Timothy Ellis v. Westinghouse Electric CO, LLC.
- Summarized by Michael Myers , Ballard Spahr LLP
- 1 year 6 months ago
- Case Type:
- Case Status:
- 20-2867 (3rd Circuit, Aug 30,2021) Published
- The Third Circuit Court of Appeals, reversing the U.S. District Court, held that an individual creditor's post-confirmation, pre-effective date administrative expense claim was bound by the terms of the confirmed plan, which provided that administrative expense claims must be filed within thirty days of the plan's effective date. The creditor's administrative expense claim--based on his employment discrimination claim that arose after being terminated post-confirmation--would be barred unless he can demonstrate "cause" to file a tardy claim with the bankruptcy court.
- Procedural context:
- A former employee filed an employment discrimination lawsuit in the U.S. District Court for the Western District of Pennsylvania based on a claim arising from his termination from Westinghouse Electric Company, LLC between the confirmation of Westinghouse's plan and the effective date of the plan. The case was stayed pending administrative review until July 2019 when Westinghouse filed a motion for summary judgment arguing that Ellis's claim was discharged based on the confirmed plan's administrative claims bar date. The District Court denied the motion for summary judgment, holding that section 503 of the Bankruptcy Code does not authorize the use of a bar date to discharge post-confirmation administrative expense claims and that section 1141(d) prohibits the discharge of post-confirmation claims. The District Circuit certified an interlocutory appeal of these issues to the Third Circuit Court of Appeals.
- Westinghouse Electric Company, LLC filed for chapter 11 bankruptcy in March 2017 in the Southern District of New York. The bankruptcy court set September 1, 2017 as the general bar date for pre-petition claims. The bankruptcy court confirmed debtor Westinghouse's chapter 11 plan on March 28, 2018. The confirmed plan defined administrative expense claims to include claims through the effective date and provided an administrative claims bar date of the first business day that is 30 days after the effective date. The plan also provided that administrative claims filed after the bar date would be discharged.
The confirmed plan became effective on August 1, 2018 such that administrative expense claims were to be filed no later than August 31, 2018. Between the March 28, 2018 confirmation date and the August 31, 2018 effective date, Westinghouse terminated employee Timothy Ellis. According to Westinghouse, Ellis was served with three notices: the first for the general bar date, the second for the plan objection and voting deadlines, and the third for the effective date notice which included the administrative claims bar date. Ellis admitted receiving the first two notices but did not admit receiving the third regarding effective date and administrative claims bar date.
Ellis filed a charge with the Equal Employment Opportunity Commission in July 2018, and then in October 2018 filed suit against the reorganized Westinghouse in the U.S. District Court for the Western District of Pennsylvania. The Third Circuit, reversing the District Court, held that sections 503 and 1141(d) allows a confirmed chapter 11 plan to provide for a discharge of post-confirmation, pre-effective date administrative claims even though the default rule under section 1141(d) (should the plan be silent) is that the discharge applies only to claims arising prior to confirmation.
- AMBRO, GREENAWAY, JR., and BIBAS
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