American Airlines, Inc. v. Robinson

Citation: 180 F. App'x 330Docket: No. 05-2260

Court: Court of Appeals for the Third Circuit; May 10, 2006; Federal Appellate Court

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The appeal involves the chapter 11 bankruptcy case of Trans World Airlines, Inc. (TWA) and its affiliates, with American Airlines, Inc. (American) as the appellant, having purchased TWA’s assets. Elizabeth Robinson, a former TWA flight attendant who was permanently disabled due to a work-related injury in 1984, sought to compel American to pay her benefits under the Federal Longshoremen’s and Harbor Workers’ Act, claiming that American assumed this liability through the Asset Purchase Agreement (APA). The Bankruptcy Court ruled in favor of Robinson, mandating American to pay her $1,866.32 per month in benefits starting April 9, 2001, a decision later affirmed by the District Court.

Robinson had been receiving benefits aligned with a collective bargaining agreement (CBA) between TWA and the Independent Federation of Flight Attendants (IFFA), which stipulated that TWA would provide benefits according to the higher of state workers' compensation laws or the Longshoremen's Act. Despite an amended CBA in 1992, which American claims clarified the entitlement to Longshoremen’s benefits, TWA continued to pay Robinson. The APA, executed in January 2001, required American to assume all workers’ compensation obligations for TWA employees as of the closing date. After the asset sale approval by the Bankruptcy Court in March 2001, TWA stopped paying Robinson's Longshoremen’s benefits, although her New York State workers’ compensation benefits continued. A separate settlement agreement between TWA and Robinson in December 2002, which included a $25,000 payment, did not involve American. The court ultimately affirmed the decision that American assumed liability for Robinson's benefits under the APA.

On March 24, 2003, Robinson filed a motion in Bankruptcy Court to compel American to pay her benefits under the Longshoremen’s Act. After reviewing evidence and testimony, the Bankruptcy Court issued an order on February 27, 2004, directing American to pay Robinson $1,866.32 monthly in workers' compensation, retroactive to April 9, 2001, with interest on unpaid amounts. The Court reasoned that TWA had an ongoing obligation to Robinson not extinguished by the Amended Collective Bargaining Agreement (CBA), that American assumed this obligation through the Asset Purchase Agreement (APA), and that Robinson’s settlement with TWA did not affect American's liability. American appealed, arguing that TWA had no obligation to Robinson after the Amended CBA's effective date, that it did not assume any liability, and that any obligation was limited to $446.30, the pro-rata amount due at the sale's closing. The appellate court found these arguments unconvincing, noting TWA continued payments to Robinson for eight years post-Amended CBA and that the CBA specifically allowed for existing permanent disability benefits. Therefore, the court upheld the Bankruptcy Court's conclusions regarding TWA's obligations and American's assumed liabilities under the APA.

American Airlines, upon acquiring nearly all assets of TWA, agreed to assume all workers' compensation obligations for TWA's employees as of the Closing Date, calculated based on TWA's records and generally accepted accounting principles. The Bankruptcy Court determined that this assumption included TWA’s obligation to pay Robinson at the Longshoreman’s Act rate. The court upheld that Robinson’s December 2002 settlement with TWA did not eliminate American's obligation to pay Robinson, as American assumed this obligation on April 9, 2001, before the settlement was executed. The settlement agreement specifically did not release American from any liability to Robinson, and American was not a party to the settlement and was unaware of it until after execution. The Bankruptcy Court concluded that TWA recognized Robinson's continuing right to claim against American. The District Court affirmed the Bankruptcy Court's order, which had jurisdiction under 28 U.S.C. § 157(b)(2) and 1334, with appellate jurisdiction pursuant to 28 U.S.C. § 158 and 1291. The court reviewed findings for clear error and legal determinations de novo.