Legal Document

547 U.S. 651 (2006) HOWARD DELIVERY SERVICE, INC., et al. v. ZURICH AMERICAN INSURANCE CO. No. 05-128. Supreme Court of United States. Argued March 21, 2006. Decided June 15, *654 Paul F. Strain argued the cause for petitioners. On briefs were Richard M. Francis, Heather G. Harlan, Lawrence A. Katz, and Mitchell Y. Mirviss. Donald B. Verrilli, Jr., respondent. With him on brief William Hohengarten, Elaine J. Goldenberg, Barbara S. Steiner, Daniel R. Murray, Margaret Anderson, Hugh Balsam, Karen Lee Turner.[*] JUSTICE GINSBURG delivered opinion Court. The Bankruptcy Code accords a priority, among unsecured creditors' claims, unpaid "wages, salaries, or commissions," 11 C. § 507(a)(4)(A), contributions to "an employee benefit plan," 507(a)(5).[1] It is uncontested here that 507(a)(5) covers fringe benefits complete pay packagetypically pension plans, group health, life, disability insurancewhether unilaterally provided by an employer result collective bargaining. This case presents question whether *655 priority also encompasses claims premiums policy purchased cover its workers' compensation liability. We hold owed carrier do not fit within 507(a)(5). Workers' laws ensure workers will be compensated work-related injuries negligence contributed injury. To extent, arrangements payment awards might typed "employee plan[s]." other hand, statutorily prescribed regimes run exclusively employees' benefit. In this regard, they differ from privately ordered, employer-funded welfare plans that, together with wages, remunerate employees services rendered. Employers, too, gain prescriptions. exchange no-fault liability, employers immunity tort actions yield damages many times higher than payable under schedules. Although close, we conclude paid insurance are more appropriately bracketed liability insurance, e. g., motor vehicle, fire, theft made secure retirement, benefits. holding qualify mindful aims, in main, equal distribution creditors. See Kothe Taylor Trust, 280 224, 227 (1930); Kuehner Irving Trust Co., 299 445, 451 (1937). take into account, as well, complementary principle preferential treatment class creditors order only when clearly authorized Congress. Nathanson NLRB, 344 25, 29 (1952); States Embassy Restaurant, Inc., 359 29, 31 (1959). *656 I Petitioner Howard Delivery Service, Inc. (Howard), years owned operated freight trucking business. employed 480 about dozen Each those required maintain coverage receipt disability, death event on-the-job accidents. contracted Zurich provide Howard's operations ten January 30, 2002, filed Chapter bankruptcy petition. creditor's claim proceeding, seeking status some $400,000 premiums. amended proof claim, asserted these qualified "[c]ontributions plan" entitled App. 32a.[2] denied Zurich's reasoning overdue bargained-for furnished lieu increased hence fall outside 507(a)(5)'s compass. Pet. Cert. 51a-57a. District affirmed, similarly determining share health plans. Id., at 39a-50a. Appeals Fourth Circuit reversed 2 1 per curiam opinion. 403 F.3d 228 (2005). judges majority, however, disagreed rationale. Judge King concluded unambiguously accorded *657 237. Shedd, concurring judgment, found phrase ambiguous. Looking legislative history, he Congress likely intended give past due status. 238-239. dissent, Niemeyer, like King, relied "plain meaning" 507(a)(5), but read provision unequivocally deny insurer's 241-244. granted certiorari, 546 1002 (2005), resolve split Circuits concerning bankrupt carrier. Compare re Birmingham-Nashville Express, 224 511, 517 (CA6 2000) (denying premiums), Southern Star Foods, 144 712, 717 (CA10 1998) (same), HLM Corp., 62 226-227 (CA8 1995) Employers Ins. Wausau Plaid Pantries, 10 605, 607 (CA9 1993) (according status), F.3d, 229 (case below) (same).