Parks v. Dittmar (In Re Dittmar)

Jacqueline and In re Michael E. Lowe DITTMAR, Flowers-Lowe, Debtor. Debtors. William E. In re Marc Trustee, Appellant, Parks, Davis, Trustee, Appellant, Linda S. B. Carl

v. v. Dittmar, Appellee. Marc William Jacqueline E. Lowe and Michael Flowers-Lowe, Appellees. E. Little, Debtor. A. In re Patricia KS-08-003, KS-08-002, KS- BAP Nos. Trustee, Parks, Appellant, Linda S. KS-08-006, KS-08-005, 08-004, KS- v. KS-08-008, 08-007, KS-08-009. 05-17094, 05-15334, Bankruptcy Nos. Little, Appellee. A. Patricia 05-17430, 05-15333, 05-16951, 05- Larry Donna E. Letourneau and In re 05-16484, 05-14936. Letourneau, Debtors. M. Panel Bankruptcy Appellate United States Trustee, Parks, Appellant, Linda S. Tenth Circuit. for the v. July Larry and Donna E. Letourneau Letourneau, Appellees.

M. Earl Denton In re Forest Denton, Ann Germaine Debtors. Parks, Trustee, Appellant, Linda S.

v. Earl Denton and Germaine Forest Denton, Appellees. Ann Hulse, Earl Debtor. In re John Parks, Trustee, Appellant, Linda S.

v. Hulse, Appellee. Earl John Murphy Ricky and Denise A. Murphy, Debtors. L. Parks, Trustee, Appellant, Linda S.

v. Ricky Murphy Denise A. Murphy, Appellees.

L. Cynthia My Nguyen, Debtor. Trustee, Parks, Appellant, Linda S. My Nguyen, Appellee. Cynthia Hite, Fanning &

Gaye B. Tibbets KS, L.L.P., Wichita, Appel- for Honeyman, Parks, Trustee. lant Linda S. Kansas, Wichita, Ap- Riley,

Don W. Dittmar. pellee Marc William (KS-08-003, on the briefs Submitted KS-08-005, KS-08-006, KS-08-004, KS- KS-08-009): KS-08-008, 08-007, and LLP, Dewey & Lund J. Lund of David Kansas, Wichita, Appellees Patricia A. for Denton, Little, A. E. and Germaine Forest Denton. Michael J. of J. Studtmann

Michael Wichita, KS, Studtmann, P.A., Appel- for Donna M. E. and Larry lees Letourneau Letourneau. briefs) (on of Gra- L. Hiebert

David KS, Link, Wichita, Hiebert, Gray & gert, Earl Appellee John Hulse. for (on D. Kiefer B. Davis and Mark Carl L.L.C., briefs) Jack, Wich- of Davis & Davis, KS, B. Trus- ita, Appellant for Carl tee. F. and Elaine Winter

Ryan Hodge E. briefs) Associates, (on Ray Hodge & of Wichita, KS, L.L.C., Appellees Michael Flowers-Lowe. Jacqueline Lowe and E. E. BROWN, BOHANON, Before WEAVER1, Judges. Bankruptcy

OPINION

BOHANON, Judge. Bankruptcy S. and Carl B. Linda Parks Appellants Trustees”) (“the the bank- appeal Davis order summary judgment ruptcy court’s and stock cash holding post-petition by the debtors received distributions proper- are employment their through II U.S.C. estates under the debtors’ ty of Weaver, of Okla- District ruptcy for the Western Court Michael United Thomas Honorable homa, sitting by designation. Judge, Bank- Bankruptcy United States States reasons, 541.2 For the following we AF- court’s Findings detailed Fact and Con- FIRM. clusions of Law and will not repeated except

here as necessary to discuss the 1. Jurisdiction legal arguments appeal.6 jurisdiction

This Court has to hear time- employees Debtors former of The ly filed appeals judgments, from “final Boeing or- Company (“Boeing”) who became ders, employees Spirit decrees” courts Aerosystems, Inc. Circuit, within the (“Spirit”) Tenth unless one on June the date parties elects to have the acquired Boeing’s district court plant. Wichita At the hear appeal.3 sale, time court’s Debtors’ Unions ratified a judgment is a final subject (“CBA”) order to appeal collective bargaining agreement 158(a)(1). under 28 U.S.C. with Appel- Spirit.7 CBA, The Under Spirit the lants timely filed their appeal.4 agreed notices of to establish an equity participation No party (“EPP”) elected have this appeal program heard for union-represented by the United States District Court for the employees, and stock apprecia- contribute Kansas, District of thus consenting rights to re- tion program. the Upon the by view this Court. events, occurrence of certain certain em-

ployees eligible were to receive distribu- II. Standard Review tions anticipated, under the yet but not formed EPP.

We review de novo the bankruptcy legal court’s post- determination While each Debtor has a different filing petition date, property distributions were not each of the Debtors filed their bank- the Debtors’ estates under ruptcy 17, 2005, U.S.C. cases before October after § 541.5 ratified, the CBA was but before the EPP

was created.8 III. The Bankruptcy Facts and the 27, 2006, On October Spirit created the Holding Court’s EPP and issued stock appreciation rights complete

The facts (“SARS”) underlying ap- this to vest upon public an initial peal fully are set out in (“IPO”) the bankruptcy or offering other trigger- defined 2. Carl B. is the 158(a)(1), Davis trustee in (b)(1), BAP Case No. (c)(1); 28 U.S.C. and KS-08-009. Linda S. Parks is the trustee Fed. R. Bankr.P. 8002. remaining cases. For ease of reference in 8002(a). 4. Fed. R. Bankr.P. opinion, any position this jointly by shared trustee Linda Parks and trustee Carl Davis Wise, In re Cir. shall be referred to as "the Trustees." The 2003). BAP appeals debtors in all the are referred to as Lowe, (Bankr.D.Kan. 380 B.R. 251 "the Debtors.” References to "Unions” are 2007). to the International Association of Machinists Aerospace ("IAM”) and Workers or the Inter- ratified, 7. Two CBAs by were one the IAM national Brotherhood of Electrical Workers and the other they IBEW. Since are ("IBEW”); represented or the one other identical, substantively reference, for ease of during negotiations debtors with their em- they will be singular referred in the as the ployer. Appendix The submitted BAP No. "CBA.” KS-08-009 Appx.” will referred as "Davis Appendices The submitted in BAP No. KS- 8. October 2005 is the effective date of the through -008 will be referred as "Parks Bankruptcy Abuse Prevention and Consumer Appx.” Protection Act of 2005. turnover of the distribu- em- tees’ motions EPP identified which The ing event. in the tions. participate eligible ployees were

EPP: bankruptcy On December par- eligible are employees who (the opinion a memorandum court issued hourly those in the Plan are

ticipate Order”) Debtors’ mo- granting “Appealed (a) repre- who employees judgment denying summary tion for were by one of Unions sented motion, the distribu- finding trustees’ while by one of the Unions represented tions were not (b) em- Spirit, are former employed by court, relying estate.12 The who Boeing Company ployees of law, that the CBA upon Kansas state held (I) by Spirit on employed either became an grant not the Debtors enforceable did (ii) Date, or Closing day after the in the distribution because did right approved leave of absence were on have clearly employees define which would employed Closing Date and became “partici- under the EPP. The term immediately upon conclusion by Spirit until employees” was not defined pating (c) leave, employed were such EPP in creation of the post-petition (90) ninety for at least consecutive Spirit Thus, EPP was until the October 2006. commencing on days during period the created, right to the SARS an enforceable Date, and end- Closing the day the after result, bankruptcy the not exist. As a did 31, 2005.9 ing on December rights to the the distribu- court concluded completed Spirit the be- property November were of estate On tions rights to the employees’ the document prepetition the and there was no IPO cause made to were establishing vested. Distributions that these Debt- agreement SARS or 2006, March in December and eligi- debtors qualify participating the would ors received a cash distribution 2007. Debtors future having contingent, employees ble $34,556 December of around EPP. interest the under I,034 A common Spirit of Class shares IV. Discussion 15, 2007.

