In Re Trans World Airlines, Inc. ( 2003 )


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  •                                                                                                                            Opinions of the United
    2003 Decisions                                                                                                             States Court of Appeals
    for the Third Circuit
    3-13-2003
    In Re: Trans World
    Precedential or Non-Precedential: Precedential
    Docket 01-1788
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    Recommended Citation
    "In Re: Trans World " (2003). 2003 Decisions. Paper 687.
    http://digitalcommons.law.villanova.edu/thirdcircuit_2003/687
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    PRECEDENTIAL
    Filed March 13, 2003
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    Nos. 01-1788, 01-4159, and 01-4437
    In re: TRANS WORLD AIRLINES, INC.
    UNITED STATES OF AMERICA AND EQUAL
    EMPLOYMENT OPPORTUNITY COMMISSION,
    Appellants in Nos. 01-1788
    and 01-4437.
    LINDA KNOX-SCHILLINGER, on behalf of herself and the
    class of flight attendants she represents,
    Appellant in No. 01-4159.
    On Appeal from the United States District Court
    for the District of Delaware
    (Civil Action Nos. 01-194 and 01-218)
    District Judge: The Honorable Sue L. Robinson
    Argued: September 12, 2002
    Before: ALITO and FUENTES, Circuit Judges and
    OBERDORFER,* District Judge
    (Opinion Filed: March 13, 2003)
    * The Honorable Louis F. Oberdorfer, United States District Judge for the
    District of Columbia, sitting by designation.
    2
    JOHN S. KOPPEL (Argued)
    WILLIAM KANTER
    Appellate Staff, Civil Division
    United States Department of Justice
    601 D Street, N.W.
    Washington, D.C. 20530
    ROBERT D. MCCALLUM, JR.
    Assistant Attorney General
    United States Department of Justice
    901 E Street, N.W.
    Washington, D.C. 20530
    COLM F. CONNOLLY
    United States Attorney
    Chase Manhattan Centre
    P.O. Box 2046
    Wilmington, DE 19899
    NICHOLAS M. INZEO
    Acting Deputy General Counsel
    PHILIP B. SKLOVER
    Associate General Counsel
    LORRAINE DAVIS
    Assistant General Counsel
    ROBERT J. GREGORY
    Senior Attorney
    Equal Employment Opportunity
    Commission
    1800 L Street, N.W.
    Washington, D.C. 20507
    ATTORNEYS FOR FEDERAL
    APPELLANTS
    NAMITA LUTHRA (Argued)
    LENORA M. LAPIDUS
    American Civil Liberties Union
    Foundation
    Women’s Rights Project
    125 Broad Street, 18th floor
    New York, NY 10004
    ATTORNEYS FOR APPELLANT
    LINDA KNOX-SCHILLINGER
    3
    RICHARD A. ROTHMAN (Argued)
    GREG A. DANILOW
    ALAN B. MILLER
    Weil, Gotshal & Manges L.L.P.
    767 Fifth Avenue
    New York, NY 10153
    GREGORY S. COLEMAN
    Weil, Gotshal & Manges L.L.P.
    700 Louisiana, Suite 1600
    Houston, TX 77002
    MARK D. COLLINS
    Richards, Layton & Finger
    One Rodney Square
    Wilmington, DE 19844
    ATTORNEYS FOR APPELLEES
    AMERICAN AIRLINES, INC., AMR
    CORPORATION, AMR FINANCE
    INC.
    ERIC F. LEON
    Kirkland & Ellis
    Citigroup Center
    153 East 53rd Street
    New York, NY 10022
    ALEXANDER DIMITRIEF, P.C.
    JAMES H.M. SPRAYREGEN
    Kirkland & Ellis
    200 East Randolph Drive
    Chicago, IL 60601
    LAURA DAVIS JONES
    BRUCE GROHSGAL
    Pachulski, Stang, Ziehl, Young
    & Jones
    919 North Market Street, 16th floor
    Wilmington, DE 19899
    ATTORNEYS FOR APPELLEES
    TRANS WORLD AIRLINES, INC.,
    ET AL.