[3] II Adjoining subsections Code, 507(a)(4) (5), centrally involved case. Subsections (5) currently provide: *658 "(a) following expenses have order: ..... "(4) Fourth, allowed . for "(A) commissions, including vacation, severance, sick leave earned individual "(5) Fifth, plan arising rendered 180 days before date filing [bankruptcy] petition cessation debtor's business, whichever occurs first ." 507. Two decisions Court, (1959), Joint Industry Bd. Elec. States, 391 (1968), prompted enactment Restaurant concerned 1898 Act "wages" said nothing plans" anything similar. 104(a)(2) (1952 ed., Supp. V; repealed 1978). held union planwhich life weekly benefits, hospital surgical advantagesdid "wages." U.S., 29-35. Bd., followed employer's annuity plan did 228-229. kind issue added what now it 1978. H. Rep. 95-595, p. 187 (1977) (hereinafter Rep.) (explaining amendment *659 "health programs, funds, all forms [are] form wages"); 95-989, 69 (1978). Notably, enlarge [and] commissions" 507(a)(4), include Instead, created new such one step lower wage priority. provision, contained allows provider recover premiumsalbeit after been paid. 507(a)(4). Beyond genuine debate, main office capture portions covered Cf. U. S., 35; 228-229 (both emphasizing Congress' prerogative regard). current Code's juxtaposition wages priorities manifests comprehension generally complement, "substitute" for, hourly pay. Rep., 357 (noting "the realities labor contract negotiations, which demands often reduced if adequate substituted"); id., ("[T]o ignore reality bargaining trades dollars does severe disservice working failing enterprise."); Saco Local Development 711 F.2d 441, 449 (CA1 1983) (majority Breyer, J.) (substitution "can normally assumed, unless philanthropist"). tightened linkage (a)(4) (a)(5) imposing combined cap two priorities, set $10,000 employee. 507(a)(5)(B).[4] Because *660 has status, first, up limit; can recovered next remainder ceiling. No 507 joined common way. Putting aside clues textual ties binding recognize left undefined terms: "contributions plan. petition." (Emphasis added.) Maintaining subsection substitutes urges borrow encompassing definition Employee Retirement Income Security 1974 (ERISA), 88 Stat. 829, amended, 1001 seq. (2000 ed. III). 1002(1) (term means, inter alia, "any plan, fund, program [that provides] participants their beneficiaries, through purchase otherwise,. sickness, accident, unemployment"); 1002(3) means both *661 plan"); cf. 1003(b)(3) (excluding "maintained solely purpose complying applicable work[ers'] unemployment laws"). dissent endorses borrowing. post, 676. Federal courts questioned ERISA used fill blanks panel below parted ways issue. 235, n. 9 (King, J., judgment) ("declin[ing] rely upon definition"); 239-241 (Shedd, (reading history indicate "`employee plan' same meaning [the term] ERISA"); 245 (Niemeyer, dissenting) (maintaining inapt context); 3d, 516-517 division concluding rejecting incorporation ERISA's "ha[ve] better argument"); 226 ("[T]he associated court guidelines designed effectuate ERISA, Code." (internal quotation marks omitted)); 714 (same). Brief American Home Assurance Company Amici Curiae 17-25 (legislative suggests incorporate definition) National Coordinating Committee Multiemployer Plans Amicus 22-27, 21 intend definition). omnibus show, least, term susceptible construction would That Act's signals mixed, specifically exempts *662 genre issue, i. e., laws."[5] exemption strengthens our resistance argument. follow lead earlier decision, Reorganized CF&I Fabricators Utah, 518 213, 219 (1996), noting "[h]ere there included specific directions establish significance law elsewhere federal statutes." 