In re USA United Fleet Inc.
496 B.R. 79
Bankr. E.D.N.Y.2013Background
- Debtors' assets were sold under 11 U.S.C. § 363(b) in joint Chapter 7 cases.
- DOL sought to apply the Debtors' prepetition unemployment experience rating to Reliant, the post-sale purchaser, to determine post-petition unemployment tax.
- Sale order permitted the assets to be transferred free and clear of interests that third parties may hold.
- DOL notified Reliant that its experience rating would be revised and then debited Reliant for past-due amounts.
- DOL contends the Court lacks jurisdiction under § 505(a)(1) and the Tax Injunction Act; Reliant argues the DOL’s rights transfer with the assets as an “interest” under § 363(f).
- Court determined it had jurisdiction to interpret and enforce the sale order and that DOL had an interest that could be extinguished by § 363(f).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court has jurisdiction to adjudicate the DOL’s rights post-sale | DOL contends lack of jurisdiction under § 505(a)(1) and the TIA | Reliant argues court has core jurisdiction under § 363(f) to extinguish interests | Court has subject-matter jurisdiction under § 363(f) and related authorities |
| Whether the DOL’s right to transfer the experience rating is an “interest in property” under § 363(f) | DOL asserts experience rating is a non-property, computational device | Reliant asserts it arises from property transferred and thus qualifies | DOL’s right is an interest in property extinguishable under § 363(f) |
| Whether the DOL’s interest was extinguished by the sale order | N/A | Sale order free and clear applies to interests including the DOL’s | Yes; interest extinguished by the sale order pursuant to § 363(f) |
| Whether precedents limit § 363(f) to liens or permit broader “interests” | DOL relies on narrower readings (e.g., Wolverine) | Cases like Chrysler, GM support broader interpretation of interests | Broad interpretation of “interest in property” applies under § 363(f) |
Key Cases Cited
- Travelers Indem. Co. v. Bailey, 557 U.S. 137 (U.S. 2009) (court's treatment of collateral attack on sale orders; core bankruptcy jurisdiction)
- In re Motors Liquidation Co., 428 B.R. 43 (S.D.N.Y.2010) (corollary jurisdiction to interpret and enforce sale orders)
- In re Chrysler LLC, 576 F.3d 108 (2d Cir. (cir. 2009)) (broadly defined “interests in property” to include claims arising from property being sold)
- GM, General Motors Corp., 407 B.R. 463 (S.D.N.Y. 2009) (support for expansive § 363(f) reach to successor liability claims)
- Leckie Smokeless Coal Co., 99 F.3d 573 (4th Cir. 1996) (illustrates interest arises from property use; supports broader view of § 363(f))
- WBQ P’ship v. Va. Dep’t of Med. Assistance Servs., 189 B.R. 97 (Bankr.E.D.Va. 1995) (right to recapture depreciation runs with the property; interest concept broader than claims)
- Hechinger Inv. Co. of Del., 335 F.3d 243 (3d Cir. 2003) (TIA does not bar enforcement of bankruptcy provisions affecting state taxes)