In re Pulaski Highway Exp., Inc.
Decision Date | 09 January 1986 |
Docket Number | Bankruptcy No. 382-00465. |
Citation | 57 BR 502 |
Parties | In re PULASKI HIGHWAY EXPRESS, INC., Debtor. |
Court | U.S. Bankruptcy Court — Middle District of Tennessee |
Greg Nelson, Dept. of Justice, Washington, D.C., for U.S.
R. Jan Jennings, Nashville, Tenn., for Central States Pension Fund.
Paul K. Bramlett, Nashville, Tenn., for J.T. Foster.
The issue presented is whether a multiemployer pension plan's withdrawal liability claim is entitled to administrative expense priority. On peculiar facts and for the reasons stated below, the withdrawal liability claim must be apportioned between pre- and post-petition liability. The post-petition portion of the claim, when ultimately fixed in amount, may be entitled to administrative expense priority, in whole or in part.
The following constitute findings of fact and conclusions of law. Bankruptcy Rule 7052. This is a core proceeding. 28 U.S.C. § 157(b)(2)(B) (1985).
Central States Southeast and Southwest Areas Pension Fund ("Central States") is the administrator of a multiemployer pension plan. Pulaski Highway Express ("PHE") was a party to that plan pursuant to its collective bargaining agreement.1 On February 17, 1982, PHE filed for Chapter 11 relief. PHE ceased all business operations on March 26, 1982. Five days later its collective bargaining agreement expired by its terms without renewal.
On June 23, 1982 this court approved a plan of liquidation which included the following provision:
Class 2: All necessary and actual expenses and costs incurred by the Debtor-in-Possession in preserving the estate since the date of filing of the petition, February 17, 1982, including rent, wages and salaries for services rendered after the commencement of the case.
PLAN OF LIQUIDATION, May 7, 1982, p. 2. Class 2 was described in PHE's disclosure statements as follows:
Class 2. Administrative Claims. All necessary and actual costs and expenses of administration incurred by the debtor-in-possession since the date of the filing of the petition in preserving the estate and winding down of the business, including rent for premises, utilities and salaries for necessary personnel.
MODIFIED DISCLOSURE STATEMENT, May 23, 1982, p. 10; MODIFIED DISCLOSURE STATEMENT, May 13, 1982, p. 8; DISCLOSURE STATEMENT, May 7, 1982, p. 8.
Following confirmation, Central States amended its claim to assert status as a Class 2 administrative claimant for pension plan withdrawal liability in the amount of $820,382.24. The United States, which holds a claim for $221,938.81 in pre- and post-petition taxes and interest, and J.T. Foster ("Foster"), a principal of the debtor, have objected to administrative expense treatment for Central States' claim.2
Several courts have considered whether a claim for withdrawal liability is an administrative expense pursuant to 11 U.S.C. § 503(b) (1985), entitled to first priority of distribution pursuant to 11 U.S.C. § 507(a) (1985). They have all held that it is not. See Amalgamated Insurance Fund v. William B. Kessler, Inc., 55 B.R. 735 (S.D.N.Y.1985) aff'g, 23 B.R. 722, 9 B.C.D. (CRR) 943 (Bankr.S.D.N.Y.1982); In re United Department Stores, Inc., 49 B.R. 462 (Bankr.S.D.N.Y.1985); In re McFarlin's, Inc., 46 B.R. 88 (Bankr.W.D.N.Y. 1985) (11 U.S.C. § 365(g)) ; In re Cott Corp., 47 B.R. 487 (Bankr.D.Conn. 1984) ( ); In re Blue Ribbon Delivery Service, Inc., 31 B.R. 292 (Bankr.W.D.Ky.1983); In re Concrete Pipe Machinery Co., 28 B.R. 837, 10 B.C.D. 550 (CRR) 8 COLLIER BANKR.CAS.2d (MB) 294 (Bankr.N.D.Iowa 1983); In re Goldblatt Brothers, Inc., No. 81-B-7075 slip op. (Bankr.N.D.Ill. Nov. 12, 1982). See Granada Wines, Inc. v. New England Teamsters Pension Fund, 748 F.2d 42 (1st Cir.1984), aff'g, unpublished district court judgment, aff'g, 26 B.R. 131 (Bankr.D.Mass.1983) ( ). But see Concrete Pipe, 28 B.R. at 839, 841 ( )(dicta).3 This court cited with approval Kessler and Granada Wines in an earlier opinion in this case. In re Pulaski Highway Express, Inc. v. Central States Southeast and Southwest Areas Health and Welfare and Pension Fund, 41 B.R. 305, 12 B.C.D. (CRR) 34 (Bankr.M.D.Tenn.1984).