    4
    OPINION OF THE COURT
    FUENTES, Circuit Judge:
    The issues in this bankruptcy appeal involve the doctrine
    of successor liability and arise out of the Bankruptcy
    Court’s order approving the sale of the assets of Trans
    World Airlines (“TWA”) to American Airlines (“American”).
    The primary question is whether the District Court erred in
    affirming the Bankruptcy Court’s order, which had the
    effect of extinguishing the liability of American, as
    successor to TWA, for (1) employment discrimination claims
    against TWA and (2) for the Travel Voucher Program
    awarded to TWA’s flight attendants in settlement of a sex
    discrimination class action. Because section 363(f) of the
    Bankruptcy Code permits a sale of property “free and clear”
    of an “interest in such property[,]” and because the claims
    against TWA here were connected to or arise from the
    assets sold, we affirm the Bankruptcy Court’s order
    approving the sale “free and clear” of successor liability.
    I.   Facts and Procedural Background
    We first review the factual background as it relates to the
    two types of claims under consideration here, the Travel
    Voucher Program and the Equal Employment Opportunity
    Commission (“EEOC”) claims.
    A.   The Travel Voucher Program
    In regard to the Travel Voucher Program, two separate
    federal actions were filed. In 1976, the EEOC filed an action
    in the United States District Court for the Central District
    of California against TWA and against TWA’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 TWA, in the
    United States District Court for the Southern District of
    New York. The principal contention of the two lawsuits was
    5
    that TWA’s former maternity leave of absence policy for
    flight attendants, including placing female flight attendants
    on leave immediately upon becoming pregnant, constituted
    sex discrimination in violation of Title VII of the Civil Rights
    Act of 1964, as amended, 42 U.S.C. § 2000e, et seq. In
    1978, the Knox-Schillinger case was certified as a class
    action and thereafter consolidated with the EEOC suit filed
    in the Central District of California.
    Eventually, in 1995, both lawsuits were settled under a
    court-approved settlement agreement. The terms of the
    agreement required TWA 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 (hereafter the “Travel Voucher Program”). The
    agreement provided that travel vouchers could be used by
    the class member or her family at any time during her life
    subject to certain age limitations for dependent children.
    Under the program, anyone traveling on one of these
    vouchers could be bumped by a paying passenger.
    Approximately 2,053 class members each received on
    average twenty five vouchers under the settlement
    agreement. 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.
    B.   EEOC Claims
    In addition to the claims arising out of the Travel
    Voucher Program, as of March 2, 2001, twenty-nine
    charges of discrimination had been filed against TWA with
    the EEOC or simultaneously filed with both the EEOC and
    a state or local Fair Employment Practices Agency.1 The
    charges alleged various violations of several federal
    employment discrimination statutes, including Title VII, the
    Americans with Disabilities Act, and the Age Discrimination
    1. The EEOC asserts that, given that the law allows victims of
    discrimination 300 days from the date of the incident to file a claim with
    the EEOC, more charges of this type may have been filed after March 2,
    2001.
    6
    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.
    C.   American’s Purchase of TWA’s Assets
    On January 10, 2002, TWA filed a Chapter 11
    bankruptcy petition.2 Although it was the nation’s eighth
    largest airline at the time, it had not earned a profit in over
    a decade.3 Months earlier, in the Spring of 2000, TWA
    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. See In re Trans
    World Airlines, Inc., et al., No. 01-00056, slip op. at 5
    (Bankr. D. Del. Apr. 2, 2001) (hereafter “Order on
    Emergency Stay Motions”). Throughout 2000, TWA held
    intermittent discussions with American concerning the
    possibility of a strategic partnership. On January 3, 2001,
    American contacted TWA with a proposal to purchase
    substantially all of TWA’s assets. On January 9, 2001,
    American agreed to a purchase plan subject to an auction
    and Bankruptcy Court approval.
