Continental Airlines, Matter of

• Decision Date: 21 March 1991
• Docket Number: No. 89-2943,89-2943
• Citation: 928 F.2d 127
• Parties: 137 L.R.R.M. (BNA) 2158, 118 Lab.Cas. P 10,725, 21 Bankr.Ct.Dec. 773, Bankr. L. Rep. P 73,934 In the Matter of CONTINENTAL AIRLINES, et al., Debtors. Joseph E. O'NEILL, et al., Appellants, v. CONTINENTAL AIRLINES, INC., Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 127

928 F.2d 127

137 L.R.R.M. (BNA) 2158, 118 Lab.Cas. P 10,725,

21 Bankr.Ct.Dec. 773, Bankr. L. Rep. P 73,934

In the Matter of CONTINENTAL AIRLINES, et al., Debtors.

Joseph E. O'NEILL, et al., Appellants, v. CONTINENTAL AIRLINES, INC., Appellee.

No. 89-2943.

United States Court of Appeals, Fifth Circuit.

March 21, 1991.

Janet Napolitano, Marty Harper, Randolph J. Haines, Allen R. Clarke, Lewis & Roca, Phoenix, Ariz., William Schweinle, Jr., Reginald H. Wood, Stubbeman, McRae, Sealy, Laughlin & Browder, Houston, Tex., for O'Neill GRP.

James R. O'Donnell, Jeannette M. McAllister, Leon V. Komkov, Butler & Binion, Houston, Tex., for Stephens GRP.

John J. Gallagher, Charles L. Warren, David Callet, Akin, Gump, Straus, Hauer & Feld, Washington, D.C., for appellee.

Appeals from the United States District Court for the Southern District of Texas.

Before BROWN, POLITZ, and JOHNSON, Circuit Judges.

PER CURIAM:

This case arises out of a bankruptcy proceeding filed by Continental Airlines, Inc. (Continental), on September 24, 1983 (hereafter "the 1983 bankruptcy proceedings"), in the United States Bankruptcy Court for the Southern District of Texas. Two groups of pilot-employees of Continental appeal the district court's dismissal of their proofs of claim for furlough pay they contend Continental owes them because of a temporary work stoppage which took place around the time of the 1983 bankruptcy petition. On December 3, 1990, Continental filed a second Chapter 11 bankruptcy (hereafter "the 1990 bankruptcy proceedings"), which stayed all judicial actions against the airline by operation of 11 U.S.C. Sec. 362(a). For the reasons stated below, we issued an Order on March 15, 1991, holding that the present appeal is stayed in light of Sec. 362(a) and the 1990 bankruptcy proceedings (see Appendix). We set forth our reasons below.

Facts and Procedural Background

At 5:00 p.m. on September 24, 1983, Continental suspended its entire domestic air passenger service and a portion of its international operations. One and one-half hours later, the airline filed for protection from creditors under the Chapter 11 reorganization provisions of title 11 of the United States Bankruptcy Code. See 11 U.S.C. Secs. 1101-1174. On September 27, the airline reopened portions of its domestic service, using substantially fewer pilots than it had employed prior to filing for bankruptcy. Continental cut recalled pilots' salaries by 50 percent or more and significantly reduced their benefits.

Before the April 30, 1985, bar date to file employee-related claims, and relying upon provisions in the collective bargaining agreement between the Airline Pilots Association (ALPA) and the airline, a number of Continental pilots filed individual proofs of claim with the bankruptcy court for furlough pay totalling $32.6 million they contended they were owed as a result of the September 1983 shutdown. With the bankruptcy court's approval, Continental filed motions for summary judgment disposal of a variety of employee-related claims, including furlough pay claims filed by the individual pilots. ALPA opposed the motion in the pilots' behalf. The court allowed the Stephens and O'Neill Groups, which organized to pursue these claims separately from the union and which include all of the pilot claimants, the opportunity to file their own oppositions. On June 27, 1986, the bankruptcy court granted Continental's motion for summary judgment dismissing the pilots' claims.

On July 7, 1986, the Stephens and O'Neill Groups jointly filed a Notice of Appeal from the June 27 Order to the district court. On December 3, 1987, the district court dismissed the appeal from the bankruptcy court for the pilots' groups' failure to file briefs within the time specified. However, on March 13, 1989, the court granted the two groups' motions to reinstate their appeals. On August 4, 1989, the district court, Singleton, J., issued a memorandum opinion affirming the bankruptcy court's order in all respects. The O'Neill and Stephens Groups perfected their appeal to this Court on August 4, 1989, and oral argument was heard in the case on September 14, 1990. On December 3, 1990, before the Court had rendered its decision in this case, Continental again filed Chapter 11 bankruptcy proceedings, this time in the Delaware bankruptcy court. The parties to this appeal thereafter briefed the court on the question whether the Sec. 362(a) automatic stay provision applies here.

Automatic Stay of the Appeal

Section 362 of title 11 of the Bankruptcy Code provides:

(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title ... operates as a stay, applicable to all entities, of--

(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title; ...

11 U.S.C. Sec. 362 (emphasis added). Continental contends that this provision stays the present appeal of the pilots' claims against the airline for furlough pay until the current 1990 bankruptcy proceedings, which the airline voluntarily instituted in the Delaware court, are resolved. The pilots counter that the stay does not apply to this proceeding because it is a claim filed in response to Continental's 1983 Chapter 11 bankruptcy and therefore had its genesis in a voluntary initiation of proceedings by the debtor rather than against it. By Order issued March 15, 1991, we held that the Sec. 362(a) stay applies, and state our reasons herein.

This appeal from the district court decision denying the pilots' claim that they are entitled to furlough pay for the three-day work stoppage is certainly the continuation of a judicial proceeding. Therefore, we need only resolve whether this proceeding is "against the debtor." See Freeman v. Commissioner of Internal Revenue, 799 F.2d 1091, 1092-93 (5th Cir.1986). In Freeman, this Court held that the answer to the question whether a suit is against the debtor and is stayed by Sec. 362(a) "is determined from an examination of the posture of the case at the initial proceeding." Id. at 1093; see also Cathey v. Johns-Manville Sales Corp., 711 F.2d 60, 61-62 (6th Cir.1983). In the O'Neill and Stephens Groups' view, the initial "judicial ... proceeding ... commenced" on September 24, 1983, when Continental filed a chapter 11 petition for reorganization; thus, this proceeding, they argue, should be deemed initiated by the debtor.

We disagree. While it may be true that this appeal is linked to the 1983 bankruptcy proceedings, filed by Continental, proofs of claim to which the debtor objects, including this one, are undoubtedly "against the debtor" in the context of Sec. 362(a)(1). This case is different from Freeman, upon which the O'Neill and Stephens Groups rely so heavily. We determined that Sec. 362(a) did not stay that case, a petition for redetermination of federal income tax liability, because the proceedings were clearly begun by the debtor. 799 F.2d at 1093. In contrast, the dispute over the pilots' claim for furlough pay, initiated against Continental, is the subject of the litigation...