# Petition for Writ of Certiorari — Adventure Resources, Inc. v. Holland, 119 S. Ct. 404 (1998) (No. 98-173) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386008_1331%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1998 ## Text Supreme Court, u.»s. } FILED \ 98 173 pn 231998 No. __ ME OF Ie curs ~~ = In The Supreme Court of the United States October Term, 1997 + ADVENTURE RESOURCES, INC., Petitioner, MICHAEL H. HOLLAND, MARTY D. HUDSON, ELLIOTT A. SEGAL, PAUL R. DEAN, Trustees of the UMWA 1950 Pension Trust And the UMWA 1974 Pension Trust, et al., Respondents. + On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Fourth Circuit 4 PETITION FOR A WRIT OF CERTIORARI ¢ JOHN A. RO.ins Counsel of Record Lewis, FRIEDBERG, GLASSER, Casey & Routins, LLP Suite 700, One Valley Square Charleston, WV 25301 (304) 345-2000 Attorney for Petitioner COCKLE LAW BRIEF PRINTING CO., (800) 225-6964 OR CALL COLLECT (402) 342-2831 QUESTIONS PRESENTED Adventure Resources, Inc. owed pre-bankruptcy con- tributions to union pension funds and did not assume or reject its collective bargaining agreement with the union during its Chapter 11 bankruptcy case. The question pre- sented is: Whether the pre-bankruptcy obligations due under an unrejected and unassumed collective bargaining agreement are entitled to first priority, administrative claim status over the pre-bankruptcy claims of non-union employees and other creditors under the provisions of 11 U.S.C. §§ 365, 1113. ii LIST OF PARTIES In addition to the parties listed in the caption, the following were parties in the court of appeals: Amigo Smokeless Coal Company; Tommy Creek Coal Company; Green Mountain Energy, Incorporated; M.A.E. Services, Incorporated; Maben Energy Corporation; Raleigh Leas- ing Incorporated; Stony Coal Company; Spruce Laurel Coal Company; Hawley Coal Mining Corporation; Bick- ford Mining, Incorporated; Barrett Fuel Corporation; East Gulf Fuel Corporation; Coal-X Equipment & Supply Com- pany, Incorporated; Beckley Repair & Hydraulic Service Incorporated; Half-Way, Incorporated; Chesapeake Leas- ing, Incorporated; Piney Fuel Corporation; Lakeside Leasing, Incorporated; Raleigh Services, Incorporated; Atlas Leasing Incorporated; Sugar Camp Mining Incorpo- rated; HD Enterprises, Limited; Jet Coal Services, Incor- porated; Microblack, Incorporated; Dover Coal Sales, Incorporated; No. 10 Mining, Incorporated; Panther Red Ash Land Company, Incorporated; United Mine Workers of America 1974 Pension Trust; United Mine Workers of America 1950 Pension Trust; Michael H. Holland, Marty D. Hudson, Elliott A. Segal, Thomas O. S. Rand, Cariton R. Sickles, Gail R. Wilensky, William P. Hobgood, Trustees of the United Mine Workers of America Combined Bene- fit Fund; United Mine Workers of America Combined Fund; Michael H. Holland, Marty D. Hudson, Thomas Connors and Robert D. Wallace, Trustees of the UMWA 1992 Benefit Plan; United Mine Workers of America 1992 Benefit Plan; Michael H. Holland, Marty D. Hudson, Thomas F. Connors, Elliott A. Segal, Trustees of the UMWA 1993 Benefit Plan; and Michael H. Holland, Marty iii LIST OF PARTIES — Continued D. Hudson, Elliott A. Segal, Joseph J. Stahl, II, Trustees of the UMWA Cash Deferred Savings Plan of 1988. All-par- ent and subsidiary companies of Petitioner, Adventure Resources, Inc. and of the parties below are included in the foregoing list of parties. iv TABLE OF CONTENTS Page CIRO LIS PIM U oo cheb cedcicsivantvivenss i Se Ee Ps poe atains 205k tnd ees RT SA TEER ii TAREE CP AU TEIEREED oo obec dcesccnsesccustanes vi fy 8 8 Tk rrr ee trey ere rr 1 pias esas 2 | MANES SERE hpe ey DU See ee eer prey or 1 STATUTORY PROVISIONS INVOLVED............. 2 STATEMENT OF THB CARB oo ocii ik dee ec cceciees oe REASONS FOR GRANTING THE WRIT ........... 4 I. THE COURT OF APPEALS’ DECISION CRE- ATES AN IMPLIED ADMINISTRATIVE CLAIM TO FAVOR LABOR AGREEMENT CREDITORS THAT ALTERS STATUTORY CLAIM PRIORI- Il. THE STATUTORY INTERPRETATION OF THE COURT OF APPEALS CONFLICTS WITH THE MORE REASONED POSITION OF THE OTHER CPR EOE ss Hines beads cen Wepre ee ae hae ee bens 8 Ill. THE PLAIN PROVISIONS OF THE BANK- RUPTCY CODE WERE MISINTERPRETED BY THE COURT OF APPEALS . ooscce cescscaceses 13 IV. THE FINDING OF THE COURT OF APPEALS WILL UNDERMINE REORGANIZING EMPLOYERS AND FAVOR UNION OVER NONUNION EMPLOYEES ...............--+-. 18 he | we OS 8 | Be se error mary F 20 ee on Vv TABLE OF CONTENTS - Continued APPENDIX Adventure Resources, Inc., et al. v. Michael H. Holland, et al., 137 F.3d 786 (4th Cir. 1998).... Adventure Resources, Inc. v. Michael H. Holland, i199 Gu: 707 (5.0. W.Va: 1997) «oo. 6. ices icc Order on Petition for Rehearing and Suggestion caw coercion BR SERIO ae Bankruptcy Code Provisions — Sections 1113, 365, PG SE oa SSA Orde oo OLAS os 386 ues od ce ek cmek Page vi TABLE OF AUTHORITIES Page CASES Airline-Pilots’ Ass'n Int'l v. Shugrue (In re Ionosphere Clubs, Inc.), 22 F.3d 403 (2nd Cir. 1994) 0 0 50 0:4 de ood bin OR ea a RD Oa ee 4, 5, 9, 11, 12, 14 Eagle, Inc. v. Local 537 of United Ass'n of Journeymen and Apprentices of Plumbing and Pipe Fitting Indus. of U.S. and Canada, AFL-CIO, 198 B.R. 637 CED REN SE eA aia ee Oa Raa Ree Ba SW hes es 11 In re Arlene’s Sportswear, Inc., 140 B.R. 25 (Bankr. LP. WON, Fe oo 5a 0b 6 60k WR CESK Oo Cea ee cea 11 In re Armstrong Store Fixtures Corp., 135 B.R. 18, reconsideration denied, 139 B.R. 347 (Bankr. W.D. ge 2 Pee OE I Een ee Prey eee 10 In re Moline Corp., 144 B.R. 75 (Bankr. E.D. IIl. 1992); 5553 Ek AEW GELS S DEEP REERE SR Mbn est b44r ks 17 In re Ohio Corrugating Co., 115 B.R. 572, 578 (Bankr. N.D. Ohio 1990), rev'd, United Steelworkers of America, AFL-CIO v. Ohio Corrugating Co., No. 4: 90CV0810, 1991 WL 213850 (N.D. Ohio 1991) ..... 19 In re Roth American, Inc., 975 F.2d 949 (3rd Cir. International Union v. Acorn Building Components, Inc. (In re Acorn Bldg. Components, Inc.) 170 B.R. S17. (ETD. Fa SRG 5 hes iain ekg we re a 11 Jones Truck Lines, Inc. v. Central States, Southeast and Southwest Areas Pension Fund (In re Jones Truck Lines, Inc.), 166 B.R. 885 (Bankr. W.D. Ark. 1994). 6:0s:5i6ss cis ca ep heeeeCa ee Fe 8 ao 10 ‘ordan v. Rayman, Martin & Fader, Inc. (In re Ray- man, Martin & Fader, Inc.), 170 B.R. 286 (D. Md. DGS) «oa avs cp eee Cae en nk b Ons 48 Ce ees uaa bass 10 Vii TABLE OF AUTHORITIES - Continued Page Mass. Air Conditioning & Heating Corp. v. McCoy, are Ou Coe CEP. BEROR. I9DG). wos cc cecsvieaswecse 16, 17 Metropolitan Distribution Services, Inc. v. Local 153 OPEIU (In re Golden Distributors, Ltd.), 152 B.R. 35 (S.D.N.Y. 1992) (Bankr. D. Mass. 1992)......... 11 Nathanson v. NLRB, 344 U.S. 25 (1952) ............... 6 NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984)... 5, 8, 15 Nostas Associates v. Costich (In re Klein Sleep Prod- uete, int.), ve Food 18 (2nd Cir, 1996)... .. 2.6.5... 18 Shipwrights, Joiners and Caulkers Local 2071 of the ‘United Brotherhood of Carpenters v. Uniflite, Inc. (In re Murray Industries, Inc.), 110 B.R. 585 (Bankr. M.D. Fla. 1990), appeal vacated as moot, PO Te BO COR As CUMS EPPAD oes ec civsacceseecece 10 Trustees of Amalgamated Ins. Fund v. McFarlin’s, ic.; For Rad 98 (2nd Cit. 1986) .. oe. 5. ccc veces 6 United States v. Noland, 116 S.Ct. 1524 (1996) ......... 7 United States v. Ron Pair Enters., Inc., 489 U.S. 235 SIRES AEE TANS SAS ag eR SS oe Re a ae 7 United Steelworkers of America v. Unimet Corp. (In re Unimet Corp.), 842 F.2d 879 (6th Cir.), cert. denied, 488 U.S. 828 (1988)........ 6S, 40, 11, 12, 16 STATUTES Be NE Reka naw h bis sy eehek v84 454k ys bees passim Ser eee OP PET 0 bbe) Gh ws oes A wees nance 8, 14, 15, 18 Pe: Ae OLED os Wes CEN SS ee Sead de oscncceccks 15 Vili TABLE OF AUTHORITIES — Continued Page AE TIGA B BGIS) kc kina xin kh see cen sea eee tees 15 SiS St 8 phe wees cy ee Dg ee a partie 2, 10 AE WK. Be aac ein Ga Se ee cae eees 7,9 ES USA Pas is wh sk sho ees 2, 3,.6, 8, 13,14 RE EIAs rad a ns shoeing ds ous edeweh si eannes 7, 13 1i USA. § SraNS) and (4). «2.65 veces 9, 14, 19, 20 ES MRA BS TEs cis s sais bi onc ks cadadeni passim Rh. Shs HS RR ces ts wcaeh seh pbc die ees 4, 5, 8, 11 RORY cam Es) RE er ee eae mre iy ay Pee 3, 10 MISCELLANEOUS Priority of Claims under Unmodified Collective Bargaining Agreements, 16 Am. Bankr. Inst. J. Oe TT ns Ok bs Ge ke 0 Cee Ae ER aa ee ne wes 4 PETITION FOR A WRIT OF CERTIORARI Adventure Resources, Inc. (“Adventure”), by its bankruptcy trustee, H. Lynden Graham (“Trustee”). respectfully petitions that a Writ of Certiorari be issued to review the judgment of the United States Court of Appeals for the Fourth Circuit entered February 27, 1998, in order to resolve the conflict between the Second, Third, Fourth and Sixth Circuit Courts of Appeal on the impor- tant issue presented herein. S OPINIONS BELOW The opinion of the court of appeals (App. 1) is reported at 137 F.3d 786. The opinion of the district court is reported at 193 B.R. 787 (App. 31). 2 JURISDICTION The judgment of the court of appeals was entered on February 27, 1998. A petition for rehearing and sugges- tion for rehearing en banc was denied on April 24, 1998. App. 55. Pursuant to Supreme Court Rule 13.1, this peti- tion has been filed within 90 days of the denial of rehear- ing. The jurisdiction of this Court is envoked pursuant to 28 U.S.C. § 1254(1). STATUTORY PROVISIONS INVOLVED The provisions of the Bankruptcy Code involved are 11 U.S.C. §§ 365, 503, 507, 1113, which are reproduced in Appendix 61-89. STATEMENT OF THE CASE Adventure and its related companies were parties to a coilective bargaining agreement with the United Mine Workers of America (“UMWA”). In December 1992, Adventure filed a chapter 11 bankruptcy proceeding in the United States Bankruptcy Court for the Southern District of West Virginia. During the bankruptcy proceed- ing, the term of the agreement expired. After expiration of the agreement in 1993, the UMWA and Adventure entered into a new collective bargaining agreement. At no time did Adventure either assume or reject the agree- ments pursuant to the Bankruptcy Code. The Adventure reorganization was unsuccessful and its bankruptcy case was converted to a chapter 7 proceed- ing. The chapter 7 Trustee for Adventure is now faced with over $12 million in pre-bankruptcy claims of the UMWA Health and Retirement Funds (“UMWA Funds”) arising under the agreements. These claims arose entirely in the years prior to Adventure’s bankruptcy proceeding and represent claims for unpaid pension contributions. During the reorganization proceedings, Adventure filed an adversary proceeding in the bankruptcy court seeking a determination of the priority of claims filed by the UMWA Funds. The district court withdrew reference ae ON et Wi a pees SY ARUN it Ree N EN BER ie RAE OREO IE Wie hee ae Spc he SMe” SM BPN RRC ate CORE NN iin Ac Se as be AB Pr alle aie. of the proceeding to decide the issues presented. The UMWA Funds argued before the district court below that these pre-petition claims were conferred first priority, administrative claim status in Adventure’s chapter 11 case under the provisions of Sections 1113 and 1114 of the Bankruptcy Code. On March 8, 1996 the district court issued an opinion which rejected that argument and determined that only post-petition pension contribution claims were entitled to administrative claim status.! App. 31. The court of appeals reversed and held that the com- bined applications of Sections 365 and 1113 of the Bank- ruptcy Code did provide for administrative claim status of the pre-petition claims under Section 507. This conclu- sion was based upon the court of appeal’s view that Adventure’s failure to reject its pre-petition labor agree- ment under Section 1113 was tantamount to assuming the agreement under Section 365. The UMWA Funds’ pension claims were deemed by the court of appeals to be ele- vated to administrative status due to the implied assump- tion of the agreement. The court of appeals did not reconcile its view with contrary authority or the provi- sions of Section 365 that only allow bankruptcy debtors to assume agreements based upon an affirmative request that is approved by the bankruptcy court. 1 In the post-petition labor agreement entered into by the UMWA and Adventure in 1993, the parties agreed that the entry into the agreement would not affect the priority of any claim at issue in the pending adversary proceeding before the district court. Adventure’s petition for rehearing and suggestion for rehearing en banc were denied. ¢ REASONS FOR GRANTING THE WRIT The decision of the Fourth Circuit Court of Appeals is in direct conflict with the opinions of the Second and Third Cireuits of Appeal in Airline-Pilots’ Ass’n Int'l v. Shugrue (In re Ionosphere Clubs, Inc.), 22 F.3d 403 (2nd Cir. 1994) and In re Roth American, Inc., 975 F.2d 949 (3rd Cir. 1992). The court of appeals’ decision is consistent with the Sixth Circuit’s decision in United Steelworkers of Amer- ica v. Unimet Corp. (In re Unimet Corp.), 842 F.2d 879 (6th Cir.), cert. denied, 488 U.S. 828 (1988). “To date, the 2nd, 3rd and 6th Circuits have issued opinions interpreting § 1113(f) differently”. Priority of Claims Under Unmodified Collective Bargaining Agreements, 16 Am. Bankr. Inst. J. 36 (1997).