In re Dittmar
| Decision Date | 13 July 2009 |
| Docket Number | BAP No. KS-08-009.,BAP No. KS-08-004.,BAP No. KS-08-002.,Bankruptcy No. 05-15334.,BAP No. KS-08-006.,Bankruptcy No. 05-15333.,Bankruptcy No. 05-15728.,BAP No. KS-08-003.,Bankruptcy No. 05-16951.,Bankruptcy No. 05-17430.,Bankruptcy No. 05-17094.,BAP No. KS-08-007.,Bankruptcy No. 05-14936.,BAP No. KS-08-008.,Bankruptcy No. 05-16484.,BAP No. KS-08-005. |
| Citation | 410 B.R. 71 |
| Parties | In re Marc William DITTMAR, Debtor. Linda S. Parks, Trustee, Appellant, v. Marc William Dittmar, Appellee. In re Patricia A. Little, Debtor. Linda S. Parks, Trustee, Appellant, v. Patricia A. Little, Appellee. In re Larry E. Letourneau and Donna M. Letourneau, Debtors. Linda S. Parks, Trustee, Appellant, v. Larry E. Letourneau and Donna M. Letourneau, Appellees. In re Forest Earl Denton and Germaine Ann Denton, Debtors. Linda S. Parks, Trustee, Appellant, v. Forest Earl Denton and Germaine Ann Denton, Appellees. In re John Earl Hulse, Debtor. Linda S. Parks, Trustee, Appellant, v. John Earl Hulse, Appellee. In re Ricky A. Murphy and Denise L. Murphy, Debtors. Linda S. Parks, Trustee, Appellant, v. Ricky A. Murphy and Denise L. Murphy, Appellees. In re Cynthia My Nguyen, Debtor. Linda S. Parks, Trustee, Appellant, v. Cynthia My Nguyen, Appellee. In re Michael E. Lowe and Jacqueline E. Flowers-Lowe, Debtors. Carl B. Davis, Trustee, Appellant, v. Michael E. Lowe and Jacqueline E. Flowers-Lowe, Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, Tenth Circuit |
Gaye B. Tibbets of Hite, Fanning & Honeyman, L.L.P., Wichita, KS, for Appellant Linda S. Parks, Trustee.
Don W. Riley, Wichita, Kansas, for Appellee Marc William Dittmar.
Submitted on the briefs (KS-08-003, KS-08-004, KS-08-005, KS-08-006, KS-08-007, KS-08-008, and KS-08-009): David J. Lund of Dewey & Lund LLP, Wichita, Kansas, for Appellees Patricia A. Little, Forest E. Denton, and Germaine A. Denton.
Michael J. Studtmann of Michael J. Studtmann, P.A., Wichita, KS, for Appellees Larry E. Letourneau and Donna M. Letourneau.
David L. Hiebert (on the briefs) of Gragert, Hiebert, Gray & Link, Wichita, KS, for Appellee John Earl Hulse.
Carl B. Davis and Mark D. Kiefer (on the briefs) of Davis & Jack, L.L.C., Wichita, KS, for Appellant Carl B. Davis, Trustee.
Ryan E. Hodge and Elaine F. Winter (on the briefs) of Ray Hodge & Associates, L.L.C., Wichita, KS, for Appellees Michael E. Lowe and Jacqueline E. Flowers-Lowe.
Before BOHANON, BROWN, and WEAVER1, Bankruptcy Judges.
Appellants Linda S. Parks and Carl B. Davis ("the Trustees") appeal the bankruptcy court's summary judgment order holding that post-petition cash and stock distributions received by the debtors through their employment are not property of the debtors' estates under 11 U.S.C § 541.2 For the following reasons, we AFFIRM.
This Court has jurisdiction to hear timely filed appeals from "final judgments, orders, and decrees" of bankruptcy courts within the Tenth Circuit, unless one of the parties elects to have the district court hear the appeal.3 The bankruptcy court's judgment is a final order subject to appeal under 28 U.S.C. § 158(a)(1). The Appellants timely filed their notices of appeal.4 No party elected to have this appeal heard by the United States District Court for the District of Kansas, thus consenting to review by this Court.
We review de novo the bankruptcy court's legal determination that the post-petition distributions were not property of the Debtors' estates under 11 U.S.C. § 541.5
The complete facts underlying this appeal are fully set out in the bankruptcy court's detailed Findings of Fact and Conclusions of Law and will not be repeated here except as necessary to discuss the legal arguments on appeal.6
Debtors are former employees of The Boeing Company ("Boeing") who became employees of Spirit Aerosystems, Inc. ("Spirit") on June 17, 2005, the date Spirit acquired Boeing's Wichita plant. At the time of the sale, Debtors' Unions ratified a collective bargaining agreement ("CBA") with Spirit.7 Under the CBA, Spirit agreed to establish an equity participation program ("EPP") for union-represented employees, and contribute stock appreciation rights to the program. Upon the occurrence of certain events, certain employees were eligible to receive distributions under the anticipated, but not yet formed EPP.