219-220. no warrant write them text. turns, hold, borrowed statute without mind, essential character regimes. Unlike provisions plansnegotiated supplements substitutesworkers' prescriptions dominant employer-oriented thrust: They modify, substitute common-law exposed 6 Larson & L. Larson, Compensation Law 100.01[1], pp. 100-2 100-3 (2005) Larson); 4 Lindahl, Modern Tort Law: Liability Litigation 43:25, 43-45 43-46 (2d 2003). As typically explained: "The invention existed country since 1910 involves classic social trade-off or, use Latin term, quid pro *663 quo. What given injured right receive certain limited regardless fault, is, even cases partially entirely fault anyone's part. taken away employee's full damages, pain suffering, part." P. Lencsis, Workers Compensation: A Reference Guide (1998) Lencsis). thus something employeesthey fixed payments injuriesand employersthey remove risk large judgments heavy costs generated litigation. 100.03[1], 100-11 ("[Workers' compensation] relieves statutory virtually state statutes, well admiralty, injury act." (footnote Lubove, Workmen's Prerogatives Voluntarism, 8 Lab. Hist. 254, 258-262 (Fall 1967) (workers' programs adopted nearly every State part because anticipated significant programs; groups sought make mandatorynotably, insurancewere embraced). tradeoff augment each worker's pay.[6] *664 Employer-sponsored characteristically insure (or his survivor) only. contrast, theft, vehicle shield insured enterprise: policies protect employer-policyholder tort, obligation 165 B.R. 38, 41 (Bkrtcy. Ct. Minn. 1994). When fails coverage, loses nonpayment premiums, affected remedy lie suit should who sustain commonly recourse state-maintained fund. See, 176.183, subd. (2004); N. Work. Comp. Ann. 26a (West 2006). Or, obtainable fund schedules, pursue larger recoveries successful litigation ordinarily yields. 2005); W. Va. 23-2-8 (Lexis Lencsis 67. Further distancing voluntarily exceptions, require participate systems. Ill. Stat., ch. 820, 305/4 2004); 176.181, Dept. Labor, Office Compensation, Laws, Table 1: Type Insurance Requirements Private Employment online http://www.dol.gov/esa/regs/statutes/owcp/stwclaw/tables-pdf/table1.pdf (as visited *665 13, 2006, available Clerk Court's file). An mandatory subject substantial penalties, criminal suggest, hypothesizes, see 674, where elective. Nor suggest surrogates supplements, lose protection mandate them. simply count factor relevant assessment overwhelmingly prescribe regulate accidents, while leaving pension, private ordering.[7] note confronted insurer ranked "excise taxes" qualifying 507(a)(8)(E). New Neighborhoods, West Virginia Fund, 886 714, 718-720 (1989).[8] Suburban Motor Freight, 998 *666 2d 338, 342 ("Where `compel[s] payment' `involuntary exactions, name,' universally situated persons firms, taxes purposes." (quoting 2d, 718-719; alteration original)); LeRoy al., Bankruptcy: How Do Parties Fare? 24 593, 623-624 (1989) (describing disagreement state-run funds excise 507(a)(8)). express view 507(a)(8)(E) presented Neighborhoods. venture observation: prefer Government over creditors, 517-518; anomalous, advance level state-fund (a)(8). argues according carriers incentive continue enterprise, promoting rehabilitation may doubted projected outweigh competing financial pressure pull plug swiftly insolvent policyholder, thereby contain potential losses. undertakes scheduled job effect. serious injuries, remain termination coverage. §§ 10.02-10.03, 10-3 10-7; 51-52. While cancellation responsibility future cannot escape paying enduring maladies disabilities, though former policyholder. *667 weigh balance incurring fresh obligations long duration insuring unable consideration controlling assurance guarantee preferred positions fact Tr. Oral Arg. 31-32 ("[A]s soon smell bankruptcy, they're going anyway." (SCALIA, J.)); LeRoy, supra, 596 "general reluctance insurers debtors necessary coverage"). Rather speculating how react guided reaching decision objective underlying corollary allowing preferences must tightly construed. Kothe, ("The broad bring equitable bankrupt's estate ."); Nathanson, theme `equality distribution' .; claimant others, clear statute." Sampsell Imperial Paper Color 313 215, (1941))); 186; Collier Manual ¶ 507.01, 507-4 (rev. 3d 2005) ("[P]riorities narrowly construed."). Every reduces general diminish recovery claimants lesser priorities. "To thereto inconsistent equality distribution; dilutes value prefer." Mammoth Mart, 536 950, 953 1976). Cases illustrative. caps amount recoverable *668 659-660. Opening could shrink paradigmatically surrogates, prime them, plans.