Sanchez v. Nw. Airlines Inc.

• Decision Date: 14 October 2011
• Docket Number: No. 10–2393.,10–2393.
• Parties: Carlos SANCHEZ, Appellant,v.NORTHWEST AIRLINES, INC., aka NWA, a domestic corporation; Delta Air Lines, Inc., a foreign corporation doing business in Minnesota, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

659 F.3d 671

55 Bankr.Ct.Dec. 145

25 A.D. Cases 417

Carlos SANCHEZ, Appellant,

v.NORTHWEST AIRLINES, INC., aka NWA, a domestic corporation; Delta Air Lines, Inc., a foreign corporation doing business in Minnesota, Appellees.

No. 10–2393.

United States Court of Appeals, Eighth Circuit.

Submitted: Feb. 17, 2011.Filed: Oct. 14, 2011.

Dorene R. Sarnoski, argued, Minneapolis, MN, for appellant.Timothy Robert Thornton, argued, Molly B. Thornton, on the brief, Minneapolis, MN, for appellee.Before WOLLMAN and BYE, Circuit Judges, and FLEISSIG,¹ District Judge.BYE, Circuit Judge.

Carlos Sanchez brought a claim under the Americans with Disabilities Act (“ADA”), 42 U.S.C. §§ 12101–12213, alleging his employer, Northwest Airlines, Inc. (“Northwest”), engaged in prohibited disability discrimination by rescinding Sanchez's offer of promotion on the basis of his perceived physical limitations. Northwest moved for summary judgment contending, in part, that Sanchez's claim was discharged in the company's Chapter 11 bankruptcy, which had concluded two months after rescission of Sanchez's offer. Siding with Northwest, the district court held Sanchez's ADA claim was discharged by virtue of his failure to submit a request for payment by July 30, 2007, the bar date for the majority of administrative expense claims. Because Sanchez was not required to file a request for payment of an administrative expense at all, we reverse the judgment in favor of Northwest and remand for further proceedings.

I

Sanchez has been employed with Northwest for the past twenty years. Since 1994, he worked as an equipment service employee (ESE) alternating between the Minneapolis–St. Paul and the Honolulu International Airport. The position required Sanchez and other ESEs to handle luggage and cargo; clean both the interior and the exterior of the airplanes, ramp equipment, and other airport facilities; service the aircraft and automotive equipment with fuel and oil; and perform a variety of other tasks associated with servicing aircrafts and airport facilities.

As a result of a work-related injury sustained in 2001, Sanchez had to undergo a knee replacement surgery two years later. Following the 2003 surgery, Sanchez returned to work with some restrictions. Among them were restrictions on squatting, crawling, or ladder climbing documented in a functional capacity evaluation conducted at Northwest's insistence and verified by Sanchez's personal physician, Dr. Calvin Oishi. In addition, Dr. Oishi placed Sanchez on a permanent restriction against lifting more than seventy-five pounds. As Sanchez recuperated, Dr. Oishi revised the scope of Sanchez's work restrictions, relaxing the initial prohibition on ladder climbing and crawling on one occasion in response to Northwest's inquiry.

In January 2007, Sanchez was selected for a position as a Lead ESE at the Honolulu airport. The job included a significant supervisory component consisting of assigning, leading, and directing the work of ESE crews, but also required performance of regular ESE duties as necessary. Although Sanchez denies having requested any accommodations in connection with his new or, for that matter, previous position, Northwest initiated an “accommodation assessment” of his physical limitations out of concern that “permanent work-related restrictions previously placed on [Sanchez] may impact [his] ability to perform certain essential functions of this particular position as a Lead ESE at HNL.” Appellant App'x at 98. On the basis of this assessment, conducted by telephone, Northwest rejected Sanchez's “request” to absolve him from the responsibilities of loading and unloading luggage from inside the aircraft bins. On March 30, 2007, Northwest officially rescinded Sanchez's offer of employment as a Lead ESE.

After exhausting his intra-union grievances and administrative remedies with the Equal Employment Opportunity Commission, Sanchez received a right-to-sue letter on August 15, 2007, and filed the present action on November 13, 2008. Meanwhile, Northwest had emerged from a Chapter 11 bankruptcy less than a year earlier. Together with its parent corporation and certain subsidiaries, Northwest requested bankruptcy protection under Chapter 11 from the United States Bankruptcy Court for the Southern District of New York on September 14, 2005. The company's creditors were given until August 16, 2006, to file regular proofs of claim. On May 18, 2007, the bankruptcy court entered an order confirming Northwest's plan of reorganization effective May 31, 2007. At the same time the reorganization plan went into effect, the court approved the Notice of Bar Date of July 30, 2007, for the Filing of Administrative Expense Claims.