    Though TWA’s assets were being sold under a court-
    approved bidding process, as of February 28, 2001, the
    deadline for the submission of bids, TWA had not received
    any alternate proposals other than American’s that
    conformed with the bidding procedures. Accordingly, TWA’s
    Board of Directors voted to accept American’s proposal to
    purchase TWA’s assets for $742 million.
    2. TWA had filed Chapter 11 petitions twice before, once in 1992 and
    again in 1995.
    3. The Bankruptcy Court found that TWA ended the year 2000 with $100
    million in cash, which was $50 to $100 million less than the airline
    needed to survive its winter season. See In re Trans World Airlines, Inc.,
    et al., No. 01-00056, slip op. at 10 (Bankr. D. Del. Apr. 2, 2001) (Order
    on Emergency Stay Motions). The Court also found that TWA’s cash
    balance on January 10, 2001, was approximately $20 to $30 million and
    TWA needed $40 million to fund its operations the next day. See id.
    7
    D.   Bankruptcy Court and District Court Approval of
    Sale
    The EEOC and the Knox-Schillinger class objected to the
    sale to American. After conducting an evidentiary hearing,
    the Bankruptcy Court approved the sale to American over
    the objections of the EEOC and the Knox-Schillinger
    plaintiffs. In approving the Sale Order, the Bankruptcy
    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. In
    keeping with the Bankruptcy Court’s conclusions, the Sale
    Order extinguished successor liability on the part of
    American for the Travel Voucher Program and any
    discrimination charges pending before the EEOC.
    Specifically, 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.
    Sale Order, ¶ 4, App. at 6. The Sale Order also enjoined all
    persons from seeking to enforce successor liability claims
    against American. The Court’s order provided that:
    Pursuant to sections 105(a) and 363 of the Bankruptcy
    Code, all Persons are enjoined from taking any action
    against Purchaser or Purchaser’s Affiliates including,
    without limitation, TWA Airlines LLC, to recover any
    claim which such Person had solely against Sellers or
    Sellers’ Affiliates.
    Sale Order, ¶ 11, App. at 8.
    Immediately after the Sale Order was entered, the EEOC
    filed a Notice of Appeal. On October 11, 2001, the District
    Court affirmed the Bankruptcy Court’s decision, finding
    that TWA’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. The District
    8
    Court affirmed the Bankruptcy Court’s holding that the
    claims against the debtor (TWA) were “interests in property”
    within the meaning of 
    11 U.S.C. § 363
    (f), and therefore, the
    debtor’s assets could be transferred free and clear of those
    claims. The District Court determined that the Bankruptcy
    Court’s findings of fact were not clearly erroneous and that
    the Bankruptcy Court’s legal conclusions were supported
    by the factual record. The District Court further noted that:
    there is record evidence supporting the bankruptcy
    court’s conclusions that: (a) pursuant to a court-
    approved bidding procedure, debtors determined that
    American’s offer was the highest and best offer for the
    purchase of substantially all of debtor’s assets; (b) it
    was unlikely that debtors and American would have
    consummated the sale if appellants’ claims were not
    extinguished; (c) if the sale did not go forward, it was
    highly likely that debtors would have been liquidated
    with resulting material harm to creditors, employees
    and the St. Louis, Missouri region, as well as rendering
    debtors unable to satisfy its [sic] obligations under the
    Travel Voucher Program; and (d) the travel vouchers
    may be reduced to a monetary satisfaction.
    District Court’s Order affirming the Bankruptcy Court’s
    Sale Order, App. at 118 (citations omitted). On November
    13, 2001, the Knox-Schillinger class filed a Notice of
    Appeal. On December 7, 2001, the EEOC also appealed the
    District Court’s order. The appeals have been consolidated.
    II.   Jurisdiction and Standard of Review
    This Court has jurisdiction to review the District Court’s
    order of October 11, 2001, affirming the Bankruptcy
    Court’s Sale Order of March 12, 2001, pursuant to 
    28 U.S.C. §§ 158
    (d) and 1292(a)(1).