-Such a-conflict of the circuits must be resolved to allow a uniform treatment of claims in bankruptcy cases. The Second and Third Circuit cases both involved pre-petition claims under unrejected collective bargaining agreements. These decisions concluded that, in enacting Section 1113 to establish procedures for the rejection of collective bargaining agreements, Congress did not intend to establish a claim priority for claims under the agreements. Based upon this finding, the Roth and Iono- sphere courts found that Section 1113 does not create an administrative claim priority for pre-petition claims. In contrast to the approaches in Roth and Ionosphere, the court of appeals in Adventure granted administrative claim status to the UMWA Funds’ pre-petition claims based upon Adventure’s presumed assumption of its labor agreement. While citing with approval the prece- dent from the Second and Third Circuits, the Adventure decision reached the opposite result under the same facts. The articulated difference in Adventure was the Fourth Circuit’s conclusion that Section 1113 must be read in conjunction with Section 365. Section 365 has been ii.ter- preted by this Court, in an opinion issued prior to the enactment of Section 1113, to provide that the assumption of any executory contract results in pre-petition claims being elevated to first priority, administrative status. NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984). The determination in Adventure that pre-petition claims under unrejected collective bargaining agreements are entitled to administrative status was the same result reached by the Sixth Circuit in Unimet. Based on different applications of the Bankruptcy Code, Unimet and Adven- ture both granted payment priorities to pre-petition labor claims out of concern that there must be enforcement of the provisions of Section 1113(f) requiring debtors not to breach collective bargaining agreements without court approval. The Roth and Ionosphere decisions present a more reasoned approach. They recognize that the priority of a bankruptcy claim may not be implied and can only be established by specific congressional enactment. In con- trast, Adventure and Unimet imply a claim treatment where none is specifically provided by statute. The result of this implied claim treatment is that pre-petition claims of non-union employees, taxing authorities and trade creditors are less likely to be paid than the pre-petition claims of union employees and pension plans. The analysis of the provisions of Section 1113 and other provisions differ in the decisions of the four courts of appeal so as to create a conflict between them which is clear and irreconcilable. Certiorari is appropriate. I. THE COURT OF APPEALS’ DECISION CREATES AN IMPLIED ADMINISTRATIVE CLAIM TO FAVOR LABOR AGREEMENT CREDITORS THAT ALTERS STATUTORY CLAIM PRIORITIES. The ultimate issue presented in Adventure was whether pre-petition claims of the UMWA Funds may be moved to the head of the line for bankruptcy payment by being deemed administrative claims. Priorities for claim distribution are provided in Section 507 of the Bank- ruptcy Code. This priority schedule is designed to pro- vide payment of certain classes of claims by requiring that they be paid first before others are satisfied. “Because the presumption in bankruptcy cases is that the debtor’s limited resources will be equally distributed among its creditors, statutory priorities are narrowly con- strued”. Trustees of the Amalgamated Ins. Fund v. McFarlin’s, Inc., 789 F.2d 98, 100 (2nd Cir. 1986) (citing Joint Indus. Board v. U.S., 391 U.S. 224, 228 (1968)). “[I]f one claimant is to be preferred over others, the purpose should be clear from the statute”. Nathanson v. NLRB, 344 U.S. 25, 29 (1952). Under the provisions of the Bankruptcy Code, an administrative claim is normally for “actual, necessary costs and expenses of preserving the estate, including wages, salaries or commissions for services rendered after the commencement of the case”. 11 U.S.C. a eS i oi ITS Lod Bs ech nis AE DLE. | is ERE RIN DEMERS AIOE STE, § 503(b)(1)(A). Accordingly, this preferred treatment is normally reserved for claims which arise post-petition. Such administrative claims have first priority in the pay- ment of unsecured claims under Section 507(a)(1). The other priorities established under Section 507(a)(2)-(8) are for specified, pre-petition claims which are granted a payment priority below that provided for administrative claims. While the court of appeals in Adventure implied a claim priority for pre-petition claims of union employees and pension funds, where no rejection of their collective bargaining agreement occurs, there is no provision in the Bankruptcy Code that provides for such treatment. The court of appeal’s finding was instead based upon the assumption that a failure to reject a collective bargaining agreement under Section 1113 is an implied assumption of that agreement under Section 365. In reaching this result, the court of appeals ignored the provisions of Section 365 that provide that agreements may only be assumed by an affirmative assumption by the debtor upon approval by the bankruptcy court. The novel con- struction of the statutes in Adventure to create a new administrative claim contradicts this Court’s direction that courts must give effect to the Bankruptcy Code and catrinot make policy decisions to alter Congress’ intent. United States v. Noland, 116 S.Ct. 1524, 1527-28 (1996); United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989). II. THE STATUTORY INTERPRETATION OF THE COURT OF APPEALS CONFLICTS WITH THE MORE REASONED POSITION OF THE OTHER CIRCUITS. A consideration of the analysis of the court of appeals in Adventure reveals an erroneous interpretation of Sections 365, 507 and 1113 that is at odds with prior authority. This consideration begins with the provisions of Section 1113 which provide that a bankruptcy debtor may only modify or reject a collective bargaining agree- ment under certain defined procedures that must be reviewed and approved by the bankruptcy court. Until any court approved rejection or modification, the debtor is directed by the statute to not alter or breach the terms of the agreement. 11 U.S.C. § 1113(f). Section 1113 was enacted under the 1984 amend- ments to the Bankruptcy Code to protect collective bar- gaining employees from arbitrary use of the provisions of Section 365(a). Section 365(a) provides that a debtor may, with court approval, either assume or reject any execu- tory contract. 11 U.S.C. § 365(a). Until the passage of Section 1113, Section 365 had been applied to collective bargaining agreements. NLRB v. Bildisco & Bildisco, 465 U.S. at 522. The standard under Section 365 for the bank- ruptcy court to approve a request by a debtor to assume or reject any contract is whether the requested act is in the best interest of the bankruptcy estate. Since this stan- dard provided only limited protection for bargaining employees, Congress responded to Bildisco by enacting Section 1113. After the passage of Section 1113, union employees and pension plans began to argue that Congress intended this provision to enhance the bankruptcy payment prior- ity for wages and benefits defined by a collective bargain- ing agreement. Since this section provides a debtor shall not breach or terminate a union agreement until it is modified or rejected upon approval of the bankruptcy court, the union claimants argued that failure to reject such an agreement meant all pre-petition claims of union employees and benefit plans must be paid. The error in this position was that Section 1113 states nothing about claim priority. Prior to the enactment of Section 1113, both union and non-union employees and benefit plans already had - administrative priority for all post-petition wages and benefits under Section 503(b)(1)(A). Pre-petition wages and benefits had priority treatment after administrative claims up to $2,000 per employee.? 11 U.S.C. § 507(a)(3) and (4). The new issue presented by Section 1113 was whether the pre-petition wages and benefits of union employees and retirees could be elevated from their pre- petition priority under Section 507(a)(3) and (4) to post- petition, administrative status under Section 503(b), if their collective bargaining is never rejected. The Second and Third Circuits expressly rejected this argument in Roth and Ionosphere based upon the finding that, in enacting Section 1113, Congress did not intend to 2 The $2,000 per employee limit was increased to $4,000 under the 1994 amendments to the Bankruptcy Code. 10 upset the careful ordering of claim priorities under Sec- tion 507. This finding has been adopted by a majority of the recent decisions of the lower courts. E.g., Jordan v. Rayman, Martin & Fader, Inc. (In re Rayman, Martin & Fader Inc.), 170 B.R. 286 (D. Md. 1994); Jones Truck Lines, Inc. v. Central States, Southeast and Southwest Areas Pension Fund (In re Jones Truck Lines, Inc.), 166 B.R. 885 (Bankr. W.D. Ark. 1994); In re Armstrong Store Fixtures Corp., 135 B.R. 18, reconsideration denied, 139 B.R. 347 (Bankr. W.D. Pa. 1992). Also, see Shipwrights, Joiners and Caulkers Local 2071 of the United Brotherhood of Carpenters v. Uniflite, Inc. (In re Murray Industries, Inc.), 110 B.R. 585 (Bankr. M.D. Fla. 1990), appeal vacated as moot, 140 B.R. 298 (M.D. Fla. 1992). Courts following Roth have distinguished the con- trary position of the Sixth Circuit’s decision in Unimet. In Unimet, a bankruptcy debtor sought to reject its collective bargaining and was denied that authority by the bank- ruptcy court. The lower courts later denied administra- tive status to the union retirees’ medical claims upon the finding that only employees were protected by Section 1113 and that the claims arose pre-petition. In reversing this decision, the Sixth Circuit determined that retirees were also protected by Section 1113 and found retirees’ claims were entitled to priority, whether or not they qualified as Section 503 administrative claims.* 842 F.2d at 884. In reaching its conclusion, the Sixth Circuit implied a priority in payment based upon the provisions 3 11 U.S.C. § 1114 was enacted after the Unimet decision to protect retiree benefit plans. The retiree plans protected by Section 1114 include health and death benefits, but do not include pension plans. 11 of Section 1113(f), prohibiting unilateral modification of a collective bargaining agreement. Despite the limitations of the Sixth Circuit decision, many lower courts have interpreted Unimet to support an administrative or super administrative claim priority for claims under collective bargaining agreements. E.g., Eagle, Inc. v. Local No. 537 of United Ass'n of Journeymen and Apprentices of Plumbing and Pipe Fitting Indus. of U.S. and Canada, AFL-CIO, 198 B.R. 637 (D. Mass 1996); International Union v. Acorn Building Components, Inc. (In re Acorn Bldg. Components, Inc.), 170 B.R. 317 (E.D. Mich. 1994); Metropolitan Distribution Ser- vices, Inc. v. Local 153 OPEIU (In re Golden Distributors, Ltd.), 152 B.R. 35 (S.D. N.Y. 1992); In re Arlene's Sportswear, Inc., 140 B.R. 25 (Bankr. D. Mass. 1997). Adventure is at odds with the more recent opinions in Roth and Ionosphere, but does not explain the difference nor does it even suggest there is a difference between its decision and those in the other circuits. On the other hand, the court of appeals indicated its disapproval of Unimet, but ultimately reached the same result in Unimet. Rather than rely on the disapproved analysis of Unimet under Section 1113(f), the court of appeals in Adventure created a new rationale under Section 365. The conflict of the Adventure decision is even more remarkable when one considers that the facts in Adven- ture are the same on all relevant points as those in Roth. In Roth, the employer had filed bankruptcy while it was a party to a collective bargaining agreement with the Inter- national Brotherhood of Teamsters. 975 F.2d at 950. Dur- ing the bankruptcy, the collective bargaining agreement expired, without the debtor’s assumption or rejection of 12 the agreement. The debtor then entered into a new collec- tive bargaining agreement which was also not assumed or rejected. Later, the debtor had to cease operation and sell off its business in the bankruptcy proceeding, which gave rise to unpaid claims under both the pre-petition and post-petition collective bargaining agreements. Id. at 951. The Roth panel rejected the union argument that ben- efit claims due under the pre-bankruptcy agreement were administrative claims based on the theory that the debtor had assumed the agreement by its failure to reject the agreement under Section 1113. In rejecting the position adopted by the Adventure decision, the Second Circuit stated in Roth: The Union contends that since Roth American has not sought to reject the collective bargaining agreement under Section 1113, Roth American has “assumed” the collective bargaining agree- ment by operation of law, and that Roth Ameri- can thus is bound by all of its terms. We agree with the Union up to this point. But it simply does not follow, as the Union contends, that all claims under unrejected collective bargaining agreements are entitled to first priority. .. . [W]e will also conclude that 11 U.S.C. § 1113 does not create a super priority or automatic first priority for claims under an unrejected collective bar- gaining agreement. 975 F.2d at 957-58. The Roth opinion was later endorsed by the Second Circuit in Ionosphere as a better reasoned position than that articulated in Unimet. Ionosphere, 22 F.3d at 407. This more reasoned position was adopted by the district court 13 below and should have been affirmed by the Fourth Circuit on appeal. Ill. THE PLAIN PROVISIONS OF THE BANK- RUPTCY CODE WERE MISINTERPRETED BY THE COURT OF APPEALS. The court of appeals misinterpreted or ignored the plain language of the Bankruptcy Code. This is reflected by the strained construction in Adventure attached to the provisions of Sections 365, 507 and 1113. The Adventure decision begins by the supportable position that the claim priorities of Section 507 cannot be upset by implication, but ends by misinterpreting those priorities. [a] bankruptcy claim arising from the breach of a collective bargaining agreement may be accorded priority status only insofar as it fits into one of the categories singled out for prefer- ential treatment in section 5(7. Fortunately for the Funds, the claims of the Pension Trust are the proverbial round peg. App. 25. The foregoing analysis is irreconcilable with the final determination in Adventure that the UMWA Funds claims are administrative claims. Section 507 does not provide any specific “categories” for administrative claims, but merely states administrative claims under Section 503 have a payment priority over various categories of pre- petition claims identified in that section. 1s V.-C. § 507(a)(1). The only categories in Section 507 constituting pegs for collective bargaining agreement claims are the pre-petition priorities provided for employee wages and 14 benefit funds in Sections 507(a)(3) and (4). While the UMWA Funds’ claims are pre-petition claims which fit within the type of claims described in 507(a)(3) and (4), these provisions do not grant administrative status to such claims. Instead, these claims are granted a lesser priority behind administrative claims. Given the conflict between these provisions and Adventure’s finding of administrative status of the UMWA Fund claims, it would appear that the court of appeals erred in construing the normal application of Section 507. To further support administrative claim status, the Adventure court goes on to introduce a new view not adopted in Roth and related decisions. Adventure con- cludes that, upon an employer’s failure to reject a collec- tive bargaining agreement, an employer must be deemed to have assumed the agreement. The decision then looks to Section 365 to determine the effect of assumption as being the duty to pay all claims under the agreement, including those arising pre-petition. To the extent Section 365 dictates the result in Adventure, it would also be equally applicable in Roth, Ionosphere and cases with unrejected collective bargaining agreements with which Adventure is irreconcilably in conflict. The only seeming explanation for the discrepancy is that the court of appeals erred in not accounting for the provisions of Section 365(a) which require a debtor to affirmatively act to assume any executory contract. The court of appeal’s misconstruction of this section is better understood by viewing the difference between assumption and rejection of contracts under Section 365 from that provided under Section 1113. Under Section 365, a contract is not deemed assumed simply because it 15 is not rejected. In order to assume a contract under this section, a debtor must specifically seek and obtain the bankruptcy court’s approval to assume the contract. 