Opinion ID: 695150
Heading Depth: 1
Heading Rank: 3

Heading: bankruptcy claims

Text: 73 In addition to its constitutional challenge, LTV claims that its Chapter 11 bankruptcy protections operate to relieve it of its Coal Act obligations. LTV claims that its Coal Act obligations constitute pre-petition debts which must now be disallowed because no timely proof of claim was filed. The district court analyzed these claims in detail and rejected LTV's arguments. The district court further held that the assessments under the Coal Act are in the nature of a tax, therefore according administrative priority treatment to those assessments accruing during the bankruptcy period. We agree. 74 The critical issue before us is the scope of the term claim as employed by the Bankruptcy Code. If the Combined Fund's premium assessment is a claim against LTV that existed prior to the filing of the petition, then those premiums must now be disallowed. The Code defines a claim as a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured. 11 U.S.C. Sec. 101(5)(A). As this court noted in a prior iteration of this case, Congress unquestionably expected this definition to have wide scope. In re Chateaugay, 944 F.2d at 1003. In Pennsylvania Dep't of Pub. Welfare v. Davenport, 495 U.S. 552, 558, 110 S.Ct. 2126, 2130-31, 109 L.Ed.2d 588 (1990), the Supreme Court reviewed the legislative history of the Bankruptcy Code and noted Congress's intent to invest the term claim with the broadest possible scope so that all legal obligations of the debtor ... will be able to be dealt with in a bankruptcy case. See H.R.Rep. No. 95-595, at 310 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5787, 6267. However broadly claim is understood, it is clear that the existence of a valid bankruptcy claim depends on (1) whether the claimant possessed a right to payment, and (2) whether that right arose before the filing of the petition. Looking to the plain language of the Bankruptcy Code, we must ascertain whether a right to payment existed at the time of LTV's petition. In Davenport, the Court stated simply that a 'right to payment' is nothing more nor less than an enforceable obligation.... 495 U.S. at 559, 110 S.Ct. at 2131. 75 A claim will be deemed pre-petition when it arises out of a relationship recognized in, for example, the law of contracts or torts. A claim exists only if before the filing of the bankruptcy petition, the relationship between the debtor and the creditor contained all of the elements necessary to give rise to a legal obligation--'a right to payment'--under the relevant non-bankruptcy law. In re National Gypsum Co., 139 B.R. 397, 405 (N.D.Tex.1992). 76 We reject LTV's contention that its Coal Act obligations arise out of pre-petition consideration for purposes of bankruptcy analysis. LTV argues that its contributions to the Combined Fund represent additional compensation for the labor of its former miners. We disagree. The obligations here at issue are exclusively statutory in origin and cannot be considered a pay-back for pre-petition labor. Coal Act premiums are no more compensation for past labor than were those mandated by the Black Lung Act. Most important, they do not constitute the maturation of a right to payment that vested at the time labor was supplied. LTV's liability to the Combined Fund is newly imposed by the Coal Act, not a revival of old contractual obligations. No right to payment on the part of the Combined Fund existed until the enactment of the Coal Act six years after the filing of LTV's petition. Our conclusion in no way narrows the definition of the term claim, but rather represents a common sense recognition that its reach is not infinite. 77 In this case, the distinction between statutory and contractual obligations is of paramount importance. The cases cited by LTV for the proposition that its Coal Act liability constitutes consideration for pre-petition labor all involved unmatured or contingent contractual liabilities. See, e.g., PBGC v. LTV Corp., 875 F.2d 1008, 1019 (2d Cir.1989), rev'd, 496 U.S. 633, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990); Trustees of Amalgamated Ins. Fund v. McFarlin's, 789 F.2d 98, 103-04 (2d Cir.1986). Thus, the existence of a prior contractual liability for retiree health benefits, see In re Chateaugay, 945 F.2d at 1209, does not render pre-petition the later statutory imposition of retiree health care obligations by Congress. 