[9] sum, find far fits category rendered." Weighing against categorization, compensate work performed, instead, incurred; payments, Any doubt appropriate characterization, conclude, best resolved accord aim. therefore reject expanded interpretation invites. Unless until otherwise directs, carriers' * For reasons stated, judgment reversed, remanded further proceedings consistent so ordered. KENNEDY, whom Justice SOUTER ALITO join, dissenting. *669 reversing relies premise "statutorily benefit." Ante, 655. rationale, suffice justify holding. accord, moreover, text defined These points respectful dissenting Before commencing detailed discussion central preliminary matters addressed. begin with, states background rule interpret "provisions construed." 667. links distribution. Ibid. objective, true, acknowledged precedents, another found. (1952). different, though, establishing interpretive strict addresses tension "equality similar creditors." Small Business Administration McClellan, 364 446, 452 (1960). then, few possible. interpreted claims. any conflict plain meaning. principles seem dispute "contributions" "aris[e] rendered," *670 There seems little requirements met. contribution voluntary; says mandatory, contributions. situationsfor example, discussing charitable contributionsit possible suggests. Webster's Third International Dictionary 496 (1971) (defining "contribution" "a sum thing contributed"). context voluntariness requirement usual word. ibid. alternatively group-insurance fund"). Many statutes own expressly refer "mandatory contributions" employees. 26 411(a)(3)(D); 1053(a)(3)(D); 1054(c)(2)(C); 1344; Hughes Aircraft Co. Jacobson, 525 432, 435 (1999); General Building Contractors Assn., Pennsylvania, 458 375, 394 (1982); Lee, 455 252, 258 (1982). Even undeniably rarely ever voluntary sense invokes. nature most argument unpersuasive. phrase, Howard, companies company, accept ante, 659, 661-662, statute's operation. *671 go predicated nonetheless performing employer. rendered" manner From practical standpoint, "[t]o allow obtain surest way entitled." J.). remainsand my point Courtis qualifies plan." answer, think, depends do, enable out assuming provides net benefit, condition easily satisfied. true return receiving compensation, remedies pursued. 662-663. remedies, fault; defenses contributory negligence, assumption risk, fellow-servant doctrine. 2.03 result, small percentage received recovery. considering relinquished, 2.03, 2-6 "helplessness characterized position worker precompensation era"). greater suit, *672 speed certainty worth tradeoff. choice opt system, her traditional remedies. Ariz. Rev. 23-906 1995); Cal. 4154 2003); Ky. 342.395 Mass. Gen. 152, D. Cent. 65-07.1-03 Pa. Ann., Tit. 77, 1402(b) (Purdon 2002); I. Laws 28-29-17 (Supp. 2005). chooses plainly considered reasons, whole, employees; indeed, otherwise. holds largely employers. 663. employers, nor so. Since goal employees, reason suppose based additional well. altruism, surely tax breaks, good will, healthy force, leverage wages. distinguished basis recognizes three bases treating differently support Code. First, maintains, structure relation *673 covered. 