By Joy P. Waltemath, J.D.
Finding no abuse of discretion in a district court’s refusal to reopen United Air Lines’ bankruptcy proceedings some three years after they closed in 2009, the Seventh Circuit agreed that a former flight attendant could not reopen the bankruptcy proceedings so that he could pursue his pre-petition California state-law employment discrimination claims that stemmed from his discharge in 2001. The employee’s years of inaction amounted to an abandonment of those claims (Brown v. UAL Corp.
, December 31, 2015, Hamilton, D.).
Flight attendant fired.
After 10 years as a flight attendant for United, the employee was fired following a psychiatric hospitalization and a new diagnosis of bipolar disorder. Though he was then more stable with treatment, UAL had fired him for his prior misconduct (repeated absenteeism and lack of professionalism). He contested his discharge to an arbitration panel, which ruled in late 2003 that his bipolar disorder mitigated the seriousness of his misconduct. He could return to work, it said, provided that UAL and his physician agreed he was medically fit, but he never submitted to a required medical exam, so in 2005 his non-reinstatement was upheld.
Meanwhile, UAL and its subsidiaries filed for Chapter 11 bankruptcy in late 2002. A week before the deadline for creditors to submit claims in 2003, the employee filed a proof of claim seeking almost $80,000 in back pay. In 2004, he filed suit in state court alleging California state law claims, including disability and sexual orientation discrimination plus retaliation and wrongful discharge, asking for $500K in damages. UAL removed the suit to the bankruptcy court in California and, not seeking dismissal, asked for transfer to the Illinois bankruptcy court handling its filing.
The employee sought modification of the bankruptcy stay so he could litigate his state law claims; the bankruptcy court refused in 2004 because they were pre-petition claims that had to be resolved through the bankruptcy case. Eighteen months passed until the California bankruptcy court transferred the suit to Illinois, characterizing it as an adversary proceeding. But the employee had never filed a new or amended proof of claim identifying his state-law claims or his demands for more than $500,000, nor did his attorney object to UAL’s reorganization plan, which was confirmed days after his lawsuit was transferred from California to Illinois. That plan discharged all claims filed by union-represented employees under the CBA.
In April 2006, months after the reorganization was confirmed, the federal court in Illinois directed that the employee’s lawsuit be remanded to the bankruptcy court—which the clerk erroneously interpreted as meaning back to the California court, not the bankruptcy judge in Illinois. None of the courts, or the employee, took any action for four years on his claim, although the bankruptcy itself closed in 2009. When the employee hired a new attorney who contacted UAL, he was told that his claim in bankruptcy had been paid (it had not). He took no further action for two and one-half years until, through another attorney in 2013, he moved to reopen UAL’s bankruptcy so that his claims in the 2004 California state-court complaint could be litigated.
His argument on appeal was that the bankruptcy court should reopened the case because his adversary proceeding was never properly docketed in the bankruptcy court. Reviewing for abuse of discretion, the Seventh Circuit looked, among other things, to whether the employee would be entitled to relief if the case were reopened and the length of time it had been closed. It found the employee’s delay to be inexcusable and precluded a finding of abuse of discretion.
“Not my fault.”
The employee first blamed the court for not docketing his case as an adversary proceeding. “That was an unfortunate clerical error,” said the appeals court, but he offered no reason for waiting so many years to tell the court of its mistake, even if he had been unrepresented by counsel for some of those years. His attempt to blame UAL was “frivolous”; once UAL removed his state court case to federal court, which it was clearly entitled to do, the bankruptcy court found his claims could only proceed in bankruptcy court—a decision he did not appeal, although he was told of that right. UAL “cannot be faulted for trying to protect itself in bankruptcy,” reasoned the appeals court.
And trying to blame UAL’s attorney (who apparently mistakenly told him his claim had been paid) was unavailing because the employee must have known that UAL had never paid him. Even if he were confused, that did not explain either why he waited years to ask about the adversary action or waited an additional two more years to move to reopen the bankruptcy. Finding the bankruptcy court had not abused its discretion in refusing to reopen UAL’s complex bankruptcy a full three years after it ended while the employee essentially did nothing to protect his interest, the Seventh Circuit affirmed the lower court’s denial.