Timothy Ellis v. Westinghouse Electric Co LLC

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 20-2867
____________
TIMOTHY ELLIS
v.
WESTINGHOUSE ELECTRIC CO., LLC,
Appellant
________________
Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil Action No. 2-18-cv-01442)
District Judge: Honorable Mark R. Hornak
________________
Argued on April 6, 2021
Before: AMBRO, GREENAWAY, JR., and BIBAS, Circuit
Judges
(Opinion filed: August 30, 2021)
Robert B. Niles-Weed (Argued)
Weil Gotshal & Manges
767 Fifth Avenue
New York, NY 10153
Zachary Tripp
Weil Gotshal & Manges
2001 M Street, N.W.
Suite 600
Washington, DC 20036
Shelly R. Pagac
Eric G. Soller
Pietragallo Gordon Alfano Bosick & Raspanti
301 Grant Street
One Oxford Centre, 38th Floor
Pittsburgh, PA 15219
Counsel for Appellant
Joel S. Sansone (Argued)
Massimo Terzigni
Elizabeth A. Tuttle
Law Offices of Joel Sansone
603 Stanwix Street
Two Gateway Center, Suite 1290
Pittsburgh, PA 15222
Counsel for Appellee
2
___________
OPINION OF THE COURT
___________
AMBRO, Circuit Judge
Dates matter in bankruptcy. For creditors, none is more
important than the “bar date,” a deadline set by the bankruptcy
court for them to file claims against, or request payment from,
the debtor. Claims filed after the bar date without an
acceptable excuse are usually discharged (meaning the
creditor cannot pursue the claim further and the debtor is
released from the liability). The bar date interacts with the
Chapter 11 plan of reorganization, which typically discharges
claims occurring before the plan is confirmed (i.e., approved)
by the bankruptcy court.
But what if the claim arose after a plan was confirmed
and before it goes into effect? To our knowledge, no federal
appellate court has directly addressed this issue. We hold that
sections 503 and 1141 of the Bankruptcy Code authorize
bankruptcy courts to set and enforce bar dates for
administrative expense claims, including claims arising after
confirmation of a plan but before its effective date. The holder
of a post-confirmation administrative expense claim cannot
choose to bypass the bankruptcy process, so if the claim is not
timely filed by the bar date, it faces discharge like a pre-
confirmation claim. Thus, we reverse the District Court’s
decision that a claim for employment discrimination that arose
after plan confirmation and was not filed by the applicable bar
date could not be discharged.
3
I. BACKGROUND
A. The Westinghouse Chapter 11 Case
Westinghouse Electric Company LLC (together with its
debtor-affiliates, “Westinghouse” or the “Debtors”) operates a
global nuclear power business. In March 2017, following
costly delays with several nuclear power projects,
Westinghouse filed for Chapter 11 bankruptcy in the Southern
District of New York (the “New York Bankruptcy Court” or
“Bankruptcy Court”). In re Westinghouse Elec. Co. LLC, No.
17-10751-MEW, ECF No. 1 (Bankr. S.D.N.Y. Mar. 29, 2017).
Through the bankruptcy process, Westinghouse hoped to
receive “judicial confirmation of a reorganization plan that
[would] enable[] [it] to restructure its pre-bankruptcy debts,
pay its creditors, and return to active operation as a viable
enterprise, free from judicial control and creditor scrutiny.” In
re Great Am. Pyramid Joint Venture, 144 B.R. 780, 788
(Bankr. W.D. Tenn. 1992).
Filing a bankruptcy petition has immediate
consequences. It “‘creates an estate’ that, with some
exceptions, comprises ‘all legal or equitable interests of the
[Debtors] in property as of the commencement of the case.’”
City of Chicago v. Fulton, 141 S. Ct. 585, 589 (2021) (quoting
11 U.S.C. § 541(a)(1)). The petition also affects the
classification and treatment of claims under the Bankruptcy
Code. Holders of prepetition claims1 not secured by collateral
1
The Bankruptcy Code defines the term “claim” broadly to
include the “right to payment” as well as the “right to an
equitable remedy for breach of performance if such breach
4
typically recover only a fraction of the claim amount. On the
other hand, postpetition “actual, necessary costs and expenses
of preserving the estate” are treated as administrative expense
claims entitled to priority under the Bankruptcy Code’s
distribution scheme and paid in full under a Chapter 11 plan
unless the claimant agrees to other treatment. See 11 U.S.C.
§§ 503(b)(1)(A), 507(a)(2), 1129(a)(9)(A); In re Energy
Future Holdings Corp., 990 F.3d 728, 741 (3d Cir. 2021)
(hereinafter “EFH Admin Expense Decision”).
In June 2017, the New York Bankruptcy Court set a
“General Bar Date” for September 1, 2017—the deadline by
which creditors had to file proofs of claims for most
prepetition claims. As is typical in bankruptcy cases, the bar
date for postpetition administrative expense claims is later
than the general prepetition claims bar date because the estate
continues to incur expenses throughout the bankruptcy.
Westinghouse’s Chapter 11 plan of reorganization (the
“Westinghouse Plan” or simply the “Plan”) contemplated a bar
date for administrative expense claims of “the first Business
Day that is 30 days following the [Plan’s effective date].”
App. at 260, Plan § 1.3. The Plan further provided, with its
usual overlapping verbs, that “Holders of Administrative
Expense Claims that . . . do not file and serve [a request for
payment] by the Administrative Expense Claims Bar Date
shall be forever barred, estopped, and enjoined from
asserting such [] Claims against the Debtors, . . . or their
property, and such [] Claims shall be deemed compromised,
settled, and released as of the Effective Date.” App. at 275,
Plan § 2.1. The Plan also contained customary language
gives rise to a right to payment.” 11 U.S.C. § 101(5); see In re
Rodriguez, 629 F.3d 136, 138–39 (3d Cir. 2010).