Administrative expenses are defined by § 503(b) of the Code:
Administrative expenses are entitled to first priority of distribution. 11 U.S.C. § 507(a) (1985). Sections 503(b) and 507(a) grant priority status to encourage the provision of goods and services to the estate, and to compensate those who expend new resources attempting to rehabilitate the estate. In re Jartran, Inc., 732 F.2d 584, 586 (7th Cir.1984). Ordinarily, administrative expense priority is only available for expenses incurred by, and beneficial to the bankruptcy estate. Id.4 At a minimum the claim must be incurred in the regular administration of the bankruptcy estate. See Jartran, 732 F.2d at 584.
Withdrawal liability was designed by Congress to ensure that multiemployer pension plans have adequate funds to pay employee pensions. MPPAA § 3, 29 U.S.C. § 1001a(c) (1985).5 It is defined as the amount of "unfunded vested benefits" allocable to the employer, subject to certain adjustments not relevant here. ERISA § 4201(b)(1), 29 U.S.C. § 1381(b)(1) (1985).6 The term "unfunded vested benefits" is defined as:
ERISA § 4213(c), 29 U.S.C. § 1393(c) (1985). A nonforfeitable benefit is:
With respect to a plan, a benefit for which a participant has satisfied the conditions for entitlement under the plan or the requirements of this Act . . . whether or not the benefit may subsequently be reduced or suspended by a plan amendment, an occurrence of any condition, or operation of this Act, or the Internal Revenue Code of 1954.
ERISA § 4001(a)(8), 29 U.S.C. § 1301(a)(8) (1985) (emphasis added). Withdrawal liability is triggered when an employer withdraws from a multiemployer pension plan. ERISA § 4201(a), 29 U.S.C. § 1381(a) (1985).7 The court in Kessler explained the relationship between vested benefits and withdrawal liability as follows:
Kessler, 55 B.R. at 737. See T.I.M.E. — DC, Inc. v. Management-Labor Welfare & Pension Funds, of Local 1730 International Longshoremen's Ass'n., 756 F.2d 939, 943-44 (2d Cir.1985).
Central States argues that its withdrawal liability claim was incurred post-petition because the triggering event, PHE's complete withdrawal,8 occurred post-petition. There is some support for this position. See United Department Stores, 49 B.R. at 467 n. 8; and cf. In re Computerized Steel Fabricators, Inc., 40 B.R. 344, 12 B.C.D. (CRR) 72 (Bankr.S.D.N.Y.1984). In Computerized, the debtor ceased operations seven months after receiving a discharge under Chapter XI of the former Bankruptcy Act. The debtor's pension fund then asserted a claim for withdrawal liability. The debtor moved the bankruptcy court for contempt, arguing that any claim by the fund was discharged. Computerized, 40 B.R. at 346-47. The court held that "post-confirmation withdrawal liability . . . was neither provable nor dischargeable under the Bankruptcy Act . . ." Id. at 349. Because the "entire liability was triggered" post-confirmation when the debtor withdrew from the plan, ". . . discharge did not affect the debtor's post-confirmation withdrawal liability." Id. The court stated that "merely because the calculations of amounts in arriving at such liability include pre-petition and pre-confirmation factors does not mean that such liability should be regarded as having accrued either during a pre-petition or pre-confirmation...
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