In re Kitty Hawk, Inc.
| Decision Date | 22 November 2000 |
| Docket Number | 00-42141 through 00-42149. Adversary No. 00-4092.,Bankruptcy No. 00-42069-BJH |
| Citation | 255 BR 428 |
| Parties | In re KITTY HAWK, INC., et al., Debtors. International Brotherhood of Teamsters, AFL-CIO, Plaintiff, v. Kitty Hawk International, Inc., Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
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William R. Wilder, Baptiste & Wilder, P.C., Washington, DC, for Plaintiff.
John David Penn, Haynes and Boone, Ft. Worth, TX, for Defendant.
Before the Court is Kitty Hawk International, Inc.'s ("Kitty Hawk" or "Debtor") Motion for Partial Summary Judgment Regarding Priority of Claims (the "Motion"). The Court heard oral argument on the Motion on October 10, 2000. This Memorandum Opinion constitutes the Court's Findings of Fact and Conclusions of Law.
In its Complaint filed on June 13, 2000, the International Brotherhood of Teamsters (the "Union") contends that the claims of its members (the "Union Employees") arising under a collective bargaining agreement between the Union and the Debtor (the "CBA") are currently due and payable without regard to the provisions of 11 U.S.C. §§ 502, 503, and 507. The Union further contends that in terminating the Union Employees, the Debtor violated the Worker Adjustment and Retraining Notification Act ("WARN Act"), 29 U.S.C. § 2101, et seq. Specifically, the Union seeks a declaratory judgment that (i) unpaid wages and other benefits to Union Employees under the CBA are currently due and payable because the CBA was not rejected or modified by the Debtor in accordance with 11 U.S.C. § 1113 () and (ii) amounts owing under the WARN Act (essentially wages for 60 days following the termination of the Union Employees, 59 days of which occurred after the Debtor's bankruptcy filing) are payable as a post-petition expense of administration due to the Debtor's termination of operations without proper notice to the Union Employees.
In the Motion, the Debtor contends that all actions cited by the Union as "wrongful" occurred prior to the Debtor's bankruptcy filing and, as a result, any claims of the Union are pre-petition claims not entitled to priority. Specifically, the Motion seeks a summary judgment declaring that any claims arising under either the CBA (the "CBA Claims") or the WARN Act (the "WARN Claims") are "pre-petition claims governed by 11 U.S.C. §§ 502 and 507 and that they are neither administrative claims under 11 U.S.C. § 503 or some other form of claim requiring immediate payment outside the priority scheme of the Bankruptcy Code." See Motion at p. 3.
The facts relevant to the Motion are not in dispute. The Debtor and the Union, as collective bargaining agent for the Union Employees, were parties to the CBA which established, inter alia, rules, rates of pay, and working conditions. See Brief of International Brotherhood of Teamsters in Opposition to Kitty Hawk's Motion for Partial Summary Judgment ("Union Brief") at pp. 1, 4; Appendix to Plaintiff International Brotherhood of Teamsters Opposition to Defendant's Motion for Partial Summary Judgment ("Union App.") at pp. 1-55. The CBA became effective on October 30, 1992 and was scheduled to expire on October 30, 2003. See Union Brief at pp. 1, 4; Union App. at pp. 1-55.
On April 29 and 30, 2000, the Debtor terminated all of the Union Employees. See Affidavit of John Turnipseed ("Turnipseed Aff.") at ¶ 3. On April 30, 2000, the Debtor grounded all of its aircraft and ceased all flight operations. See Union Brief at p. 4. The Debtor and eight (8) other affiliates filed Chapter 11 on May 1, 2000.1 No Union Employee was still employed by the Debtor at the time it filed bankruptcy. See Turnipseed Aff. at ¶ 5.
On May 2, 2000, the Debtor filed a motion seeking to abandon certain aircraft and engines previously used in its flight operations. See Union App. at pp. 56-61. In that motion the Debtor stated that any further operation of these assets was a "drain on resources" and that the assets were "not necessary for an effective reorganization." See id.
On June 12, 2000, the Debtor filed a motion to reject the CBA pursuant to 11 U.S.C. § 1113. See Union Brief at p. 2. The Union opposed rejection. The Court heard two days of argument and evidence on the Debtor's motion. Before any ruling issued, the Debtor withdrew its motion without objection by the Union. See id. at p. 5. By agreement of the Debtor and the Union, the CBA was modified and assigned as part of a sale of certain assets of the Debtor by Order entered on August 11, 2000 (the "Agreed Modification and Assignment Order"). Pursuant to the terms of the Agreed Modification and Assignment Order, the Debtor did not assume the CBA and the modification and assignment of the CBA were to have no effect on the Union's claims in this proceeding. See Union Brief at p. 3, n. 2; see also Agreed Modification and Assignment Order.