5
discharging all claims as of the Effective Date. App. at
301–02, Plan §§ 11.1, 11.3.
Westinghouse then proceeded with negotiating and
confirming the Plan. In February 2018, it informed creditors
of various deadlines for filing objections to and voting on the
Plan. Following a hearing, the Bankruptcy Court confirmed
the Plan on March 28, 2018 (the “Confirmation Date”),
concluding that it satisfied all the requirements for
confirmation in 11 U.S.C. § 1129.
Although plans usually become effective shortly after
confirmation, there can be a delay of months or longer in cases
where, for example, the debtor must wait for regulators to
approve the plan or investors to finalize financing. See, e.g.,
In re Venoco LLC, 998 F.3d 94, 107 n.14 (3d Cir. 2021); In re
Worldcom, Inc., 401 B.R. 637, 640 (Bankr. S.D.N.Y. 2009).
The effectiveness of the confirmed Westinghouse Plan was
delayed pending the closing of an investment transaction,
which in turn required approval from government agencies
such as the Department of Energy. As a result, it did not
become effective until August 1, 2018 (the “Effective
Date”).
That day, all the property of the Debtors’ estates
(subject to a few exceptions) vested in the reorganized
Westinghouse, which began a fresh corporate life. See App.
at 281, Plan § 5.1. See generally In re Montgomery Ward,
LLC, 634 F.3d 732, 737 (3d Cir. 2011) (noting there are
three entities in a successful Chapter 11, “the pre-
bankruptcy debtor, the estate, and the post-bankruptcy
business” (quoting Elizabeth Warren, A Theory of Absolute
Priority, 1991 Ann. Surv. Am. L. 9, 12 (1992)). When
6
Westinghouse gave notice of the Effective Date, it also told
creditors that, under the confirmed Plan, August 31, 2018 is
the deadline for filing administrative expense claims (the
“Administrative Claims Bar Date”). App. at 558. The
notice emphasized that those who do not file a claim by then
will see their claims “discharged as of the Effective Date.”
Id. All this was blessed by the New York Bankruptcy Court.
App. at 250–51, Confirmation Order ¶ 47.
B. Ellis and the Pennsylvania District Court
Case
Timothy Ellis worked for Westinghouse from 2010
until 2018, most recently as Vice President, Global Projects
Management Operations. See Ellis v. Westinghouse Elec. Co.,
No. 2:18-cv-01442, 2020 WL 4499931, at *3 (W.D. Pa. Aug.
5, 2020) (hereinafter “Dist. Ct. Op.”). On May 31, 2018,
about two months after the New York Bankruptcy Court
confirmed the Plan, Westinghouse terminated Ellis’s
employment, explaining that his department was being
restructured. However, Ellis, 67 years old at the time,
believed he was unlawfully fired due to his age. He
immediately hired counsel, who represented him by filing
a charge with the federal Equal Employment Opportunity
Commission (the “EEOC”) in July 2018. The parties agree
that Ellis’s employment discrimination claim “arose” when he
was terminated, so it is a claim after confirmation of the Plan
but before its Effective Date.
During its bankruptcy case, Westinghouse served Ellis
with three notices: the first about the General Bar Date, the
second about the Plan objection and voting deadlines, and the
third about the Effective Date and the Administrative Claims
7
Bar Date. Ellis acknowledges receiving the first two notices
but does not admit receiving the third. See Dist. Ct. Op. at *3–
4. He never took any action in the New York Bankruptcy
Court to assert his employment discrimination claim.
Instead, in October 2018, Ellis filed suit in the Western
District of Pennsylvania District Court against (the now
reorganized) Westinghouse. It was initially stayed pending
Ellis’s exhaustion of state administrative remedies. After the
case resumed in July 2019, Westinghouse filed a motion for
summary judgment, arguing that Ellis’s claim, as an
administrative expense claim not timely filed by the
Administrative Claims Bar Date, was discharged by the Plan
and the order confirming it.
The District Court denied Westinghouse’s motion and
granted summary judgment in favor of Ellis as to the
bankruptcy discharge issue. It first concluded that Ellis
received proper notice of the Administrative Claims Bar Date,
in part because the Debtors’ claims and noticing agent
affirmed that all three notices were sent to Ellis and none were
returned as undeliverable. Dist. Ct. Op. at *7. However, the
Court ultimately decided that Ellis’s claim was not discharged
in the bankruptcy, concluding that § 503 of the Bankruptcy
Code does not authorize the use of a bar date to discharge post-
confirmation administrative expense claims. Id. at *13. It
further held that § 1141(d) of the Bankruptcy Code prohibits
the discharge of post-confirmation claims. Id. at *19.
Recognizing the novel and complex legal questions
involved, the District Court certified the following questions
to our Court for immediate interlocutory appeal:
8
Where a plaintiff’s claim under the Age
Discrimination in Employment Act (and parallel
provisions of state law) arises after the
confirmation of an approved bankruptcy plan of
reorganization, but prior to the effective date of
the plan and the vesting of the bankruptcy estate
as set forth and defined in such plan by order of
the bankruptcy court: (1) is the plaintiff’s claim
barred by the provisions of 11 U.S.C. § 503 if the
plaintiff did not file such employment
discrimination claim as a claim for an
administrative expense prior to the post-
confirmation administrative claim bar date under
the plan; and/or (2) is such employment
discrimination claim discharged by the
provisions of 11 U.S.C. § 1141, and/or under the
principles of res judicata, if such claim was not
filed in the bankruptcy court prior to the post-
confirmation effective and discharge dates set
out in the plan?
