Ellis v. Westinghouse Elec. Co.

• Decision Date: 30 August 2021
• Docket Number: No. 20-2867,20-2867
• Citation: 11 F.4th 221
• Parties: Timothy ELLIS v. WESTINGHOUSE ELECTRIC CO., LLC, Appellant
• Court: U.S. Court of Appeals — Third Circuit

11 F.4th 221

Timothy ELLIS

v.WESTINGHOUSE ELECTRIC CO., LLC, Appellant

No. 20-2867

United States Court of Appeals, Third Circuit.

Argued on April 6, 2021

Opinion filed: August 30, 2021

Robert B. Niles-Weed (Argued), Weil Gotshal & Manges, 767 Fifth Avenue, New York, NY 10153 Zachary Tripp, Weil Gotshal & Manges, 2001 M Street, N.W., Suite 600, Washington, DC 20036, Shelly R. Pagac, Eric G. Soller, Pietragallo Gordon Alfano Bosick & Raspanti, 301 Grant Street, One Oxford Centre, 38th Floor, Pittsburgh, PA 15219, Counsel for Appellant

Joel S. Sansone (Argued), Massimo Terzigni, Elizabeth A. Tuttle, Law Offices of Joel Sansone, 603 Stanwix Street, Two Gateway Center, Suite 1290, Pittsburgh, PA 15222, Counsel for Appellee

Before: AMBRO, GREENAWAY, JR., and BIBAS, Circuit Judges

OPINION OF THE COURT

AMBRO, Circuit Judge

Dates matter in bankruptcy. For creditors, none is more important than the "bar date," a deadline set by the bankruptcy court for them to file claims against, or request payment from, the debtor. Claims filed after the bar date without an acceptable excuse are usually discharged (meaning the creditor cannot pursue the claim further and the debtor is released from the liability). The bar date interacts with the Chapter 11 plan of reorganization, which typically discharges claims occurring before the plan is confirmed (i.e. , approved) by the bankruptcy court.

But what if the claim arose after a plan was confirmed and before it goes into effect? To our knowledge, no federal appellate court has directly addressed this issue. We hold that sections 503 and 1141 of the Bankruptcy Code authorize bankruptcy courts to set and enforce bar dates for administrative expense claims, including claims arising after confirmation of a plan but before its effective date. The holder of a post-confirmation administrative expense claim cannot choose to bypass the bankruptcy process, so if the claim is not timely filed by the bar date, it faces discharge like a pre-confirmation claim. Thus, we reverse the District Court's decision that a claim for employment discrimination that arose after plan confirmation and was not filed by the applicable bar date could not be discharged.

I. BACKGROUND

A. The Westinghouse Chapter 11 Case

Westinghouse Electric Company LLC (together with its debtor-affiliates, "Westinghouse" or the "Debtors") operates a global nuclear power business. In March 2017, following costly delays with several nuclear power projects, Westinghouse filed for Chapter 11 bankruptcy in the Southern District of New York (the "New York Bankruptcy Court" or "Bankruptcy Court"). In re Westinghouse Elec. Co. LLC , No. 17-10751-MEW, ECF No. 1 (Bankr. S.D.N.Y. Mar. 29, 2017). Through the bankruptcy process, Westinghouse hoped to receive "judicial confirmation of a reorganization plan that [would] enable[ ] [it] to restructure its pre-bankruptcy debts, pay its creditors, and return to active operation as a viable enterprise, free from judicial control and creditor scrutiny." In re Great Am. Pyramid Joint Venture , 144 B.R. 780, 788 (Bankr. W.D. Tenn. 1992).

Filing a bankruptcy petition has immediate consequences. It " ‘creates an estate’ that, with some exceptions, comprises ‘all legal or equitable interests of the [Debtors] in property as of the commencement of the case.’ " City of Chicago v. Fulton , ––– U.S. ––––, 141 S. Ct. 585, 589, 208 L.Ed.2d 384 (2021) (quoting 11 U.S.C. § 541(a)(1) ). The petition also affects the classification and treatment of claims under the Bankruptcy Code. Holders of prepetition claims¹ not secured by collateral typically recover only a fraction of the claim amount. On the other hand, postpetition "actual, necessary costs and expenses of preserving the estate" are treated as administrative expense claims entitled to priority under the Bankruptcy Code's distribution scheme and paid in full under a Chapter 11 plan unless the claimant agrees to other treatment. See 11 U.S.C. §§ 503(b)(1)(A), 507(a)(2), 1129(a)(9)(A) ; In re Energy Future Holdings Corp. , 990 F.3d 728, 741 (3d Cir. 2021) (hereinafter " EFH Admin Expense Decision ").