    Our standard of review over the District Court’s
    bankruptcy decision is the same as that exercised by the
    District Court. See In re Woskob, No. 01-1482, 
    2002 WL 31102682
    , at *3 (3d Cir. Sept. 20, 2002). Accordingly, we
    review the Bankruptcy Court’s findings of fact for clear
    error and exercise plenary review over the Bankruptcy
    9
    Court’s legal determinations. See id.; see also In re
    Continental Airlines, 
    125 F.3d 120
    , 128 (3d Cir. 1997).
    III.   Analysis
    The parties’ dispute in this case concerns the meaning of
    the phrase “interest in such property” (hereafter “interest in
    property”) as that phrase is used in § 363(f) of the
    Bankruptcy Code. This section “permits sale of property
    free and clear of any interest in the property of an entity
    other than the estate.” S. Rep. No. 95-989, at 56 (1978).
    Appellants assert that the Travel Voucher Program and the
    pending EEOC charges are not interests in property within
    the meaning of this section and that, therefore, these
    claims were improperly extinguished by the Sale Order.
    They assert that interests in property are limited to “liens,
    mortgages, money judgments, writs of garnishment and
    attachment, and the like, and cannot encompass successor
    liability claims arising under federal antidiscrimination
    statutes and judicial decrees implementing those statutes.”
    Federal Appellants’ Br. at 19. Appellants also assert that
    their claims are outside the scope of § 363(f), and therefore
    cannot be extinguished, because they could not “be
    compelled, in a legal or equitable proceeding, to accept a
    money satisfaction of [their] interest[s].” 
    11 U.S.C. § 363
    (f)(5). The Airlines, on the other hand, argue that,
    while Congress did not expressly define “interest in
    property,” the phrase should be broadly read to authorize a
    bankruptcy court to bar any interest that could potentially
    travel with the property being sold, even if the asserted
    interest is unsecured. They also assert that appellants’
    claims lie within the scope of § 363(f)(5), and therefore, can
    be extinguished because appellants can be compelled to
    accept a money satisfaction of their claims. We agree with
    the Airlines.4
    4. On appeal the Airlines also assert that the imposition of successor
    liability on American is not warranted under applicable nonbankruptcy
    law. We have addressed the issue of successor liability in other contexts.
    See Rego v. ARC Water Treatment Co. of Pa., 
    181 F.3d 396
    , 401-02 (3d
    Cir. 1999) (explaining the rationale underlying successor liability and
    setting forth factors to consider in determining whether successor
    liability should attach). Here we decline to speculate as to whether there
    is a basis for successor liability and, instead, assume for purposes of our
    analysis that but for the Sale Order, appellants could have asserted
    viable successor liability claims against American.
    10
    A.   Interest in Property
    The contentions of the parties require us to consider
    whether the claims in this case constitute an interest in
    property as understood within the meaning of § 363(f).
    Section 363(f) of the Bankruptcy Code provides, in
    pertinent part:
    The trustee may sell property . . . free and clear of any
    interest in such property of an entity other than the
    estate, only if—
    (1) applicable nonbankruptcy law permits sale of
    such property free and clear of such interest;
    (2) such entity consents;
    (3) such interest is a lien and the price at which
    such property is to be sold is greater than the
    aggregate value of all liens on such property;
    (4) such interest is in bona fide dispute; or
    (5) such entity could be compelled, in a legal or
    equitable proceeding, to accept a money satisfaction
    of such interest.
    
    11 U.S.C. § 363
    (f) (emphasis added). Some courts have
    narrowly interpreted interests in property to mean in rem
    interests in property, such as liens. See, e.g., In re White
    Motor Credit Corp., 
    75 B.R. 944
    , 948 (Bankr. N.D. Ohio
    1987) (“General unsecured claimants including tort
    claimants, have no specific interest in a debtor’s property.
    Therefore, section 363 is inapplicable for sales free and
    clear of such claims.”); In re New England Fish Co., 
    19 B.R. 323
    , 326 (Bankr. W.D. Wash. 1982) (same). However, the
    trend seems to be toward a more expansive reading of
    “interests in property” which “encompasses other
    obligations that may flow from ownership of the property.”