Dist. Ct. Op. at *19. We agreed to hear the appeal.
II. JURISDICTION AND STANDARD OF REVIEW
The District Court had jurisdiction pursuant to 28
U.S.C. §§ 1331 and 1343, as Ellis asserts a claim under the
federal Age Discrimination in Employment Act (“ADEA”), 29
U.S.C. § 621 et seq.2 The District Court also had jurisdiction
2
To the extent Ellis is still pursuing a state law claim under the
Pennsylvania Human Relations Act, the District Court had
supplemental jurisdiction over it. See 28 U.S.C. § 1367(a).
9
to decide whether Ellis’s claim was discharged in the New
York Bankruptcy Court case. See In re Apex Oil Co., 406 F.3d
538, 543 (8th Cir. 2005) (holding that a non-bankruptcy court
“is fully competent to determine whether the [bankruptcy] plan
and the injunction” barred certain claims); see also Whitehouse
v. LaRoche, 277 F.3d 568, 576 (1st Cir. 2002) (explaining that
bankruptcy and non-bankruptcy courts have concurrent
jurisdiction over whether a claim was discharged by
bankruptcy).3
We have jurisdiction over this interlocutory appeal
under 28 U.S.C. § 1292(b). Our scope of review “is generally
constrained to the questions certified for review by the district
court, [though] we may consider any grounds justifying
reversal.” Morris v. Hoffa, 361 F.3d 177, 196 (3d Cir. 2004)
(emphasis and quotation omitted). Our standard of review is
plenary, meaning we review anew the District Court’s
summary judgment decisions, applying the same standard it
must apply. See Rivas v. City of Passaic, 365 F.3d 181, 193
(3d Cir. 2004). To prevail, Westinghouse as the moving party
must show “that there is no genuine dispute as to any material
3
A week after filing its summary judgment motion,
Westinghouse also filed a parallel motion with the New York
Bankruptcy Court seeking to enjoin Ellis from prosecuting his
claim. After he argued in the Pennsylvania District Court that
the New York Bankruptcy Court motion was duplicative,
Westinghouse agreed to continue that motion indefinitely. See
Dist. Ct. Op. at *2. The District Court noted that, assuming the
Bankruptcy Court maintained jurisdiction, Westinghouse
could have withdrawn its motion for summary judgment and
proceeded only in the latter Court. Id. at n.2.
10
fact and [it] is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a).
III. ANALYSIS
“The principal purpose of the Bankruptcy Code is to
grant a fresh start to the honest but unfortunate debtor.”
Marrama v. Citizens Bank of Mass., 549 U.S. 365, 367 (2007)
(internal quotation marks and citation omitted); see also
N.L.R.B. v. Bildisco & Bildisco, 465 U.S. 513, 527 (1984)
(“[T]he policy of Chapter 11 is to permit successful
rehabilitation of debtors.”). However, the debtor’s interest in
a fresh start is not absolute, as the Bankruptcy Code tries to
strike the “delicate balance between the competing interests of
creditors pursuing their claims and debtors in obtaining a fresh
start and finality.” In re Bugarenko, 373 B.R. 394, 400 (Bankr.
E.D. Pa. 2007). This case puts in play these two competing
interests.
Against this backdrop, we conclude as follows. First,
Ellis’s employment discrimination claim is an “actual and
necessary” administrative expense claim under
§ 503(b)(1)(A). Second, § 503 authorizes bankruptcy courts to
set and enforce bar dates for administrative expense claims.
Third, that provision permits the discharge of post-
confirmation administrative expense claims not timely filed by
the bar date. Fourth, § 1141(d)(1)’s language regarding the
discharge of pre-confirmation claims is a default rule that can
be overridden by the plan and confirmation order. Finally,
various policy and practical concerns about the discharge of
post-confirmation claims are overstated and ignore the
creditor-friendly protections still in place.
11
A. A Postpetition Employment Discrimination
Claim Is an Administrative Expense Claim.
For the Administrative Claims Bar Date to be invoked,
Ellis’s claim must be an “Administrative Expense Claim” as
defined by the Plan. The Plan’s definition references § 503(b)
of the Bankruptcy Code, which provides in relevant part that,
“[a]fter notice and a hearing, there shall be allowed
administrative expenses, . . . including the actual, necessary
costs and expenses of preserving the estate.” App. at 260, Plan
§ 1.2; 11 U.S.C. § 503(b). To qualify, the claimant must
typically show there was a “[postpetition] transaction between
the claimant and the estate” and the “expenses yielded a benefit
to the estate.” See EFH Admin Expense Decision, 990 F.3d at
741 (internal quotation marks omitted) (quoting In re Women
First Healthcare, Inc., 332 B.R. 115, 121 (Bankr. D. Del.
2005)). On first glance, employment discrimination claims do
not fit neatly into this definition.
However, we agree with the District Court’s suggestion
that, per the Supreme Court’s decision in Reading Company v.
Brown, 391 U.S. 471 (1968), postpetition employment
discrimination claims are “actual and necessary”
administrative expenses. In Reading, a bankruptcy receiver’s
negligence allegedly caused a fire that resulted in damage to a
non-debtor third party, who then asserted an administrative
expense claim against the estate. Id. at 473–74. The Court
held that, under the predecessor to the Bankruptcy Code, the
claim was for the “actual and necessary costs” of preserving
the estate. Id. at 475, 484–85.
