Court Opinion

ID: 9461635
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:20:07.925973+00
Date Added: 2024-06-11T17:37:10.933578
License: Public Domain

FAIRCHILD, Chief Judge
(dissenting in part).
I respectfully dissent, in part.
It seems to me that Judge McLaren’s definition of an operating expense as an expense “incurred in the conduct of the major activities of a business which [is] generally recurrent in nature and somewhat normal and dependable in [its] operation” is reasonable. I agree that the cost of separation pay is an operating expense to an on-going business, but here the expense has become a cost of liquidation. Such cost ought to be borne by the company’s shareholders in proportion to their ownership interests, not in proportion to their use of the company’s assets.
Pullman’s treatment of liabilities arising from executive employment contracts and under group insurance and pension plans confirm the soundness of this distinction. Both the executive employment agreements, which in substance provided protection in the event the business terminated, and the employee insurance and pension plans were executed to attract and retain qualified employees to run Pullman's operation. Yet, once it was decided to liquidate the business these liabilities were quite properly charged to surplus. I can see no meaningful distinction between these expenses and the separation allowances the majority now deems to be “operating expenses.”
Accordingly, I would affirm the judgment of the district court in all respects.