1 14-3349-bk FELRA v. The Great Atl. & Pac. Tea Co. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DA TABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CI TING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. At a stated term of the United States Court of Appeals for the Second Circuit, held at the 1 Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 2 2 nd day of July, two thousand fifteen. 3 4 PRESENT: G UIDO C ALABRESI , 5 D EBRA A NN L IVINGSTON , 6 Circuit Judges , 7 W ILLIAM K. S ESSIONS III, 1 8 District Judge. 9

____________________________________________________ 10 11 F OOD E MPLOYERS L ABOR R ELATIONS A SSOCIATION AND U NITED 12 F OOD AND C OMMERCIAL W ORKERS P ENSION F UND , 13 14 Appellant , 15 16 v. No. 14-3349-bk 17 18 T HE G REAT A TLANTIC & P ACIFIC T EA C OMPANY , 19 20 Appellee, 21 22

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1 The Honorable William K. Sessions III, of the Unite s States District Cour t for the District of Vermont, sitting by designation.2 FOR APPELLANT: J EFFREY S. S WYERS , Barry S. Slevin, Christopher M. Leins, 1 Slevin & Hart, P.C., Washington, DC. 2 3 FOR APPELLEE: M ICHAEL B. S LADE , John S. Moran, Paul M. Basta, 4 Kirkland & Ellis LLP, Chicago, IL. 5 6 Appeal from the United States District Cour t for the Southern District of New York 7 (Román, J. ). UPON DUE CONSIDERATION WHEREO F, IT IS HEREBY ORDERED, 8 ADJUDGED, AND DECREED that the judgment of the District Court is AFFIRMED

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* * * 10 Appellant Food Employers Labor Relati ons Association and United Food and 11 Commercial Workers Pension F und (“FELRA”) sought administra tive expense treatment under 12 11 U.S.C. § 503(b)(1)(A) for a po rtion of its claim against the bankruptcy estate of Appellee 13 Great Atlantic & Pacific Tea Company (“A&P” ) arising out of A&P’s withdrawal from 14 participation in the FELRA pension plan. An employer that withdraws from a multiemployer 15 employee benefit plan incurs “w ithdrawal liability” to the plan under 29 U.S.C. § 1381(a), meant 16 to cover that employer’s share of the pl an members’ vested but unfunded benefits. See Trustees 17 of the Amalgamated Ins. Fund v. McFarlin’s, Inc. , 789 F.2d 98, 99 (2d Cir. 1986). The Bankruptcy 18 Court (Drain, J. ) denied FELRA’s motion for allowance of an administrative expense claim, and 19 the district court affirmed. “On an appeal from the district court’s affirmance of a bankruptcy 20 court’s order, we review the decision of th e bankruptcy court independently, assessing its 21 conclusions of law de novo and its factual findings for clear error.” In re Dana Corp. , 574 F.3d 22 129, 144-45 (2d Cir. 2009). As this appeal involves only questions of law, our review is de novo

. 23 See In re Bethlehem Steel Corp. , 479 F.3d 167, 172 (2d Cir. 2007) (“The bankruptcy court’s 24 determination in this case that the payment at issue does not constitute an administrative expense 25 is a conclusion of law.”). We assume the partie s’ familiarity with the underlying facts, the 26 procedural history, and the i ssues presented for review. 273 Section 503(b) of the Bankruptcy Code provide s that, “[a]fter notice and a hearing, there 1 shall be allowed administrative expenses, . . . including . . . the actual, necessary costs and 2 expenses of preserving the esta te including . . . wages, salari es, and commissions for services 3 rendered after the commencement of the case.” U nder this Court’s case law, “an expense is 4 administrative only if it arises out of a transaction between the cr editor and the . . . debtor in 5 possession, and only to the extent that the consideration supporti ng the claimant’s right to 6 payment was both supplied to and beneficial to the debtor-in-possession in the operation of the 7 business.” McFarlin’s , 789 F.2d at 101 (citations and internal quotation marks om itted). A 8 creditor seeking administrative expense treatment has the burden of proving its entitlement to 9 that status. In re Bethlehem Steel , 479 F.3d at 172. 10 FELRA recognizes that, under our decision in McFarlin’s , it is not entitled to 11 administrative expense priority for its entire withdrawal liability claim. See 789 F.2d at 103-04. 12 Instead, FELRA seeks administrative expense treatm ent for an amount that it claims is the portion 13 properly attributable to A&P’s post-petition oper ations, and thus to the post-petition labor of 14 FELRA’s members. Assuming without deciding that such a claim exists, we nevertheless affirm 15 the bankruptcy court’s denial of FELRA’s moti on for allowance of an administrative expense 16 claim on the ground that FE LRA has failed to meet its burden of proving that its claim is entitled to 17 administrative expense treatment. 18 FELRA’s proposed calculation method involves performing the operations necessary to 19 arrive at A&P’s total withdrawal liab ility under ERISA’s presumptive method, see 29 U.S.C. 20 § 1391(b), but stopping once FELRA’s share of the unf unded vested benefits allocated to the year 21 2011 has been calculated, and basing its claim on that number. Due to the peculiarities of ERISA’s 22 calculation methodology, that number bears little if any relation to the actual amount of unfunded 23 benefits that vested in 2011, because ERISA’s pr esumptive method uses the most recent plan year 244 as a dumping ground for any unfunded vested benef its that exist as a financial reality, but which 1 have been discounted out of past years’ amounts. In other words, the amount of unfunded vested 2 benefits allocated to the year 2011 by the ERISA presumptive method is a fiction, bearing no 3 relationship to the amount by whic h the Plan’s unfunded benefits or A&P’s wit hdrawal liability 4 actually increased or decreased during the 2011 plan year. 5 A debt “can only be an administ rative expense if the debtor re ceived the consideration for 6 the obligation after the commencement of bankruptcy proceedings.” In re Bethlehem Steel , 479 7 F.3d at 172-73. Because FELRA’s proposed post-petition claim amount bears no causal 8 relationship to the post-petition consideration prov ided by the covered employees—either in terms 9 of hours worked or in terms of the employees’ willingness to work at all—FELRA cannot meet its 10 burden of showing that A&P received the c onsideration for FELRA’s claim “after the 11 commencement of bankruptcy proceedings.” Id. at 173. Moreover, as the bankruptcy court pointed 12 out, “the calculation is loaded in favor of a higher number for the year of withdrawal,” even though 13 FELRA cannot show that the co nsideration provided by the covered workers was concomitantly 14 “loaded in favor of” the year 2011. Sp. App’x at 14. FELRA’s protests that this is the only method 15 that accords with ERISA are disingenuous—FEL RA’s own expert admitted that ERISA had 16 nothing to say about how a w ithdrawal liability claim shoul d be partitioned for bankruptcy 17 purposes—and incorrect, as the ERISA presumptiv e method is meant to arrive at a total 18 withdrawal liability number, and the various subtotals that go in to that final total serve no 19 independent purpose in the statute. See generally 29 U.S.C. § 1391. Thus, th e bankruptcy court did 20 not err in holding that FELRA’s proposed administr ative expense claim, as calculated, failed to 21 qualify for administrative expense status. 225 We have considered all of th e remaining arguments raised by Appellant and find them to 1 be without merit. For the reasons stated above, we AFFIRM the District Court’s August 11, 2 2014 judgment affirming the July 2, 2013 order of the Bankruptcy Court. 3
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FOR THE COURT: 5 Catherine O’Hagan Wolfe, Clerk 6