11 U.S.C. § 365(a). Section 365 does not dictate a specific priority for pre-petition claims upon the assumption of a contract, but states that to gain bankruptcy court approval for an assumption of a contract, all defaults in the contract must be cured. 11 U.S.C. § 365(b)(1). This provision has been interpreted to provide that all obligations under an assumed contract, including those due pre-bankruptcy, must be paid in full as administrative claims. This Court noted in Bildisco that: Should the debtor-in-possession elect to assume the executory contract, however, it assumes the contract cum onere (citation omitted) and the expenses and liabilities incurred may be treated as adrhinistrative expenses, which are afforded the highest priority of the debtor’s estate, 11 U.S.C. § 503(b)(1). Rildisco at 531-532. If the bankruptcy court grants a rejec- tion of the contract, or under certain circumstances the contract is not assumed, then it is automatically deemed rejected and the pre-petition obligations due under the contract are treated as general, unsecured claims, pur- suant to 11 U.S.C. § 502(g). Section 1113(a) provides that a bankruptcy debtor “may assume or reject a collective bargaining agreement only in accordance with the provisions of this section”. While subparagraph (a) of Section 1113 refers to both assumption and rejection, the balance of the provisions of this section only deal with how and what a debtor must 16 show to modify or reject a collective bargaining agree- ment. There is no provision in Section 1113 for how or what a bankruptcy debtor or trustee must do to assume a collective bargaining agreement. The Adventure court interprets the Congressional omission in Section 1113 of a procedure for the assump- tion of a collective bargaining agreement to mean that there is an automatic assumption of a collective bargain- ing agreement upon the failure to reject the agreement. This position does not logically harmonize Section 1113 with Section 365. The Trustee submits that the more con- sistent conclusion is that, to assume a collective bargain- ing agreement, one would turn to Section 365 to determine the procedure for assumption, just as the court of appeals looked to this section to determine the effect of assumption. The procedure provided by Section 365 is a court approved request by the debtor for such an assumption. Without following this procedure, no con- tract is assumed under Section 365. No decision since Unimet supports Adventure’s inter- pretation of Section 1113 as removing the plain require- ments of Section 365(a) that an express assumption must be approved by the court. The court of appeals did rely on the district court’s opinion in Mass. Air Conditioning & Heating Corp. v. McCoy, 196 B.R. 659, (D. Mass. 1996) for that proposition. The McCoy court only concluded that Section 365 continues to apply to collective bargaining agreements, except where it conflicts with the provisions of Section 1113. The district court in McCoy did not determine, as the court of appeals did in Adventure, that failure to reject a collective bargaining was tantamount to assuming the agreement under Section 365. Instead, the 17 bankruptcy court in McCoy required the debtor employer to make a specific election to assume or reject its collec- tive bargaining agreement. The debtor chose to assume the agreement and this assumption was approved by the bankruptcy court. Thus, when the McCoy court found that the debtor had a duty to pay pre-petition claims under the assumed agreement, it did so only upon an express assumption under the provisions of Section 365. The Adventure decision notes that it does not tread any new ground in finding that assumption of an execu- tory contract under Section 365 means pre-petition claims arising from the contract are to be paid as administrative claims.* There is no error in the finding of the court of appeals that assumption of an executory contract results in pre-petition obligations under the contract being treated as an administrative expense. The conflict pre- sented by Adventure is its finding that contract assump- tion can occur without an affirmative act by the bankruptcy debtor and approval of that act by the bank- ruptcy court after notice to creditors. While the duty of a debtor employer to comply with the terms of a collective bargaining agreement in post- 4 In all but one of the six decisions cited for this proposition in the Adventure decision, the debtor affirmatively assumed a lease under Section 365. See footnote 18, App. 29. A pre-Roth decision of In re Moline Corp., 144 B.R. 75 (Bankr. E.D. Ill. 1992) did involve a collective bargaining agreement that had not been assumed or rejected. During the pendency of the bankruptcy, a union moved for its claims to be granted administrative claim status and the bankruptcy court denied that request finding the debtor had not yet assumed the contract. 18 bankruptcy employment is undisputed, the implied con- clusion of Adventure that this requirement elevates pre- petition obligations under the wage agreement to admin- istrative status, has no support. Under Section 365, var- ious types of executory contracts are required to be performed to the extent of post-bankruptcy obligations, but there is no provision that pre-petition obligations must be paid uniess and until a court approves the assumption of the agreement. See e.g., Nostas Associates v. Costich (In re Klein Sleep Products, Inc.), 78 F.3d 18, 26 (2nd Cir. 1996). The Trustee submits that the conflict of Adventure with the other circuits should be resolved by this Court determining that a debtor must act to assume a collective bargaining agreement with bankruptcy court approval under Section 365 before pre-bankruptcy claims arising under the agreement are treated as administrative claims. IV. THE FINDING OF THE COURT OF APPEALS WILL UNDERMINE REORGANIZING EMPLOYERS AND FAVOR UNION OVER NON- UNION EMPLOYEES. The issues presented in Adventure have a significant impact on the administration of bankruptcy cases. In a case where a debtor is successful in reorganizing, the assumption and payment in full of all collective bargain- ing obligations seems well founded. The debtor could seek to assume the agreement under Section 365(a) and other pre-bankruptcy creditors could participate in a hearing to protect their interests in the event payment of 19 their claims was adversely affected by such an assump- tion. On the other hand, when a business in reorganiza- tion fails, the simple fact that a pre-petition claim is related to a collective bargaining agreement should not allow that claim to come ahead of all other pre-petition creditors based upon a mythical assumption of the agree- ment. Consumer creditors, taxing authorities and non- union employees holding pre-petition claims all suffer under such an inequitable result. While their claims are elevated in priority under Section 507(a)(3)-(8), the Adventure decision provides that these claims can only receive payment, if there are sufficient funds in the bank- ruptcy to pay the administrative claims of the collective bargaining employees and plans in full. As noted by the Third Circuit in Roth, having an unknown amount of pre-petition obligations automat- ically becoming equal to new post-petition credit in a bankruptcy could be detrimental to a reorganization case. The Roth court stated that “[i]f post-petition administra- tive expenses can be, in effect, wiped out by pre-petition employment obligations, a strong disincentive to reorgan- ization under Chapter 11 would be created”. Roth at 956, quoting In re Ohio Corrugating Co., 115 B.R. 572, 578 (Bankr. N.D. Ohio 1990). The application of the Adventure position would hamper the reorganization efforts of chapter 11 debtors with collective bargaining agreements since the debtors would be less likely to obtain new credit. Adventure creates a further disparity in the treatment of union and non-union wage and benefit claims. The pre-petition claims of all employees or their benefit plans 20 for wages or contributions are treated as pre-petition claims under Section 507(a)(3) or (4) with a payment priority after administrative claims. On the other hand, Adventure provides union employees and benefit plans administrative claims for pre-petition claims ahead of non-union employees and plans, where there is no court approved rejection of the collective bargaining agree- ment. There is no statutory support or rational basis to suggest that Congress intended to grant such a special claim priority to union claimants by enacting Sections 1113 to the detriment of other employees and benefit plans of a bankruptcy debtor. The disparity created by Adventure should be resolved by the Court following the plain language of the Bankruptcy Code. ¢ CONCLUSION The Petition for a Writ of Certiorari should be granted. Respectfully submitted, Joun A. ROo.tins Lewis, FRIEDBERG, GLASSER, Casey & Ro.utns, LLP Suite 700, One Valley Square Charleston, WV 25301 (304) 345-2000 . Attorney for Petitioner July 23, 1998 APPENDIX A APPENDIX Page Adventure Resources, Inc., et al. v. Michael H. Holland, et al., 137 F.3d 786 (4th Cir. 1998)....... Al Adventure Resources, Inc. v. Michael H. Holland, EO MMs FOF p COEs. WE. VOs ADEE) vv cscw evens evecees A31 Order on Petition for Rehearing as Suggestion for a eee er er ee Pee eee eRe Eee A55 Bankruptcy Code Provisions - Sections 1113, 365, ie Thi a Vida Ciena As wea Ova we deans te bess Aél Al APPENDIX UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT ADVENTURE Resources, INCORPORATED, a West Virginia corporation; Amico SMOKELESS Coa Company, a West Virginia corporation; Tommy CREEK Coat Company, a West Virginia corporation; GREEN Mountain ENERGY, INCORPORATED, a West Virginia corporation; M.A.E. Services, INCORPORATED, a West Virginia corporation; Masen ENERGY CorporaTION, a West Virginia corporation; RALEIGH LEASING, INCORPORATED, a West Virginia corporation; Stoney Coat Company, a West Virginia corporation; Spruce Laure. Coat Company, a West Virginia corporation; Haw.Ley Coat MINING CorporRATION, a West Virginia corporation; BickrorD MINING, INCORPORATED, also knewn as Allports Coals, Incorporated, a West Virginia corporation; Barrett Fue. CorPORATION, successor by merger to Beckley Lick Run Company, a West Virginia corporation; East Gutr Fuer CorporaTION, a West Virginia corporation; Coat X Equipment & Suppty COMPANY, INCORPORATED, formerly known as Lakeside Supply Company, Incorporated, a West Virginia corporation; Beck.tey Repair & Hyprautic Service, INCORPORATED, a ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. 96-1557 A2 West Virginia corporation; Halfway, Incorporated, a West Virginia corporation; CHESAPEAKE LEASING, INCORPORATED, a West Virginia corporation; Piney Fuet CORPORATION, a West Virginia corporation; LAKEsIDE Leasinc, Incorporated, formerly known as Airplane Leasing, Incorporated, a West Virginia corporation; RALEIGH SERVICES, INCORPORATED, a West Virginia corporation; AtLas Coat LEASING, INCORPORATED, a West Virginia corporation; SuGAR CAMP MINING, INCORPORATED, a West Virginia corporation; H.D. Enterprises, Limiteb, a West Virginia corporation; Jet Coal Services, Incorporated, a West Virginia corporation; Microblack, Incorporated, a West Virginia corporation; Dover Coat SALEs, INCORPORATED, a West Virginia corporation; No. 10 Minna, INCORPORATED, a West Virginia corporation; PANTHER Rep AsH LAND ComPaANY, INCORPORATED, a West Virginia corporation, Plaintiffs-Appellees, v. MicHaAe, H. Hoititanp, Marty D. Hupson, E.tuot A. Seca, Pau R. Dean, Trustees of the UMWA 1950 Pension Trusts and UMWA 1974 Pension Trusts; UNirep Mine WorKeERS or AMERICA 1974 PENsION TRUST; ee ee eee OOO OO OO ae Or” A3 Unrrep Mine Workers oF AMERICA 1950 Pension Trust; Micuaet H. Ho.tianp, Marty D. Hupson, ELuiot A. Secat, THomas O.S. RaNnpb, CARLTON R. Sicxies, and Gam R. WILENsky, WituiaM P. Hoscoop, Trustees Of The United Mine Workers of America Combined Benefit Fund; Unirrep Mine Workers OF AMERICA COMBINED FUND; MicHaet H. Hoiitanp, Marty D. Hupson, THomMaAs F. Connors and Rosert D. Wa.tace, Trustees of The -_UMWA 1992 Benefit Plan; Unrrep Mine Workers OF AMERICA 1992 Benerir PLAN; MicHAet H. HOLiANp, Marty D. Hupson, THomas F. Connors, E.uiot A. Seca, Trustees of The UMWA 1993 Benefit Plan; Unitrep Mine Workers OF AMERICA 1993 Benerit PLAN; and Micnaet H. HoLLANbD, Marty D. Hupson, ELuiot A. SEGAL, JosePH J. StAHt, II, Trustees of The UMWA Cash Deferred Savings Plan of 1988; Unrrep MINE Workers OF AMERICA CASH DEFERRED SAVINGS PLAN OF 1988, Defendants-Appellants, and Donna E. SHa.ata, Secretary, Department of Health & Human Services, Social Security Administration of the United States of America, Defendant. er er a a a a a a a a ee eee ie i i aS a eS ws A4 ADVENTURE RESOURCES, INCORPORATED, a West Virginia corporation, Plaintiff-Appellant, and Amico SMOKELESS Coat Company, A West Virginia Corporation; Tommy Creek Coat Company, A West Virginia Corporation; GREEN MOuNTAIN ENERGY, INCORPORATED, a West Virginia corporation; M.A.E. Services, INCORPORATED, a West Virginia corporation; Masen ENERGY CorporaTION, a West Virginia Corporation; RALEIGH LEASING, INCORPORATED, a West Virginia Corporation; Stoney Coat Company, a West Virginia corporation; Spruce Laure. Coat Company, a West Virginia corporation; HAwLey Coa MINING Corporation, a West Virginia corporation; Bickrorp MINING, INCORPORATED, also known as Allports Coals, Incorporated, a West Virginia corporation; Barrett Fuet CorPORATION, successor by merger to Beckley Lick Run Company, a West Virginia corporation; East Gur Furr CorporaTION, a West Virginia corporation; Coat X Equipment & Suppty ComMPANy, INCORPORATED, formerly known as Lakeside Supply Company, Incorporated, a West Virginia corporation; Becktey Repair & Hyprautic Service, INCORPORATED, a No. 96-1938 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) A5 West Virginia corporation; Hatrway, INCORPORATED, a West Virginia corporation; CHesaPeaAkE LEASING, INCORPORATED, a West Virginia corporation; Piney Fue. Corporation, a West Virginia corporation; Laxesipe LEASING, INCORPORATED, formerly known as Airplane Leasing, Incorporated, a West Virginia corporation; RALEIGH SERviceEs, INCORPORATED, a West Virginia corporation; Attas Coat LEasiNG, INCORPORATED, a West Virginia corporation; SuGAR Camp