Opinion ID: 149094
Heading Depth: 2
Heading Rank: 3

Heading: Delta's Other Arguments for Affirmance

Text: As an alternative basis for affirmance, Delta argues that a single loss can only give rise to a single claim in bankruptcy, and that Appellants seek to be compensated for losses on account of which another set of claimsthe SLV claimshas already been allowed. Delta presses this argument notwithstanding that the TIA claims and SLV claims arise under agreements (1) between different parties, (2) addressing different events, and (3) providing for different remedies. In light of these facts, we agree with the bankruptcy court that: Each agreement was freely negotiated and fully supported by fair consideration on both sides. If a component of the SLV claim under the Lease is calculated by reference to the owner participant's tax consequences which are indemnified under the TIA (the overlap Delta objects to), so be it. That is what Delta agreed to and what both the owner participant and the indenture trustee relied upon in negotiating the agreements. If Delta has contracted to pay duplicative claims, then it must pay bothit cannot repudiate its duty to party A under contract A by asserting that it contracted to pay the same amount to party B under contract B. In re Delta Air Lines, Inc., 370 B.R. at 557. Delta argues that the bankruptcy court's decision in this respect rested on three errors of law. Delta Br. at 21. First, Delta argues that the court failed to appreciate that [a]n agreement to pay an amount, upon default, that is not based on the other party's actual loss is contrary to public policy and void as a penalty. Id. However, as the bankruptcy court noted, the general legal principle that precludes double liability for a single injury or loss has never been applied by any court to void separate contract obligations owed to different parties under different contracts. In re Delta Air Lines, Inc., 370 B.R. at 557. Moreover, even if it were true as a general principle that [a]n agreement to pay an amount... that is not based on the other party's actual loss is ... void as a penalty, Delta Br. at 21, that principle would be of limited applicability in the instant case (to bar Appellants' claims), where it is uncontested that Appellants have suffered an actual loss that has not been compensated. Next, Delta argues that the bankruptcy court erred in finding that its obligations under the TIAs and Leases were owed to different parties, because the Indenture Trustees are mere assignees of the Owner Trusts' interests in the Leases, and [f]or tax purposes, the Owner Trust[] has no separate existence; the Owner Trust[] and Owner Participant are the same entity. Delta Br. at 22 (emphasis added). As Appellants point out, this argument is unavailing because the tax regulations specify that the tax treatment of single-member entities is independent of their corporate separateness for all other purposes, including entry into and enforcement of contracts. See, e.g., Treas. Regs. §§ 301.7701-1 to -3. Finally, Delta argues that the claims asserted against a debtor in bankruptcy are supposed to equal the out-of-bankruptcy right of payment. Delta Br. at 23. In effect, Delta argues that allowing Appellants' claims would violate the bankruptcy policy of equality of distribution among creditors, see, e.g., Musso v. Ostashko, 468 F.3d 99, 104 (2d Cir.2006), because the collective recovery of the Appellants and Indenture Trustees would exceed their pro rata share of entitlements. To the extent that this is true, it is Delta's own fault: the problem exists because Delta (and the creditors' committee) agreed, under the Bingham Term Sheet, the other restructured lease agreements, and Delta's plan of reorganization, to pay the Indenture Trustees more than they were entitled tonamely, their share and the Owner Participants' share. While Delta is correct that the aggregate amounts claimed by the Owner Participants and the Indenture Trustees exceeded their proper aggregate share to the extent of the duplication of the Owner Participants' claims under the TIAs, the proper remedy was disallowance of the claims of the Indenture Trustees to the extent they were predicated on the Owner Participants' TIA entitlements.