    3 Collier on Bankruptcy ¶ 363.06[1].5
    5. See, e.g., In re WBQ Partnership, 
    189 B.R. 97
    , 105 (Bankr. E.D. Va.
    1995) (Virginia’s right to recover depreciation overpayment upon sale of
    debtor’s assets was an “interest” within the meaning of section 363(f)); In
    re All American of Ashburn, Inc., 
    56 B.R. 186
    , 190 (Bankr. N.D. Ga.
    1986) (sale pursuant to § 363(f) precluded mobile home owners from
    prosecuting product liability action against purchaser of debtor’s assets).
    11
    In Folger Adam Sec., Inc. v. DeMatteis/MacGregor, JV,
    
    209 F.3d 252
     (3d Cir. 2000), we addressed the issue of
    whether certain affirmative defenses to a claim for breach of
    contract constituted an interest in property within the
    meaning of section 363(f). Specifically, we were asked to
    decide “whether the affirmative defenses of setoff,
    recoupment, and other contract defenses . . . constitute an
    ‘interest’ under section 363(f) of the Bankruptcy Code such
    that a sale of the debtors’ assets in a consolidated
    Bankruptcy Court auction free and clear, extinguished
    such affirmative defenses . . . .” 
    Id. at 253-54
    . We observed
    that there was no support in the case law for the
    proposition that a defense may be extinguished as a result
    of a free and clear sale. See 
    id. at 261
    . Accordingly, we held
    that “a right of recoupment is a defense and not an interest
    and therefore is not extinguished by a § 363(f) sale.” Id.
    In arriving at this conclusion, we explored the
    significance of the Fourth Circuit’s decision in In re Leckie
    Smokeless Coal Co., 
    99 F.3d 573
     (4th Cir. 1996). In Leckie,
    the Fourth Circuit held that, irrespective of whether the
    purchasers of the debtors’ assets were successors in
    interest, under § 363(f), the Bankruptcy Court could
    properly extinguish all successor liability claims against the
    purchasers arising under the Coal Act by entering an order
    transferring the debtors’ assets free and clear of those
    claims. See id. at 576. The Fourth Circuit held that the two
    employer-sponsored benefit plans that sought to collect
    Coal Act premium payments from the debtors’ successors
    in interest were asserting interests in property that had
    already been sold through the section 363 sale. The Fourth
    Circuit explained that:
    while the plain meaning of the phrase “interest in such
    property” suggests that not all general rights to
    payment are encompassed by the statute, Congress did
    not expressly indicate that, by employing such
    language, it intended to limit the scope of section 363(f)
    to in rem interests, strictly defined, and we decline to
    adopt such a restricted reading of the statute here.
    Id. at 582. The Court explained that the employer-
    sponsored benefit plans had interests in the property of the
    debtors which had been transferred under section 363(f) in
    12
    the sense that there was a relationship between their right
    to demand premium payments from the debtors and the
    use to which the debtors had put their assets. See id.
    Importantly, in the course of our review of Leckie, we noted
    that “the term ‘any interest’ is intended to refer to
    obligations that are connected to, or arise from, the
    property being sold.” Folger Adam, 
    209 F.3d at
    259 (citing
    3 Collier on Bankruptcy ¶ 363.06[1]).
    Here the Airlines correctly assert that the Travel Voucher
    and EEOC claims at issue had the same relationship to
    TWA’s assets in the § 363(f) sale, as the employee benefits
    did to the debtors’ assets in Leckie. In each case it was the
    assets of the debtor which gave rise to the claims. Had TWA
    not invested in airline assets, which required the
    employment of the EEOC claimants, those successor
    liability claims would not have arisen. Furthermore, TWA’s
    investment in commercial aviation is inextricably linked to
    its employment of the Knox-Schillinger claimants as flight
    attendants, and its ability to distribute travel vouchers as
    part of the settlement agreement. While the interests of the
    EEOC and the Knox-Schillinger class in the assets of TWA’s
    bankruptcy estate are not interests in property in the sense
    that they are not in rem interests, the reasoning of Leckie
    and Folger Adam suggests that they are interests in
    property within the meaning of section 363(f) in the sense
    that they arise from the property being sold.