While each Debtor has a different filing date, each of the Debtors filed their bankruptcy cases before October 17, 2005, after the CBA was ratified, but before the EPP was created.8
On October 27, 2006, Spirit created the EPP and issued stock appreciation rights ("SARS") to vest upon an initial public offering ("IPO") or other defined triggering event. The EPP identified which employees were eligible to participate in the EPP:
The employees who are eligible to participate in the Plan are those hourly employees of Spirit who (a) are represented by one of the Unions or were represented by one of the Unions while employed by Spirit, (b) are former employees of The Boeing Company who either (I) became employed by Spirit on the day after the Closing Date, or (ii) were on an approved leave of absence on the Closing Date and became employed by Spirit immediately upon conclusion of such leave, and (c) were employed by Spirit for at least ninety (90) consecutive days during the period commencing on the day after the Closing Date, and ending on December 31, 2005.9
On November 27, 2006, Spirit completed the IPO and the employees' rights to the SARS vested. Distributions were made to the debtors in December 2006, and March 2007. Debtors received a cash distribution of $34,556 around December 6, 2006, and 1,034 shares of Spirit Class A common stock around March 15, 2007.
Following Spirit's payment of distributions to Debtors, the Trustees filed motions for turnover of all distributions received from Spirit, contending they were property of the estates under 11 U.S.C. § 541.10 The Debtors objected, and, after a hearing, the bankruptcy court entered an interim order denying turnover of the distributions.11 A pretrial order followed. After discovery, various parties filed motions for summary judgment on the Trustees' motions for turnover of the distributions.
On December 24, 2007, the bankruptcy court issued a memorandum opinion (the "Appealed Order") granting Debtors' motion for summary judgment and denying the trustees' motion, finding the distributions were not property of the bankruptcy estate.12 The bankruptcy court, relying upon Kansas state law, held that the CBA did not grant the Debtors an enforceable right in the distribution because it did not clearly define which employees would have rights under the EPP. The term "participating employees" was not defined until the post-petition creation of the EPP in October 2006. Thus, until the EPP was created, an enforceable right to the SARS did not exist. As a result, the bankruptcy court concluded the rights to the distributions were not property of the estate because there was no prepetition document or agreement establishing that these Debtors would qualify as participating or eligible employees having a contingent, future interest under the EPP.
The Trustees claim that the bankruptcy court erred in concluding that the Debtors' rights to the SARS are not property of the estate under § 541. The gist of the Trustees' appeal is that the bankruptcy court erroneously applied state contract law in construing the CBA, and disregarded federal collective bargaining law that recognizes and enforces oral agreements at the bargaining table. The Trustees claim that the parties to the CBA had orally agreed at the bargaining table which employees were eligible to receive the distributions in June 2005.
The bankruptcy court's analysis was based on its belief that Kansas law requires the Debtors to be expressly identified as third-party beneficiaries in order to enforce a provision of the CBA. Because the Debtors' interest in the property must exist as of the commencement of the case, the bankruptcy court focused its attention on which agreement clearly expressed these Debtors would qualify as participating employees. The bankruptcy court's analysis is flawed for two reasons. First, the bankruptcy court's reliance on the Kansas Stovall case is misplaced.13 Stovall is distinguishable because it does not involve a CBA. Second, focusing on the issue of who is eligible to receive the distributions presumes that the rights/interests granted under the CBA/EPP are of the kind that may be included in "property of the estate."
We begin our analysis by reviewing the interest granted by the CBA/EPP. Section 541(a)(1) defines property of the estate as "all legal or equitable interests of the debtor in property as of the commencement of the case." The purpose of § 541(a) is to bring anything of value that the debtors have into the estate. Courts have construed the term "property" broadly and "an interest is not outside its reach because it is novel or contingent or because enjoyment must be postponed."14
State law defines and creates property interests.15 Once property rights are determined under state law, federal bankruptcy law establishes the extent to which the property interest is property of the bankruptcy estate.16 A "legal interest" is an interest recognized by law.17 An "equitable interest" is an interest held by virtue of an equitable title or claimed on equitable grounds, such as the interest held by a trust beneficiary.18
The rights at issue are contractually-based, rather than state-created; thus resolution of this case requires interpretation of the CBA and EPP. The determinative issue is whether the Debtors had an enforceable right to the distribution when they filed their respective petitions. A leading treatise provides:
While federal labor law governs the enforcement of...
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In Re Marc William Dittmar
...the sale, Debtors' unions ratified substantially similar collective bargaining agreements (“the CBA”) with Spirit. In re Dittmar, 410 B.R. 71, 74 n. 7 (10th Cir. BAP 2009). During negotiations, Spirit proposed a 10% wage cut for union-represented Lowe, 380 B.R. at 254. As an inducement, Spi......
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...the line from “mere expectancy” to contingent property interest within the scope of § 541. Parks v. Dittmar (In re Dittmar), 410 B.R. 71, 84–85 (10th Cir. BAP 2009) (Brown, J., dissenting). 8. Damien Powell filed on the 244th day of the Plan Year. Jason Hobart filed on the 296th day. Christ......
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IN RE: MARC WILLIAM DITTMAR
...U.S.C. § 157(b)(2)(A)and (E). 8 Dkt. 95, Ex. A. 9 Dkt. 95, Ex. B. 10 Dkt. 16. 11 Dkt. 67. See In re Lowe, supra. 12 In re Dittmar, et al, 410 B.R. 71 (10th Cir. BAP 2009). 13 Parks v. Dittmar, supra. 14 The Trustee also objected to debtor's exemption on the grounds of laches and that the de......