stock around March bankruptcy claim that the The Trustees payment of distribu- Following Spirit’s the concluding that Debtors’ court erred in Debtors, mo- Trustees filed the tions to the property are not rights to the SARS re- of all distributions tions for turnover gist § The Trus- under estate they were contending Spirit, ceived from court bankruptcy appeal is that tees’ under 11 U.S.C. the estates property of contract law erroneously applied state and, objected, after The Debtors 541.10 CBA, disregarded fed- construing bankruptcy court hearing, entered recog- law that bargaining eral collective turnover the dis- denying interim order agreements oral at nizes and enforces order followed. pretrial A tributions.11 The Trustees claim bargaining table. mo- parties filed discovery, various After orally agreed the CBA had on the Trus- summary judgment tions for 3, 3.01, Equity Made Under Partic Appx. butions to in Davis at Debtors 9. EPP Order”), ("Interim in Davis ipation Program noted, statutory all otherwise future 10. Unless Appx. at 63-78. Bank- are to Title 11 of the Federal references ruptcy of 1978. Reform Act (Bankr.D.Kan. Lowe, 380 B.R. 251 12. In 2007). Chapter 7 Trustees’ Mo Order on Interim Aerosystems’ Distri tions Turnover at the bargaining table which employees State law defines and creates eligible were property receive the distributions in interests.15 property Once rights law, June determined under state federal bankruptcy law establishes the extent to bankruptcy analysis court’s was which the property interest based on its belief that Kansas law re A “legal estate.16 interest” quires the Debtors to be expressly identi is an recognized by interest An law.17 fied as third-party beneficiaries in order to “equitable interest” is an interest held provision enforce a of the CBA. Because virtue of an equitable title or claimed on the Debtors’ interest in the property must equitable grounds, such as the interest exist as of case, the commencement of the held a trust beneficiary.18 the bankruptcy court focused its attention at issue are contrac on agreement which clearly expressed tually-based, state-created; than rather these Debtors qualify would as participat thus resolution of this requires case inter ing employees. The bankruptcy court’s pretation of the CBA and EPP. The deter analysis is flawed for two First, reasons. minative issue is whether the Debtors had court’s reliance on the an enforceable right the distribution Kansas Stovall case is misplaced.13 Sto they when filed respective petitions. their vall is distinguishable because does not A leading provides: treatise Second, involve a CBA. focusing While federal governs labor law issue of who is eligible to receive the dis enforcement of collective bargaining presumes tributions rights/inter that the agreements, traditional principles of granted ests under the are of CBA/EPP contract law frequently apply. Conse- the may kind that be included “property quently, the enforcement of collective of the estate.” bargaining agreements governed by traditional rules governing the enforce- begin We analysis by our review ability and interpretation contracts, of so ing the granted by interest the CBA/EPP. long as application their does conflict 541(a)(1) Section defines property the of with federal policy. However, labor estate “all legal equitable as or of interests since a bargaining “collective agreement the debtor in property as of the com is not an ordinary contract for pur- the mencement of the case.” The purpose of goods services, chase and nor is it 541(a) is to bring anything of value that governed by the same old common-law the debtors have into the estate. Courts concepts, which control such private con- have construed the term “property” broad tracts,” not all concepts common-law are ly and “an interest is not outside its reach applied to exists; determine if a contract because it is novel contingent or thus, or be for example, a stipulation under enjoyment cause postponed.”14 must be which employer agreed by to abide Lowe, 380 (citing Wise, B.R. at 257 State ex. rel. (10th 1241-42 Co., Stovall v. Reliance Ins. 278 Kan. Cir.2003). 107 (2005)). P.3d 1230-31 Dictionary Ed.2001). Black's Law 816 Rochelle, Segal 382 U.S. example, For agreements or contracts are en- (1966). S.Ct. 15 L.Ed.2d 428 at forceable law. States, 48, 54-55, 15. Butner v. United 440 U.S. (1979). S.Ct. L.Ed.2d 18. Id. (“IPO”) (3) of the public offering an initial be- bargaining agreement any collective interpreted court associ- stock. The employers’ and an a union tween these Debt- provision simply giving for lack of consid- this was not invalid ation hope, anticipation, expectation ors the eration.19 event, triggering in the event of a of col- interpretation The basic canons they profits, receive a share of the would (1) the bargaining agreements lective stating: whole, every and be read as writing will reference to interpreted with part will First, in- appear these cases do not (2) whole, give possible will if the court Indeed, options. eligible volve stock instrument, and an parts all effect to option did not receive an employees a reasonable gives which interpretation them; rather, upon the be exercised pre- will be meaning provisions to all its the EPP appreciation effective date of portion leaves a ferred to one which appreciation were issued. The (3) the inexplicable, writing useless or upon eligible not confer rights did form try put into concrete court must any ownership stock employees were, not intentions of the what the stock. If and right purchase or the say the words but to by slavishly following price yielded when the IPO stock ex- underlying purpose was as what the price, appre- excess of the threshold (4) used, language pressed into rights would be converted ciation meaning seek to ascertain court should pay- to receive a distribution right agreement not bargaining a collective eligible employees in cash and able to by the language used only by viewing the They “option” per had no se and stock. bargaining agree- parties to the collective any steps have to take to “exer- did not ment, by considering parties’ but also option. cise” the In oth- practices. past interpretations Second, important and far more words, in a collective bar- interpreting er today’s the record shows purposes, the fundamental can- gaining agreement, nor the EPP existed neither the IPO require that interpretation of contract ons cases. these debtors filed their the time plain lan- a court not examine the EPP was All the debtors had before abstract, but in the guage of the contract 27, 2006 was the executed on October to and effectuate the that it seek ascertain in that hope, anticipation, expectation or intent, by the con- as evidenced parties’ IPO, they an would receive the event of cir- surrounding and the purpose tract’s That is the profits. a of the share cumstances.20 interest contingent” or [“] “future” in the The were first referenced SARS from the CBA terms. glean Court can both the IAM and IBEW CBA. Under Here, expectations, debtors’ CBA, ... these Spirit agreed to es-

versions of the or possibility on the any, if were based provide EPP that would tablish an sale, might merger, or IPO hope that employees participate represented The during the term of the CBA. occur by Spirit percent on ten profit earned over no control whatever employees three had upon one of its initial common stock because the (1) might if that occur by its inves- when or a substantial sale events: sell, publicly offer (2) merge, or tors; merger; or decision change of control Contracts, Lord, § Id. 55:20. 19. 20 Richard A. Williston (foot- 2009) updated May ed. 55:54 omitted). part employment on his on date almost six plan specifically that provided bonus that "a filing petition, months after debtor had to Participant will any have any not interest in perform job satisfactorily his eligible to be to distributed.”). Award until it is See also Eliz all, receive a bonus at and debtor was not Tsai, Annotation, abeth T. Employer’s entitled to receive Effect of until bonus executive chief Determination, Discretionary Generally, 43 employer officer of made such a determina- (1972 (collec § A.L.R.3d Supp.2009) tion.); (E.D.Mich. Sharp Dery, B.R. 204 tion holding employer’s of cases promise 2000) (No to portion employee bonus that pay a bonus was not held enforceable in Chapter 7 view employer, debtor’s in exercise of its employer’s discretion, right reservation of the to paid sole postpetition and declared amount, control the rate estate,” or or was to withhold included in "property of the discretion). payment, at his eligibility where for bonus was conditioned upon postpetition debtor’s employ- continued ment, 3, 3.01, and debtor had § enforceable no claim to 23.EPP at Appx. in Davis at 57. any completed. tion until the IPO was When ownership

legal or beneficial filed, they bankruptcy petitions their were company.]”24 in the [stock not have sued to recover the distri- could in EPP Date is defined the The Effective Accordingly, we AFFIRM on this bution. execution, October of its as the date ground.28 alternative Thus, Appre- issue the Spirit had to day. Rights on that ciation V. Conclusion appreciation 4.07 states Section Having carefully parties’ reviewed the nonassign- and

rights are non-transferable record, law, briefs, applicable we Appre- that the 4.02 states able.25 Section AFFIRM for the reasons stated above. Rights vest on the Measurement ciation Date defined Measurement Date.26 The BROWN, Bankruptcy Judge, dissenting. IPO, was closing date of the which as the 4.01, 2006.27 Pursuant to November respectfully ap- I dissent. I believe Appreciation Rights became only when the in analysis apply this case is propriate they converted into would vested (1) whether the Debtors to determine: of the net to receive a distribution right rights to the acquired contingent SARS Thus, eligible an the IPO. proceeds of CBAs; prepetition distributions under or the under the CBA employee, whether (2) and, so, if whether the distributions EPP, to receive a distribution right had no based, in part, prepet- at least on the were completed. until the IPO was employment legal of Debtors. The ition CBAs, in- including Debtors’ effect of the bankrupt if the summary, even thereunder, must be determined terests (1) Kansas relying upon erred cy court gov- law with federal common accordance (2) CBA, interpret contract law law. erning contracts and not state labor (3) lim unambiguous, and finding the CBA law, I the EPP determine Applying iting analysis plain language to the its ambiguous, provisions of the CBAs to be CBA, we would affirm the an issue of fact thereby creating that the Debtors’ court’s conclusion summary been resolved on should have are not of the es to the SARS I would therefore reverse judgment. for filing At the time of the Debtors’ tate. court to allow the remand to to the was bankruptcy, right their SARS evidence. hear extrinsic expectancy that did not rise merely equitable interest. legal the level of a or Background I. IPO, consummated the Until majority, the timeline interest As noted legal equitable

