642 B.R. 825
Bankr. S.D. Ill.2022Background
- Debtor Norrenberns Foods, Inc. (Subchapter V Chapter 11) operates one remaining grocery (Mascoutah, IL); prior store closures left substantial multi-employer pension withdrawal liabilities.
- United Food & Commercial Workers Unions and Employers Midwest Pension Fund (the Fund) filed an unsecured claim (~$4.77M) based largely on ERISA withdrawal liability.
- Debtor moved to sell substantially all grocery assets to Norrenberns Properties, LLC / Betty Ann Market, Inc. under an Asset Purchase Agreement and requested authority to sell "free and clear" under 11 U.S.C. § 363(f).
- Purchaser (a family member) testified he would not close the purchase unless successor liability claims were extinguished. Citizens Community Bank's secured claim was resolved by a $40,000 carve-out.
- The Fund objected, arguing the court lacks jurisdiction to enjoin successor-liability claims and § 363(f) cannot extinguish withdrawal/successor liability; the court held an evidentiary hearing and ruled the sale may be approved free and clear.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether successor-liability/withdrawal claims are an "interest in such property" under § 363(f) and thus extinguishable by a § 363(f) sale | Fund: Successor/withdrawal liability are not "interests" in the property and cannot be wiped out by a § 363(f) sale | Debtor: "Interest" is broad; successor claims arise from the assets and § 363(f)(5) permits sale free and clear because money satisfaction is possible | Court: Adopts broad interpretation (following Leckie/TWA); successor/withdrawal claims are "interests" and may be extinguished under § 363(f)(5) |
| Whether Zerand (and related Seventh Circuit authority) bars the court from enjoining successor-liability claims post-sale | Fund: Zerand shows bankruptcy court lacks jurisdiction to enjoin successor-liability actions after a § 363 sale | Debtor: Zerand is distinguishable (involved unknown future tort claimant and non-party); existing claimants at time of sale differ materially | Court: Distinguishes Zerand and Tasemkin; jurisdiction exists to authorize a § 363(f) sale that extinguishes existing successor claims |
Key Cases Cited
- In re Leckie Smokeless Coal Co., 99 F.3d 573 (4th Cir. 1996) (adopts expansive view that §363(f) can extinguish successor liability tied to debtor's assets)
- In re Trans World Airlines, Inc., 322 F.3d 283 (3d Cir. 2003) (applies Leckie reasoning; employment and voucher claims are "interests" extinguishable under §363(f))
- Precision Indus., Inc. v. Qualitech Steel SBQ, LLC, 327 F.3d 537 (7th Cir. 2003) (supports broad reading of "any interest" language in §363(f))
- Zerand-Bernal Group v. Cox, 23 F.3d 159 (7th Cir. 1994) (involved post-sale tort claim by non-party; court found limits on enjoining such suits and is distinguished here)
- Chi. Truck Drivers, Helpers & Warehouse Workers Union v. Tasemkin, Inc., 59 F.3d 48 (7th Cir. 1995) (not a §363(f) sale case and thus not controlling for §363(f) successor-liability issues)