    Indeed, to equate interests in property with only in rem
    interests such as liens would be inconsistent with section
    363(f)(3), which contemplates that a lien is but one type of
    interest. Section 363(f)(3) provides:
    The trustee may sell property . . . free and clear of any
    interest in such property of an entity other than the
    estate, only if—
    (3) such interest is a lien and the price at which
    such property is to be sold is greater than the
    aggregate value of all liens on such property[.]
    
    11 U.S.C. § 363
    (f)(3). In this regard, we find ourselves in
    agreement with Collier’s observation that:
    Section 363(f) permits the bankruptcy court to
    authorize a sale free of ‘’any interest” that an entity has
    13
    in property of the estate. Yet the Code does not define
    the concept of ‘’interest,” of which the property may be
    sold free. Certainly a lien is a type of ‘’interest” of
    which the property may be sold free and clear. This
    becomes apparent in reviewing section 363(f)(3), which
    provides for particular treatment when ‘’such interest
    is a lien.” Obviously there must be situations in which
    the interest is something other than a lien; otherwise
    section 363(f)(3) would not need to deal explicitly with
    the case in which the interest is a lien.
    3 Collier on Bankruptcy ¶ 363.06[1]. See also In re P.K.R.
    Convalescent Centers, Inc., 
    189 B.R. 90
    , 94 (Bankr. E.D.
    Va. 1995) (“As the plain meaning of the statute
    demonstrates, § 363 covers more situations than just sales
    involving liens.”) (citing In re Beker Indus. Corp., 
    63 B.R. 474
    , 478 (Bankr. S.D.N.Y. 1986) and In re Manning, 
    37 B.R. 755
    , 759 (Bankr. D. Colo. 1984), aff ’d in part, vacated
    in part, 
    831 F.2d 205
     (10th Cir. 1987)); In re WBQ
    Partnership, 
    189 B.R. at 105
     (“Since ‘lien’ is a defined term
    under the Bankruptcy Code, it stands to reason that
    Congress would have used the term ‘lien’ instead of
    ‘interest,’ had it intended to restrict the scope of § 363(f) to
    liens. Furthermore, § 363(f)(3) applies to situations in which
    ‘such interest is a lien,’ which suggests that liens constitute
    a subcategory of ‘any interest.’ ”).
    B.   Money Satisfaction
    In addition to asserting that their claims are not interests
    in property within the meaning of § 363(f), appellants also
    assert that their claims are outside the scope of § 363(f)(5)
    because neither the vouchers nor the EEOC claims are
    interests on account of which they could be compelled to
    accept money satisfaction. As noted above, under § 363(f),
    assuming the “interest in property” at issue falls within the
    meaning of the statute, a sale free and clear of such
    interest can occur if any one of five conditions has been
    satisfied. The Bankruptcy Court determined that, because
    the travel voucher and EEOC claims were both subject to
    monetary valuation, the fifth condition had been satisfied.
    We agree. Had TWA liquidated its assets under Chapter 7
    of the Bankruptcy Code, the claims at issue would have
    14
    been converted to dollar amounts and the claimants would
    have received the distribution provided to other general
    unsecured creditors on account of their claims. A travel
    voucher represents a seat on an airplane, a travel benefit
    that can be reduced to a specific monetary value. Indeed,
    TWA arrived at a valuation for tax purposes, as noted in the
    Annex to the settlement agreement. Likewise, the EEOC
    discrimination claims are reducible to, and can be satisfied
    by, monetary awards even if the relief sought is injunctive
    in nature. See In re Continental Airlines, 
    125 F.3d at 133-36
    (seniority integration rights of employees of a bankrupt
    airline could be satisfied by monetary awards).
