W. T. Grant Co., In re
| Citation | 620 F.2d 319 |
| Decision Date | 14 March 1980 |
| Docket Number | 716,D,Nos. 525,s. 525 |
| Parties | Bankr. L. Rep. P 67,325, Bankr. L. Rep. P 67,342 In re W. T. GRANT COMPANY, Bankrupt. Charles G. RODMAN, as Trustee of the Estate of W. T. Grant Company, Bankrupt, and Morgan Guaranty Trust Company of New York, Appellants, v. Alton RINIER, as Agent for Certain Employees of Bankrupt, Answering Employees of Bankrupt, Local 807-IBT, Retail Clerks International Association, National Labor Relations Board, Appellees. ockets 79-5046, 79-5047. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
Harvey R. Miller, New York City (Richard P. Krasnow, and Weil, Gotshal & Manges, New York City, on the brief), for appellant Rodman.
Philip C. Potter, Jr., New York City (Ogden N. Lewis, Donald S. Bernstein, and Davis, Polk & Wardwell, New York City, on the brief), for appellant Morgan Guaranty Trust Company.
Chester B. Salomon, New York City (Salomon & Thal, New York City, on the brief), for appellee Rinier.
Earl Barrison, New York City (George Natanson, and Reich, Rosen, Barrison & Felzen, New York City, on the brief), for appellees Answering Employees.
Sheldon Engelhard, New York City (Irwin Bluestein, Richard S. Corenthal, and Vladeck, Elias, Vladeck & Engelhard, New York City, on the brief), for appellee Retail Clerks International Association.
Michael D. Stein, Atty., N.L.R.B., Washington, D.C. (Norton J. Come, Acting Gen. Counsel, Aileen A. Armstrong, Asst. Gen. Counsel for Special Litigation, John E. Higgins, Jr., Deputy Gen. Counsel, Robert E. Allen, Acting Associate Gen. Counsel, Elliott Moore, Deputy Associate Gen. Counsel, N.L.R.B., Washington, D.C., on the brief), for appellee National Labor Relations Board.
Before TIMBERS and MESKILL, Circuit Judges, and MacMAHON, District Judge. *
We affirmed by our memorandum order entered January 3, 1980 the judgment of the district court in this case. The National Labor Relations Board thereafter requested that we publish our decision. In accordance with our practice in appropriate cases of publishing previously unpublished decisions or orders of this Court, Braunstein v. Eastern Photographic Laboratories, Inc., 600 F.2d 335 (2 Cir.) (per curiam), cert. denied, 441 U.S. 944 (1979); Continental Stock Transfer and Trust Co. v. SEC, 566 F.2d 373, 374 n.1 (2 Cir. 1977) (per curiam), we now publish the following opinion in the instant case which incorporates in substance our memorandum order of January 3, 1980.
This appeal arises from the severance pay claims of more than 32,000 former employees of W. T. Grant Co., which, having filed a Chapter XI petition for an arrangement on October 2, 1975, was adjudicated a bankrupt on April 13, 1976. We find the dispositive questions on appeal to be (1) whether Grant, as debtor-in-possession, rejected the executory contracts of its employees, and (2) whether the severance pay claims arising from those contracts are entitled to first priority as costs and expenses of administration.
We answer the first question in the negative. Under "the decisions in this Circuit . . . an executory contract is binding on the debtor in possession if it receives benefits under it." In re Unishops, Inc., 553 F.2d 305, 309 (2 Cir. 1977) (Medina, J.). Here, Grant received benefits under the contracts by permitting the workers to continue in its employ after it entered Chapter XI. As the district court stated, Grant secured 474 F.Supp. at 793.
The Trustee argues that Grant rejected the executory contracts by posting notices in its stores that it was discontinuing the severance pay benefits. We agree with the bankruptcy and district courts, however, that only a formal rejection pursuant to § 313(1) of the Bankruptcy Act, 11 U.S.C. § 713(1) (1976), is sufficient to disaffirm an executory contract. In re Unishops, Inc., supra, 553 F.2d at 308.
Turning to the second question before us, we reaffirm and adhere to our decision in Straus-Duparquet, Inc. v. Local Union No. 3 International Brotherhood of Electrical Workers, 386 F.2d 649 (2 Cir. 1967), and hold that the entire portion of the employees' severance pay claims is entitled to first priority as costs and expenses of administration.
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