Debtors had no pre- two ratified this case involves CBAs SARS distributions. The Debtors representing Debtors. petition by Unions not entitled to receive distribu- were “ 3, 4.01, to affirm a Appx. appellate court is 'free at 57. 28.An Id. at in Davis grounds district court decision on Appx. at Order at in Davis 25. See Interim permit there is a record sufficient which appellate record contains limit- 68. The law, grounds not relied even conclusions excerpts of the CBA and EPP. Sections ” ed Colo., upon by Griess v. the district court.' us, provided but were not to 4.02 and 4.07 1042, (10th Cir.1988) (quoting 841 F.2d they in the Interim Order. were mentioned Ward, Motors, Inc. v. Alfaro Sandoval, Cir.1987)); (2d United States Id. 26. (10th Cir.1994). F.3d 542 n. 6 27. Id. ratification, leading up public the months to initial offering of the common Spirit engaged bargaining in collective ne- stock.1

gotiations with the Unions. One of the The CBA for the IAM stated: negotiated Spirit’s items was offer to es- parties agree The equity to establish an employ- tablish the EPP for current Union participation program for I.AM.-repre- ees, employees which would entitle those employees Spirit sented Aerosystems, Spirit receive cash or stock in event Inc. appreciation rights Stock will be IPO, sale, completed an merger, subject or program to the representing contributed to certain conditions. The terms of the profit opportunity a on 10% of the initial proposed EPP were in a described slide common stock of parent Mid-Western’s presentation show prepared by Spirit, to company. program The will be able explaining assist the Unions in the terms participating distribute to employees EPP of the to their in prepara- members cash common stock following a sub- investors, tion the Unions’ vote on stantial proposed sale the Onex change merger, CBAs. of control or an initial public offering of the common stock.2 By the end of June both Unions Shortly CBAs, after ratification of the ratified Spirit. had new CBAs with For all of the Debtors filed their respective cases, of these purposes the CBAs were bankruptcy petitions a roughly over two substantially similar and provi- contained period month August between and Octo- obligating Spirit sions to establish the ber, later, 2005. Approximately year one provisions EPP. The EPP in the CBAs on October Spirit established detailed, were not they but laid out the “Spirit AeroSystems Holdings, Inc. Union general parameters program. of the The (Initial Equity Participation Plan Public CBA for the IBEW stated: Offering).” The full plan document is not parties agree equity establish an part record,3 of the appellate but the avail- participation program for able IBEW-repre- excerpt defines those union-repre- employees sented sented Spirit AeroSys- employees Spirit eligi- that were tems, Inc., participate EPP, ble to provided employees as well the “Appreciation Rights” eligible each payroll on the active as of June employee would receive under the EPP. appreciation Stock bewill contrib- program uted to the repre- for the select Spirit’s payment Following of distribu- units, sented bargaining representing a Debtors, tions to Trustees sought turnover profit opportunity on 10% of the initial case, distributions each arguing common stock of AeroSystems had Debtors contractual rights parent company. [sic] program will SARS on the date the Unions ratified be able to distribute participating [sic] CBAs prepetition, making thus Debtors’ employees cash or common stock follow- interests in the SARS and the distribu- ing a substantial sale the Onex inves- tions made thereunder property of the es- tors, change merger, control anor tate. turnover, The Debtors opposed as- Appx. CBAat plan in Parks at typically document —a task that involves review of the entire contract document—the 2. CBAat art. Appx. Davis at 55. appellate record contains ex- limited cerpts plan the CBAs from and EPP docu- Although parties request that this Court ment. construe the terms of both the CBAs EPP bankruptcy distinguished The court these interests the SARS serting that their Spirit first issued when postpetition, employee arose re cases from the benefit cases February document. plan the EPP (e.g., Trustees those involv lied on the In- court issued its bankruptcy the ing payment employee options stock the stan- applied in which it terim Order profit sharing plans), from distributions injunc- a obtaining preliminary for dards cases, because in all of those the benefit the Trustees to determine whether tion program pursuant or contract to which the immediate turnover of were entitled to debtor-employee payment received was The Interim Order denied distributions.4 date. petition existence on the turnover, on a final determination pending op- After the had an the matter. majority bankruptcy The affirms the discovery, some one portunity complete to order, ruling court’s in the final but based one of the of the Debtors and Trustees reasoning bankruptcy on contained on summary judgment for filed motions majority court’s Interim Order.7 The con- issue. the turnover no interest in cludes the Debtors had bankruptcy On December Spirit the distributions until consummated (“Final its final order Or court entered majority prior The states that IPO. der”) turnover, granting the Debt denying IPO, only “hope, Debtors had antici- summary judgment for or’s motion pation, expectation” or distributions be- summary denying the Trustee’s motion for entirely “were cause those distributions final judgment. bankruptcy The court’s upon the economic decisions of dependent did not order concluded that the CBAs words, Spirit.” Spirit In other because belonging to any property rights create into a had “discretion” on whether enter clearly do not Debtors because CBAs sale, IPO, the debtors had no merger, or identify third-party beneficia Debtors in the contingent interest dis- prepetition, law, con Kansas the court ries. Under tributions.8 enforced cluded Debtors could not have bankrupt any provision of the CBAs.5 contingent

cy court also found that no II. of Review Standard petition dates interests existed on Debtors’ for applicable standard of review granted “the were to be because SARS summary judgment is de granting orders the EPP”6 and pursuant contributed novo, required apply and this Court Because executed not the CBAs. was used legal the same standard as postpetition, EPP document the court plan court to determine wheth- bankruptcy contingent had no concluded Debtors judgment as is entitled to petition party dates. er either respective interests on their Order, Order, summary judgment full Appx. at 63-78. issued before 4. See Interim in Davis issues, briefing court on the Lowe, (Bankr. 5. In re 380 B.R. obtaining prelimi- applied the standards D.Kan.2007) (citing State ex rel. Stovall analysis and nary injunction. Much of the Co., 278 Kan. 107 P.3d Reliance Ins. in the court used case law that (2005) Co. and Bunnell Farms 1230-31 probability of determine the Interim Order to Assocs., Kan.App.2d Gary, v. Samuel Jr. & signifi- on the merits” is the Trustees "success (2002)). 47 P.3d different, absent, cantly from the Final if not Order. Appx. at 271. 6. Final Order at in Parks the Interim Order is It is unclear whether 8.Majority Opinion, at 10-11. panel. Interim appeal before this In the 82

a matter of law.9 De novo review re- erroneous.”16 question of whether quires an independent determination of bankruptcy court failed to consider or issues, giving special weight no to the give proper weight to relevant evidence is bankruptcy Summary court’s decision.10 subject to de novo review.17 judgment appropriate is “if the pleadings,

depositions, interrogatories, answers to Governing III. Law file, together and admissions on with the affidavits, any, property if show that there is issue of what no interests are genuine issue as to material fact and included the estate under 541 is a moving party is entitled to a matter of federal bankruptcy law.18 But judgment aas matter of law.”11 the nature of a property debtor’s interests usually is by determined reference to state property Whether is included in the explained, Supreme law.19 As the Court has ques estate under 541 is a “[p] roperty interests are created tion of Interpretation law.12 of an unam by defined state law. Unless some biguous question contract ais of law and is result, interest requires a subject to de novo review on appeal.13 federal different why there is no reason such interests The initial determination of whether a con should analyzed differently simply be tract is ambiguous legal is also a conclu party cause interested is involved in a sion reviewed de novo.14 “Once is deter proceeding.”20 mined that a When the ambiguous contract depends its construction interest issue is created on extrinsic circumstances, federal interpretation subject law or is regula of the con federal tion, however, tract question becomes a fact.”15 federal law rather than “Findings law, of fact may district court will state apply to define the nature not be set aside they clearly unless and extent of the debtor’s interest.21 9. Tillman ex rel. Estate Tillman v. Camelot 16. Id. 1300, Music, Inc., (10th 408 F.3d 1303 Cir. 2005). Harvey 17. ex rel. Blankenbaker v. United 1235, Union, (10th Transp. 878 F.2d 1244 225, Russell, 1989). Regina 10. Salve 499 U.S. Cir. Coll. v. 238, 1217, (1991). 111 S.Ct. 113 L.Ed.2d 190 States, 18. Butner v. United 440 U.S. 99 56(c). 914, (1979); Fed.R.Civ.P. 11. See also Anderson v. S.Ct. 59 L.Ed.2d 136 Parles v. 242, Inc., 247, Liberty 477 Lobby, U.S. 106 (In Marshall), FIA Card Serv’s. 550 F.3d re 2505, (1986). 1251, S.Ct. (10th Cir.2008). 91 L.Ed.2d 202 1255 1185, Parsons, (8th 280 F.3d Marshall, 12. In re 1188 550 F.3d at 1255. 19. In re Cir.2002). Butner, 55, (em- 440 U.S. at 99 S.Ct. 914 (In Assocs.), phasis Kay Williamson v. supplied). re Villa W. 798, (10th Cir.1998); 146 F.3d 802 Milk ‘N’ More, Beavert, 963 F.2d Schneider, Inc. v. 1345 E.g., 864 F.2d In re 686 1992). (10th Cir.1988) Cir. (construing regula- federal defining agricultural tions crop payment pro- 14. gram 998 F.2d 789 Corp., Kaiser Steel to determine crop debtor's interest in (10th Cir.1993); payments); Exploration Inc., Drilling, Teton re 997 Sys., In Columbia Gas (3rd Cir.1993) (conclud- Corp., Inc. v. F.2d Bokum Res. 1055-58 (10th Cir.1987). ing applied federal common law to determine federally regulated debtor's interests in natu- City Co., revenues); Farmington gas pipeline ral Amoco Gas Montgom- Baer v. (10th Cir.1985). F.2d (In ery 219 B.R. Montgomery), administration of collective negotiation law and applied court state

