1998 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

3-23-1998

In Re: Continental

Precedential or Non-Precedential:

Docket 97-7109

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Recommended Citation

"In Re: Continental" (1998). 1998 Decisions. Paper 54.

http://digitalcommons.law.villanova.edu/thirdcircuit_1998/54
Filed March 23, 1998 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 97-7109 

IN RE: CONTINENTAL AIRLINES, 

 Debtor 

UNITED STATES OF AMERICA, 

 Appellant 

v. 

CONTINENTAL AIRLINES 

 THOMAS E. ROSS, 

 Trustee 

An Appeal from the United States District Court 

for the District of Delaware 

Civil Action No. 93-cv-00485 

Argued December 2, 1997 

Decided January 20, 1998 

Before: COWEN, McKEE and ROSENN, Circuit Judges. 

(As Amended March 23, 1998) 
ORDER AMENDING OPINION 

The opinion of the court filed in the above entitled case 

on January 20, 1998, is herewith amended as follows: 

1) Slip opinion, page 4, second full paragraph, the first 

two sentences should now read as follows: 

 The Government argues that the $4.8 million in 

 funds it held at the time of confirmation and 

 subsequently deposited into the registry of the 

 bankruptcy court, and which the Government alleged it 

 was entitled to set-off1 against the $14.5 million owed 

 by Continental, was not "property of the [bankruptcy] 

 estate." The Government contends that the bankruptcy 

 court's confirmation of Continental's reorganization 

 plan did not extinguish its right of set-off vis-a-vis the 

 $4.8 million in funds because it still held them at the 

 time of confirmation.2 

2) Slip opinion, page 6, line 7, delete "in the registry of 

the court" and substitute "by the Government." 

3) Slip opinion, pages 6-7, revise and combine the last 

paragraph on page 6 and the first full paragraph of page 7 

to read: 

 Finally, the Government's contention that the Norton 

 court "incorrectly considered the funds held by the 

 creditor to be property of the estate" which led to its 

 "erroneous ruling that confirmation of the plan 

 extinguishes a creditor's set-off rights" is without merit. 

 (citing 11 U.S.C. SS 1141(b) and 1327, and Norton, 717 

 at 774). The Government's argument thus misses the 

 cumulative effect of the Norton and Strumpf holdings. 

 Although Norton implicitly held that the funds withheld 

 by the creditor subject to set-off were "property of the 

 estate," today under Strumpf, the relevant "property of 

 the estate" is instead the bankrupt debtor's claim to 

 the funds as opposed to the possession of the physical 

 funds themselves. Even though the actual funds 

 themselves may not have passed as property of the 

 bankruptcy estate, upon confirmation of the plan, 

 2 
 Continental did acquire a claim or interest in them 

 subject only to final resolution of the Government's 

 appeal. Thus, contrary to the Government's assertion, 

 its set-off rights in the funds did not remain unaffected 

 by confirmation of the plan because, under Norton, its 

 set-off right was extinguished by the confirmation of 

 the plan. Norton continues to have vitality and survives 

 Strumpf. 

 BY THE COURT: 

 /s/ Max Rosenn 

 Circuit Judge 

March 23, 1998 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 3