MINING, INCORPORATED, a West Virginia corporation; H.D. Enterprises, Limirep, a West Virginia corporation; Jer Coat SERVICES, INCORPORATED, a West Virginia corporation; MicrosLack, INCORPORATED, a West Virginia corporation; Dover Coat Sates, INCORPORATED, a West Virginia corporation; No. 10 Minna, INCORPORATED, a West Virginia corporation; PANTHER Rep Ash LAND Company, INCORPORATED, a West Virginia corporation, Plaintiffs, Vv. MicHaet H. HoLtanp, Marry D. Hupson, E.uiot A. Secat, Paut R. Dean, Trustees of the UMWA 1950 Pension Trusts and UMWA 1974 Pension Trusts; United Mine Workers of America 1974 Pension Trust; Unitrep Mine Workers OF AMERICA et eet et et ee ee Se eet See ee ee See ee Se Ne Se Se See Se Nee Nee Se ee Se Nee ee We Nee ee Nee Net ee Ne ee ee ee es ee A6 1950 Pension Trust; Micuaew H. Hottanp, Marty D. Hupson, Evuior A. Seca, THomas O.S. Ranp, CARLTON R. Sicxies, and Gan R. Wicensky, WiuuiamM P. Hoscoop, Trustees of the United Mine Workers of America Combined Benefit Fund; Unrrep Mine Workers oF AMERICA ComBINeD FuND; Micuaet H. Hoiitanp, Marry D. Hupson, THomas F. Connors and Rosert D. Wattace, Trustees of the UMWA 1992 Benefit Plan; Unirep Mine Workers or America 1992 Benertit PLAN; MicHaset H. Hoitanp, Marty D. Hupson, THomas F. Connors, Etuior A. Seca, Trustees of the UMWA 1993 Benefit Plan; UNitep Mine Workers oF AMERICA‘1993 Benerit PLAN; and Micuaet H. Ho.ttaAnp, Marty D. Hupson, E.uor A. Secat, JoserH J. Stant, IL, Trustees of the UMWA Cash Deferred Savings Plan of 1988; Unirep Mine Workers or AmeriIcA CasH Dererrep SAVINGS PLAN oF 1988, Defendants-Appellees, and Donna E. SHALALA, Secretary, Department of Health & Human Services, Social Security Administration of the United States of America, Defendant. ee eee ee” A7 Appeals from the United States District Court for the Southern District of West Virginia, at Charleston. Charles H. Haden II, Chief District Judge. (CA-94-858-2, BK-91-50509, AP-93-197) Argued: August 13, 1997 Decided: February 27, 1998 Before RUSSELL,* Circuit Judge, HALL, Senior Circuit Judge, and MICHAEL, Senior United States District Judge for the Western District of Virginia, sitting by designa- tion. Affirmed in part, reversed in part, and remanded with instructions by published opinion. Senior Judge Hall wrote the opinion, in which Judge Russell and Senior Judge Michael joined. COUNSEL ARGUED: Jami Wintz McKeon, Morgan, Lewis & Bockius, L.L.P., Philadelphia, PA, for Appellants. John Allen Rollins, Lewis, Friedberg, Glasser, Casey & Rollins, Charleston, WV, for Appellees. ON BRIEF: David W. Allen, Larry D. Newsome, Barbara Locklin-George, Brian H. Benjet, Office of the General Counsel, UMWA Health & Retirement Funds, Washington, DC; Marilyn L. Baker, Mooney, Green, Baker, Gibson & Saindon, P.C., Washing- ton, DC, for Appellants. * Judge Russell participated in the decision of this case, but died prior to the time the opinion was issued. The opinion is filed by a quorum of the panel pursuant to 28 U.S.C. § 46(d). A8 OPINION HALL, Senior Circuit Judge: The primary question before us in this appeal is whether a debtor in bankruptcy operating under the aegis of Chapter 11 may, with regard to an executory contract in effect at the time of the filing of the petition for reorganization, continue to reap the benefits of its bargain without concern that the non-debtor party will be made whole for the debtor’s unfulfilled prepetition obli- gations. We hold, in accordance with the pronouncement of the Supreme Court in NLRB v. Bildisco & Bildisco, that it may not. I. A. The Adventure Group comprises forty-six com- panies, all of which are affiliates or subsidiaries of Adventure Resources, Inc. The Adventure companies are involved, to varying degrees, in nearly every aspect of the production of coal. For instance, certain of the com- panies merely own or lease the mine properties and the coal beneath them. Other Adventure companies actually mine and prepare the coal, and still others provide sup- port services such as supplies and equipment. In December 1992, twenty of the Adventure com- panies filed petitions for reorganization under Chapter 11 of the Bankruptcy Code. Among the myriad of Adven- ture’s creditors were six trusts established to provide pension, health, disability, and death benefits to members AY of the United Mine Workers of America and their depen- dents. Together, these trusts constitute the UMWA Health and Retirement Funds (“the Funds”). Four of the trusts (the 1950 Pension Trust, the 1974 Pension Trust, the Cash Deferred Savings Plan of 1988, and the 1993 Benefit Plan) were created as the result of NBCWAs - collective bargaining agreements negotiated by the UMWA with the Bituminous Coal Operators Asso- ciation.! The remaining two trusts (the Combined Benefit Fund and the 1992 Benefit Plan) exist by operation of law; they were established as a result of the enactment of the Coal Industry Retiree Health Benefit Act, 26 U.S.C. §§ 9701-9722 (the “Coal Act”). Adventure was among the coal operator signatories to the NBCWA of 1988, the collective bargaining agree- ment in effect at the time of the bankruptcy filing. Pur- suant to the 1988 agreement, the employers undertook to ensure the funding of employee pension and health bene- fits initially payable during the contract term. In addition, the employers guaranteed the funding of benefits already being administered by the 1950 and 1974 Pension Trusts; those trusts were “incorporated by reference and made a part of this Agreement.” Nationat Bituminous Coat WAGE AGREEMENT OF 1988 art. XX, §§ (b), (c)(1). Adventure did not live up to its part of the bargain. Instead, as evidenced by the preliminary report of an 1 NBCWA is an abbreviation for “ National Bituminous Coal Wage Agreement.” Al0 independent business analysis prepared in 1988, Adven- ture engaged in a deliberate strategy of expanding its mining operations at the expense of its employees: In 1985 and a portion of 1986, the companies began extensive mine development. . . . [M]ine development and sustaining capital costs are not easily financed, and management was faced with significant cash obligations. Management felt that expanding vendor credit beyond the level being used at the time was impossible and sought other sources of funds. The decision was made to not make payments, as due, to the mineworkers pension and benefit funds. . . . This “funding” mechanism was viewed as short- term but necessary, and the deferral of these payments was undertaken. May 5, 1988, Preliminary Report of David A. Harrah, CPA, to John P. Lamond, Treasurer, Westmoreland Coal Co. Adventure’s “deferral” of its pension and health ben- efit contributions was anything but short-term. Once it had initially defaulted on its payments to the Funds, Adventure continued to remain in arrears. Even after filing for reorganization, Adventure satisfied neither its ongoing obligations to the 1950 and 1974 Pension Trusts, nor those subsequently imposed by the Coal Act and the 1993 NBCWA.? As a result of Adventure’s business 2 To comply with the Coal Act, Adventure was required to make payments to the Combined Benefit Fund and to the 1992 Benefit Plan (the “Coal Act trusts”). Consistent with the terms of the 1993 NBCWA, Adventure agreed to contribute to the Cash Deferred Savings Plan of 1988 and to the 1993 Benefit Plan. All “ ‘funding’ mechanism,” the Funds’ claims may exceed $25 million, including approximately $4-5 million assessed during the 43-month duration of the Chapter 11 bankruptcy.® B. The twenty Adventure companies in Chapter 11, joined by eight non-debtor affiliates, filed this adversary proceeding in the bankruptcy court to determine the via- bility and priority of the claims filed by three of the trusts. See 28 U.S.C. § 157(b)(1) (conferring jurisdiction upon the bankruptcy judges over certain “core” bank- ruptcy proceedings, as outlined in § 157(b)(2)). By order dated June 23, 1994, the district court, pursuant to its authority under 28 U.S.C. § 157(d), withdrew its reference of the proceeding to the bankruptcy court. The remaining three trusts were subsequently granted leave to intervene as additional defendants and to file a counter-complaint against Adventure. Following a period of discovery, the Funds moved for partial summary judgment, contending that virtually all of their claims were entitled to be designated administra- tive expenses of the bankruptcy estate. See 11 U.S.C. § 507(a)(1) (according first priority to “administrative expenses allowed under section 503(b) of this title”).4 The * On July 25, 1996, after the notice of appeal was filed in the instant matter, the bankruptcy court, upon Adventure’s motion, converted the case to a liquidation proceeding under Chapter 7. 4 Adventure’s creditors have filed over $160 million in claims relating to its pre-bankruptcy operations. During the oral Al2 district court, by memorandum opinion and order dated March 8, 1996, granted the motion as to the claims filed by the Coal Act trusts. See note 2, supra. However, with respect to the vast bulk of the Funds’ claims, i.e., the pre- bankruptcy amounts owed by Adventure to the 1950 and 1974 Pension Trusts, the court below denied the motion. Adventure Resources, Inc. v. Holland, 193 B.R. 787 (S.D.W. Va. 1996).5 The district court concluded that the Funds’ claims pursuant to the Coal Act did not accrue until after the filing of the Chapter 11 petitions in late 1992. The initial contributions and benefit premiums exacted by the terms of the Coal Act are, the district court ruled, taxes on the bankruptcy estates, and are therefore administrative expenses within the contemplation of 11 U.S.C. § 503(b)(1)(B)(i). 193 B.R. at 793-96. Regarding Adventure’s obligations to the 1950 and 1974 Pension Trusts, the district court dismissed the Funds’ arguments that 11 U.S.C. §§ 1113(f) and 1114(e) (addressing, respectively, the rejection in bankruptcy of argument of this matter, counsel for the Chapter 7 trustee surmised that the sale of the estate’s assets will generate only enough cash to pay the secured claims, the costs of the liquidation, and an unspecified portion of the expenses associated with the administration of the Chapter 11 bankruptcy. 5 The parties do not appear to dispute that the claims filed by the 1993 Benefit Plan and the Cash Deferred Savings Plan of 1988, to the extent that they are attributable to obligations assumed by Adventure pursuant to its 1993 wage agreement, see note 2, supra, are entitled to priority as postpetition administrative expenses of the bankruptcy estates. Al3 collective bargaining agreements and the payment of cer- tain health insurance benefits to retired employees of Chapter 11 debtors) conferred first priority status upon the entirety of those claims, regardless of whether they accrued prior to the filing of the petitions. The district court determined instead that any claims for benefit con- tributions payable pursuant to an NBCWA were entitled to administrative expense priority only insofar as they had initially arisen postpetition. 193 B.R. at 796-98. The Funds appeal that portion of the district court’s order denying them summary judgment as to the claims of the Pension Trusts originating prior to Adventure’s immersion in bankruptcy. The Chapter 7 trustee cross- appeals the remainder of the order granting summary judgment to the Funds on the Coal Act claims; the notice of crossappeal incorporates the district court’s order of June 26, 1996, denying Adventure’s post-proceeding motions for relief under Fed. R. Civ. P. 59(e) and 60(b). We agree with the district court that the Funds’ claims under the Coal Act did not arise until after Adven- ture had already filed its petitions for reorganization. Inasmuch as these claims are for unpaid taxes, they must be accorded administrative expense priority. Conse- quently, we affirm the district court’s grant of summary judgment to the Funds as to the Coal Act claims. The district court also correctly determined that the plain language of 11 U.S.C. §§ 1113(f) and 1114(e) does not accommodate the notion that Congress specifically intended to address through those statutes the priority of claims for unpaid pension benefit obligations. In the absence of specific direction from the legislative branch, Al4 we conclude that, where such claims emanate from the breach of a collective bargaining agreement, they are to be granted priority in accordance with the law governing the treatment in bankruptcy of executory contracts in general. Thus, where the Chapter 11 debtor has assumed the benefits and obligations of an existing collective bargain- ing agreement, but does not comply with its statutory duty to cure all defaults then extant, any claims arising from the debtor’s failure to cure are entitled to first priority as administrative expenses of the bankruptcy estate. Because the district court held to the contrary, i.e., that the Funds’ claims are not entitled to any priority to the extent that they are attributable to prepetition defaults, we reverse its grant of summary judgment to Adventure as to the applicable Pension Trust claims. We will explain the reasons for our holdings in more detail below. Il. The parties agree that no genuine issue of material fact exists at this stage of the litigation. Our task is simply to determine, on the undisputed facts, which party is entitled to judgment as a matter of law concerning the issues on appeal. Fep. R. Crv. P. 56(c). In that respect, our review of the district court’s application of the law is, as always, de novo. Patten v. United States, 116 F.3d 1029, 1031 (4th Cir. 1997). Congress passed the Coal Act to redress the “looming insolvency” of the trusts that had been established by prior NBCWAs to provide health care benefits to retired coal miners. LTV Steel Co., Inc. v. Shalala (In re Chateaugay Corp.), 53 F.3d 478, 484-85 (2d Cir. 1995). To that end, the Act created the Combined Benefit Fund to secure the continuation of health benefits for those retired miners who had been receiving them under the old system as of July 20, 1992. 26 U.S.C. § 9703(f). The Act also devised the 1992 Benefit Plan, which covered two other groups of miners: (1) those eligible for benefits as of February 1, 1993, and who retired by September 30, 1994; and (2) those “orphaned” upon the insolvency of an individual employer benefit plan. § 9712(b). With regard to both new trusts, the Coal Act assessed initial, “prefunding” contributions against the coal opera- tors who had signed the 1988 NBCWA. See §§ 9704(i) (Combined Fund), 9712(d)(1)(A) (1992 Plan). The Act also specified that, beginning on February 1, 1993, the affected operators would pay health benefit premiums to the trusts, based on the number of beneficiaries assigned to them by the Social Security Administration. See §§ 9704(b) (Combined Fund), 9712(d)(1)(B) (1992 Plan). Lastly, the Act required the operators to pay additional premiums to the Combined Fund to provide death bene- fits for their employees and to ensure health coverage for the industry’s unassigned beneficiaries. § 9704(c), (d). Al6 B. Section 503 of the Bankruptcy Code provides for the payment of expenses incurred in administering the bank- ruptcy estate. Allowable administrative expenses com- monly include the direct costs of preserving the estate (for example, postpetition wages earned by the debtor’s employees) and compensation for services rendered to the estate by professionals, such as attorneys and accoun- tants. See 11 U.S.C. § 503(b)(1)(A), (4). We are more con- cerned at present, however, with that category of administrative expenses comprising “any tax . . . incurred by the estate[.]” § 503(b)(1)(B)(i).