The analyzing agreements.”26 in Debtors’ principles contract beneficiary rights under

third-party Supreme The Court has defined the in error. The I this was CBAs. believe range scope of claims that fall within the of a long has held that collec- Supreme Court § only disputes 301 to include not over more than a bargaining agreement is tive bargain- of a express provisions collective employment law con- traditional common but claim ing agreement, also “sub- creating rela- agreement is an tract. “[I]t stantially upon analysis of dependent [a the federal tionships and interests under in- collective-bargaining agreement],”27 policy.”22 of common law labor depend cluding state law claims which that federal common law is sec- source of meaning bargain- of a collective upon Management of the Labor Rela- tion 301 ing agreement for their resolution.28 As (“LMRA”), governs feder- Act which tions expressed by the Court: alleging over suits violations jurisdiction al bargaining agreements.23 collective of interpretive uniformity “The interests in § 301 to interpreted has Supreme Court require that that la- predictability simply jurisdiction confer do “more than by ref- disputes bor-contract be resolved congres- as “a courts” but also on federal require that erence to federal law also to the federal courts sional mandate meaning given phrase a contract law to body a of federal common fashion subject to uniform federal inter- term be disputes arising out be used to address Thus, relating to pretation. questions requires mandate contracts.”24 This labor agreement what the to a labor area paramount law “the that federal legal consequences and what agreed, need for unifor- by” covered 301.25 The to flow from breaches of were intended important the labor mity particularly is agreement, must be resolved possibility to avoid indi- “[t]he context law... .”29 reference to uniform federal different might contract terms have vidual bargaining a collective Consequently, law” be- meanings under state and federal by the governed “is not same agreement inevitably ex- cause such variance “would interpretation applicable upon principles both the disruptive ert a influence Hechler, 855-56, (10th 1998), 107 S.Ct. aff'd, 24. 481 U.S. at 224 F.3d 1193 Cir. BAP Cir.2000) (citations omitted). (construing Revenue Internal 2161 interests Code to determine debtors' credits). Co., earned income 174, v. Lucas Flour 25. Local Teamsters 95, 103, 571, S.Ct. 7 L.Ed.2d 593 369 U.S. 82 Serv., 212, 459 U.S. 22. Bowen v. U.S. Postal (1962). 588, (1983). 220, 103 S.Ct. 74 L.Ed.2d 402 Am. v. Warrior See also United Steelworkersof 103-04, 571. Id. at 82 S.Ct. 578-79, Co., Navigation 363 U.S. & Gulf (1960) (“The 4 L.Ed.2d 1409 80 S.Ct. Lueck, Corp. v. 471 U.S. 27. Allis-Chalmers agreement bargaining states the collective L.Ed.2d 206 105 S.Ct. parties. It is more rights and duties of the (1985). contract; generalized code to than a govern myriad of cases which the draftsmen Inc., Chef, Lingle Norge Magic v. Div. wholly anticipate.”). cannot 399, 405-06, S.Ct. 486 U.S. (1988). L.Ed.2d 410 185(a). Int'l Bhd. U.S.C. See also Hechler, 481 U.S. Elec. Workers Allis-Chalmers, (1987). 471 U.S. at 211. 95 L.Ed.2d 791 107 S.Ct. Rather, private property very contracts.”30 courts must defines estate broadly legal as “all or equitable interests of the apply construing federal common law when debtor in as of the commence bargaining interpreting collective ment of the case” wherever located and agreements.31 This federal common law is Court, Supreme whomever held.35 The “grounded policy,”32 in national labor Rochelle, Segal the seminal of v. case held may from though guidance courts draw that an interest is not outside the reach of traditional state law rules of contract con- bankruptcy estate “because it is novel they compatible struction to the extent are contingent enjoyment or because must policies.33 light with federal labor law “In postponed.”36 be Indeed courts have con important policy favoring of the federal § “every strued 541 to include conceivable collective-bargaining agree- existence of debtor, future, nonpossesso interest of the ments, however, may given contract law be ry, contingent, speculative, and deriva interpretation.”34 Applying a liberal these Thus, tive ....”37 the estate can include a principles, court should contingent right debtor’s to a (post- future legal have determined the effect of the petition) payment, if the debtor has a le EPP provision of the CBAs and the Debt- gally recognizable payment interest ors’ thereunder reference to fed- petition on the date.38 To be included eral common law. estate, a contingent property such in terest must be “sufficiently rooted IV. Discussion pre-bankruptcy past[.]”39 Contingent Property A. Interests Un- general principles governing While these §der 541 property § of the estate under 541 gener- Contingent property interests held a controversy, ate little their application var- petition on the proper- debtor date become widely, especially regarding ies contingent ty of the property estate. Section 541 legal interests. Given that our Act, Operating Eng’rs Pension v. 30. Bankruptcy Congress Trusts B & E under the affirma Backhoe, Inc., 1347, (9th 911 F.2d tively adopted Segal’s analysis 1352 Cir. property of 1990). Lord, See also 20 Richard A. § Williston Barowsky, when it enacted 541. See In re (4th § updated May 1516, on (10th Cir.1991) Contracts 55.15 ed. (citing 946 F.2d 1519 2009) (‘'[C]ollective bargaining agreements 541). legislative history of See also Parks v. large degree generis.”). a are to sui (In Marshall), FIA Card Servs. 550 F.3d 1251, (10th Cir.2008) (stating 1255 that the 404, Lingle, 486 U.S. at 108 S.Ct. 1877. 31. parameters § "generously of 541 are con strued; may property an interest be Serv., 212, 32. Bowen v. U.S. Postal 459 U.S. (inter contingent”) estate even if it is novel or 225, 588, (1983). 103 S.Ct. 74 L.Ed.2d 402 omitted). quotation nal marks Int’l Bhd. Elec. v. 33. Workers Balmoral Club, Inc., (7th Yonikus, Racing (7th 293 F.3d 405 In re F.2d 996 869 Cir. Cir.2002). 1993). See also Textile Workers Union v. Mills, 448, 457, Lincoln 353 U.S. 77 S.Ct. (1957). 1 L.Ed.2d 972 Ryerson, 739 F.2d 1984) ("By including legal Cir. all interests Lines, Ass'n, 34. E. Air Inc. v. Air Line Pilots exception, Congress without indicated its in- Int’l, (11th Cir.1988). legally recognizable tention to include all in- although may contingent terests 541(a)(1). § 35. 11 U.S.C. subject possession until some future time.”) Rochelle, Segal 382 U.S. (1966). Although S.Ct. 15 L.Ed.2d 428 Segal interpreted predecessor Segal, 382 U.S. at 86 S.Ct. 511. contingent property pay- interests in those variety prop- recognizes a wide system con- interests, Exactly ments. when and how those diversity of treatment erty this arose, however, Nevertheless, tingent property rights is surprising.40 is not disputed. rely Both sides sharply it difficult to cull varying analyses make settled, determining types 541 cases that involve various functional rule for employee body benefits. This of case law contingent interest when best, employer generally type the case law can be addresses some At the estate.41 postpeti- to a paid debtor-employee At one end benefit to exist on a continuum. said analyzes whether the debtor-em- interests tion and contingent property prepetition, contingent inter- clearly ployee and rooted in a debt- had were created payment, bring in that so as to past, prepet- such as a est benefit pre-bankruptcy or’s it into the estate.42 that will result the debtor ition contract postpetition. At the receiving payments court, I find no Like the are so spectrum end of the interests other with employee other benefit cases facts subject or to so amorphous, speculative, so exactly like the ones at issue here. Never- many contingencies, that courts deem theless, cases employee the various benefit rather expectancies,” them to be “mere by are As noted the bank- instructive. in- interests. Most existing property than court, ruptcy employee the benefit cases extremes, fall in between these two terests hold, basis, fairly uniform that a on a a mix of characteristics that and often have contingent pay- debtor’s interest in future very to ascertain whether make difficult held on employer ments from his or her has crossed the line from the interest of the filing property the date becomes contingent property to expectancy” “mere of underlying principle estate.43 An these §of 541. scope interest within the employer cases is that the contract or ben- program entitling debtor-employee efit the is the case here. The do Such the debt- that, payment to is existence before dispute point prior not at some bankruptcy.44 Although the and stock distribu- or files for actually receiving cash usually payment eventual to the debtor is employer, from their the had tions Debtors Kedrowski, sharing payment property profit is of In re 284 B.R. tion 40. See (" (Bankr.W.D.Wis.2002) Carlton, (Bankr. ‘Property,’ estate); James In re 309 B.R. 67 wrote, everything 'embraces S.D.Fla.2004) Madison once (employee options re- stock may value and have a which a man attach estate). postpetition property the ceived are ”). right.’ Dery, Sharp v. B.R. 204 But see (E.D.Mich.2000) (finding employee bonus Pitts, See, e.g., George Rights R. to Future paid postpetition property not of the es- was Payment Property the Estate Under Sec- course, tate). per- earnings from services Of Code, Bankruptcy Am. tion 541 of postpetition by debtor formed an individual 1990) (Winter (examining dif- Bankr.L.J. 61 541(a)(7) by § excluded from the estate analyses applied by determin- ferent courts in (2005). contingent property ing whether interests are estate). Booth, (existing 260 B.R. at 284 44.See governed employee benefits 42. This excludes bargain- sharing profit program in collective ERISA, dealt with elsewhere in which are Edmonds, ing agreement); 273 B.R. at In re Bankruptcy Code. profit sharing agreement (prepetition 527-28 union); employer and debtor’s In re between Booth, E.g., Cir. 260 B.R. 281 Carlton, (employer executed 309 B.R. at 69 2001) pay (post-petition profit sharing BAP option agreements in favor of four stock estate); property In re Ed is of the ment monds, prepetition). debtor (Bankr.E.D.Mich.2000), 273 B.R. 527 (E.D.Mich.2001) (postpeti- aff'd, 263 B.R. 828 factors, ment contingent prepetition on several such as em- is based on both activities, postpetition employment amount of time or ployment for certain company, right prorate courts often in- profitability payment payment prepetition portion payment is created with estab- clude of the program prepetition Depend- lishment of the contract or at based on activities.50 circumstances, ing scope proration may issue.45 The 541 is broad on the 541(a)(6), contingent rights by § enough required to include these also be which ex- payment.46 principle any earnings This is also found cludes from the estate from non-employee involving performed by benefit cases services an individual debtor postpetition.51 contracts.47 employee benefit cases also look at There are some employee benefit cases payment

