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Second Circuit joins chorus on inapplicability of Bankruptcy Code Section 502(d) to administrative claims

The Second Circuit Court of Appeals recently issued its decision on a question of first impression before the court: whether section 502(d) of the Bankruptcy Code applies to administrative claims arising under section 503(b) of the Bankruptcy Code. See, generally, ASM Capital, L.P. v. Ames Dept. Stores, Inc. (In re Ames Dept. Stores, Inc.), 582 F.3d 422 (2d Cir. 2009).

USA, Insolvency & Restructuring, Litigation, Squire Patton Boggs, Bankruptcy, Debtor, Federal Reporter, Default judgment, Liquidation, Conveyancing, Title 11 of the US Code, Trustee, Second Circuit, Ninth Circuit, United States bankruptcy court, Fifth Circuit
Second Circuit decision results in significant nondischargeable debt as a result of new PBGC claims arising from pension plan termination in Chapter 11

During the bankruptcy cycle following the recession of 2001, numerous debtors – notably airlines such as US Airways and United Air Lines, Inc. – undertook “distress terminations” of their ERISA-qualified defined benefit pension plans, which are insured by the Pension Benefit Guaranty Corporation (PBGC). The PBGC found itself holding large general unsecured claims arising from significant underfunding of pension plans insured by the PBGC as a result of these terminations. Efforts by the PBGC to obtain either administrative priority or secured status for these claims invariably failed.1

USA, Employee Benefits & Pensions, Insolvency & Restructuring, Litigation, Squire Patton Boggs, Bankruptcy, Employee Retirement Income Security Act 1974 (USA), Debtor, Consumer protection, Unsecured debt, Debt, Defined benefit pension plan, Bankruptcy discharge, US Congress, Pension Benefit Guaranty Corporation, United Airlines, Title 11 of the US Code, Second Circuit, United States bankruptcy court