    C.   Other Considerations
    Even were we to conclude that the claims at issue are not
    interests in property, the priority scheme of the Bankruptcy
    Code supports the transfer of TWA’s assets free and clear of
    the claims. The statutory scheme, 
    11 U.S.C. § 507
    (a)
    (2003), defines various classes of creditors entitled to
    satisfaction before general unsecured creditors may access
    the pool of available assets. In New England Fish, the
    Bankruptcy Court held that the civil rights claims before it
    were not interests in property but decided that the
    claimants were general unsecured creditors and that the
    debtor’s assets could be transferred free and clear of such
    claims. See New England Fish, 
    19 B.R. at 326-29
    .
    In New England Fish Co., the issue was whether the
    Bankruptcy Court could extinguish the right to payment of
    claimants asserting civil rights claims in the Bankruptcy
    Court. The civil rights claims at issue in New England Fish
    were based on allegations of racial discrimination in
    employment. In that case, two class actions had been
    brought against the debtor by its employees. One of the
    suits went to trial and the plaintiffs obtained a damages
    award for job discrimination, housing discrimination and
    attorneys fees. In the other suit, there had been no
    determination of liability at the time of the bankruptcy filing.6
    6. This parallels the status of appellants’ claims here. The Knox-
    Schillinger class is comprised of general unsecured creditors whose
    claims have been liquidated by the Travel Voucher Program. The EEOC
    is a general unsecured creditor whose claims have not been liquidated.
    15
    The Bankruptcy Court recognized the claimants holding a
    judgment as being general unsecured creditors with
    liquidated claims and recognized the other class of
    claimants as being general unsecured creditors to the
    extent they could prove liability. See 
    id. at 326
    . The
    prospective purchaser of the assets of the debtor and its
    trustee sought an adjudication that the assets of the debtor
    were transferred free and clear of the interests of the civil
    rights claimants. The prospective purchaser also sought a
    declaration that it did not qualify as a successor employer
    of the debtor, and, therefore, could not be held liable to the
    civil rights claimants. See 
    id. at 325
    .
    In the course of discussing the civil rights claims in New
    England Fish, the Bankruptcy Court applied the Supreme
    Court’s admonition in Nathanson v. National Labor
    Relations Board, 
    344 U.S. 25
     (1952), that “if one claimant
    of the bankrupt’s estate is to be preferred over others, ‘the
    purpose should be clear from the statute.’ ” New England
    Fish, 
    19 B.R. at 326
     (quoting Nathanson, 
    344 U.S. at 29
    ).
    The Court reasoned that allowing the claimants to seek a
    recovery from the successor entity while creditors which
    were accorded higher priority by the Bankruptcy Code
    obtained their recovery from the limited assets of the
    bankruptcy estate would “subvert the specific priorities
    which define Congressional policy for bankruptcy
    distribution to creditors.” New England Fish, 
    19 B.R. at 329
    .
    Other courts have followed the rationale set forth in New
    England Fish. For instance, in Forde v. Kee-Lox Mfg. Co.,
    Inc., 
    437 F. Supp. 631
     (W.D.N.Y. 1977), the District Court
    dismissed a suit brought under Title VII by an employee of
    a bankrupt debtor against the purchaser of its assets on a
    successor liability theory. The Court rejected the civil rights
    claimant’s assertion that the Court could not reduce his
    demand for reinstatement to a fixed amount of money that
    could be satisfied out of the proceeds of the sale of the
    assets of the debtor’s bankruptcy estate. See 
    id. at 633
    . The
    Court explained:
    There are two major difficulties with the plaintiff ’s
    position. First, the plaintiff would allow claimants such
    as himself to assert their claims against purchasers of
    16
    the bankrupt’s assets, while relegating lienholders to
    the proceeds of the sale. This elevates claims that have
    not been secured or reduced to judgment to a position
    superior to those that have. Yet the Bankruptcy Act is
    clearly designed to give liens on the bankrupt’s
    property preference over unliquidated claims.
    An additional difficulty with the plaintiff ’s position is
    that it would seriously impair the trustee’s ability to
    liquidate the bankrupt’s estate. If the trustee in a
    liquidation sale is not able to transfer title to the
    bankrupt’s assets free of all claims, including civil
    rights claims, prospective purchasers may be unwilling
    to pay a fair price for the property, leaving less to
    distribute to the creditors.
