IN RE TRANS WORLD AIRLINES 322 F.3d 283 (3rd Cir. 2003) CASE BRIEF

IN RE TRANS WORLD AIRLINES

322 F.3d 283 (3rd Cir. 2003)

NATURE OF THE CASE: The United States Government and flight attendants, who were awarded a travel voucher program and Equal Employment Opportunity Commission (EEOC) claims in a class-action lawsuit, challenged extinguishment of the claims under the bankruptcy court's order approving the sale of the assets of a bankrupt airline to a successor airline.

FACTS: The EEOC filed an action against TWA (P) and against P's flight attendant collective bargaining representative. The collective bargaining representative subsequently aligned itself with the EEOC as a plaintiff. In 1977, Linda Knox-Schillinger filed a separate suit on her own behalf and on behalf of other female flight attendants, solely against P, in the United States District Court for the Southern District of New York. The complaint addressed P's former maternity leave of absence policy for flight attendants. The Knox-Schillinger case was certified as a class action and thereafter consolidated with the EEOC suit filed in the Central District of California. Both lawsuits were settled under a court-approved settlement agreement. P was required to provide ten travel vouchers for each covered pregnancy to eligible class members who timely submitted a notarized proof of claim form to the EEOC. Most flight attendants, as was their prerogative, elected to save the vouchers for long trips to be taken after retirement when they had more time to travel and would receive more favorable tax consequences for use of the vouchers. Twenty-nine charges of discrimination had been filed against P with the EEOC or simultaneously filed with both the EEOC and a state or local Fair Employment Practices Agency. They alleged various violations of several federal employment discrimination statutes, including Title VII, the Americans with Disabilities Act, and the Age Discrimination in Employment Act. The appellants, the EEOC and the United States (collectively the 'EEOC'), assert that they are unable to estimate the value, if any, of these claims, or the likelihood that the EEOC would commence litigation on the basis of any of these claims. P filed a Chapter 11 bankruptcy petition. P determined that it could not continue to operate as an independent airline and that it needed to enter into a strategic transaction, such as a merger with, or sale of, TWA as a going concern to another airline. American contacted P with a proposal to purchase substantially all of P's assets. American agreed to a purchase plan subject to an auction and Bankruptcy Court approval. P's Board of Directors voted to accept American's proposal to purchase P's assets for $742 million. The EEOC and the Knox-Schillinger class objected to the sale. The Court approved the sale over the objections of the EEOC and the Knox-Schillinger. The court determined that there was no basis for successor liability on the part of American and that the flight attendants' claims could be treated as unsecured claims. The Order provided that, in accordance with 363(f) of the Bankruptcy Code: the free and clear delivery of the Assets shall include, but not be limited to, all asserted or unasserted, known or unknown, employment related claims, payroll taxes, employee contracts, employee seniority accrued while employed with any of the Sellers and successorship liability accrued up to the date of closing of such sale. EEOC filed a Notice of Appeal. The District Court affirmed the Bankruptcy Court's decision, finding that P's assets were properly transferred free and clear of (1) the Travel Voucher Program and (2) the charges of employer misconduct filed with the EEOC. This appeal resulted.

ISSUE:

RULE OF LAW:

HOLDING AND DECISION:

LEGAL ANALYSIS:

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