Court Opinion

ID: 9479759
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:28:29.174523+00
Date Added: 2024-06-11T17:47:15.993853
License: Public Domain

CUDAHY, Circuit Judge,
dissenting:
In this case, a group of railroad workers agreed to a contingent reduction in their wages, for what turned out to be a three year period, in order to help their employer continue its railroad operations in the face of mounting losses. The employees’ wages were to be returned when, and if, the company was profitably sold. The company was profitably sold, but a final determination of the sale price took approximately 19 months and, as a result, the employees had *164to wait some time for the return of part of their wages. The employees now want an award of interest to compensate for this delay.
The Wage Reduction Agreement (the “WRA”) signed by the employees’ union contains no provision for interest on the employees’ claims, but none of the relevant documents in the case has a provision which allows expressly for a delay as long as 19 months in ascertaining the amount of money that would be returned to the employees. Thus, the essential question presented by the case is whether there was a “gap” in the controlling documents (the Wage Reduction Agreement, the Asset Purchase Agreement (the “APA”) and the Plan of Reorganization (the “Plan”)) which was within the discretion of the reorganization court to fill. This is the dispositive issue whether one views the case from the perspective of jurisdiction or analyzes the legal or equitable merits. For, if the issue was resolved by the Plan, and there was no gap, the Plan’s general reservation of jurisdiction provision would not authorize “reconsideration” of matters already settled and confirmed. If, on the other hand, there was a gap — that is, new and unforeseen circumstances not provided for by the Plan — the bankruptcy court would have discretion to exercise its jurisdiction in deciding how the gap should be filled. See, e.g., United States v. Georgia Power Co., 634 F.2d 929, 932 (5th Cir.1981) (“The power of a court of equity to modify the prospective effect of its decrees in response to changed circumstances is ‘inherent in the jurisdiction of the Chancery.’ ” (quoting United States v. Swift & Co., 286 U.S. 106, 114, 52 S.Ct. 460, 462, 76 L.Ed. 999 (1932))).
The logic of CMC’s and the majority’s position here is that, however long it might take to negotiate the price, interest could not accrue until a final sale price was agreed to and approved. This, they say, follows from the definition of “liquidation date” in the Plan and from the language of the WRA. According to the majority’s reasoning, if the negotiations had taken, for example, ten years, the employees would have apparently been entitled to no interest even though all or part of their wage reductions remained for that period in the hands of CMC, a solvent debtor coming into a net worth of more than $400 million. Perhaps the majority would persevere in its reasoning in the ten-year case or perhaps it would think that case extreme. Certainly, with a ten-year delay, there would be a strong case for changed circumstances— that is, a gap in the provisions of the Plan and the WRA. The question then is how long would the delay have to be for it to be regarded as so far outside the contemplation of the parties as to justify equitable intervention.
A delay of 180 days for determining the sale price was explicitly anticipated by the APA. Therefore, a delay for negotiations of up to six months could hardly result in a gap within which equity could be invoked. Beyond six months, the determination of exactly where a gap — a change in circumstances justifying equitable intervention— might come into existence, is, I believe, itself a job for equity. And, in making that equitable calculation, one must weigh CMC’s strongest equitable argument — that in prolonging negotiations it improved the employees’ recovery as well as its own— against the employees’ most powerful argument — that they had made an interest-free loan to a debtor which turned out to be quite solvent. In re Shaffer Furniture Co., 68 B.R. 827, 830 (Bankr.E.D.Pa.1987) (“[Bjased upon general equitable principles, post-petition interest ought to be paid to the creditors of solvent debtors before proceeds of liquidation are returned to the debtor.”); In re San Joaquin Estates, Inc., 64 B.R. 534, 535-36 (Bankr. 9th Cir.1986) (“[A]n award of post-petition interest may be allowed when the estate is solvent.”), citing In re Walsh Construction, 669 F.2d 1325 (9th Cir.1982).
Just where equity would draw the line between reasonably anticipated circumstances and changed and unforeseen circumstances is hard to determine in this case. I might not have drawn it as close as Judge Marshall. But, I think it was within his discretion to draw it where he did. Judge Marshall’s decision is to be judged by an abuse of discretion standard. The *165test is whether any reasonable person could agree with him, and I think that test has been met. Hough v. Local 134, IBEW, 867 F.2d 1018, 1022 (7th Cir.1989) (“[i]f reasonable [persons] could differ as to the propriety of the court’s action, no abuse of discretion has been shown.” (quoting Smith v. Widman Trucking & Excavating, 627 F.2d 792, 796 (7th Cir.1980))).
I therefore respectfully dissent.