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In re Consolidated Freightways Corp. of Delaware

May 6, 2009

IN THE MATTER OF: CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE, DEBTOR,
CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE APPELLANT,
v.
AETNA, INC., APPELLEE.



Appeal from the United States District Court for the Central District of California John F. Walter, District Judge, Presiding D.C. No. CV-07-00545-JFW.

The opinion of the court was delivered by: Fernandez, Circuit Judge

FOR PUBLICATION

Argued and Submitted April 13, 2009 -- Pasadena, California.

Before: Ferdinand F. Fernandez, Barry G. Silverman, and Consuelo M. Callahan, Circuit Judges.

OPINION

K. Morgan Enterprises, Inc., Trustee of the Trust of Certain Creditors of Consolidated Freightways Corp. and Certain Affiliates ("Trustee") appeals from a decision of the district court affirming a determination by the bankruptcy court regarding certain claims of priority made by Aetna, Inc. Aetna claimed priority for "claims for contributions to an employee benefit plan." 11 U.S.C. § 507(a)(5).*fn1 The bankruptcy court agreed with Aetna and accorded priority. We affirm in part, reverse in part, and remand.

BACKGROUND

Consolidated Freightways Corporation of Delaware and its Affiliates*fn2 (collectively "CFC") operated a trucking and long-haul freight transportation business. CFC maintained self-funded medical health plans for non-union employees ("the Plans"), and Aetna administered the Plans. When employees or retired former employees or their providers had claims, they submitted the claims to Aetna, which reviewed them, determined if they should be allowed, and reimbursed the claimants when appropriate. Once Aetna issued the reimbursements, it submitted a request for payment to CFC, which, in principle, would then repay Aetna.

Alas, CFC fell on hard times and after ceasing business operations, it terminated its employees and the Plans, and immediately thereafter filed its petition in bankruptcy on September 3, 2002. As of the date of filing, employees and retirees had outstanding claims that had not been reimbursed by Aetna or CFC. Moreover, Aetna itself had not been reimbursed for amounts it had advanced in payment of other employee and retiree claims.

On November 22, 2004, the bankruptcy court issued an "Order Confirming Debtors' Consolidated Plan of Liquidation Dated July 1, 2004 (As Amended)." The Trustee was appointed to administer that trust.

On February 2, 2003, Aetna had filed a proof of claim in an unliquidated amount for fees and costs related to its administration of the Plans, and on April 21, 2003, had amended its claim to fix the claimed amount at $1,498,026. The Trustee conceded that the non-retiree-related portion of Aetna's asserted claims, including Aetna's costs in administering the Plans, was entitled to priority under § 507(a)(5); however, it asserted that the claims relating to retirees were not entitled to priority treatment. The bankruptcy court heard arguments on the Trustee's objection, but ultimately granted priority to the claims regarding Plan contributions for retirees. See In re Consol. Freightways, Corp. of Del., 363 B.R. 110 (Bankr. C.D. Cal. 2007) (CFC I). The Trustee appealed to the district court, which affirmed on November 6, 2007. This appeal followed.

STANDARDS OF REVIEW

We review a "bankruptcy court's decision independently, without deference to the district court." Zurich Am. Ins. Co. v. Int'l Fibercom, Inc. (In re Int'l Fibercom, Inc.), 503 F.3d 933, 940 (9th Cir. 2007). "The bankruptcy court's conclusions of law, including its interpretation of the Bankruptcy Code, ...


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