The notice defined administrative expenses as

any right to payment, whether secured or unsecured, constituting a cost or expense of administration of any of the chapter 11 cases under sections 330, 503(b), 507(a)(1) and 1114(e) of the Bankruptcy Code, including, without limitation, any actual and necessary costs and expenses of preserving the Debtors' estates, any actual and necessary costs and expenses of operating the Debtors' businesses, any indebtedness or obligations incurred or assumed by the Debtors, as debtors in possession, during the chapter 11 cases including, without limitation, for the acquisition or lease of property or an interest in property or the rendition of services, and any allowance of compensation and reimbursement of expenses....

Appellant Br. Addendum 3. Excluded from the duty to file a request for payment were five groups of administrative expenses, including “[l]iabilities incurred in the ordinary course of business by the Debtors.”

Northwest mailed the notice of the administrative expenses bar date to its creditors and all of its employees between June 1 and June 4, 2007. With respect to Sanchez specifically, Northwest presented the Affidavits of Mailing documenting the mailing of the relevant bankruptcy notices to Sanchez's address in Hawaii. Although Sanchez acknowledges receipt of the initial notice of Northwest's bankruptcy filing, he denies receiving any other correspondence concerning the bankruptcy.

Having focused the parties' briefs at the summary judgment stage on the issue of bankruptcy discharge, the district court concluded Sanchez's failure to submit a request for payment by the administrative expenses deadline resulted in the discharge of his claim. In the present appeal, Sanchez argues he did not receive an adequate notice of the relevant bankruptcy deadlines so as to suffer the discharge of his claim. He also takes issue with the district court's characterization of his claim as an administrative expense; the court's reliance on McSherry v. Trans World Airlines, Inc., 81 F.3d 739 (8th Cir.1996), to justify the finding of the discharge; and the court's denial of equitable relief.

II

“The principal purpose of the Bankruptcy Code is to grant a fresh start to the honest but unfortunate debtor.” Marrama v. Citizens Bank of Mass., 549 U.S. 365, 367, 127 S.Ct. 1105, 166 L.Ed.2d 956 (2007) (citation and internal quotation marks omitted). With respect to Chapter 11 reorganization in particular, the objective is “to restructure a business's finances so that it may continue to operate, provide its employees with jobs, pay its creditors, and produce a return for its stockholders.” In re Cedar Shore Resort, Inc., 235 F.3d 375, 379 (8th Cir.2000); Fla. Dep't of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33, 51, 128 S.Ct. 2326, 171 L.Ed.2d 203 (2008) (Chapter 11 bankruptcy “strikes a balance between a debtor's interest in reorganizing and restructuring its debts and the creditors' interest in maximizing the value of the bankruptcy estate”). Once the plan of reorganization is confirmed, it “binds each of the creditors and parties in interest, leaves the property with the debtor free of claims and interests, and effects a discharge of the unpaid portion of debts.” Richard I. Aaron, Bankruptcy Law Fundamentals, § 1:9 (citing 11 U.S.C. § 1141(d)(1)(A)).

A

Generally, the bankruptcy court's entry of the confirmation order “discharges all debts arising prior to the date of confirmation.” U.S. Commodity Futures Trading Comm'n v. NRG Energy, Inc., 457 F.3d 776, 779 (8th Cir.2006). Under the Bankruptcy Code, a “debt” means “liability on a claim.” 11 U.S.C. § 101(12). The term “claim” is, in turn, defined broadly, Johnson v. Home State Bank, 501 U.S. 78, 83, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991), and includes a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” 11 U.S.C. § 101(5)(A). In McSherry v. Trans World Airlines, Inc., this court held a cause of action that accrues prior to the confirmation of the plan constitutes a “claim” dischargeable upon confirmation even if it lacks some jurisdictional prerequisite for proceeding in court, like exhaustion. 81 F.3d at 741 (employee's cause of action under the ADA constituted a “claim” under § 101(5)(A) of the Bankruptcy Code where employee was terminated and his legal claim therefore accrued prior to confirmation, even though he did not yet receive a right-to-sue letter and could not therefore proceed in court). By analogy, Sanchez's cause of action, which had accrued but had not been fully exhausted prior to the confirmation of Northwest's reorganization plan on May 31, 2007, matured into a “claim” within the meaning of § 101(5)(A) at the time Northwest rescinded his promotion on March 31, 2007.

Nevertheless, McSherry does not compel the conclusion that Sanchez's claim was discharged upon confirmation. The operation of the Bankruptcy Code, including its discharge provisions, is subject to due process constraints. Ginsberg v. Lindel, 107 F.2d 721, 726 (8th Cir.1939); Broomall Indus., Inc. v. Data Design Logic Sys., Inc., 786 F.2d 401, 403 (Fe...