© Claims for taxes, like those for wages, professional fees, and other administra- tive expenses, are entitled to priority over all other unsecured claims. § 507(a)(1). 1 1. The trustee contends that the assessments mandated by the Coal Act are not “taxes.” The pertinent case authority is to the contrary. See In re Leckie Smokeless Coal Co., 99 F.3d 573, 583 (4th Cir. 1996) (Coal Act premiums are taxes whose validity may be determined in the federal 6 Section 503(b)(1)(B)(i) excepts from its reach “a tax of a kind specified in section 507(a)(8) of this title.” The latter provision, in turn, addresses the priority accorded claims of “governmental units” for, inter alia, certain income, property, employment, and excise taxes. Regardless of how one might characterize the Funds’ Coal Act claims within the broader rubric of “taxes,” the Funds themselves are not governmental units, and, therefore, their claims are not within the ambit of § 507(a)(8). Adventure Resources, 193 B.R. at 795 n. 15. This aspect of the district court’s ruling has not been challenged on appeal. Al7 courts notwithstanding the asserted jurisdictional bars of the Anti-Injunction Act and the Declaratory Judgment Act), cert. denied, 117 S.Ct. 1251 (1997). In Leckie, we recognized that Coal Act obligations “are involuntary pecuniary burdens imposed by Con- gress for the public purpose of restoring financial stabil- ity to coal miners’ benefit plans,[”] and those burdens have been imposed as an exercise of Congress’s taxing power.” Id., citing Chateaugay at 498.8 There is no doubt, then, that the assessments meet this circuit’s definition of a x.” 7 Cf. New Neighborhoods, Inc. v. W. Va. Workers’ Comp. Fund, 886 F.2d 714, 718 (4th Cir. 1989) (“The ‘public’ purpose of systems such as the [workers’ compensation scheme] in force and effect in West Virginia is to allocate the burden of the costs of injured employees and/or their dependents among employers rather than among the general public.”). 8 The court in Chateaugay was faced with the precise issue before us. The Second Circuit concluded that Coal Act assessments are taxes within the meaning of § 503(b)(1)(B)(i), entitled to administrative expense priority under § 507(a)(1). 9 See United States v. City of Huntington, W. Va., 999 F.2d 71, 73 n. 4 (4th Cir. 1993): For the purpose of determining claim priority in the context of bankruptcy, the courts have established the following elements of a tax: “(a) An involuntary pecuniary burden, regardless of name, laid upon individuals or property; (b) Imposed by, or under authority of the legislature; (c) for public purposes, including the purpose of defraying expenses of government of undertakings authorized by it; and (d) Under the police or taxing power of the state.” (quoting In re Lorber Industries, 675 F.2d 1062, 1066 (9th Cir. 1982)). : Al8 2. Remaining is the question of whether the taxes levied by the Coal Act were, in the case of the Adventure companies, “incurred by the estate[s].” The trustee argues in the negative, pointing out that the Coal Act was signed into law on October 24, 1992, antedating the filing of the bankruptcy petitions by more than a month. Under the terms of the statute, however, no claim could accrue to the Combined Fund and the 1992 Plan until February 1, 1993, well after the bankruptcy estates had been cre- ated.10 A “claim” is a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undis- puted, legal, equitable, secured, or unsecured[.]” 11 U.S.C.A. § 101(5)(A) (West 1993). Claims, however, do not exist in a vacuum; they must be possessed by creditors. See § 101(10) (“creditor” defined as, inter alia, an “entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor”). 10 See 26 U.S.C.A. § 9702(c) (“The first plan year of the Combined Fund shall begin February i, 1993. ...”) and 26 U.S.C.A. § 9712(b)(2) (“[T]he term ‘eligible beneficiary’ means an individual who . . . but for the enactment of this chapter, would be eligible to receive benefits from the 1950 UMWA Benefit Plan or the 1974 UMWA Benefit Plan, based upon age and service earned as of February 1, 1993[.]”) (West Supp. 1997); In re CF & I Fabricators of Utah, Inc., 169 B.R. 984, 987 (D.Utah 1994) (“[S]ection 9702 of the Coal Act establishes the Combined Fund and merges the UMWA 1950 and 1974 Benefit Plans into the Combined Fund effective February 1, 1993... . [SJection 9712 of the Coal Act establishes the 1992 Benefit Plan, which also became effective on February 1, 1993.”). Al9 Neither the Combined Fund nor the 1992 Plan were capable of being anyone’s creditor until at least February 1, 1993, the earliest date on which the trusts could have been entitled to collect their first premiums. See note 10, supra; 26 U.S.C.A. § 9704(a) (West Supp. 1997) (“Each assigned operator shall pay to the Combined Fund for each plan year beginning on or after February 1, 1993, an annual premium|[.]”). Consequently, the entirety of the Coal Act claims filed against Adventure by these two trusts must necessarily have arisen postpetition.!! We therefore affirm the district court’s determination that those claims be accorded administrative expense priority as taxes incurred by the estates.!? ‘1 We speculated in Leckie that a debtor’s liability for future Coal Act premiums may attach prior to the filing of the bankruptcy petition, inviting the conclusion that a trust’s entitlement to such premiums constitutes a prepetition claim. 99 F.3d at 580-81 & n. 9; In re Westmoreland Coal Co., 213 B.R. 1, 12 (Bankr. D.Colo. 1997) (“[T]he Fourth Circuit [in Leckie] concluded that Coal Act obligations fell within the bankruptcy definition of a claim and characterized future premium obligations under § 9712 as unmatured and contingent rights[.]”). In Leckie, however, none of the eight debtors filed for bankruptcy prior to February 1, 1993, the date that the trusts’ credi:or status was effectively established. See 99 F.3d at 577 n. 3, 578 n. 6 (first petition filed on April 16, 1993). ‘2 The Funds have argued alternatively that the Coal Act claims should be accorded first priority status by virtue of 11 U.S.C. § 1114(e), which provides, in pertinent part: (1) Notwithstanding any other provision of this title, the debtor in possession, or the trustee . . . shall timely pay and shall not modify any retiree benefits, except [by court order after notice and a hearing, or as the parties may agree]... . A20 IV. The final matter on appeal involves the Pension Trust claims, the lion’s share of which the district court deemed ineligible for priority status as having initially accrued prior to the filing of the bankruptcy petitions. The Funds assert that the district court’s ruling was in error, relying primarily on 11 U.S.C. §§ 1113 and 1114, enacted by Congress during the 1980s in response to a perceived threat to labor stability and to retiree health benefits posed by the bankruptcy reorganization of numerous large employers. A. Section 1114 simply has no application to the claims of the Pension Trusts. Although it commands that the trustee or debtor-in-possession pay “any” retiree benefits as an administrative expense of the bankruptcy estate, see § 1114(e) and note 12 supra, the term “retiree benefits” is limited to (2) Any payment for retiree benefits required to be made before a plan confirmed under section 1129 of this title is effective has the status of an allowed administrative expense as provided in section 503 of this title. (emphases supplied). The trustee contends (and the district court held) that § 1114(e) applies only to benefit payments due after the filing of the bankruptcy petition. The Funds respond forcefully that the word “any” in paragraphs (1) and (2) encompasses both pre- and postpetition payments. Inasmuch as we have already decided that all of the Coal Act claims arose postpetition, we leave for another day the task of ascertaining the scope of § 1114(e). A21 payments to any entity or person for the pur- pose of providing or reimbursing payments for retired employees and their spouses and depen- dents, for medical, surgical, or hospital care benefits, or benefits in the event of sickness, accident, disabil- ity, or death under any plan, fund, or program -- . Maintained or established in whole or in part by the debtor prior to filing a petition commenc- ing a case under this title. 11 U.S.C.A. § 1114(a) (West 1993) (emphasis supplied). True to their designations, the Pension Trusts administer only pension benefits for retired coal miners. None of their claims are for the types of benefits enumerated in § 1114(a). B. 1. Section 1113, Ly contrast, affects the treatment of pension benefits in bankruptcy to the extent that those benefits exist pursuant to a collective bargaining agree- ment. The statute provides that a Chapter 11 debtor (or trustee) may reject a collective bargaining agreement “only in accordance with the Provisions of this section.” 11 US.C.A. § 1113(a) (West 1993).13 The whole of the 'S If the debtor believes that its obligations under a collective bargaining agreement would inhibit its effective reorganization, it must first make a good-faith effort to negotiate a modification of the contract with its employees’ authorized representative. § 1113(b). In the event of an impasse, the bankruptcy court may, after notice and a hearing, permit the debtor to reject the collective bargaining agreement only if (1) the debtor’s proposed modifications are “necessary to permit A22 agreement is protected, as are its components: “No provi- sion of this title shall be construed to permit a trustee to unilaterally terminate or alter any provisions of a collec- tive bargaining agreement prior to compliance with the provisions of this section.” § 1113(f). The parties acknowledge that, during the course of its attempted reorganization, Adventure never sought to reject or modify its labor agreement with the UMWA in accordance with § 1113; it merely continued to breach its contractual obligation to pay the premiums due the Pen- sion Trusts. The Funds maintain that Adventure’s breach, in essence, unilaterally altered the pension contribution provision of the 1988 NBCWA, in contravention of § 1113(f). According to the Funds, the only means of giving full force and effect to the statute is to compensate the Pension Trusts for the breach by granting all of their claims for unpaid premiums priority in distribution from the bankruptcy estates. The Funds’ position finds some support in the hold- ing of In re Unimet Corp., 842 F.2d 879, 884 (6th Cir. 1988). In that case, the court of appeals opined that § 1113(f)’s “unequivocal” prohibition against the modification of collective bargaining agreements means that a debtor in Chapter 11 “cannot escape its obligations in [that] regard.” Id. Unimet was therefore ordered to continué the reorganization of the debtor and assures that all creditors, the debtor and all of the affected parties are treated fairly and equitably”; (2) the employees’ authorized representative has, without good cause, refused to accept the debtor’s proposal; and (3) the balance of the equities clearly favors rejection of the collective bargaining agreement. § 1113(c). A23 paying health and life insurance premiums on behalf of its retirees, pursuat to its prepetition agreement with the steelworkers’ union. We agree that the language employed by Congress in § 1113 is unequivocal, insofar as it goes. It plainly imposes a legal duty on the debtor to honor the terms of a collective bargaining agreement, at least until that agree- inent is properly rejected. By implication, the statute cre- ates a claim on behalf of the debtor’s employees in the event that the debtor fails to comply with the law. Section 1113, however, offers no advice as to how this new category of claims should be treated vis a vis other categories competing for payment. The statute’s silence stands in stark contrast to § 1114, see Section IV-A supra, which clearly states that “[a]Jny payment for retiree bene- fits required to be made before a plan confirmed under section 1129 of this title is effective has the status of an allowed administrative expense[.]” 11 U.S.C.A. § 1114(e)(2) (West 1993). The Unimet court explicitly declined to decide whether benefit premiums payable under § 1113 are administrative expenses, deeming resolution of the issue immaterial to its conclusion that the premiums had to be paid. 842 F.2d at 884. To the extent that the Sixth Circuit's rationale has been followed by the lower courts, a so- called “superpriority” has attached to claims within the purview of § 1113. E.g., Eagle, Inc. v. Local No. 537 of United Ass'n of Journeymen and Apprentices of Plumbing and Pipe Fitting Indus. of United States and Canada, AFL-CIO, 198 B.R. 637, 638-39 (D.Mass. 1996). A24 The obvious difficulty with the approach taken in Unimet and its progeny is that it engenders disharmony between § 1113 and the carefully ordered hierarchy of priorities embodied in § 507. “Section 507 is intended to be the exclusive list of priorities in bankruptcy. Priorities are to be fixed by Congress. Courts are not free to fashion their own rules of superpriorities or subpriorities within any given priority class.” 