcy Court granted this relief only in part. The Court apportioned both the BHQ time payments and the severance pay between the period of pre- and post-petition employment and treated only the latter as administrative expenses. The District Court affirmed, and this appeal followed.
We have appellate jurisdiction pursuant to 28 U.S.C. § 158(d). Our review of the District Court's decision effectively amounts to review of the bankruptcy court's opinion in the first instance. See In re Telegroup, Inc., 281 F.3d 133, 136 (3d Cir.2002). Interpretations of the Bankruptcy Code are subject to plenary review. See In re Abbotts Dairies, 788 F.2d 143, 147 (3d Cir.1986). We review a refusal to exercise jurisdiction under 11 U.S.C. § 105 for an abuse of discretion. See Nordhoff Invs., Inc. v. Zenith, 258 F.3d 180, 182 (3d Cir.2001).
The dispute between the parties is limited to the priority to be afforded to the Stay-On Benefits claims. The employees argue that the entirety of their claims qualify as administrative expenses under § 503(b)(1)(A) because the benefits were not "earned," i.e., employees could not expect payment, until after the last day of business of the individual store or the individual employee's release date. Each named employee completed employment after Hechinger's petition date. The employees contend that this feature of the Stay-On Benefits distinguishes them from conventional severance pay and that therefore this case is not controlled by our precedents allowing administrative priority to claims for severance benefits only inasmuch as the claims arose post-petition. Based on their contention that the benefits at issue here were earned after the petitions were filed, the employees argue that they are administrative expenses under § 503(b)(1)(A).
Section 503(b) provides:
After notice and a hearing, there shall be allowed administrative expenses, other than claims allowed under section 502(f) of this title, including
(1)(A) the actual, necessary costs and expenses of preserving the estate, including wages,...
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