In Re Marcal Paper Mills, Inc.
191 L.R.R.M. (BNA) 2373
| 3rd Cir. | 2011Background
- Marcal Paper Mills, Inc. filed Chapter 11 and operated as DIP, employing Teamsters Local 560 workers covered by TENJ Pension Fund.
- CBA and the TENJ Pension Fund remained in effect post-petition, requiring continued employee contributions and post-petition pension benefits.
- DIP Marcal contributed to the TENJ Pension Fund from Nov 30, 2006 to May 30, 2008; Marcal LLC acquired Marcal assets and assumed its liabilities on May 30, 2008.
- TENJ Pension Fund determined DIP Marcal made a complete withdrawal; it filed a claim for $5,890,128 as a post-petition administrative claim.
- Bankruptcy Court classified the entire withdrawal liability as general unsecured; District Court held post-petition portion is an administrative expense and remanded for apportionment calculation.
- Marcal LLC appeals, arguing withdrawal liability cannot be treated as administrative expense and cannot be apportionable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can withdrawal liability be apportioned between pre- and post-petition periods? | TENJ Pension Fund argues apportionment is appropriate based on post-petition work. | Marcal LLC contends liability is not divisible by period and is not solely tied to post-petition work. | Yes; withdrawal liability can be apportioned between pre- and post-petition periods. |
| Does the post-petition portion of withdrawal liability qualify as an administrative expense under the Bankruptcy Code? | Post-petition work confers a benefit to the estate, so related liability is administrative. | Withdrawal liability is a plan-wide obligation not specifically tied to post-petition services. | Yes; the post-petition portion can be classified as an administrative expense. |
Key Cases Cited
- Schering Plough Corp. ERISA Litig., 589 F.3d 585 (3d Cir. 2009) (ERISA context; explains defined benefit vs defined contribution and unfunded liabilities)
- In re McFarlin's, Inc., 789 F.2d 98 (2d Cir. 1986) (withdrawal liability funds benefits earned by employees; allocation considerations)
- In re O'Brien Envtl. Energy, Inc., 181 F.3d 527 (3d Cir. 1999) (administrative priority requires post-petition, actual and necessary costs)
- Howard Delivery Serv. v. Zurich Am. Ins. Co., 547 U.S. 651 (U.S. 2006) (priority of claims; stay-benefits and post-petition value considerations)
- In re Hechinger Inv. Co. of Del., 298 F.3d 219 (3d Cir. 2002) (stay-on benefits; apportionment where benefits relate to post-petition work)