Like the tort claim in Reading, an employment
discrimination claim is a “cost[] ordinarily incident to
12
operation of a business.” Id. at 483. Further, a federal
employment law violation is often considered a statutory tort.
See Price Waterhouse v. Hopkins, 490 U.S. 228, 264 (1989)
(O’Connor, J., concurring) (referring to Title VII of the Civil
Rights Act of 1964 as creating a “statutory employment
‘tort’”). Indeed, at least two circuits have applied the Reading
exception to employment discrimination claims. See Sanchez
v. Northwest Airlines, Inc., 659 F.3d 671, 679 (8th Cir. 2011)
(explaining that employment discrimination claims are
administrative expenses because they come “out of the regular
employment relationship between the debtor and its
employee”); 4 In re Zilog, 450 F.3d 996, 999 n.1 (9th Cir. 2006)
(“Thus, under Reading and its progeny, [employment]
discrimination claims that arise post-petition but pre-
4
In Sanchez, an employee with a postpetition, but pre-
confirmation, discrimination claim argued it was not
discharged by the bar date. 659 F.3d at 674–75. The Eighth
Circuit ultimately sided with the employee, concluding his
claim survived under the specific terms of the plan, which
exempted from discharge any administrative expenses
“incurred in the ordinary course of business.” Id. at 678; see
also In re Eagle-Picher Indus., Inc., 447 F.3d 461, 467 (6th
Cir. 2006) (same). Ellis does not raise a similar argument, so
it is forfeited. In any event, the argument would likely be
unworkable here, as the language in the Westinghouse Plan
and notices differ from those cases. See Sanchez, 659 F.3d at
676 (providing in the relevant notice that claims do not need to
be filed for “[l]iabilities incurred in the ordinary course of
business”).
13
confirmation can be filed as administrative expenses against
the debtor’s estate.”).5
We recognize this result appears counterintuitive, as
Westinghouse does not need to violate employment laws to
operate. To be sure, we do not mean to imply that employment
discrimination is merely a cost of doing business. But that “is
the wrong prism to use in looking at the situation.” Sanchez,
659 F.3d at 679. “Rather than focus on what went wrong, we
must look at the utility of the underlying exercise.” Id. The
employment discrimination claim arose out of Ellis’s
employment, which without dispute benefitted the
Westinghouse estate. Treating such claims as administrative
expenses furthers the policy goal of § 503(b)(1)(A)—providing
incentives for employees to continue working for a bankrupt
company. Pa. Dep’t of Env’t Res. v. Tri-State Clinical Lab’ys,
Inc., 178 F.3d 685, 690 (3d Cir. 1999). Without the assurance
that any valid employment discrimination claim would be paid
in full, workers may leave based on fear that their rights will
not be fully protected.
We part, however, from the District Court’s suggestion
that certain administrative expense claims may be categorized
differently for the purposes of priority and discharge. See Dist.
Ct. Op. at *12; see also Sanchez, 659 F.3d at 678 (stating in a
dictum that “Reading defines administrative expenses for the
5
The Ninth Circuit in Zilog held that a postpetition (and
arguably post-confirmation) employment discrimination claim
cannot be discharged “without first allowing for the
presentation of such claims.” 450 F.3d at 1001. That is not the
case for Ellis, who received notice of the filing deadline a
month before the Administrative Claims Bar Date.
14
purposes of priority status under § 503, which differ from
purposes of dischargeability.”). Under this view, a Reading-
type administrative expense claim that is entitled to priority
could still be outside the reach of a bar date. But this position
finds no textual support in the Bankruptcy Code. A claim is
either an administrative expense claim or it is not; it cannot be
a chameleon. And as explained below, the importance of the
bar date is even greater when the debtor’s administrative
solvency is at stake. As a practical matter, the District Court’s
position that the claim is entitled to administrative priority, but
not subject to discharge, is untenable, as that would allow
creditors to cherry-pick whether they want to recover from the
estate or the reorganized debtor. Ellis’s claim is thus an
administrative expense claim under § 503 and subject to the
Administrative Claims Bar Date.
B. Section 503 Allows Bankruptcy Courts to Set
and Enforce Bar Dates for Administrative Expense Claims.
At a high level, bar dates ensure that the promise of a
fresh start is not illusory, as claims not filed and addressed in
the bankruptcy cannot be asserted later against the reorganized
debtor. “[I]t not only allows the trustee or debtor-in-possession
to estimate the debtor’s potential liabilities, it is also essential
in formulating a viable reorganization plan. Without a final
claims deadline, participants in the reorganization process
would be hindered by undue caution in their negotiations and
in voting on the plan.” In re Energy Future Holdings Corp.,
619 B.R. 99, 118 n.109 (Bankr. D. Del. 2020) (quoting In re
Trump Taj Mahal Assocs., 156 B.R. 928, 938 (Bankr. D.N.J.
1993)).
15
For prepetition claims, bankruptcy courts have the
power to set bar dates “before which proofs of claim against
the debtor’s estate must be filed.” See In re Energy Future
Holdings Corp., 949 F.3d 806, 811 (3d Cir. 2020) (hereinafter
“EFH Bar Date Decision”); see also Fed. R. Bankr. P.
3003(c)(3). In practice, they often set multiple bar dates to
address the specific needs of the case. See In re Lehman Bros.
Holdings, Inc., 433 B.R. 113, 118–19 (Bankr. S.D.N.Y. 2010)
(discussing “custom-made features” in the Bar Date Order and
different bar dates based on claim types).
