298 F.3d 219 (3rd Cir. 2002), 01-2018, In re Hechinger Inv. Co. of Delaware
| Docket Nº: | 01-2018. |
| Citation: | 298 F.3d 219 |
| Party Name: | 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, W |
| Case Date: | July 25, 2002 |
| Court: | United States Courts of Appeals, Court of Appeals for the Third Circuit |
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Argued: March 5, 2002.
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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.
OPINION
ALITO, Circuit Judge.
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.
I.
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
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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).
II.
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...
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