whether the is somehow related take a more narrow view of to, on, cases, prepetition majori- or based the debtor’s This line of relied on words, employment. ty, In other con- employee paid courts holds that a bonus to a “sufficiently sider whether the benefit is debtor postpetition estate, prepetition past.”48 based, rooted in the if part, debtor’s even it is payment prepetition employment.52 Although When is based on the debt- prepetition employment, or’s or it specific vary, activities facts of these each cases of property pay- employer the estate.49 the involves an pro- When with a bonus Edmonds, ("The Booth, estate). E.g., 45. re 273 B.R. at 528 of the See also In re 260 B.R. profit sharing agreement Edmonds, between the UAW (citing Segal); at 288-89 In re 273 gave poten- [Debtor] and Ford an interest in a (same). B.R. at 529 contingent payment, tial future cash on suffi- profits being payroll cient and Debtor on the Booth, 290; 49. See In re 260 B.R. In re 31st."); Carlton, as of December In re 309 Edmonds, 273 B.R. at 529-30. ("The B.R. at 72 Debtor's contract un- [prepetition] Agreements, der the whether ac- Booth, (finding 50. See In re 260 B.R. at 290 contingent, property crued or became the appropriate prorate por to so that that 541(a)(1) estate under 11 U.S.C. profit sharing tion of the that related to the date."). petition prepetition employment Debtor’s became Edmonds, estate.”); property of the In re 273 Yonikus, 46. See In re 996 F.2d 869 541(a)(6) (applying § B.R. at 531 to calculate Cir.1993). prepetition portion payment). Schneider, E.g., In re 685-86 (10th Cir.1988) (finding debtor’s interest in Edmonds, Compare In re 273 B.R. at 531 crop payments property federal was not of the 541(a)(6)) Carlton, (applying § with In re 309 estate because debtor did not execute neces (Bankr.S.D.Fla.2004) (finding B.R. 74-75 sary government contract with the until after 541(a)(6) inapplicable). date); Weinschneider, petition v. Hoseman (N.D.Ill.2002) ("Thus, 277 B.R. 900 in a (In Palmer), E.g., Vogel v. Palmer re 57 B.R. case, contract have there must been a con (Bankr.W.D.Va.1986); Dery, Sharp v. tract, something that could have been en (E.D.Mich.2000); Chappo, B.R. 204 In re forced, assigned or otherwise alienated or (E.D.Mich.2001). B.R. 852 But see In re Pet against.”). levied itt, (Bankr.S.D.Ind. 2009 WL *2 1012977 at 2009) Rochelle, (finding paid postpeti bonus to debtor Segal 382 U.S. (1966) agreed by employer prepetition tion but to (finding S.Ct. 15 L.Ed.2d 428 estate); (In property Daly be loss-carryback of the v. Soboslai debtor's interest in tax refund Soboslai), (Bankr.D.Conn. "sufficiently pre-bankrupt to be 263 B.R. 700 rooted in 2001) cy (finding past entangled portion year-end and so little with the bank bonus rupts’ ability prepetition property to make an earned unencumbered fresh be of the es tate). regarded property start” that it should be courts, disagree Like some other I petition on the debtor’s with gram, existence date, gave employer and, event, discretion as Sharp reasoning pay required the bonus and to whether it inapplicable would deem to the facts of employed period to be for some the debtor First, Sharp’s requirement these cases.58 on these circum- postpetition. Based currently that a debtor have an “enforce- stances, these courts held that a bonus right” able on the petition date seems to postpetition property was not paid overly be broad. As noted the Sixth estate.53 BAP, “[f]ocusing Circuit on whether the Sharp, in the court example, For right debtor had an ‘enforceable’ contract focused on whether the debtor had petition when filed was would exclude right” to the on the “enforceable bonus contingent all bankrupt- interests from the petition date.54 Because the debtor’s em- estate, definition, cy because a contin- pay retained discretion to not ployer still gent interest is not ‘enforceable’ until the date, petition the bonus on the the court Further, contingency is met.”59 I dis- the debtor had no enforceable concluded Sharp agree with the refusal court’s date, thereby right to the bonus on prorate payment. majority the bonus As a payment the entire from excluding bonus concluded, pro- have I courts believe it im- the estate.55 The court also found may appropriate ration where benefit that, bonus, portant eligible to be for the pre- is based on payment postpe- both had to work for two months debtor tition conduct of the debtor.60 Because the bonus was “de- postpetition. key importantly, More factor pendent upon the continued services Sharp ivas the discretion of the employer subsequent petition,” to the debtor payment to make the and that factor is not bonus was not of the estate.56 present fully here. As discussed more Further, although apparent- the bonus was below, Spirit binding, had a contractual ly part prepetition based in on debtor’s obligation to make EPP distributions to services, prorate the court declined bonus, employees, upon the occurrence of certain not finding proration per- that was plain language contingencies.61 Spirit mitted under the of 541.57 did not have unfet- Palmer, 333-36; (E.D.Mich.2001) (conclud- Sharp, 53. B.R. at 253 263 B.R. 831 See 57 207-09; Chappo, ing reading Sharp at re B.R. at B.R. 257 that a broad would be 854-55. "inconsistent with the multitude of cases holding property continent interests to be variety in a wide of circum- estate Sharp, 54. 207. 253 B.R. at stances”). Palmer, 336-37). (citing 55. Id. 57 B.R. at See Booth, (conclud- B.R. at 59. In re 260 290. Chappo, re 257 B.R. at 854 also In ing dispositive that characteristic of the bonus Booth, plan employer complete was had E.g., (prorat In re 260 B.R. at 290 pay discretion on whether to the bonus to ing debtor-employee profit sharing payment); debtor). Edmonds, (same); Daly In re 273 B.R. at 531 (In Soboslai), v. re 263 B.R. 700 Soboslai Palmer, (Bankr.D.Conn.2001) Sharp, (citing (prorating year-end 253 B.R. at 208 bo 334). nus); (In Allen), Levey B.R. at 226 B.R. Allen (Bankr.N.D.Ill.1998) (prorating debtor-employee’s options). stock 57. Id. 208-10. course, below, Booth, there is 61. Of as discussed 58. See In re 260 B.R. Cir. 2001) binding (discussing prob- as to when this contractu- BAP "fundamental some issue Edmonds, Sharp's analysis); obligation lem” with In re al arose. (2) discretion, CBAs; and, so, employer did in contracts —the if tered as Sharp, payments on whether to make based, whether the distributions were at debtors, requirements if all other even in part, prepetition employ- least on the program were met. The ma- the benefit ment of If Debtors. both these factors are EPP jority attempts to characterize the met, “sufficiently then the distributions are “discretionary” all because distributions rooted in the debtor’s prepetition past” so (ie., sale, triggering of the EPP’s events as to be included some extent in their IPO) merger, “dependent were on the bankruptcy estates. Spirit.”62 This so- economic decisions discretion, however, does not dero- called B. EPP Provisions CBAs: gate Spirit’s obligation contractual to make Binding Contract? if payments triggering a event oc- issue, then, The first is to determine obligation, It that contractual curred.63 whether the EPP provisions of the CBAs my opinion, that is the source of Debt- binding constitute contracts under which property ors’ interests. had contingent rights. Debtors One of Thus, disagree majority’s I with the con- that the bankruptcy reasons court held clusion that Debtors’ interests in the EPP rights Debtors no under had expectancies.”64 distributions were “mere CBAs was because the CBAs did iden- Rather, considering all of the case law tify third-party the Debtors as beneficia- above, discussed I the appropriate believe merely ries and because the agreed CBAs analysis involves a determination of two (1) to establish the EPP and did not factors: whether Debtors’ to the define by prepetition distributions were created who would “participating employees,” Majority Opinion majority at 10-11. debtor!.]” The also focuses on lan guage plan pro in the EPP document that Kedrowski, 284 B.R. Cf. Eligible Employee vides that “no individual (Bankr.W.D.Wis.2002) (debtor’s right per any rights respect have shall with to or inter capita distribution from Indian tribe of which Appreciation Rights!.]” Majority est in the she was member is of estate even 3.01, Opinion (citing at EPP at discretion, though tribe had based on eco- 57). Appx. construing Davis Courts simi circumstances, nomic on whether to make language lar in other contexts have found tribe). distribution to language preventing such to be ineffective in disagree majority’s I also with the reliance property being from property included in limiting on transfer restrictions and Barnes, 927, other of the estate. See In re language plan proof in EPP document as (7th Cir.2002) (finding 928 liquor debtor’s granted expec- that the CBAs debtors a "mere estate, property license despite to be of the First, tancy.” language by cited the ma- regulation stating Government that license jority is in the EPP document and not in the license); property right holder has no in In re CBAs, is, best, so it extrinsic evidence of Co., Inc., 143, Cent. Ark. Broad. 170 B.R. 146 meaning of the terms in the CBAs. As- (Bankr.E.D.Ark.1994), aff'd, 68 F.3d 213 admissible, suming this extrinsic evidence is I Cir.1995) (finding broadcasting debtor’s li persuasive. do not believe it to be The EPP property despite cense was of estate federal provides that the SARS are non-transferable regulation prohibiting owning debtor from li non-assignable. provi- The effect of such cense); Pizza., Atl.Wash., Conn. Inc. v. Bell 541(c)(1)(A), specifically by § sions is limited D.C., (In Pizza, Inc.), Inc. re Conn. 193 B.R. that, subject excep- which states to certain 217, (Bankr.D.Md.1996) (finding 226-27 here, applicable tions not “an interest of the phone property debtor’s number was of the property debtor in becomes estate, despite phone company policy which notwithstanding any provision estate ... in property right stated customers have no in instrument, agreement, an appli- transfer numbers). telephone nonbankruptcy cable law ... that restricts or by conditions transfer of such interest