3 Lawrence P. KINGET ET AL., COLLIER ON Bankruptcy { 507.02[2] (15th ed. 1996), cited in In re Ionosphere Clubs, Inc., 22 F.3d 403, 408 (2d Cir. 1994) (Ionosphere II). The Second and Third Circuits have both observed that, on those infrequent occasions where Congress has intended to supersede the general priority scheme set forth in § 507, it has done so explicitly. See Ionosphere II at 408 (citing § 1114(e)(2)’s allowance of claims for retiree benefits as administrative expenses); In re Roth American, Inc., 975 F.2d 949, 956 (3d Cir. 1992) (citing § 364(c)(1)’s authorization for the bankruptcy court to accord “priority over any ox all administrative expenses of the kind speci- fied in section 503(b) or 507(b) of this title” to credit obtained or debt incurred for the purpose of operating the debtor’s business). As we have noted, explicit instruc- tion from Congress concerning the priority of claims under § 1113 is conspicuously absent from the statute. “[T]here is no indication either from the language or the legislative history of section 1113 that Congress intended to address the priority to be given claims based on a collective bargaining agreement.” Roth American at 956. A25 We believe that, to the extent possible, Sections 507 and 1113 must be construed harmoniously. It is impera- tive to the orderly administration of the bankruptcy pro- cess that § 507 remains, unless otherwise clearly specified by Congress, the final word on the priorities of compet- ing claims. We can faithfully adhere to that principle in this case without doing violence to the legislative pur- pose inherent in § 1113: Section 507 only establishes the priority of [§ 1113] claims[;] it does not affect the underly- ing obligation. . . . Judicial ordering of benefit claims pursuant to § 507 is not equivalent ‘to employer avoidance of obligations under a col- lective bargaining agreement. The collective bar- gaining agreement is respected, but the financial obligations issuing from it are accorded priority consistent with the Bankruptcy Code. Ionosphere II at 407 (citation and quotation marks omit- ted); see Roth American at 957 (“The congressional goal ernbodied in section 1113 to give special consideration to a collective bargaining agreement and encourage the debtor and the union to reach a mutually acceptable agreement . . . can be satisfied without interfering with the previously established statutory priorities.”). ye We conclude that a bankruptcy claim arising from the breach of a collective bargaining agreement may be accorded priority status only insofar as it fits into one of the categories singled out for preferential treatment in § 507. Fortunately for the Funds, the claims of the Pen- sion Trusts are the proverbial round peg. A26 i. We begin with the unremarkable premise that unex- pired collective bargaining agreements are executory con- tracts. NLRB v. Bildisco & Bildisco, 465 U.S. 513, 521-22 (1984).!4 Their treatment in bankruptcy is, therefore, gov- erned generally by 11 U.S.C. § 365, pertaining to execu- tory contracts and unexpired leases entered into by the debtor prior to the filing of the bankruptcy petition. Id. at 522-23. In Bildisco, the Supreme Court held that a debtor attempting a Chapter 11 reorganization may reject a col- lective bargaining agreement that “burdens the estate,” provided that “after careful scrutiny” the equities balance in favor of rejection. Id. at 525-26; see 11 U.S.C. § 365(a) (stating that the trustee “may assume or reject any execu- tory contract or unexpired lease of the debtor”). It was precisely this holding that inspired Congress’s almost immediate enactment of § 1113 “to preclude employers from using bankruptcy law as an offensive weapon in labor relations by going into bankruptcy and unilaterally rejecting or modifying the extant collective bargaining agreement (or exerting leverage at the bargaining table 14 Upon examining the legislative history of the relevant portion of the Bankruptcy Code, the Supreme Court ascertained that Congress intended the term “executory contract” to describe those contracts “on which performance is due to some extent on both sides.” Bildisco at 522 n. 6 (quoting H.R.Rep. No. 95-595, at 347 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6303). Collective bargaining agreements typically impose reciprocal obligations on the employer and the union, on which performance is due at all times for the duration of the contract. A27 by threatening to do so).” Roth American at 956 (citation omitted). However, in erecting § 1113’s substantive and pro- cedural obstacles to the unilateral rejection of collective bargaining agreements, Congress did not indicate that it intended to otherwise restrict the general application of § 365 to those agreements. Section 1113 “governs only the conditions under which a debtor may modify or reject a collective bargaining agreement{.]” Id. (quoting In re Ohio Corrugating Co., 115 B.R. 572, 578 (Bankr. N.D.Ohio 1990), rev'd,15 United Steelworkers of America, AFL-CIO v. Ohio Corrugating Co., No. 4:90CV0810, 1991 WL 213850 (N.D.Ohio Jan. 3, 1991)). Thus, § 365 continues to apply to collective bargain- ing agreements, except where such an application would create an irreconcilable conflict with § 1113. Mass. Air Conditioning & Heating Corp. v. McCoy, 196 B.R. 659, 663 (D.Mass. 1996) (“Section 1113 is designed to provide additional procedural requirements for rejection or mod- ification of collective bargaining agreements, and only to that degree supersedes and supplements the provisions in § 365.”) (citing Norfolk and Western Ry. Co. v. American Train Dispatchers Ass'n, 499 U.S. 117, 136 n. 2 (1991) (Stevens, J., dissenting)). The essential character of collec- tive bargaining agreements as executory contracts, made plain in Bildisco, was left undisturbed by Congress. 15 The bankruptcy court’s denial of priority status to the union’s claims for wages and benefits in Ohio Corrugating was summarily reversed by the district court as inconsistent with the Sixth Circuit’s interpretation of § 1113 in Unimet. A28 ii. The collective bargaining agreement between the UMWA and Adventure was assumed in bankruptcy as the result of the latter’s failure to reject it in accordance with § 1113. Roth American at 957. Where the debtor-in- possession assumes an executory contract, “it assumes the contract cum onere |.|"Bildisco at 531 (citation omit- ted).1© That the obligations of an executory contract be accepted along with its benefits is made plain by the Bankruptcy Code’s requirement that, as conditions of the contract’s assumption, the debtor cure any existing default and compensate all non-debtor parties for actual pecuniary losses that have resulted therefrom. See § 365(b)(1). Upon assumption of the contract, “the expenses and liabilities incurred may be treated as administrative expenses, which are afforded the highest priority on the debtor’s estate.” Bildisco at 532; In re Stewart Foods, Inc., 64 F.3d 141, 145 (4th Cir. 1995).17 There can be no doubt, of course, that the statutory duty to cure any existing default is a “liability” incurred by the debtor by virtue of its assumption in bankruptcy of an executory contract. 16 “What is taken cum onere is taken subject to an existing burden or charge.” Biack’s Law Dictionary 342 (5th ed. 1979). 17 If the contract is instead rejected, the resulting damages (including any prepetition breach) constitute general, unsecured claims against the estate. Bildisco at 531; see Stewart Foods at 144-45 (“[R]egardless of the nature of the contract, if at the time of the bankruptcy filing the debtor has an obligation under the contract to pay money to the non-debtor party, that obligation is handled as a pre-petition claim in the bankruptcy proceedings.”). A29 Hence, when Adventure assumed the collective bar- gaining agreement, it undertook a legal obligation to cure its existing defaults under that agreement, including the arrears to the Pension Trusts. Adventure’s failure to com- ply with its legal obligation gave rise, under Bildisco and Stewart Foods, to an administrative expense claim on behalf of the Pension Trusts for the entirety of the arrearage. In effect, Adventure’s postpetition assumption of its executory labor contract with the UMWA trans- formed the prepetition claims of the Pension Trusts, once not cured, into new claims arising postpetition. In re Mushroom Transp. Co., Inc., 78 B.R. 754, 759 (Bankr. E.D.Pa. 1987).18 18 We tread no new ground in holding that prepetition defaults of executory contracts and leases assumed in bankruptcy, left uncured, constitute postpetition administrative expenses of the estate. A number of learned colleagues and commentators have blazed that trail before us. See, e.g., LJC Corp. v. Boyle, 768 F.2d 1489, 1494 n. 6 (D.C. Cir. 1985); Mass. Air Conditioning & Heating, 196 B.R. at 663; In re Moline Corp., 144 B.R. 75, 79 (Bankr. N.D.Ill. 1992); In re French, 131 B.R. 138, 141 (Bankr. E.D. Mo. 1991); In re Leon’s Casuals Co., Inc., 122 B.R. 768, 771 (Bankr. S.D. Ala. 1990); In re Monroe Well Serv., Inc., 83 B.R. 317, 321 (Bankr. E.D. Pa. 1988); Mushroom, 78 B.R. at 759; 2 Lawrence P. KING ET AL., COLLIER ON BANKruptTcy {J 365.08[1] (15th ed. 1996) (“[A] trustee must proceed cautiously in electing whether to assume or reject [an executory contract} since an assumption will have the effect of making the expenses and liabilities incurred expenses of administration.”); Jesse M. Fried, Executory Contracts and Performance Decisions in Bankruptcy, 46 Duxe L.J. 517, 525 (1996): If the trustee “assumes” the [executory] contract, Section 365 binds the bankruptcy estate to the contract, permitting the estate to seek performance from the other party under the contract’s original A30 We conclude that the district court erred as a matter of law by declining to accord administrative expense priority to the Pension Trust claims insofar as the arrearage they represent initially accrued prior to the filing of the bankruptcy petitions. We therefore reverse its grant of summary judgment to Adventure as to those claims. V. We affirm the district court’s orders of March 8, 1996, and June 26, 1996, granting summary judgment to the Funds regarding the priority classification of the Coal Act claims. We reverse the district court’s order of March 8, 1996, to the extent that it granted summary judgment to Adventure regarding the priority classification of the Pension Trust claims. We remand the matter to the district court with instructions to enter summary judgment for the Funds as to the Pension Trust claims, according them administrative expense priority. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED WITH INSTRUCTIONS. terms. [O]bligations in connection with assumed contracts . .. are treated as postpetition administration claims. . . . Thus, the effect of assumption is that the estate acquires all of the debtor’s rights and obligations under the contract. A31 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF WEST VIRGINIA CHARLESTON DIVISION ADVENTURE RESOURCES, INC., et al., Plaintiffs, Vs. CIVIL ACTION NO. 2:94-0858 MICHAEL H. HOLLAND, et al., Defendants. AND MICHAEL H. HOLLAND, et al., Intervenor Counter-Plaintiff Trusts, VS. ADVENTURE RESOURCES, INC., et al., Counter-Defendants. MEMORANDUM OPINION AND ORDER Pending is the motion for partial summary judgment of the Defendant/Intervenor Counter-Plaintiffs (the Funds).! For the reasons set forth below, the Court GRANTS in part and DENIES in part the Funds’ motion. ! The Funds is a shorthand reference to the UMWA Health and Retirement Funds. The Funds consists of six trusts: (1) the UMWA 1950 Pension Trust; (2) the 1974 Pension Trust; (3) the Cash Deferred Savings Plan of 1988; (4) the UMWA Combined Benefit Fund (Cembined Fund); (5) the UMWA 1992 Benefit Plan (1992 Plan); and (6) the UMWA 1993 Benefit Plan. The first three trusts are referred to collectively as the “Pension Plans.” bd A32 I. INTRODUCTION The substance of this adversary proceeding raises complicated issues under the Coal Act, the Bankruptcy Code and the parties’ collective bargaining agreements. Accordingly, it is helpful to provide some background on these statutes and contracts. An exhaustive treatment of the Coal Act is unneces- sary. The Act’s details and the history leading to its enactment can be found elsewhere. See, e.g., Carbon Fuel Co. v. USX Corp., 891 F. Supp. 1186, 1189-92 (S.D. W. Va. 1995) (Haden, C.J.), appeal pending, No. 95-2496 (4th Cir. Aug. 9, 1995). Only a general outline of the Coal Act is necessary to provide a frame of reference for some of the arguments asserted by the Funds. The Coal Act was enacted on October 24, 1992 and became effective February 1, 1993. In re Chateaugay Corp., 53 F.3d 478, 486 (2d Cir.), cert. denied, 116 S. Ct. 298 (1995). The Coal Act contains three mechanisms for the provision of health care benefits to retired miners. First, the Act continues the Individual Employer Plans (IEPs) created The Pension Plans were established under a series of National Bituminous Coal Wage Agreements (NBCWAs) to provide pensions, retirement savings opportunities and death benefits to retired coal miners and their surviving spouses. The Combined Fund and the 1992 Plan were established in accordance with the Coal Industry Retiree Health Benefit Act of 1992 (the “Coal Act” or the “Act”), 26 U.S.C. §§ 9701 et seq. to provide retiree health benefits to two specific sets of beneficiaries. The 1993 Benefit Plan was established by the most recent NBCWA and provides retiree health benefits to a third set of beneficiaries under separate eligibility rules. A33 pursuant to the 1978 NBCWA and maintained by the successor NBCWAs.? See 26 U.S.C. § 9711(a). The other two mechanisms are the Combined Fund and the 1992 Plan, which are financed in large part through per beneficiary premiums payable by companies to whom responsibility is attributed for individual bene- ficiaries of those plans. See 26 U.S.C. §§ 9702(a)(1), 9722(a}(1), 9704(b)(2), 9712(d)(1)(B). Each of these alterna- tive multiemployer plans is discussed in more detail below. The Combined Fund covers, beneficiaries eligible tor and receiving benefits from the UMWA 1974 Benefit Plan and the 1950 Benefit Plan as of July 20, 1992. 26 U.S.C. § 9703(e). These separate plans were merged into the Combined Fund effective February 1, 1993. 26 U.S.C. §§ 9702(a)(2). The Combined Fund is authorized to collect claims pre-existing the Act. 26 U.S.C. § 9708. Every coal operator who signed or otherwise became bound to an NBCWA at anytime is required to participate in the Com- bined Fund’s financing. 26 U.S.C. § 9701(b), (c)(1); Davon Inc. v. Shalala, 75 F.3d 1114, 1117 (7th Cir. 1996). The premium scheme for the Combined Fund invoives several 2 Carbon Fuel briefly explains the gencsis of the IEP: In 1978, the UMWA and the BCOA negotiated a - slightly different NBCWA. The new agreement partially dismantled the system developed in 1974. The union and operators agreed to shift from a centralized multiemployer benefit trust to a decentralized scheme in which each signatory operator established and financed its own individual health benefit delivery plan or. . . “IEP”[.] Carbon Fuel, 891 F. Supp. at 1190. A34 coordinated mechanisms. The primary financing of the Combined Fund comes from per beneficiary premiums paid by “assigned operators” and their related persons under § 9704(a), based on the number of beneficiaries assigned to them by the Secretary of Health and Human Services according to an assignment process. See generally 26 U.S.C. § 9706. These premiums were to be calculated “for each plan year beginning on or after February 1, 1993. ...” 