Claims not filed by the bar date are typically discharged,
meaning the claimant cannot recover from the debtor or the
reorganized debtor. See EFH Bar Date Decision, 949 F.3d at
811. The bar date is binding on a creditor even if he does not
participate in the bankruptcy. See Tenn. Student Assistance
Corp. v. Hood, 541 U.S. 440, 447 (2004) (“If a creditor chooses
not to submit a proof of claim, once the debts are discharged,
the creditor will be unable to collect . . . .”). To avoid
unnecessarily harsh results, a claimant can still file a claim
after the bar date if he shows “excusable neglect.” EFH Bar
Date Decision, 949 F.3d at 814; see also Fed. R. Bankr. P.
9006(b)(1). Any discharge must also satisfy due process
requirements. See Chemetron Corp. v. Jones, 72 F.3d 341, 346
(3d Cir. 1995) (“Chemetron I”) (holding that “[i]nadequate
notice is a defect which precludes discharge of a claim in
bankruptcy”).
The bankruptcy court’s power to set and enforce bar
dates extends to postpetition administrative expense claims.
Section 503(a) provides that “[a]n entity may timely file a
request for payment of an administrative expense, or may
16
tardily file such request if permitted by the court for cause.” 6
This language “provides courts with the statutory authority to
set and enforce administrative claim bar dates.” 4 Collier on
Bankruptcy ¶ 503.02[2] (16th ed. 2021);7 see In re Eagle-
Picher Indus., Inc., 447 F.3d 461, 465 (6th Cir. 2006)
(explaining that the Bankruptcy Code “permit[s] the parties to
establish a bar date by which time all administrative expenses
must be asserted against the debtor or face discharge”);
Sanchez, 659 F.3d at 677 (noting that an administrative
expense claim bar date “force[s] creditors to comply with [it]
or face a discharge”).8
6
To be technical, a claimant files a “request for payment”
rather than a “proof of claim” for an administrative expense
claim. 4 Collier on Bankruptcy ¶ 503.02[1] (16th ed. 2021).
Still, much of the logic and case law about general bar dates
for prepetition claims apply with equal force to administrative
expense claims. See id. ¶ 503.02[2] (explaining that courts
have often relied on the “excusable neglect” standard to
determine “whether to allow a tardily filed request for payment
of an administrative expense”).
7
A debtor can choose not to set an administrative expense
claim bar date. If no bar date is set, and depending on the terms
of the plan, the claim could be filed any time against the debtor
or the reorganized debtor, “limited only by the relevant statute
of limitations.” In re Worldcom, Inc., 401 B.R. 637, 647 n.13
(Bankr. S.D.N.Y. 2009).
8
One exception is that a governmental unit is not required to
file a request for payment of an administrative tax expense. 11
U.S.C. § 503(b)(1)(D); 4 Collier, supra ¶ 503.02[3].
17
Section 503 thus provides both a carrot and a stick for
creditors promptly to request payment of administrative
expenses. File claims on time and, if valid, they will receive
priority treatment in the bankruptcy and get paid in full under
the plan. File the claims late and they will face discharge. The
harsh result is justified because, like general claim bar dates for
prepetition claims, bar dates for administrative expense claims
help the debtors know their liabilities and implement a viable
plan to obtain a fresh start. Because the plan must pay
administrative expense claims in full under 11 U.S.C.
§ 1129(a)(9)(A), unexpected administrative expenses can
jeopardize the entire restructuring or become a significant
burden to the reorganized debtor.9 Inability to pay
administrative expenses is called “administrative insolvency,”
typically resulting in conversion of the Chapter 11 case to
Chapter 7 liquidation. See 7 Collier, supra ¶ 1100.07[2] n.10;
see, e.g., In re Constellation Enters. LLC, 587 B.R. 275, 279
9
In a lengthy case, the bankruptcy court may set multiple
administrative claims bar dates to help the debtor implement a
workable plan. See In re Chicago Newspaper Liquidation
Corp., 490 B.R. 487, 491 n.4 (Bankr. D. Del. 2013). Even
here, where the Administrative Claims Bar Date was after the
Effective Date, the bar date encourages claimants to file claims
promptly and gives the reorganized Westinghouse comfort that
it does not face significant unknown liabilities. See In re CM
Wind Down TopCo Inc., No. 17-13381-SCC Docket No. 1105,
Hr’g Tr. 12:13–18 (Bankr. S.D.N.Y. Dec. 13, 2018)
(Chapman, J.) (explaining that the bar date applies to post-
confirmation administrative expense claims because
“sometimes [companies] want absolute certainty that on day
[31] of the reorganized debtor’s life . . . they know what they’re
dealing with”).
18
(D. Del. 2018). Putting all this together, bankruptcy courts
have flexibility under § 503 to set and enforce bar dates for
administrative expense claims that are subject to discharge if
not timely filed.
C. Section 503 Authorizes the Discharge of Post-
Confirmation Administrative Expense Claims.
So far we know that, were Ellis fired on March 27, 2018,
(i.e., the day before the Confirmation Date), his claim would
be subject to discharge if not filed by a reasonable bar date
(e.g., 30 days after the Confirmation Date). We next consider
whether an administrative expense claim that arose between
the plan’s confirmation and effective date is also bound by the
bar date and subject to discharge.
We begin with the text of the Bankruptcy Code. See
Merit Mgmt. Grp., LP v. FTI Consulting, Inc., 138 S. Ct. 883,
893 (2018). Nothing in § 503(a) says that only pre-
confirmation claims must be “timely filed.” Ellis is essentially
asking us to hold that a bankruptcy court can never set a bar
date that applies to post-confirmation administrative expense
claims. Section 503 recognizes no such limitation, and we
generally refrain from adding words to a statute. See Hanover
Bank v. C.I.R., 369 U.S. 672, 687 (1962) (explaining that
courts cannot “add to or alter the words employed to effect a
purpose which does not appear on the face of the statute”).