The Court has jurisdiction over this dispute pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding over which the Court may enter a final judgment. 28 U.S.C. § 157(b).
The parties agree that this Court should enter a summary judgment where it appears from the record that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. See FED. R. CIV. P. 56(c); Meadowbriar Home for Children, Inc. v. Gunn, 81 F.3d 521, 533 (5th Cir.1996) (); Wilson v. Secretary, Dept. of Veterans Affairs, 65 F.3d 402, 404 (5th Cir. 1995).
Construction of the Bankruptcy Code (the "Code") is a holistic endeavor. United Savings Ass'n of Texas v. Timbers of Inwood Forest Associates, Ltd., 484 U.S. 365, 371, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988). In construing the Code, the court must consider the particular statutory language, the design of the Code as a whole, and its object and policy. Kelly v. Robinson, 479 U.S. 36, 43, 107 S.Ct. 353, 93 L.Ed.2d 216 (1986). Statutes should not be interpreted in a manner that renders certain provisions of the statute superfluous or insignificant. Woodfork v. Marine Cooks & Stewards Union, 642 F.2d 966, 970-71 (5th Cir.1981). One provision of the Code cannot be read or applied in isolation; rather, each provision should be interpreted in light of the remainder of the statutory scheme. In the Matter of Howard, 972 F.2d 639, 640 (5th Cir.1992). Provided that the statutory scheme is coherent and consistent, the court generally need not inquire beyond the statute's language. United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 240-41, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989).
A brief discussion of the history of section 1113 may be of assistance. Section 1113 was enacted by Congress in response to the Supreme Court's decision in NLRB v. Bildisco & Bildisco, 465 U.S. 513, 104 S.Ct. 1188, 79 L.Ed.2d 482 (1984). In Bildisco, the Supreme Court allowed a debtor to reject a collective bargaining agreement as an executory contract under section 365(a). Id. at 532, 104 S.Ct. 1188. Specifically, the Court found that a debtor could reject a collective bargaining agreement if it could show "that the collective bargaining agreement burdens the estate, and that after careful scrutiny, the equities balance in favor of rejecting the labor contract." Id. at 526, 104 S.Ct. 1188.
In response to that decision, and an "immediate and intense" lobbying effort by labor groups, Congress added section 1113 to the Code. International Brotherhood of Teamsters v. Roth American, Inc. (In re Roth American, Inc.), 975 F.2d 949, 955 (3rd Cir.1992) (); see Air Line Pilots Assoc., Intel v. Shugrue (In re Ionosphere Clubs, Inc.), 22 F.3d 403, 406 (2nd Cir. 1994) (); United Steelworkers of Am. v. Unimet Corp. (In re Unimet), 842 F.2d 879, 881 (6th Cir.1988), cert. denied, 488 U.S. 828, 109 S.Ct. 81, 102 L.Ed.2d 57 (1988). Among other things, section 1113 contains a timetable and outlines an exclusive process by which a debtor may seek to modify or reject a collective bargaining agreement. 11 U.S.C. § 1113. Section 1113 was intended to preclude employers from using a threat of bankruptcy, and a subsequent unilateral rejection of the collective bargaining agreement, as leverage in labor contract negotiations. See Roth American at 957; Shugrue v. Air Line Pilots Ass'n, Intel (In re Ionosphere Clubs, Inc.), 922 F.2d 984 (2nd Cir.1990) (), cert. denied, 502 U.S. 808, 112 S.Ct. 50, 116 L.Ed.2d 28 (1991).
Section 507(a)(1) of the Code provides that "first priority is given to administrative expenses allowed under section 503(b). . . ." 11 U.S.C. § 507(a)(1). In turn, section 503(b)(1) provides that administrative expenses include "the actual, necessary costs and expenses of preserving the estate, including wages, salaries, or commissions for services rendered after the commencement of the case." 11 U.S.C. § 503(b)(1)(A)(emphasis added). Section 507(a)(3) of the Code provides a third priority (behind section 503(b) administrative expenses and section 502(f) expenses) for allowed unsecured claims of up to $4,300 per individual for wages, salaries, or commissions,...
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