78 Our conclusion is supported by the courts' treatment of CERCLA liability in similar bankruptcy cases. In Matter of Penn Central Transp. Co., 944 F.2d 164 (3d Cir.1991), cert. denied, 503 U.S. 906, 112 S.Ct. 1262, 117 L.Ed.2d 491 (1992), the Third Circuit refused to find that a clean-up claim under CERCLA could exist prior to the enactment of the statute, even though the claim admittedly was based on pre-petition activities. While it is true that Matter of Penn Central was decided under the old Bankruptcy Act, which used a narrower definition of claim than the new Bankruptcy Code, the logic of that case is, as the district court pointed out, equally applicable to the Code definition of a 'claim,' which still requires a legal 'right' to be in existence at the time of the filing. 154 B.R. at 419, JA 13. The mere fact that LTV's retirees were employed by LTV pre-petition does not, in and of itself, render pre-petition all claims arising thereafter that may have any nexus to such employment. We agree with the district court that the Combined Fund's claims under the Coal Act in this case were not in any sense 'contingent' or 'unmatured' ... they simply did not exist. Id. [W]here there is no legal relationship defined at the time of petition, that is, where the statute imposing the liability has not been enacted, it would be impossible to find even the remotest 'right to payment.'  Id. Therefore, LTV's Coal Act obligations do not represent pre-petition claims that must be disallowed as untimely. 79 We must next determine whether Coal Act contributions are tax[es] ... incurred by the estate, 11 U.S.C. Sec. 503(b)(1)(B), entitled to administrative priority. In United States v. Feiring, 313 U.S. 283, 285, 61 S.Ct. 1028, 1029, 85 L.Ed. 1333 (1941), the Supreme Court held that tax priority extends to those pecuniary burdens laid upon individuals or their property, regardless of their consent, for the purpose of defraying the expenses of government or of undertakings authorized by it. The Court further refined its working definition in National Cable Television Ass'n v. United States, 415 U.S. 336, 340-41, 94 S.Ct. 1146, 1149, 39 L.Ed.2d 370 (1974), explaining that taxes are distinguished by their involuntary character. Working from these precedents, the Ninth Circuit summarized the four elements that characterize a tax: 80 (a) An involuntary pecuniary burden, regardless of name, laid upon the individuals or property; 81 (b) Imposed by, or under authority of the legislature; 82 (c) For public purposes, including the purposes of defraying expenses of government or undertakings authorized by it; 83 (d) Under the police or taxing power of the state. 84 In re Lorber Indus. of California, Inc., 675 F.2d 1062, 1066 (9th Cir.1982). Though decided under the prior Bankruptcy Act, this test is equally applicable under the Code. See, e.g., In re Continental Minerals Corp., 132 B.R. 757, 758 (Bankr.D.Nev.1991); In re O.P.M. Leasing Servs., Inc., 60 B.R. 679, 680-81 (Bankr.S.D.N.Y.1986). It is uncontested that LTV's Coal Act contributions are involuntary burdens assessed by Congress. We have already concluded above that the Coal Act serves a public purpose. As to the fourth factor, we agree with the district court that Congress's enactment of the Coal Act was at least partially an exercise of the taxing power. The placement of the Coal Act at Subtitle J of the Internal Revenue Code of 1986 provides a strong indication of Congress's intent, as does its granting of enforcement powers to the Secretary of the Treasury. 26 U.S.C. Sec. 9707. 85 In sum, we agree with the district court that the Coal Act obligations are appropriately described as 'taxes' due to their overwhelmingly involuntary nature, their explicitly stated public purpose, and their obvious potential to be imposed pursuant to the taxing power. 154 B.R. at 422, JA 16. As a result, the portion of LTV's Coal Act liability accruing during the pendency of its bankruptcy is entitled to treatment as an administrative expense of the estate pursuant to section 507(a)(1). The remainder of LTV's obligations was not dischargeable in bankruptcy and is an obligation of the reorganized LTV.