In fact, when considering the broader “statutory
structure,” see Merit Mgmt., 138 S. Ct. at 894, the only
temporal limit is with the existence of the estate, not the date
of plan confirmation. Because administrative expenses
preserve the bankruptcy “estate,” what matters is that the claim
19
accrues against the estate before it ceases to exist. See 11
U.S.C. § 503(b)(1)(A). While typically the estate ends when
the plan is confirmed, the plan can extend the life of the estate
to a later date such as the effective date. See Venoco, 998 F.3d
at 107 n.14; Hillis Motors, Inc. v. Haw. Auto. Dealers’ Ass’n,
997 F.2d 581, 588–89 (9th Cir. 1993) (holding that where the
plan “unambiguously provides for the continuation of the
estate post-confirmation,” there can be allowed post-
confirmation administrative expense claims); see also 11
U.S.C. § 1141(b). Here the Plan provided that the estate’s
property did not vest in the reorganized debtors until the
Effective Date (August 1, 2018). App. at 281, Plan, § 5.1. The
Westinghouse estate therefore continued to exist until that date,
and any post-confirmation expenses qualify as administrative
expense claims. App. at 260, Plan § 1.2 (defining
“Administrative Expense Claim” to include expenses
“incurred on or after the Petition Date and through the Effective
Date”) (emphasis added).
The Bankruptcy Code thus ties the viability of
administrative expense claims (and, by extension, the coverage
of a bar date for those claims) to the existence of the estate, not
confirmation of the plan. Permitting the bankruptcy court to
manage all claims against the estate is a logical result. Where
the gap between the confirmation date and effective date is
significant, concerns about undisclosed liabilities are
heightened, and the bar date becomes even more important. A
categorical carveout from the bar date for all post-confirmation
claims would needlessly tie the hands of bankruptcy courts to
use the bar date as a reorganization tool. See 4 Collier, supra
¶503.02[2] (explaining that § 503 allows “courts [to] exercise
their discretion in setting bar dates according to the
circumstances of each case”).
20
The District Court questioned whether authority for
discharging an administrative expense claim can even be based
on § 503, as it does not mention the word “discharge,” which
is discussed in § 1141. See Dist. Ct. Op. at *13. In practice,
the specter of discharge is integral to a bar date. Without it,
bar dates would have no teeth. See 4 Collier, supra ¶ 503.02[2]
(“[T]he effect of not permitting the ‘filing’ of a tardy request
(except for cause) is that such expenses will not be approved
for payment from the estate.”); see also Eagle-Picher, 447 F.3d
at 465 (explaining the bar date is a deadline “by which all
administrative expenses must be asserted against the debtor or
face discharge”).10 We believe the better view is that §§ 503
and 1141 work in tandem. Section 503 gives bankruptcy courts
the power to set and enforce bar dates. And, as discussed
below, § 1141(d) allows the plan and confirmation order
generally to govern the discharge of claims (with a few
exceptions).
D. Section 1141(d)(1) Does Not Prohibit the
Discharge of Post-Confirmation Claims.
Ellis argues, and the District Court agreed, that § 1141
of the Bankruptcy Code bars the discharge of valid post-
10
The District Court suggests that the “face discharge”
language means the authority for discharge does not stem from
§ 503. Dist. Ct. Op. at *13. We disagree. The more logical
reading, and the way we use the phrase in this opinion, is that
failing to file a claim by the bar date does not automatically
discharge it, as a bankruptcy court can still accept a late filing
“for cause” or refuse to discharge a claim based on due-process
concerns.
21
confirmation claims in this case. See Dist. Ct. Op. at *18–19.
The relevant provision provides:
Except as otherwise provided in this subsection,
in the plan, or in the order confirming the plan,
the confirmation of a plan—
(A) discharges the debtor from any debt that
arose before the date of such confirmation, and
any debt of a kind specified in section 502(g),
502(h), or 502(i) of this title . . . ; and
(B) terminates all rights and interests of equity
security holders and general partners provided
for by the plan.
11 U.S.C. § 1141(d)(1) (emphasis added).
We disagree with the Court that this provision is a
categorical rule. Our reading is that § 1141(d)(1) creates a
default rule for discharging pre-confirmation debts, meaning it
applies only when the plan and confirmation order are silent on
the issue. Here the Plan provided for the discharge of post-
confirmation claims not timely filed by the Administrative
Claims Bar Date. This overrides the default rule in
§ 1141(d)(1).
Our holding tracks the text of the statute. Placement of
the “[e]xcept as otherwise provided” proviso at the beginning
of subsection (d)(1) means the carveout applies to everything
that follows. Tellingly, Congress did not place the proviso
after a specific phrase in the subsection to invoke the “rule of
the last antecedent.” See Barnhart v. Thomas, 540 U.S. 20, 26
(2003) (explaining this principle of statutory interpretation
under which “a limiting clause or phrase . . . should ordinarily
22
be read as modifying only the noun or phrase that it
immediately follows”).
Our reading is also consistent with the structure of
§ 1141. Elsewhere, the section preserves broad flexibility for
a plan and confirmation order to override default rules. As
already previewed, § 1141(b) states the default rule that
confirmation vests property of the estate in the debtor but
allows the plan and confirmation order to delay vesting. See
Hillis Motors, 997 F.2d at 588–89. An identical carveout is in
§ 1141(c), which “states the general rule that property dealt
with by the plan or the confirmation order is free and clear of
all claims” after confirmation. See 8 Collier, supra ¶ 1141.04.
