11 F.4th 221
3rd Cir.2021Background
- Westinghouse filed Chapter 11 in March 2017; its plan was confirmed March 28, 2018 but did not become effective until August 1, 2018. The Plan set an Administrative Claims Bar Date 30 days after the Effective Date (August 31, 2018).
- Timothy Ellis was terminated May 31, 2018 (post-confirmation, pre-effective date), filed an EEOC charge in July 2018, but did not file a request for payment of an administrative expense in the New York Bankruptcy Court.
- Westinghouse notified creditors of the Administrative Claims Bar Date; Ellis admits receiving earlier notices but not the Effective Date/Administrative Claims notice.
- Ellis sued the reorganized Westinghouse in the W.D. Pa.; the district court held §503 does not authorize discharging post-confirmation administrative claims and that §1141 barred discharge, and certified questions for interlocutory appeal.
- The Third Circuit held Ellis’s employment-discrimination claim is an administrative expense under §503, that §503 authorizes setting/enforcing bar dates for administrative expenses (including post-confirmation/pre-effective claims), and that §1141(d)(1) is a default rule a plan/confirmation order can override—so unfiled claims can be discharged unless late filing is accepted for cause.
Issues
| Issue | Plaintiff's Argument (Ellis) | Defendant's Argument (Westinghouse) | Held |
|---|---|---|---|
| Whether an employment-discrimination claim arising post-confirmation but pre-effective date is an administrative expense under §503 | Ellis: Claim is a standalone tort/ADEA claim not governed by administrative expense rules | Westinghouse: Claim arose from employment relationship that benefitted the estate and qualifies as an administrative expense | Held: Claim is an "actual and necessary" administrative expense (Reading exception applies) |
| Whether §503 permits setting/enforcing bar dates for administrative expense claims, and discharging untimely ones | Ellis: §503 does not authorize a bar date that reaches post-confirmation claims; such claims cannot be discharged that way | Westinghouse: §503 authorizes courts to set bar dates for administrative expenses; failure to timely request payment can lead to discharge | Held: §503 authorizes bar dates for administrative expenses and bankruptcy courts may enforce them; untimely administrative claims face discharge (subject to due process and allowance for late filings for cause) |
| Whether §1141(d)(1) prohibits discharge of post-confirmation claims | Ellis: §1141 discharges debts that arose before confirmation only; thus post-confirmation debts cannot be discharged by plan/confirmation | Westinghouse: The Plan can provide for discharge of claims that arise before the estate ceases to exist (effective date); §1141(d)(1) is a default rule | Held: §1141(d)(1) is a default rule; the Plan and confirmation order may override it to discharge post-confirmation/pre-effective administrative expense claims |
Key Cases Cited
- Reading Co. v. Brown, 391 U.S. 471 (1968) (postpetition tort claims may qualify as "actual and necessary" administrative expenses)
- Sanchez v. Northwest Airlines, 659 F.3d 671 (8th Cir. 2011) (applied Reading to postpetition employment-discrimination claims)
- In re Zilog, 450 F.3d 996 (9th Cir. 2006) (discussed dischargeability of post-confirmation claims and remanded for proper process)
- In re Energy Future Holdings Corp., 949 F.3d 806 (3d Cir. 2020) (bar-date authority for claims in bankruptcy practice)
- Tenn. Student Assistance Corp. v. Hood, 541 U.S. 440 (2004) (creditors bound by bar dates even without participating)
- Holywell Corp. v. Smith, 503 U.S. 47 (1992) (distinguished—post-effective tax liability not discharged by plan)
- Eagle-Picher Indus., Inc. v. [Respondent], 447 F.3d 461 (6th Cir. 2006) (recognized that parties may establish administrative-claim bar dates)