    
    Id. at 633-34
    .
    Appellants here assert that Forde is no longer good law
    because it was decided under the Bankruptcy Act, which
    lacked a provision expressly authorizing asset sales free
    and clear of interests in property. We reject this argument
    based on the Supreme Court’s teaching in Van Huffel v.
    Harkelrode, 
    284 U.S. 225
     (1931), that although the
    Bankruptcy Act did not expressly authorize bankruptcy
    courts to do so, the power to sell property of the
    bankruptcy estate free of encumbrances was “granted by
    implication.” 
    Id. at 227
    . We note that Forde continues to be
    cited as good law by courts construing the Bankruptcy
    Code. See, e.g., In re Johns-Manville Corp., 
    837 F.2d 89
    , 94
    (2d Cir. 1988); In re Dow Corning Corp., 
    198 B.R. 214
    , 244
    (Bankr. E.D. Mich. 1996).
    We are sensitive to the concerns raised in Forde. We
    recognize that the claims of the EEOC and the Knox-
    Schillinger class of plaintiffs are based on congressional
    enactments addressing employment discrimination and are,
    therefore, not to be extinguished absent a compelling
    justification. At the same time, in the context of a
    bankruptcy, these claims are, by their nature, general
    unsecured claims and, as such, are accorded low priority.
    To allow the claimants to assert successor liability claims
    against American while limiting other creditors’ recourse to
    the proceeds of the asset sale would be inconsistent with
    the Bankruptcy Code’s priority scheme.
    17
    Moreover, the sale of TWA’s assets to American at a time
    when TWA was in financial distress was likely facilitated by
    American obtaining title to the assets free and clear of these
    civil rights claims. Absent entry of the Bankruptcy Court’s
    order providing for a sale of TWA’s assets free and clear of
    the successor liability claims at issue, American may have
    offered a discounted bid. This is particularly likely given
    that the EEOC has been unable to estimate the number of
    claims it would pursue or the magnitude of the damages it
    would seek. The arguments advanced by appellants do not
    seem to account adequately for the fact that American was
    the only entity that came forward with an offer that
    complied with the court-approved bidding procedures for
    TWA’s assets and provided jobs for TWA’s employees.
    The Bankruptcy Court found that, in the absence of a
    sale of TWA’s assets to American, “the EEOC will be
    relegated to holding an unsecured claim in what will very
    likely be a piece-meal liquidation of TWA. In that context,
    such claims are likely to have little if any value.” In re Trans
    World Airlines, Inc., et al., No. 01-00056, slip op. at 23
    (Bankr. D. Del. Mar. 27, 2001). The same is true for claims
    asserted pursuant to the Travel Voucher Program, as they
    would be reduced to a dollar amount and would receive the
    same treatment as the unsecured claims of the EEOC.
    Given the strong likelihood of a liquidation absent the asset
    sale to American, a fact which appellants do not dispute,
    we agree with the Bankruptcy Court that a sale of the
    assets of TWA at the expense of preserving successor
    liability claims was necessary in order to preserve some
    20,000 jobs, including those of Knox-Schillinger and the
    EEOC claimants still employed by TWA, and to provide
    funding for employee-related liabilities, including retirement
    benefits.
    IV.   Conclusion
    After carefully considering the arguments discussed
    above and all other arguments advanced by appellants, we
    join the District Court in affirming the Bankruptcy Court’s
    authorization of the sale of TWA’s assets to American free
    18
    and clear of the claims of the EEOC and the Knox-
    Schillinger class.7
    A True Copy:
    Teste:
    Clerk of the United States Court of Appeals
    for the Third Circuit
    7. Because we hold that the District Court properly affirmed the
    Bankruptcy Court’s Sale Order, we need not discuss appellants’
    assertion that the District Court abused its discretion in refusing to
    issue a limited stay of the Bankruptcy Court’s Sale Order. The appeal
    from the District Court’s order refusing to issue the stay will be denied
    as moot.