26 U.S.C. § 9704(b)(2). The 1992 Plan is essentially the new “orphan plan.” The 1992 Plan is required to provide health coverage for certain individuals who are not receiving benefits from the Combined Fund or from their last signatory opera- tor’s § 9711 plan. 26 U.S.C. § 9712(b)(2); see Holland v. Double G. Coal Co., 898 F. Supp. 351, 354 (S.D. W. Va. 1995) (stating the 1992 Plan was intended as a “backstop” to the Combined Fund and the IEP scheme). 3 Section 9712(b)(2) sets forth the reach of coverage for the 1992 Plan in its definition of “eligible beneficiary,” which is defined as an individual who (A) but for the enactment of this chapter, would be eligible to receive benefits from the 1950 UMWA Benefit Plan or the 1974 UMWA Benefit Plan, based upon age and service earned as of February 1, 1993; or (B) with respect to whom coverage is required to be provided under section 9711, but who does not receive such coverage from the applicable last signatory operator or any related person, and any individual who is eligible for benefits by reason of a relationship to an individual described in subparagraph (A) or (B). In no event shall the 1992 A35 The 1992 Plan enrolls beneficiaries upon determining they are eligible for coverage. The Coal Act imposes an ongoing duty on the last signatory operator and its related persons to pay annual prefunding premiums and monthly per-beneficiary premiums to the 1992 plan for every month the 1992 Plan provides health benefits to the operator’s retirees. 26 U.S.C. § 9712(d)(1)(B). There are also payment obligations associated with the applicable NBCWAs. In addition to Adventure’s stat- utory obligations under the Act, it may be required to pay contributions under these wage agreements.‘ UMWA Benefit Plan provide health benefits coverage to any eligible beneficiary who is a coal industry retiree who retired from the coal industry after September 30, 1994, or any beneficiary of such individual. ld. 4 Coal industry retirees have been promised pensions and health benefits under collective bargaining agreements dating back to 1947. See generally Carbon Fuel, 891 F. Supp. at 1189-91. The UMWA and the Bituminous Coal Operators Association established several multiemployer plans, including the UMWA 1950 Pension Trust, 1974 Pension Trust, the 1950 Benefit Plan, and the 1974 Benefit Plan. The 1993 NBCWA established the 1993 Benefit Plan to provide health benefits for certain retirees not covered by the Coal Act and requires employer contributions to the Cash Deferred Savings Plan of 1988 to defray the costs of administering the trust. While Congress, via ERISA, has sought to assure timely payment and streamlined collection of delinquent contributions to multiemployer pension plans, Adventure has often acted to the contrary. See Ex. 8 to Funds’ Mot. for Partial Summ. Jgt., Connors v. Adventure Resources, Inc., No. 5:90-0209 (S.D. W. Va. Nov. 8, 1991). The exhibits to the Funds’ motion will hereafter be denominated “Ex. ‘{blank]’.” A36 Il. FACTUAL AND PROCEDURAL BACKGROUND Given the facts are not disputed, the Court will sum- marize how this controversy developed. H. Paul Kizer, the owner of the Adventure com- panies, started Maben Energy in 1971 and acquired an ownership interest in many of the Adventure companies in 1977. By the mid-1980s, the number of companies had proliferated. Nevertheless, all were consolidated under Kizer’s sole ownership before bankruptcy. By the late 1980s, Adventure was touted as “the largest independent coal producer in West Virginia and the 49th largest inde- pendent coal producer in the United States.” Ex. 25. Unfortunately, the Adventure companies began to experience financial setbacks resulting in, inter alia, the December 1992 filing of petitions by twenty companies related to Adventure Resources, Inc., under Chapter 11 of the Bankruptcy Code. Proofs of claim for unpaid contri- butions and premiums were filed timely by the Funds. On December 14, 1993 Adventure® initiated this adver- sary proceeding by filing a complaint seeking disal- lowance of the Funds’ claims. There are over 500 beneficiaries for whom the Adventure companies are responsible, including retired 5 “Adventure” refers to the twenty Plaintiff Chapter 11 debtor companies as well as to eight to ten Plaintiff non- bankrupt affiliates. In all, there are 46 Adventure companies, some operating and some defunct. Various members of the group have been signatory to NBCWAs since 1974. Adventure is currently signatory to a 1993 NBCWA under the names of Maben Energy Corporation and a list of affiliates. See Ex. 2. A37 miners and eligible dependents.® Adventure has not paid per beneficiary premiums to the Combined Fund since December 1994. As of November 25, 1995 Adventure’s delinquent Combined Fund premiums totalled over 1.2 million dollars, and currently accrue at a rate of over one hundred fifty thousand dollars ($150,000) per month. Adventure never has paid per beneficiary premiums to the 1992 Plan.”? The 1992 Plan is owed over 1.7 million ¢ The Funds acknowledge the precise numbers of attributable beneficiaries in the Combined Fund and the 1992 Plan go up or down as more beneficiaries are enrolled in the plans, leave the plans due to mortality or other circumstances, or as the Social Security Administration’s assignments are adjusted. ” Adventure maintained for a good portion of this litigation that it was providing coverage to its retirees through a § 9711 plan. In reality, however, Adventure was merely processing claims through ‘ts self-insured plan. It eventually came to light that Adventure had been failing to pay timely its beneficiaries’ medical bills and that health care providers were refusing to serve these beneficiaries. The following is an excerpt from an August 1995 letter to the Funds’ counsel from the Chief Financial Officer of the Adventure Resources Group: In regard to your inquiry please be advised that employees, retired and active, which have filed claims under any of the Maben Energy Company- affiliated health care plans have not had any such claims funded after October 6, 1994. All active claims which entered the system after October 7, 1994 remain unpaid. Ex. 5, letter from David A. Harrah, CPA, to Susan Cannon-Ryan (Aug. 29, 1995). The 1992 Plan stepped in after this cessation of coverage and determined Adventure’s beneficiaries were not receiving § 9711 benefits from Adventure. Accordingly, Adventure’s beneficiaries were enrolled in the 1992 Plan retroactively to the date coverage from Adventure’s purported A38 dollars for per beneficiary premiums as of January 15, 1996, which continue to accrue at a rate of over seventy- three thousand dollars ($73,000) per month. Adventure also apparently failed to pay any pre-funding premiums, which also are included in the Funds’ proofs of claim. These premiums accrue at a rate of one hundred twenty- one dollars ($121.00) times the number of eligible and potentially eligible 1992 Plan beneficiaries attributable to Adventure. Finally, Adventure has failed to pay any con- tributions under the applicable NBCWAs since January 1995 and has accrued an estimated four hundred thou- sand dollars ($400,000) in unpaid contributions since November 1995, which continue to accrue at a rate of over forty-two thousand dollars ($42,000) per month. There are essentially two types of obligations at issue in this adversary proceeding: (1) monthly per beneficiary premiums owed under the Coal Act; and (2) monthly contributions owed under the applicable NBCWA. The Funds claim all of these obligations are Chapter 11 administrative expenses under various Bankruptcy Code provisions. There are two bases for the Funds’ assertion. First, the Funds assert the premiums accrued and accruing under the Coal Act are administrative expenses® because, in the alternative, (1) the premiums are a tax on the Debtors’ estates under 11 U.S.C. § 503(b)(1)(B); and (2) the premiums are an actual, necessary expense of the § 9711 plan ceased. Adventure then was billed for the 1992 Plan premiums. 8 For the uninitiated, administrative expenses are payable by the trustee as a first priority expense under 11 U.S.C. 507(a)(1). A39 estates under 11 U.S.C. § 503(b)(1)(A). Second, the Funds assert the contributions accrued and accruing under the applicable NBCWA are administrative expenses (1) to the extent they accrued and are accruing post-petition; and (2) to the extent they accrued pre-petition, alternatively, under either 11 U.S.C. § 1113(f), dealing with rejection of collective bargaining agreements in bankruptcy, or 11 U.S.C. § 1114(e), dealing with the treatment of retiree benefits in bankruptcy.’ Ill. LAW AND ANALYSIS A. The Summary Judgment Standard: The well-settled standard governing the disposition of a motion for summary judgment recently was restated by our Court of Appeals: A moving party is entitled to summary judg- ment ‘if the pleading|s], depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to material fact and that the 9 In its complaint, Adventure also challenged the Funds’ claim for contingent benefit plan withdrawal liability. As noted by the Funds, however, “separate withdrawals giving rise to such a claim could only occur if the Adventure companies are not alter egos, joint employers or a single employer for purposes of this action . . . [and] entry of summary judgment on this issue in favor of the Funds would render the contingent claim moot.” Funds Mem. in Supp. of Summ. Jgt. at 2 n.3; see also Funds Reply Mem. at 3 (“The Funds’ contingent claim for benefit plan withdrawal liability is . . . moot.”). Given the Court’s favorable ruling for the Funds on the related person/alter ego/joint employer/single employer issue, supra note 5, there is no necessity to reach the Funds’ contingent claim. A40 moving party is entitled to judgment as a matter of law.’ Fed.R.Civ.Pro. 56(c). See Charbonnages de France v. Smith, 597 F.2d 406 (4th Cir.1979). A genuine issue exists ‘if the evidence is such that a reasonable jury could return a ver- dict for the nonmoving party.’ Anderson v. Lib- erty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). In considering a motion for summary judgment, the court is required to view the facts and draw reasonable inferences in a light most favorable to the non- moving party. Id. at 255, 106 S.Ct. at 2514. The plaintiff is entitled to have the credibility of all his evidence presumed. Miller v. Leathers, 913 F.2d 1085, 1087 (4th Cir.1990), cert. denied, 498 U.S. 1109, 111 S.Ct. 1018, 112 L.Ed.2d 1100 (1991). The party seeking summary judgment has the initial burden to show absence of evi- dence to support the nonmoving party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). The opposing party must demonstrate that a triable issue of fact exists; he may not rest upon mere allegations or denials. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. A mere scintilla of evidence supporting the case is insufficient. Id. Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.), cert. denied, 115 S.Ct. 68 (1994); see also Carbon Fuel, 891 F. Supp. at 1188-89. B. Joint and Several Liability Under the Coal Act and the Wage Agreements: As an initial matter, the Court notes the Funds devote a substantial portion of its opening brief and exhibits A4l toward establishing the joint and several liability of the Adventure Plaintiffs/counter-Defendants and their other affiliates for the obligations sought in this proceeding. Adventure does not dispute the factual statement in its response and proffers no authority otherwise from the record. Adventure does appear to make a brief policy argument, without citation to supporting authority, seek- ing to avoid the imposition of joint and several liability. This, of course, is insufficient to contradict the Funds’ undisputed and well-supported factual assertions for purposes of Rule 56, Federal Rules of Civil Procedure. Accordingly, the Court concludes as a matter of law Plaintiff, each related Plaintiff bankruptcy estate and the non-bankrupt Plaintiffs are jointly and severally liable for the claims asserted by the Funds. C. Are the Coal Act Premiums Entitled to Adminis- trative Expense Priority: The Funds assert the premiums accrued and accruing under the Coal Act are administrative expenses because, in the alternative, (1) the premiums are a tax on the Debtors’ estates under 11 U.S.C. § 503(b)(1)(B); and, or (2) the premiums are an actual, necessary expense of the estates under 11 U.S.C. § 503(b)(1)(A). As to the tax argument, the Funds claim all per beneficiary premiums are recognized as post-petition A42 taxes under § 503(b)(1)(B) of the Bankruptcy Code.!° Adventure appears to concede its Combined Fund pre- miums are taxes and thus administrative expenses. It argues, however, the 1992 Plan premiums are pre-petition claims and in the nature of excise taxes under 11 U.S.C. § 507(a)(8)(E), thus according them less than first priority status."! 10 Sections 503(b)(1)(A) and (B) provide in pertinent part as follows: (b) After notice and a hearing, there shall be allowed administrative expenses . . . including - (1) (A) the actual, necessary costs and expenses of preserving the estate, including wages, salaries, or commissions for services rendered after the commencement of the case; [and] (B) any tax - (i) incurred by the estate, except [an excise tax under 11 U.S.C. 507(a)(8)(e).] Id. 11 Section 507(a)(8)(E) provides, in pertinent part, as follows: (a) The following expenses and claims have priority in the following order: (8) Eighth, allowed unsecured claims of governmental units, only to the extent that such claims are for - (E) an excise tax on - (i) a transaction occurring before the date of the filing of the petition for which a return, if required, is last due, under applicable law or under any extension, after three years before the date of the filing of the petition; or A43 The seminal case, and one of the very few cases anywhere, addressing the classification and priority of Coal Act claims is In re Chateaugay Corp., 53 F.3d 478, 486 (2d Cir. 1995). In Chateaugay, LTV Steel Company, Inc. and several subsidiaries appealed a judgment of the district court holding that LTV’s obligations under the Coal Act were incurred taxes for purposes of § 503(b)(1)(B) and thus entitled to administrative priority under § 507(a)(1). LTV, along with over fifty subsidiaries and affiliates, filed for protection under Chapter 11 on July 17, 1986. The Coal Act was enacted on October 24, 1992 and became effective February 1, 1993. Signing Stmt. of President George Bush attached to the Energy Policy Act of 1992, reprinted in 1992 U.S.C.C.A.N. 1953, 2534-1 at 3; In re Chateaugay, 53 F.3d at 487. The district court in Chateaugay held the assessments accruing during the bankruptcy period under the Coal act were in the nature of a tax and therefore entitled to administrative priority treatment. The Second Circuit concluded the critical issue was whether the premiums assessed under the Coal Act were in the nature of a “claim” pre-existing the Chapter 11 petition which would, of course, have to be “disallowed.” Id. at 496. A “claim,” for purposes of the Bankruptcy Code, is defined in 11 U.S.C. § 101(5) as a “right to payment, whether or not such right is reduced to judg- ment, liquidated, unliquidated, fixed, contingent, (ii) if a return is not required, a transaction occurring during the three years immediately preceding the date of the filing of the petition; Id. (emphasis added). A44 matured, unmatured, disputed, undisputed, legal, equita- ble, secured, or unsecured. ...” Id. As noted in Cha- teaugay, “ ‘Congress unquestionably expected this definition to have wide scope.’ . . . [and intended] to invest the term ‘claim’ with the ‘broadest possible’ scope so that ‘all legal obligations of the debtor . . . will be able to be dealt with in a bankruptcy case.’” Id. at 496-97 (quoting In re Chateaugay, 944 F.2d 997, 1003 (2d Cir. 1991); Pennsylvania Dep't of Pub. Welfare v. Davenport, 495 U.S. 552, 558 (1990); and H.R. Rep. No 95-595, at 310 (1977), reprinted in 1978 U.S.C.C.A.N. 5787, 6267).!2 Nev- ertheless, the term does not have “infinite” reach. In re Chateaugay, 53 F.3d at 497. The court in In re Chateaugay determined no right to payment existed at the time of LTV’s petition because, inter alia, no conceiveble “right to payment. . . existed until the enactment of the Coal Act six years after the filing of LTV’s petition.” Id. at 497. The court went on to hold “the portion of LTV’s Coal Act liability accruing during the pendency of its bankruptcy is entitied to treatment as an administrative expense of the estate pursuant to section 507(a)(1).”'5 Id. at 498. Adventure would have the issue framed similarly to the analysis in In re Chateaugay, i.e., whether the enact- ment of the Coal Act in October 1992 (predating the 12 Our Court of Appeals has similarly construed “claim” in sweeping fashion. See In re Carolina Motor Express, Inc., 949 F.2d 107, 111 n.4 (4th Cir. 1991), rev'd on other grounds sub nom. Reiter v. Cooper, 504 U.S. 907 (1993). 13 Adventure also appears to argue the contribution obligations under the Coal Act are not taxes within the meaning of 503(b)(1)(B). This argument clearly is without merit. In re Chateaugay, 53 F.3d at 498. A45 Chapter 11 petition by a couple of months) operates to give the Funds a lower priority or extinguishable pre- petition right to payment of per beneficiary premiums under the 1992 Plan.!4 The analysis undertaken by the court in In re Cha- teaugay is, of course, not binding on this Court. Were the Court to apply the right-to-payment analysis arising from In re Chateaugay, however, it would conclude the “obliga- tions” contained in the Act at the time of the petition were simply too removed and attenuated to constitute a pre-petition right to payment. As noted, the Act did not become effective until February 1993. The Court concludes it is more appropriate to make the straightforward determination of whether the obliga- tions at issue here were “incurred by the estate” pursuant to § 503(b)(1)(B).!5 If so, they fall squarely within that ‘4 There is one general fallacy surfacing throughout Adventure’s argument which bears correction. Adventure seems to suggest their obligations are controlled not by the Coal Act, but rather by the prior NBCWAs to which Adventure was signatory. This clearly is not the law in this judicial district. In re Chateaugay, 53 F.3d at 497 (stating “The obligations here at issue are exclusively statutory in origin and cannot be considered a ‘pay-back’ for pre-petition labor. . . . LTV’s liability to the Combined Fund is newly imposed by the Coal Act, not a revival of old contractual obligations.”); Carbon Fuel, 891 F. Supp. at 1198 (stating “The parties’ contractual obligations entered prior to the enactment of the Coal Act are not continued under the Act. The private provisions required by the applicable NBCWAs do not survive, nor are they codified, ratified, confirmed, or renewed.”) 15 Section 503(b)(1)(B) does not accord administrative expense status to “a tax of a kind specified in section 507(a)(8),” A46 - section, and are thus entitled to administrative priority status without reference to § 101(5)(A). If the Court can determine the 1992 Plan per beneficiary premiums were i.é., an excise tax, regardless of when it is incurred. Accordingly, the Court must address whether the premiums here constitute such a tax. Adventure half-heartedly asserts the 1992 Plan per beneficiary premiums are in the nature of a pre-petition excise tax under § 507(a)(8)(E)(ii), and thus outside the reach of § 503(b)(1)(B). While the Court is aware of contrary authority, it cannot conclude the premium obligations here are excise taxes. Section 507(a)(8)(E)(ii) provides that such a tax is levied on “a transaction occurring during the three years immediately preceding the date of the filing of the petition.” While it is possible to identify conceptually a transactional component which might support imposition of the 1992 Plan per beneficiary premiums, see In re Rauer, Bk. No. 95-20332, slip op. at 5, that analysis appears to stretch the limits of the section. If the remaining requirements of § 507(a)(8) were present in this case, however, it is conceivable under circuit precedent Adventure might be able to identify the necessary transactional component for application of § 507(a)(8)(E). Cf. New Neighborhoods v. West Virginia Workers’ Comp. Fund, 886 F.2d 714, 719 (4th Cir. 1989) (holding premiums due the West Virginia Workers’ Compensation Fund were excise taxes under § 507, in part, because “[t]he obligation imposed upon employers by the West Virginia statute is imposed upon employers as a class and liability arises through the transacticn or act of employing.”) (emphasis added). The remaining requirements of § 507(a)(8) are clearly not satisfied though. Section 507(a)(8) requires the collecting authority to be a “governmental unit.” Adventure itself forcefully (and curiously) argues against the Funds’ governmental unit status, and the Court concurs in that analysis. See Pls.’ Resp. at 14 (stating “the Coal Act § 9712(a)(1) clearly establishes the 1992 UMWA Benefit Plan as a private plan, not a ‘governmental unit’ as defined under Section 101(27) of the Code.”) Accordingly, the 1992 Plan per beneficiary premiums cannot be excise taxes under § 507(a)(8)(E). A47 incurred by the estate, it also would determine “neces- sarily” the premiums were post-petition because “there can be no bankruptcy estate until the petition in bank- ruptcy is filed.” United States v. Friendship College, Inc., 737 F.2d 430, 431 (4th Cir. 1984). The Bankruptcy Code does not delineate precisely when a tax obligation is “incurred” for purposes of § 503(b)(1)(B). The United States Court of Appeals for the Sixth Circuit, however, recently adopted the appropriate construction of the term. In re Columbia Gas Trans. Corp., 37 F.3d 982 (6th Cir. 1994), cert. denied sub nom. West Virginia State Dep't of Tax & Rev. v. Internal Rev. Serv., 115 S. Ct. 1793 (1995). The court observed: “a tax liability is generally ‘incurred on the date it accrues, not on the date of the assessment or the date on which it is payable.’ ” Id. at 985; see also 2 William L. Norton, Jr. et al., Norton Bankruptcy Law and Practice 2d § 42.19 (1994) (“The tax is usually deemed to be incurred at one of two times: the date of assessment of the tax or the date of accrual of the tax.”) In common parlance, accrual occurs when an oblig- ation “come[s] into existence as an enforceable claim.” Webster’s Third New International Dictionary 13. The 1992 Plan per beneficiary premiums come due based on a premium rate set by the Trustees of the 1992 Plan multiplied by the number of beneficiaries attributa- ble to the former employer who are then receiving bene- fits from the 1992 Plan. 26 U.S.C. §§ 9712(d)(2)(A), 9712(d)(1)(B) and 9701(c)(4). So long as an employer pro- vides benefits for these retirees directly through the employer’s own plan, as required under 26 U.S.C. § 9711, the beneficiaries are not enrolled in the 1992 Plan. This A48 means the employer has no 1992 Plan beneficiaries attrib- uted to it and the Funds have no enforceable claim for per beneficiary premiums. When Adventure ceased the main- tenance of its § 9711 plan in 1994, however, there arose in the Funds “an enforceable claim” for per beneficiary pre- miums and the premiums thus accrued on that date. The Court therefore concludes Adventure incurred the tax obligations due the Funds after the filing of the Chapter 11 petition. Accordingly, the per beneficiary pre- miums for the 1992 Plan are post-petition taxes under § 503(b)(1)(B) and entitled to first priority treatment under § 507(a)(1).'© The Funds’ motion for partial sum- mary judgment on this issue is GRANTED.’ . D. Are Adventure’s Due and Owing Pre-Petition Contributions For Retirees Under the Applicable NBCWAs Entitled to Administrative Expense Priority Under 11 U.S.C. § 1114(e): The Funds next assert the pre-petition contributions due under the applicable NBCWAs are entitled to admin- 16 While not specifically challenged, the same result would appear to apply with respect to the Combined Fund premiums. Prior to February 1, 1993 the Funds did not have an enforceable claim against any operator to pay Combined Fund premiums. 26 U.S.C. §§ 9702(c), 9704(a). 17 Adventure apparently does not challenge the treatment of prefunding premiums required under § 9712(d)(1)(A) as administrative taxes. See Pls.’ Resp. at 2. The Funds also have a persuasive argument that the Coal Act premiums are an actual, necessary expense of the estates under 11 U.S.C. § 503(b)(1)(A). Given the disposition under § 503(b)(1)(B), however, the Court need not address this argument. A49 istrative expense status under 11 U.S.C. § 1114(e).'® Adventure disagrees, asserting § 1114 was enacted only 18 Adventure does not dispute the NBCWA contributions which came due post-petition are entitled to administrative expense priority. In addition to its § 1114(e) argument, the Funds also assert the NBCWA contributions are entitled to administrative expense status under 11 U.S.C. § 1113(f). A good and very recent general discussion of § 1113 can be found in In re Lady H Coal Company, No. 94-20449 (Bankr. S.D. W. Va. Feb. 28, 1996). Section 1113(f) provides as follows: (f) No provision of this title shall be construed to permit a trustee to unilaterally terminate or alter any provisions of a collective bargaining agreement prior to compliance with the provisions of this section. Id. The Funds rely heavily on the decision in In re Unimet, 842 F.2d 879 (6th Cir.), cert. denied sub nom. Unimet Corp. v. United Steelworkers of America, 488 U.S. 828 (1988), which essentially interpreted § 1113(f) to provide a superpriority for the payment of retiree benefits. Id. at 884. The Court declines to apply § 1113(f) in similar fashion to the retiree obligations in question here. The holding in Unimet was subsequently codified by Congress in § 1114. In re lonosphere Clubs, Inc., 22 F.3d 403, 408 (2d Cir. 1994) (stating “That Congress was compelled to act suggests that the protection it provided in section 1114 was not already compelled by section 1113.”) The decision in In re lonosphere Clubs, Inc., 134 B.R. 515 (Bankr. S.D.N.Y. 1991) clarifies the respective scopes of § 1113 and § 1114: § 1114 is the exclusive provision relating to the modification or termination of retiree benefits. § 1114 specifically and unequivocally addresses retiree issues that are otherwise generally covered by § 1113. Id. at 519 (emphasis added). There is significant evidence of Congressional intent supporting the exclusivity analysis of lonosphere. Rather than adopting a new comprehensive provision dealing with retiree benefits, congressional bills predating § 1114 sought merely to amend § 1113 to make clear A50 to protect retiree benefits post-petition. A brief examina- tion of the history of § 1114 is in order.!9 In the mid-1980s, the fortunes of the steel industry sank dramatically. This resulted in the closure of numerous steel production facilities followed inevitably by Chapter 11 filings. Despite the presence of § 1113, many Chapter 11 debtors ceased payments for retiree benefits, arguing the Bankruptcy Code did not permit that its requirements regarding termination or alteration of the provisions of a collective bargaining agreement included any provision relating to benefits for retirees. See, e.g., H.R. 5490, 99th Cong., 2d Sess., 132 Cong. Rec. H6507 (daily ed. Sept. 9, 1986). Congress ultimately rejected this approach. Based on the authority discussed above, the Court concludes the Funds’ administrative expense argument for contributions in the nature of retiree benefits is controlled by § 1114. Section 1113 is not implicated. To the extent administrative expense status is sought for contributions not in the nature of retiree benefit obligations, and with an awareness of contrary authority, the Court concludes § 1113(f) does not assist the Funds. Section 1113 simply does not address the priority in bankruptcy of obligations under a collective bargaining agreement. '° The formal legislative history of § 1114 is limited to the somewhat sketchy Senate Report on Senate Bill 548. See S. Rep. No. 119, 100th Cong., Ist Sess., reprinted in 1988 U.S.C.C.A.N. 683. The Court, however, has located a thorough analysis by a senior attorney at the Federal Deposit Insurance Corporation, discussing at length the legislative process that led to the enactment of § 1114. Andrea J. Winkler, Legislative History of the Retiree Benefits Bankruptcy Protection Act of 1988, reprinted in App. 1 Lawrence P. King et al., Collier on Bankruptcy, Part XIX (15th ed. 1995). Also helpful on the background of § 1114 is Susan J. Stabile, Protecting Retiree Medical Benefits in Bankruptcy: The Scope of Section 1114 of the Bankruptcy Code, 14 Cardozo L. Rev. 1911 (1993). A51 such post-petition payments. The impetus for Congres- sional action was the Chapter 11 filing of LTV Corpora- tion on July 17, 1986. LTV promptly suspended retirement benefit payments to over 78,000 former employees when it filed for bankruptcy protection. Illustrating the urgency of the situation, the Senate completed enactment of a remedial measure just 13 days after LTV’s suspension of payments requiring LTV and its subsidiaries to continue paying all medical and life insur- ance benefits to retirees. See 132 Cong. Rec. $9882 (daily ed. July 30, 1986). Following a series of stopgap measures over the course of the next two years, President Reagan signed the Retiree Benefits Bankruptcy Protection Act, thus putting § 1114 into effect. Section 1114(e) provi [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386008_1331%3A1. Public record. Not legal advice.