Further, Congress knew when not to include any carveout
language, as is the case with various exceptions to discharge
that bind the parties no matter what the plan or confirmation
order says. See, e.g., 11 U.S.C. § 1141(d)(6); see also Jennings
v. Rodriguez, 138 S. Ct. 830, 844 (2018) (reasoning that
express exceptions imply there are no other exceptions).
The District Court relied on the Ninth Circuit’s dictum
that § 1141(d)(1) might prohibit the discharge of post-
confirmation claims. See Zilog, 450 F.3d at 1001 n.5 (“We are
uncertain whether post-confirmation debts can in fact be
discharged in bankruptcy.”). The Court suggested that the
“‘[e]xcept as otherwise provided’ clause . . . can be read in
either of two ways.” Id. (alteration in original). First, the
words might modify “any debt.” Second, they might modify
“‘before the date of such confirmation’ . . . [, so] even post-
confirmation debts could be discharged if that were provided
for in the reorganization plan.” Id. The Court did not take a
position but remarked it finds “the first alternative more
plausible.” Id. For the reasons laid out above, we do not follow
23
this either-or choice and read the carveout phrase to apply to
everything that follows in that subsection; a plan, or the order
confirming it, can trump the discharge rule provided by
subsection (d)(1). For our case, that means the confirmed
Westinghouse Plan governs which post-confirmation claims
are subject to discharge.
We are also unpersuaded by the reliance of the District
Court on Holywell Corp. v. Smith, 503 U.S. 47 (1992), which
held that a Chapter 11 plan did not discharge tax liability
assessed after the plan became effective. Id. at 51, 58–59. The
Court remarked that “[e]ven if § 1141(a) binds creditors of the
corporate and individual debtors with respect to claims that
arose before confirmation, we do not see how it can bind the
United States or any other creditor with respect to
postconfirmation claims.” Id. at 58 (emphasis added). But
Holywell is of little value for our analysis, as it dealt with
claims against a post-bankruptcy liquidating trustee after the
plan took effect and had nothing to do with a bar date for
administrative expenses. Id. at 51. Moreover, it was
discussing § 1141(a), and made no mention of the discharge
provision in § 1141(d). In any event, and as the District Court
acknowledged, we have already clarified that Holywell does
not mean bankruptcy plans can never bar post-confirmation
liability. In re Arctic Glacier Int’l, Inc., 901 F.3d 162, 167 (3d
Cir. 2018).
We also understand the import of our Arctic Glacier
decision differently than the District Court. That case was
about the res judicata effect of a confirmed plan’s release
provisions on investors who purchased shares after
confirmation. Id. at 165. It never tried to address the entire
scope of when post-confirmation liability can be discharged.
24
Id. at 167. The issue here is narrower—whether a creditor is
bound by an administrative claim bar date approved by the
Bankruptcy Court. The analysis is not the same, for the point
of a bar date is to bind creditors who did not participate in the
bankruptcy. See Hood, 541 U.S. at 447 (“A bankruptcy court
is able to provide the debtor a fresh start . . . despite the lack of
participation of all of his creditors.”).
To be clear, our holding today is limited to the
enforceability of a bar date for administrative expense claims
and does not otherwise interfere with Ellis’s rights to challenge
a confirmed plan. For example, Ellis could have objected after
confirmation if the Plan’s treatment of his claims were
controversial (for example, by delaying payment later than is
reasonable or making payments in a form other than cash,
rather than paying valid claims in full in cash on the Effective
Date). And, as he did in the District Court, Ellis could contest
the adequacy of the notice he received and whether discharge
of his claim violated due process, which are arguments
routinely reviewed by courts post-confirmation. See Jones v.
Chemetron Corp., 212 F.3d 199, 209–10 (3d Cir. 2000)
(“Chemetron II”) (holding that the claim of a tort claimant who
was not born as of the claims bar date was not discharged by
the confirmation order); Zilog, 450 F.3d at 1001 n.5 (“[E]ven
if the bankruptcy court had the power to discharge post-
confirmation claims, the court abused its discretion in
discharging the . . . claims here.”); In re Pavlovich, 952 F.2d
114, 119 (5th Cir. 1992) (allowing a bank to challenge the
debtor’s post-confirmation actions).
The upshot is that holders of post-confirmation, pre-
effective date administrative expense claims are bound by a bar
date like other holders of claims against the estate, and thus
25
they cannot choose to bypass the bankruptcy process
altogether. Ellis may not litigate his underlying employment
discrimination claim without filing a request for payment in the
New York Bankruptcy Court. And because he never filed such
a request for payment, we reverse the District Court’s denial of
Westinghouse’s motion for summary judgment.
E. Policy and Practical Concerns About
Discharging Post-Confirmation Claims Are Overstated.
Our holding today is supported by the Bankruptcy Code
and furthers its principal purpose of granting the debtor a fresh
start. See Marrama, 549 U.S. at 367. As noted, bar dates are
essential for a debtor to know and manage its liabilities. In the
few cases where a bankruptcy plan does not become effective
for some time after confirmation, the debtor still needs comfort
that holders of post-confirmation, pre-effective date
administrative expense claims will not come out of the woods
later to assert them against the reorganized debtor. Without
this assurance, payments to other creditors may need to be
delayed for fears that higher priority claims could be lurking.
In fact, barring the discharge of post-confirmation claims
would exacerbate this problem: creditors would likely take a
“wait-and-see” approach, as many would rather press their
claims against a reorganized debtor with no judicial
supervision. This could saddle the reorganized debtor with
significant and unexpected liabilities, hence hobbling from the
start its prospects for a successful, long-term reorganization.