89 key only provid- Supreme definition was The im- term whose Court has tracts.”67 posed EPP a plan standing requirement ed later in the document. for such suits, analysis problematic permits court’s which employees individual interpret provi- it did not the EPP bring because suit when they assert “ the context of federal sions of the CBAs in ‘uniquely personal’ rights employees hours, common law. wages, such as pay, overtime contrast, wrongful In an in- discharge.”68 employee standing dividual lacks to en- Third-Party Beneficiary Standiny force a right by collective held all union to Enforce EPP Provisions members. The union is the proper party court concluded to enforce the collective Such rights.69 rights Debtors had no contractual under include, rights collective for example, con- spe- the CBAs because the CBAs did not renegotiate tractual duties to a new collec- cifically identify them as third-party bene- tive bargaining agreement proce- or the The bankruptcy ficiaries. court’s conclu- dures for the relocation of a plant.70 sion on state contract was based law cases, In these the EPP provisions con-

requires third-party an intended beneficia- cern an employee granted benefit to indi- “clearly ry expressed” to be a contract.65 employees, vidual rather than a law, however, collective Federal common has uni- right possessed by bargaining unit as formly held that individual union members a Although whole. the EPP does not third-party beneficiaries of collective technically wages, Spirit appar- concern bargaining agreement, right with the EPP, ently offered to establish the bring agree- an action for of that breach ment, part, percent to offset the ten though specifically wage even named cut imposed by as beneficiaries This is so union workers CBA.66 CBAs.71 event, employees employee because are “a benefits are con- and, major negotiation focus of the and admin- “uniquely personal” sidered there- fore, bargaining istration of collective con- enforceable employ- individual Lowe, 251, (Bankr. (1976) Smith, 198-200, (citing 380 B.R. 257 371 U.S. at 83 D.Kan.2007) 267); Foods, Inc., (citing State ex rel. Stovall v. S.Ct. v. United 11 Gutierrez Co., 556, (5th Cir.1994). Reliance Ins. 278 Kan. 107 P.3d F.3d 559 As noted (2005) Gutierrez, employee 1230-31 and Bunnell an Farms Co. court must exhaust Assocs., Gary, Kan.App.2d any grievance procedures v. Samuel Jr. & or arbitration con- (2002)). bargaining agreement 47 P.3d tained in the collective suit, bringing before unless the union has duty (In representation. breached its of fair Id. Int’l Bhd. Elec. Workers Hechler addition, asserting Hechler), at 559 n. 8. In when 481 U.S. n. S.Ct. against employer breach of contract claim (noting L.Ed.2d 791 em- individual LMRA, employee under 301 of the must ployee right third-party beneficiary has as to prove duty that the union breached its of fair bring against employer suit his for violation of representation, Co., whether or not the union is CBA); Mfg. a v.Mohr Metro E. 711 F.2d 69, Cir.1983) (same); named as a defendant. Id. 72 Anderson v. AT 467, (6th Cir.1998) Corp., & T 147 F.3d 473 Hines, 1048; (same). at 69. 424 U.S. 96 S.Ct. Gutierrez, 11 F.3d at 559. Ass’n, Evening 67. Smith v. News 371 U.S. 195, 200, Gutierrez, (1962). S.Ct. at 560-61. 83 9 L.Ed.2d 246 11 F.3d Inc., 23, 2007, Freight, Transcript April Deposition 68. Hines v. Anchor Motor 424 (“Tr.”) Appx. at U.S. 96 S.Ct. 47 L.Ed.2d 231 Clark at in Parks Jeff undisputed “agreement agree” ees.72 Because it is that all of An to preliminary members, agreement they the Debtors were Union can take different forms. A preliminary agreement may be formed standing beneficiaries third-party had as some, parties agreed when the have on but any employee granted to enforce benefits all, agreement of the terms of an under the CBAs. they essentially enter into what is a con- tract to in negotiate good faith to reach a Intent Be EPP to Bound Provi- cases, agreement.73 final In such pre- sions liminary agreement does not commit the standing third-party parties objec- Debtors’ as benefi- to their ultimate contractual tive, CBAs, however, only obligation negotiate but to the ciaries of the does not open good in faith.74 issues Within the necessarily granted mean the CBAs them arena, bargaining collective this type of any contingent property interests in the preliminary agreement appears to be rare. court SARS. The concluded imposes The LMRA a statutory duty to prop- the CBAs were not a source of negotiate the terms of a bargain- collective erty interests because “the SARS were to ing faith,75 in agreement good un- making granted be pursuant or contributed to the necessary a separate obligating contract EPP,” CBAs, not the which the court char- party negotiate good in faith. merely agreement acterized as to estab- lish the EPP. The court noted type preliminary Another agreement provisions that the EPP in the parties CBAs indi- is one which the agreed have all material program cate that will terms and intend to later me- benefit agreement morialize their “participating a formal doc- employees,” provided but it instances, ument.76 In such agreement no definition of “participating employees.” preliminary in the sense that the “plain language” Because the of the CBAs intend to reduce their agreement to writ- does not establish that Debtors would ing or to enter into writing another qualify “participating employees,” agreement. formalizes the But formaliz- bankruptcy court concluded that the CBAs ing agreement essential, is not grant any did not Debtors “enforceable lack of formalization preclude does not en- right” benefit. But in determining parties’ forcement of the binding agree- provisions whether the EPP merely were ment.77 agreement “an agree” they or whether binding agreement

evidenced a that would type preliminary This agreement oc- date, formalized a later the bank- arena, curs often the labor par- where ruptcy court should have considered the ties reach an informal or oral collective intent of the parties. bargaining agreement that they later in- Hines, 1048; 158(a)(5). Norris, 72. See U.S. at 96 S.Ct. 75. 29 U.S.C.A. See also Pictures, Inc., Inflight N.L.R.B., Lerwill v. Motion Dover Res. Co. v. (9th Cir.1978) (holding F.2d employ- (10th Cir.2005) ("Parties bargain must standing ee had bargain- to enforce collective good comply statutory faith to with the ing provisions relating pay). to overtime duty, necessary but bad faith is not a element duty.”). for a breach of the Scott, 73. See Alan Schwartz & Robert E. Pre- Liability Preliminary Agree- contractual Scott, 73, supra 76. Schwartz & n. at 664. ments, (Jan.2007). 120 Harv. L.Rev. 664 74.Id. 77. Id.

