Opinion ID: 204103
Heading Depth: 1
Heading Rank: 3

Heading: Whether Rederford's ADA Cause of Action is a Claim for Purposes of the Discharge Provisions of the Bankruptcy Code

Text: Rederford concedes that, to the extent her initial claims would obligate U.S. Airways to pay money damages, they are barred by the bankruptcy court's injunction in the Confirmation Order. She argues instead that because she could seek relief in the form of reinstatement should she prevail in her ADA claims, this equitable remedy removes her reinstatement claim from the definition of claims under the Bankruptcy Code. [4] At the very least, she argues, her suit may not be dismissed unless she fails to establish liability or unless she fails to obtain reinstatement if she establishes liability. Section 101(5) of the Bankruptcy Code defines the term claim as a: (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; or (B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured. 11 U.S.C. § 101(5). The definition of claim serves a number of purposes; we outline the two relevant ones here. It defines what interests must be asserted in the Bankruptcy Court, and it defines what is discharged by the proceeding. In enacting this language, Congress gave the term claim the broadest available definition. F.C.C. v. NextWave Pers. Commc'ns, 537 U.S. 293, 302, 123 S.Ct. 832, 154 L.Ed.2d 863 (2003) (quoting Johnson v. Home State Bank, 501 U.S. 78, 83, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991)) (internal quotation marks omitted). Under § 101(5)(B), a right to an equitable remedy, whether or not fixed, disputed, or reduced to judgment, is a claim within the meaning of the Bankruptcy Code, and subject to bankruptcy proceedings, if a monetary payment is an alternative for the equitable remedy. Air Line Pilots Ass'n v. Cont'l Airlines, 125 F.3d 120, 133 (3d Cir.1997); Matter of Udell, 18 F.3d 403, 407 (7th Cir.1994); see also Ohio v. Kovacs, 469 U.S. 274, 283, 105 S.Ct. 705, 83 L.Ed.2d 649 (1985); In re the Ground Round, Inc., 482 F.3d 15, 19-20 (1st Cir.2007). The inclusion of equitable remedies that may be reduced to payment, similar to the inclusion of contingent claims in § 101(5)(A), ensures that even the most uncertain and difficult to estimate claims can be adjudicated in the bankruptcy proceedings. See Colonial Sur. Co. v. Weizman, 564 F.3d 526, 529 (1st Cir.2009). This serves several obvious purposes that underlie the Bankruptcy Code and Chapter 11 reorganization. One purpose is to avoid distinctions among creditors depending on whether the right to payment stems from an equitable source, a legal source, or an equitable remedy that can be reduced to payment. See Cent. Va. Cmty. Coll. v. Katz, 546 U.S. 356, 363-64, 126 S.Ct. 990, 163 L.Ed.2d 945 (2006); 1 Alan N. Resnick et al., Collier on Bankruptcy ¶ 1.01[1], at 1-4 (16th ed.2009). Thus, the Code evenhandedly grants access to the bankruptcy court for creditors to assert claims against a debtor based on both law and equity. It also treats creditors evenhandedly as to the distribution of assets of the estate. This evenhanded treatment makes sense: in the end, whether the source is law or an equitable remedy that can be reduced to payment, it is the payment that the bankruptcy court will adjust, disallow, or discharge. Allowing claims for equitable relief that could be reduced to payment to be raised after the discharge from bankruptcy would defeat the goal of evenhanded treatment by essentially granting creditors raising such claims what amounts to priority over all other creditors. Another purpose, especially in Chapter 11 proceedings, is to provide finality at the end of the bankruptcy proceeding for the debtor. Chapter 11 reorganization provides debtors with a fresh start by adjudicating, disallowing, or discharging all claims arising before the debtor is discharged from bankruptcy. See Katz, 546 U.S. at 363-64, 126 S.Ct. 990; Mason v. Official Comm. of Unsecured Creditors, 330 F.3d 36, 41 (1st Cir.2003); 1 Alan N. Resnick et al., supra, ¶ 1.01[1], at 1-4. If equitable claims that are reduceable to payment arising before the debtor's discharge from bankruptcy could be raised later, debtors would be less certain about the effect of their bankruptcy discharge and this would hamper their efforts to reorganize into profitable businesses. When the equitable relief sought cannot give rise to a payment, but requires non-monetary action by a debtor, different considerations come into play. If no monetary alternative exists for an equitable remedy, the bankruptcy court will not be able to liquidate it and so cannot readily prioritize it relative to other claims. See, e.g., In re Ben Franklin Hotel Assoc., 186 F.3d 301, 306-07 (3d Cir.1999) (finding a right to enforcement of a partnership interest in a unique business opportunity to not be a claim within the meaning of the code because no monetary alternative existed); In re Udell, 18 F.3d at 409 (holding that enforcement of a covenant not to compete was not a claim). Further, if the equitable remedy involves the abatement of ongoing conduct that is causing harm, rather than the remediation of past harms, the remedy is not a repackaged claim for damages and does not threaten the finality of the proceedings. See, e.g., In re Torwico Elec., Inc., 8 F.3d 146, 150 (3d Cir.1993) (finding an order to abate ongoing pollution not to be a claim within the code). Title I of the ADA explicitly provides for the same remedies available for employment discrimination suits in Title VII of the Civil Rights Act of 1964. 42 U.S.C. § 12117. In that context, front pay is an alternative remedy to reinstatement. Pollard v. E.I. du Pont de Nemours & Co., 532 U.S. 843, 846, 121 S.Ct. 1946, 150 L.Ed.2d 62 (2001) ([F]ront pay is simply money awarded for lost compensation during the period between judgment and reinstatement or in lieu of reinstatement.). Within our circuit, we have held that money damages are a disfavored, yet nonetheless alternative, remedy to reinstatement in employment discrimination cases, including those under the ADA. Arrieta-Colon v. Wal-Mart P.R., Inc., 434 F.3d 75, 91 (1st Cir.2006) (ADA employment discrimination case); Johnson v. Spencer Press of Me., Inc., 364 F.3d 368, 379-80 (1st Cir.2004) (Civil Rights Act employment discrimination case). We have not been cited any circuit case directly on point, but have been cited to an analogous case. The Third Circuit faced a similar question, balancing the policy interests of labor and bankruptcy law, in Air Line Pilots Association. 125 F.3d at 131-36. The court held that a right to seniority integration for airline pilots in the event of a merger, pursuant to a collective bargaining agreement, was a claim within the meaning of the Bankruptcy Code and thus within the bankruptcy court's jurisdiction. Id. at 136. Comparing a right to reinstatement to a particular level of seniority to a right to reinstatement following wrongful employment termination, the court concluded that seniority integration was a contractual provision, intended to confer a benefit on a group of people, and that breach of the provision would result in liquidated damages. Id. at 134-36. For this reason, the court found it was a claim within the meaning of the Code. Id. Because money damages are an alternative remedy for reinstatement following wrongful termination, Rederford's claim was within the jurisdiction of the bankruptcy court and so disallowed and discharged. Rederford cannot preserve her right to reinstatement by limiting her recovery to equitable relief. Allowing her to do so would grant her the equivalent of a preference over other creditors, who only had claims for monetary damages or who agreed to accept liquidated damages for their equitable claims, by allowing her to avoid the prioritization of claims established in the bankruptcy proceeding. It would also thwart the finality of that proceeding and U.S. Airways' reorganization plan by enabling her to pursue a suit arising before the discharge from bankruptcy. Rederford had proper notice of her opportunity to pursue her employment discrimination claims through the bankruptcy proceeding. Having failed to do so, her claims are disallowed and discharged, and the injunction is effective to bar her claims.