Still, some may be concerned that our holding favors the
debtor at the expense of creditors’ rights. Those concerns fail
to appreciate fully the creditor protections that still exist. First,
any discharge of a late-filed administrative expense claim must
26
comport with due process, so a claim is only subject to
discharge if a creditor received adequate notice of the
bankruptcy and had a fair opportunity to press his claim. See
Chemetron I, 72 F.3d at 346 (“Due process requires notice that
is reasonably calculated to reach all interested parties,
reasonably conveys all the required information, and permits a
reasonable time for a response.” (internal citation and
quotation marks omitted)). And to refresh, the bankruptcy
court can still accept late filings “for cause.” 11 U.S.C.
§ 503(a). We therefore do not share the concern that discharge
of post-confirmation debts could occur “without any notice of
the discharge.” See In re Holly’s Inc., 172 B.R. 545, 561
(Bankr. W.D. Mich. 1994).11
Second, the burden to comply with a bar date is low.
Other Westinghouse creditors with post-confirmation
administrative claims were able to file timely requests for
payment. Westinghouse’s Op. Br. at 14 (noting claims for
charges of equipment rental and maintenance and services of
software company after plan confirmation). A creditor does
not even have to know the amount or validity of the claim, for
11
The District Court held that Ellis received adequate notice of
the Administrative Expense Claim Bar Date and did not certify
that part of its ruling for us to consider on appeal, so we do not
reach the issue and take no position on it. See Dist. Ct. Op. at
*8–9. Still, we reiterate that a key element of adequate notice
is information about the types of claims subject to a bar date.
As most claimants and attorneys will be unfamiliar with the
Supreme Court’s holding in Reading, all parties would benefit
if notices of administrative expense claim bar dates make clear
that tort and other litigation claims may be subject to that
cutoff.
27
he can easily file a “protective” claim putting the debtor on
notice without conceding any issues. See DPWN Holdings
(USA), Inc. v. United Air Lines, Inc., 246 F. Supp. 3d 680, 691
(E.D.N.Y. 2017). Thus, contrary to the District Court’s view,
complying with the bar date does not compress the statute of
limitations available to Ellis outside of bankruptcy or deprive
the EEOC of enough time to investigate his allegations. See
Dist. Ct. Op. at *14.
Third, although holders of post-confirmation
administrative expense claims had no opportunity to vote on or
object to the plan before confirmation, their interests are well
protected because the Bankruptcy Code requires any plan to
pay valid administrative expense claims in full. See 11 U.S.C.
§ 1129(a)(9)(A). Indeed, administrative expense claims are
usually considered unimpaired and not entitled to vote on the
plan. See 11 U.S.C. § 1126(f); In re Combustion Eng’g, Inc.,
391 F.3d 190, 220–21 (3d Cir. 2004). And as explained earlier,
a post-confirmation administrative expense claimant still has
various options to challenge the treatment of his claim after
plan confirmation.
Fourth, contrary to the District Court’s suggestion, our
holding does have limiting principles. See Dist. Ct. Op. at *14.
To reiterate, administrative expense claims can only be against
the bankruptcy “estate.” So in this case the Administrative
Claims Bar Date could not discharge claims arising after the
Effective Date, when the estate’s property was vested in the
reorganized debtors. The Court speculated that the discharge
timeframe could be pushed “for months or even years to a
distant” effective date. Id. But that ignores the reality that a
debtor usually wants to emerge from bankruptcy as soon as
possible. Putting aside the intangible reputational and
28
goodwill costs, the sheer size of professional expenses in a
bankruptcy often overwhelms petition-date expectations. See
Arturo Bris, Alan Schwartz & Ivo Welch, Who Should Pay for
Bankruptcy Costs?, 34 J. Legal Stud. 295, 296 n.1 (2005).
Finally, Ellis’s argument that filing a claim
compromises his right to a jury trial is not novel, as the issue
exists for pre-confirmation claims as well. Ellis’s Br. at 20;
see Langenkamp v. Culp, 498 U.S 42, 44–45 (1990) (per
curiam) (holding “there is no Seventh Amendment right to a
jury trial” in the claims-allowance process). Without wading
into the morass on this complex topic, we note that the
consequences of filing a claim are not as straightforward as
Ellis suggests. See 1 Collier, supra ¶ 3.08; see also 28 U.S.C.
§ 157(e); In re Highcrest Mgmt. Co., 30 B.R. 776, 778–79
(Bankr. S.D.N.Y. 1983) (lifting the automatic stay to permit a
jury trial to proceed in the district court).
* * * * *
Each bankruptcy is unique. While a reorganization plan
typically becomes effective immediately after it is confirmed,
in some cases there can be a significant delay. The Bankruptcy
Code recognizes this complexity. Section 503 gives
bankruptcy courts discretion to set and enforce bar dates by
which creditors must file administrative expense claims. And
while § 1141(d) states a default rule that confirmation of a plan
discharges pre-confirmation debts, it preserves flexibility for
the plan and confirmation order to say otherwise.
Here, Ellis’s post-confirmation, pre-effective-date,
employment discrimination claim was an administrative
expense claim subject to a bar date. Because he never filed a
29
request for payment in the New York Bankruptcy Court, the
claim was discharged in the bankruptcy unless he can convince
that Court to accept a late filing.12 The result may be severe,
but that is a price for a debtor’s fresh start. Creditors still have
significant protections, though choosing to avoid the
bankruptcy process is typically not an option. We thus reverse
the District Court’s decision.
12
Our decision does not prevent Ellis from filing a claim in
the Bankruptcy Court and asking it to accept the late filing
“for cause.” 11 U.S.C. § 503(a).
30