91 that, ratified, disputes Federal common law once the CBAs be- to formalize.78 tend enforceability of such recognizes binding Spirit the came and the Unions. context, In this it is the agreements.79 EPP provisions must be considered in that determines parties intent of the context, they this in that are one term but binding have entered into a they whether valid, of what are otherwise enforceable intent need not be commitment.80 Such binding CBAs. The nature of the CBAs writing.81 in Courts also look to reflected however, generally, is not conclusive be- surrounding circumstances and to the the cause, above, provisions as noted the EPP manifesting an intention parties’ conduct might only agreement negotiate be an by agreed-upon to abide terms.82 faith. good the EPP In order to determine whether EPP provisions agree- contain an provisions binding established a commit- key ment as to several terms. ex- ment, the court should also plicitly commits to contribute “rep- SARS provisions whether have determined resenting profit opportunity a on 10% of contained sufficient terms to evidence an the initial parent common stock” of its “meeting or a of the minds.” agreement company. EPP, Through agrees it bargaining a collective “Obligations under “distribute cash and common stock” follow- agreement, like those under contracts ing triggering an IPO or other event. ultimately principle on the general, rest words, types other the amount and of dis- binding a mutual To find assent[.]”83 tributions are triggering established. The agreement, parties agreed must have agreement events defined. And the on the substantive terms and conditions of plan an EPP expressed. establish is the contract.84 A contract will not arise if dispute have not a resolved hand, “agree On the other to estab- a term.85 over substantive language susceptible possi- lish” to two It meanings. present ble could indicate a Clearly, the CBAs as a whole constitut- valid, party agreement understanding enforceable contracts. No with the that a ed Am., E.g., United Steelworkers Am. v. CCI 80. United Steelworkers 395 F.2d at (10th Cir.1968) 531-32. Corp., F.2d 395 531-32 ("[T]he clearly trial court was not erroneous Union, UAW, 81. Mack Inc. v. Int’l 856 Trucks holding binding verbal contract was (3rd Cir.1988) ("Adoption F.2d 592 of an by parties pending intended a written depend enforceable contract does not labor agreement."). formalization of their writing parties’ on the reduction to bound."). intention to be Union, E.g., Int’l United Mine Workers Co., Big 916 F.2d 1502 Horn Coal Id.; Union 1 v. Mel-O-Cream Local No. (10th Cir.1990) ("The contract between the Int’l, Inc., F.Supp.2d Donuts parties required jurisdiction need not be (C.D.Ill.2004) ("If parties’ conduct dem written, signed bargaining agree- collective meeting as to the onstrates a minds ment, agree- may exist informal but agreement, agreement has then an been parties significant ment to the between formed, yet even if it is not reduced to writ them."); peace maintenance of labor between ing.”). Brooks, Inc. v. Int’l Garment Bobbie Ladies’ Union, (6th 835 F.2d Cir. Workers Gilliam, Operating Eng’rs Trust v. Pension 1987) ("The bargain- existence of a collective Cir.1984). ing agreement depend does not on its reduc- writing; tion can be conduct shown Trucks, Inc., F.2d at 591. 84. Mack manifesting agreed- an intention to abide terms.”). upon 85. See id. at 593. EPP gaining agreement more elaborate formalization to determine its mean- instances, occur in the future. It could reflect an will In ing.88 some court “is enti- until agreement plan not to be bound indeed, in required-to tled-and some cases has executed. been past practices parties look to the of the and the ‘common law of the shop’ deter- addition, one of the terms of the EPP parties’ obligations” mine the contractual is not defined in the CBAs. As noted bargaining agreement.89 under a collective court, the CBAs do not especially disputed This is true when “a “participating employees.” define the term contract ambiguous term is on its face and definition, however, explicit The lack of an no language provides other the contract necessarily does not mean there was no a basis for construing the term.”90 meeting of the minds on that term. If definition, parties both understood its then “participating employee” The term is binding agreement may have existed Although not defined the CBAs. full CBAs, upon despite the ratification of the copies appellate of the CBAs are not in the of a written definition. Again, absence record, parties point por- to no other court should have deter- tion of light the CBAs would shed mined whether the understood the meaning I the term. would there- meaning of this term. conclude, law, fore as a matter of that the meaning “participat- To ascertain the term “participating employees” ambigu- is ing employees,” a court should look first to ous.91 bargain- the contract itself. If a collective found, ambiguity Once an it gen- is is a ing agreement unambiguous, is courts are eral rule of contract construction that a required give effect to the contract as may court consider extrinsic evidence to may written and not consider extrinsic evi- determine the intent of the parties. This interpret dence to alter or meaning.86 its rule applied “greater liberality” is with However, construing the terms of a the case of a bargaining agree- collective bargaining agreement, collective a court context, ment.92 In the labor a trier of must remain aware that “collective bar- may fact consider the circumstances sur- gaining agreements ordinary are not con- rounding a collective governed by bargaining agree- tracts and are not the same execution, concepts common law ment’s govern private including preceding negotiations, eontracts[.]”87 Often courts look at how a as well as parties’ con- term throughout formation, is used a collective subsequent bar- duct to contract Union, Transp. 86. Volkman v. United 73 F.3d 91. Id. See also v. Williston Basin Moncrief (10th Cir.1996) ("If language Co., Pipeline Interstate 174 F.3d agreement unambiguous, may (10th Cir.1999) (“A contract's silence on a construed as a matter of law without resort to particular ambiguity issue does not create an intent.”). evidence of extrinsic instance, every but silence on a 'matter naturally scope within the of the contract’ 87. Id. (internal gives ambiguity.”) quotation rise to omitted). E.g., marks (reviewing id. at 1051-52 collective bargaining agreement's “eligible use of em- ployee” in various sections to Laborers, determine Teamsters & Cement Masons Ariz. meaning). Local 395 Health & Trust Fund v. Welfare Co., Conquer Cartage 753 F.2d Inc., Freight Sys., 89. Webb v. ABF (9th Cir.1985). (10th Cir.1998). 90.Id. at 1244. pertaining presentation May custom show dated the practice, usage,

the Clark, deposition testimony of Mr. Jeff the bargaining agreements.93 to collective former Director of Union Relations for Ambiguity in the C. Contract Sum- Boeing Spirit, and later and several S-l mary Judgment Context Registration that Spirit Statements filed the prior with SEC to the IPO. The slide Determining parties’ intent the presentation prepared by show was Spirit summary judgment motions is context in presenting assist Unions the EPP imambig- of an perilous. construction proposal prior to Union members to ratifi- question uous contract is a of law cation of the It CBAs.99 defines those em- properly may be determined on a sum- ployees eligible participate in the EPP mary judgment motion because the lan- as those who work for “for at least of the contract is clear and the guage three during consecutive months the first not at But parties’ intentions are issue.94 acquires Boeing few months after it Com- contract, “in if intent of ambiguous an mercial’s Division.”100 This Wichita/Tulsa disputed, genuine is issue definition, prior arrived at least a month material fact exists which cannot be deter- CBAs, ratification of the is consistent with So, in summarily by mined the court.”95 eventually definition included case, an ordinary agreement’s when EPP plan document.101 The slide show meaning is not clear on its face and con- lays also out several other terms of the trary possible, inferences as to intent are eventually EPP that were included in the there exists an issue of material fact for plan document. Some details the slide summary judgment inappropri- which show, however, were not included Summary judgment ate.96 would be document, final plan which reflects contrary if appropriate inferences of intent preliminary nature of slide show. addi- possible.97 Contrary are not inferences tion, prepared by Spir- the slide show was possible undisputed are not “where and it, necessarily and thus does not reflect the conclusive evidence as to the intent of the understanding of the Unions’ terms court,” parties is before the such as clear hand, EPP. the other Mr. testi- On Clark unambiguous parties’ evidence of the fied that the Unions used the slide show to bargaining history.98 the EPP explain to their members and I do not believe we have such conclusive posted presenta- that the this Unions even evidence before us. extrinsic evidence tion on their websites for access mem- offered the Trustees includes the slide bers.102 Laborers,