In June 2017, the New York Bankruptcy Court set a "General Bar Date" for September 1, 2017—the deadline by which creditors had to file proofs of claims for most prepetition claims. As is typical in bankruptcy cases, the bar date for postpetition administrative expense claims is later than the general prepetition claims bar date because the estate continues to incur expenses throughout the bankruptcy. Westinghouse's Chapter 11 plan of reorganization (the "Westinghouse Plan" or simply the "Plan") contemplated a bar date for administrative expense claims of "the first Business Day that is 30 days following the [Plan's effective date]." App. at 260, Plan § 1.3. The Plan further provided, with its usual overlapping verbs, that "Holders of Administrative Expense Claims that ... do not file and serve [a request for payment] by the Administrative Expense Claims Bar Date shall be forever barred, estopped, and enjoined from asserting such [ ] Claims against the Debtors, ... or their property, and such [ ] Claims shall be deemed compromised, settled, and released as of the Effective Date." App. at 275, Plan § 2.1. The Plan also contained customary language discharging all claims as of the Effective Date. App. at 301–02, Plan §§ 11.1, 11.3.

Westinghouse then proceeded with negotiating and confirming the Plan. In February 2018, it informed creditors of various deadlines for filing objections to and voting on the Plan. Following a hearing, the Bankruptcy Court confirmed the Plan on March 28, 2018 (the "Confirmation Date"), concluding that it satisfied all the requirements for confirmation in 11 U.S.C. § 1129.

Although plans usually become effective shortly after confirmation, there can be a delay of months or longer in cases where, for example, the debtor must wait for regulators to approve the plan or investors to finalize financing. See, e.g. , In re Venoco LLC , 998 F.3d 94, 107 n.14 (3d Cir. 2021) ; In re Worldcom, Inc. , 401 B.R. 637, 640 (Bankr. S.D.N.Y. 2009). The effectiveness of the confirmed Westinghouse Plan was delayed pending the closing of an investment transaction, which in turn required approval from government agencies such as the Department of Energy. As a result, it did not become effective until August 1, 2018 (the "Effective Date").

That day, all the property of the Debtors’ estates (subject to a few exceptions) vested in the reorganized Westinghouse, which began a fresh corporate life. See App. at 281, Plan § 5.1. See generally In re Montgomery Ward, LLC , 634 F.3d 732, 737 (3d Cir. 2011) (noting there are three entities in a successful Chapter 11, "the pre-bankruptcy debtor, the estate, and the post-bankruptcy business" (quoting Elizabeth Warren, A Theory of Absolute Priority , 1991 Ann. Surv. Am. L. 9, 12 (1992) ). When Westinghouse gave notice of the Effective Date, it also told creditors that, under the confirmed Plan, August 31, 2018 is the deadline for filing administrative expense claims (the "Administrative Claims Bar Date"). App. at 558. The notice emphasized that those who do not file a claim by then will see their claims "discharged as of the Effective Date." Id . All this was blessed by the New York Bankruptcy Court. App. at 250–51, Confirmation Order ¶ 47.

B. Ellis and the Pennsylvania District Court Case

Timothy Ellis worked for Westinghouse from 2010 until 2018, most recently as Vice President, Global Projects Management Operations. See Ellis v. Westinghouse Elec. Co. , No. 2:18-cv-01442, 2020 WL 4499931, at *3 (W.D. Pa. Aug. 5, 2020) (hereinafter " Dist. Ct. Op."). On May 31, 2018, about two months after the New York Bankruptcy Court confirmed the Plan, Westinghouse terminated Ellis's employment, explaining that his department was being restructured. However, Ellis, 67 years old at the time, believed he was unlawfully fired due to his age. He immediately hired counsel, who represented him by filing a charge with the federal Equal Employment Opportunity Commission (the "EEOC") in July 2018. The parties agree that Ellis's employment discrimination claim "arose" when he was terminated, so it is a claim after confirmation of the Plan but before its Effective Date.

During its bankruptcy case, Westinghouse served Ellis with three notices: the first about the General Bar Date, the second about the Plan objection and voting deadlines, and the third about the Effective Date and the Administrative Claims Bar Date. Ellis acknowledges receiving the first two notices but does not admit receiving the third. See Dist. Ct. Op. at *3–4. He never took any action in the New York Bankruptcy Court to assert his employment discrimination claim.

Instead, in October 2018, Ellis filed suit in the Western District of Pennsylvania District Court against (the now reorganized) Westinghouse. It was initially stayed pending Ellis's exhaustion of state administrative remedies. After the case resumed in July 2019, Westinghouse filed a motion for summary judgment, arguing that Ellis's claim, as an administrative expense claim not timely filed by the Administrative Claims Bar Date, was discharged by the Plan and the order confirming it.

The District Court denied Westinghouse's motion and granted summary judgment in favor of Ellis as to the bankruptcy discharge issue. It first concluded that Ellis received proper notice of the Administrative Claims Bar Date, in part because the Debtors’ claims and noticing agent affirmed that all three notices were sent to Ellis and none were returned as undeliverable. Dist. Ct. Op. at *7. However, the Court ultimately decided that Ellis's claim was not discharged in the bankruptcy, concluding that § 503 of the Bankruptcy Code does not authorize the use of a bar date to discharge postconfirmation administrative expense claims. Id . at *13. It further held that § 1141(d) of the Bankruptcy Code prohibits the discharge of post-confirmation claims. Id. at *19.

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