657-660. proposition correct, conclusion. matter economic realities, substitutes. precise addressing scheme: "[J]ust ordinary risks presumably was account fixing rate employer, modified reflected scale." York Central White, 243 188, 201-202 (1917). Recent empirical studies confirm pass cost Fishback Kantor, Did Pay Passage Laws? 110 Q. Econ. 713 (1995); Gruber Krueger, Incidence Mandated Employer-Provided Insurance: Lessons Insurance, 5 Tax Policy Economy 111 (D. Bradford 1991); Viscusi Moore, Wage Effects, Benefit Inadequacies, Value Health Losses, Statistics 249 (1987). Second, change applicability real government mandated "prescribe regulate" "to ordering," 665, presence bearing Saco, 448-449. Indeed, difficult imagine began kinds promptly saying whenever comes accepted *674 longer practice making just analysis, optional scheme schemes. Assuming, approach create uncertainty application payments. Only wholly permissive regimes, see, Tex. 406.002 2006), offer exemptions particular Tenn. 50-6-106(5) (2005); Mich. 418.118(2) (1979). Not depend varying laws, multistate segmented purposes intent disuniformity. Third, existence fail relevance. Once again, unclear much weight places factor, doubtful fallback public system. providing benefit; indicates somewhere else. Were otherwise, appears defaulted Southeast Southwest Areas Pension Fund Transport, 472 559, 567, 7 (1985) (citing Department *675 Labor advisory opinion). matter, multiemployer effectively (unless happen time), Guaranty Corporation ensures least promised exclusion neither commonsense notion protecting insurer fundis 449. Simply put, harm passed along either rendering causing charge rates Finally, language ambiguous, III), lend considerable respondent's view. defines 1002(3), turn "mean[s] established maintained unemployment," 1002(1). necessarily control statute, contexts different terms meanings. 219-224 (1996). Where conflicting apparent, evidence understanding. Securities Assn. Board Governors, FRS, 468 137, 150-151 (1984); 661-662. *676 relevance generic closer art, unlikely context. Also, cites source exclude compensation. attempts minimize workmen's laws." 1003(b)(3); exempted definition, consideration. confirms 1003(b) subchapter shall apply belies shows ERISA. plausible inclusion (only then excluded) giving term. indication chose depart definition. By wanted narrow referring 541(b)(7). viewed art accordance meaning, includes dissent. NOTES [*] Capuano John McIntire amicus curiae urging reversal. Eric Brunstad, Rheba Rutkowski, Heuer amici affirmance. [1] All references numbering. At time respondent (Zurich) claimed numbered (a)(3) (wages) (employee plans). Abuse Prevention Consumer Protection 2005, Pub. 109-8, 212(2), 119 51, altered list became (a)(4), (a)(5). concerns dollar total $4,650 employee, 104 ceiling raised, pursuant 104, 507(a)(5)(B)(i) [2] initial check box marked "Contributions instead checked "Other," wrote "Administrative ExpenseInsurance Premiums." 22a, 30a. argue administrative 507(a)(2). [3] jurisdiction case, Appeals, ruling final 28 158(d). 231, (District between adverse valueless agreed withdraw failed prevail appeal). 444 ("Congress orders immediately appealed finally dispose discrete disputes caseand particular, settling separately appealable."). [4] Section 507(a)(5)(B) provides: "(B) extent of "(i) number multiplied $10,000; less "(ii) aggregate paragraph (4) subsection, plus behalf [5] excluded purview Davis-Bacon Act, 40 3141(2) measure fixes floor projects. incorporates "bona fide benefits," broadly defined, prevailing determinations, excludes contractors federal, state, local law. 3141(2)(B). [6] Providing care fosters happy contented force rank purposes. 672. But secondary order; dissent's logic, "benefit" come work, afford transportation jobsite, etc. redound reflexively, consequence directly eliminating workplace [7] 448-449, note, odds conclusion First package installed then-Judge Breyer explained, need negotiated plan[s]," "Congress' object enacting subsection] extend benefits." involve expressed [8] appears, urge Circuit's assumed F.2d, 720 (under court's holding, agency given, insurer, not"). [9] nowhere homes amounts diminishing health-care

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