93. Id. at 96. Teamsters & Cement Masons 1517-18. Ariz Fund, Local 395 Health & Trust Welfare at F.2d 1518. Corp., v. Am. Elec. Power Service Gomez (10th Cir.1984). 726 F.2d See also 97. Id. at 1518 n. 9. Atl. Co. v. Farm Credit Bank Wich Richfield ita, (10th Cir.2000) 98. Id. ("Once ambig a contract is determined to be 45-48, 18-21, 46, Appx. 99. Tr. at in Parks uous, meaning generally of its terms is of fact to determined in the same issue issues.”) disputed manner as other factual Appx. 100. EPP at in Davis at 121. (internal omitted). quotation marks Appx. 101. EPP at in Davis at 57. Gomez, 726 F.2d at 651. 18-19, Appx. Tr. at in Parks at 45-46. See out, needed, were not and testimony unequivocal was those elements Mr. Clark’s plan of the intent to be were not included in the EPP docu- understanding in his ment, relatively by provisions. EPP He testi- because the IPO occurred bound that, were rati- quickly fied at the time CBAs after ratification of CBAs.109 fied, the basic definition Spirit understood are, however, problems There some with employees” EPP and “participating of the testimony. Mr. Clark’s Mr. Clark testified many employees had an estimate of how during negotiations that the labor with course, final Of participate.103 would Unions, employee he an of Boe- was still not known until after the 90- number was It unclear from the ing, Spirit.110 is passed.104 Never- day qualification period actually record when Mr. became an Clark theless, that had Spirit Mr. believed Clark Further, employee Spirit. Mr. Clark about which agreement an with Unions personally input testified that he had no in eligible for the EPP. employees would be EPP developing any of the terms of the Spirit Mr. Clark also testified approve and did not write or of the slide provisions viewed the EPP the CBAs as Thus, questionable presentation.111 binding, and that at the time the Unions testimony “personal whether his meets the CBAs, they to the agreed ratified the had knowledge” of Federal Rule requirement program. of the EPP Accord- key terms (“Rule”) 56(e)(1) Procedure as to Civil Clark, in- ing Spirit “absolutely” to Mr. provisions Spirit’s the EPP intent. language” tended to “honor the [EPP] Moreover, employed Mr. Clark was never the CBAs.106 by directly testify cannot Unions and that certain acknowledging While details understanding to the of the EPP Unions’ out, program of the EPP had to worked provisions. at following Mr. Clark stated that least the key at time of agreed According Registration terms were to the S-l State- by through of the from Spirit ratification of the CBAs: value ments filed June SARS, 2006, “participating employees” who the which after ratifica- November was be, many an prior would estimate of how union tion of the CBAs but to issuance of EPP, employees participate, “agreed would and how the had establish many eligible employee equity participation program pursu- SARS each would union Clark, likely According grant contingent receive.107 to Mr. ant to which it will stock (‘SARs’) the terms of the EPP that had not been appreciation rights ... for the out, fully 4,900 approximately employ- worked and thus could not be benefit CBAs, “1,000 in the grant- included involved creation SARs will be ees^]” indepen- eligible employee.” per- a trust and a board of ed to each advisors 4,900,000 dently program.108 oversee the As it turns tinent S-l Statement then lists 28, 30, 40-41, 102, 20-21, 46, 47-48, Appx. Appx. 103. at & 108. Tr. Parks Id. at in Parks at 55, 57, 67-68, at & 130. 73. 20-21, Appx. Appx. 104. Id. at in Parks at 57. 109. Id. at at 47-48. Parks Appx. Appx. 105. Id. at in Parks at 133. 110. Id. at in Parks at 40. Appx. Appx. Id. at in Parks at Id. at in Parks at 47. 40-42, 106-07, Appx. Id. at in Parks 112. Notes to Consolidated Financial State- 67-69, ments, Appx. 133-34. in Davis at 171. “granted” but not “vested.”113 Y. Conclusion SARS as Statements, CBAs, lack like the S-1 I would remand this case to the bank- explicit “eligible employ definition of ruptcy court to take evidence on the intent ees.” to be bound the EPP respond to this ar-

Debtors evidence provisions of the CBA and whether there Unfortunately, guing it is “controverted.” a meeting was of the minds on the mean- protestations these bald without more do ing “eligible employees.” If 56(e). satisfy requirements not of Rule intended to be bound and there was a They any contrary did not offer affidavits meeting of eligibility, the minds on then in another form evidence allowed under the bankruptcy court should determine if 56(e), they argued Rule but instead that “sufficiently Debtors’ interests were rooted different inferences should be drawn from in [prepetition] past” so toas be con- proffered the Trustee’s evidence. Ordi- sidered of the estate.115 As dis- narily, parties rely when both on the same above, cussed in the employee context of evidence, it is difficult to view the evidence cases, benefit courts generally look to “disputed” summary judgment pur- for whether the payments at issue are based poses. But when the issue of fact is one of on a prepetition debtor’s conduct or em- contrary intent and inferences could rea- ployment.116 If necessary, prorate courts evidence, sonably be from the drawn same payments postpetition received so that summary judgment not appropriate. portion which is on prepet- based ition conduct is included the estate.117

I not do consider extrinsic evidence presented to be conclusive on the intent of above, parties. As discussed the evi- presented by goes primari-

dence Trustees ly Spirit’s pri- intent and it was made

marily by a appear witness who does not personal

to have had either knowledge of negotiations on this issue or the au- Marylon BOYD, In re Debtor. thority speak at the time of No. 08-47463 TG. negotiations. these Nor did parties present evidence of the Unions’ Court, Bankruptcy United States understanding intent or EPP provi- N.D. California. deficiencies, sions. I Given these believe Aug. summary judgment inappropriate was the issue at an should resolved evidentiary hearing.114 379-80, Rochelle, Segal

113. Id. 382 U.S. (1966). 86 S.Ct. 15 L.Ed.2d 428 Laborers, 114. See & Teamsters Cement Ariz. Booth, In re B.R. Masons Local 395 Health & See 289-90 Trust Welfare Edmonds, 2001); Co., Conquer Cir. BAP 273 B.R. Cartage Fund v. (Bankr.E.D.Mich.2000), (9th Cir.1985) aff'd, 530-31 (overruling summary Carlton, (E.D.Mich.2001); 263 B.R. 828 judgment trial did have where court all (Bankr.S.D.Fla.2004). 309 B.R. 71-73 necessary information before concern- term, ing ambiguous contract and the infor- Booth, 290; mation it did have was not as would such 117. In re 260 B.R. at In re Ed monds, appellee). support an award in favor of the 273 B.R. at 531. notes entirely stock remained Spirit’s within Appreciation Rights, any right or discretion.21 any portion allocated any Net Pro- ceeds and no Eligible Employee Because the Debtors’ interests were en- is as- tirely dependent upon the economic deci- sured that he or she will receive Spirit, sions of the bankruptcy court con- any allocation of Net Proceeds.23 cluded that such an did not expectancy rise Section 3.01 clear eligible makes that em- to the legal level of a equitable or interest ployees have no interest in or with in property. agree.22 We respect to the benefits even as of the dispositive Palmer, characteristic EPP, effective date of the October Sharp, and Chappo is that under words, 2006. In other eligible employees terms of the plan, payment bonus of the were not receiving any assured of distribu- solely bonus was at employer’s discre- tion, even after the EPP was established tion. The Palmer court concluded that the Appreciation Rights were issued. debtor had no claim enforceable because the employer, as of the date the debtor Section 4.01 of EPP provides: filed for bankruptcy, could have decided Date, “Effective as of the Effective pay not to any at bonus all under the Company shall issue Appreciation plan Here, terms of the itself. the distri- Rights ... for the benefit of the sale, Eligible bution is conditioned on a merger, or IPO, all Employees. vested, of which are When entirely Appre- occurrences each within Spirit’s discretion. Right ciation shall be converted into the right to receive a distribution from the Interpreting the merely grant- CBA as Company of an amount equal to the ‘Net an expectancy ing supported by further Proceeds,’ if any, provisions attributable to of the EPP. such Section 3.01 Right, states: as determined on the Measure- ment Date.... Notwithstanding herein, Appreciation anything Rights no in- dividual Eligible Employee shall not upon shall confer any Eligible have Em- any rights respect (or with to or interest in ployee his Beneficiary) or her any 13-14, 21. Interim Order at Appx. date.); Davis at petition bonus on Chappo, (footnotes omitted). 75-76 (E.D.Mich.2001) B.R. 852 (Employee bonus Chapter which postpetition debtor received (In Vogel Palmer), 22. See v. Palmer SI B.R. was not one in which he had interest on (Bankr.W.D.Va.1986) (Postpetition year- date, petition so bonus was not included paid by end bonus employer debtor’s was not estate,” "property given employ of the estate under where terminate, right er had reserved modify, receipt debtor’s of bonus was conditioned in suspend program its bonus time and

Case Details

Case Name: Parks v. Dittmar (In Re Dittmar)

Court Name: Bankruptcy Appellate Panel of the Tenth Circuit

Date Published: Jul 13, 2009

Citation: 410 B.R. 71

Docket Number: BAP Nos. KS-08-002, KS-08-003, KS-08-004, KS-08-005, KS-08-006, KS-08-007, KS-08-008, KS-08-009. Bankruptcy Nos. 05-17094, 05-15334, 05-15333, 05-16951, 05-17430, 05-15728, 05-16484, 05-14936

Court Abbreviation: 10th Cir. BAP