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Summary: RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 File Name: 09a0040p.06 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT _ X - JOHN G. MCMILLAN, - Plaintiff-Appellant, - - No. 07-4370 v. , > - Defendant-Appellee. - LTV STEEL, INC., - N Appeal from the United States District Court for the Northern District of Ohio at Cleveland. No. 06-00850—Sara E. Lioi, District Judge. Argued: December 4, 2008 Decided and Filed: February 5, 2009 * Before: CLAY and GIBBONS, Circuit Jud
Summary: RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 File Name: 09a0040p.06 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT _ X - JOHN G. MCMILLAN, - Plaintiff-Appellant, - - No. 07-4370 v. , > - Defendant-Appellee. - LTV STEEL, INC., - N Appeal from the United States District Court for the Northern District of Ohio at Cleveland. No. 06-00850—Sara E. Lioi, District Judge. Argued: December 4, 2008 Decided and Filed: February 5, 2009 * Before: CLAY and GIBBONS, Circuit Judg..
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RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 09a0040p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
-
JOHN G. MCMILLAN,
-
Plaintiff-Appellant,
-
-
No. 07-4370
v.
,
>
-
Defendant-Appellee. -
LTV STEEL, INC.,
-
N
Appeal from the United States District Court
for the Northern District of Ohio at Cleveland.
No. 06-00850—Sara E. Lioi, District Judge.
Argued: December 4, 2008
Decided and Filed: February 5, 2009
*
Before: CLAY and GIBBONS, Circuit Judges; STAMP, District Judge.
_________________
COUNSEL
ARGUED: Alexander Morris Spater, SPATER LAW OFFICE, Columbus, Ohio, for
Appellant. Kathleen B. Burke, JONES DAY, Cleveland, Ohio, for Appellee.
ON BRIEF: Alexander Morris Spater, SPATER LAW OFFICE, Columbus, Ohio,
Solvita A. McMillan, LAW OFFICE, Lakewood, Ohio, for Appellant. Kathleen B.
Burke, JONES DAY, Cleveland, Ohio, Nicholas M. Miller, DLA PIPER, Chicago,
Illinois, for Appellee.
_________________
OPINION
_________________
CLAY, Circuit Judge. John G. McMillan appeals the district court’s judgment
upholding the bankruptcy court’s denial of McMillan’s claim seeking administrative
*
The Honorable Frederick P. Stamp, Jr., United States District Judge for the Northern District of
West Virginia, sitting by designation.
1
No. 07-4370 McMillan v. LTV Steel, Inc. Page 2
expense priority status for amounts allegedly owed to him by his former employer, LTV
Steel, Inc. (“LTV Steel”), a debtor in Chapter 11 bankruptcy proceedings. The
bankruptcy court sustained LTV Steel’s objection to McMillan’s administrative expense
claims, and denied McMillan’s claims. The district court affirmed, concluding that the
bankruptcy court properly sustained LTV Steel’s objection, and that the bankruptcy
court did not err in denying McMillan’s motion for reconsideration. For the reasons set
forth below, we AFFIRM the order of the district court affirming the bankruptcy court’s
denial of McMillan’s administrative expense claim.
I. BACKGROUND
A. Employment History and Benefits
John G. McMillan worked at LTV Steel’s Cleveland Works West plant
(“Cleveland West”) in Cleveland, Ohio as an hourly employee for over thirty years.
While employed at LTV Steel, McMillan was a member of the collective bargaining unit
represented by the United Steelworkers of America, AFL-CIO (the “USWA”). The
USWA and LTV Steel negotiated a labor and benefit agreement that provided various
benefits to employees, including pension benefits. As an employee of LTV Steel,
McMillan was covered by both the Defined Contribution Pension Agreement and the
Defined Benefit Agreement. The Defined Benefit Agreement provided “basic” pension
benefits. An employee’s account under the Defined Contribution Pension Agreement
consisted of a Company Contribution Account, to which the employer contributed
certain amounts based on an hourly rate, and an Elective Contribution Account—the
employee’s 401(k) plan—to which the employee contributed.
On August 1, 1999, the USWA and LTV Steel entered into an agreement (the
“1999 Agreement”) restructuring the pension benefits for all qualified employees. The
1999 Agreement provided that “[i]ndividual Company Contribution Accounts . . . will
be transferred into the defined benefit pension plan, invested with the [defined benefit]
assets, and at retirement the [Defined Contribution Plan] annuities [will be] paid from
the [Defined Benefit] plan . . . .” (J.A. 323.) The 1999 Agreement eliminated future
No. 07-4370 McMillan v. LTV Steel, Inc. Page 3
company contributions to the pension plan, and preserved the 401(k) contributions to the
plan, as well as the right of employees to receive a lump-sum payment from the Defined
Benefit plan upon retirement, subject to a $10,000 cap.
B. LTV Steel’s Financial Difficulties
On December 29, 2000, LTV Steel, Copperweld, LTV Corporation—the parent
company of both Copperweld and LTV Steel—and numerous LTV affiliates filed
voluntary petitions for Chapter 11 bankruptcy. Subsequently, on April 16, 2001, LTV
Steel issued a notice pursuant to the Worker Adjustment and Retraining Notification Act
(“WARN Act”)1 to the USWA regarding the planned closing of Cleveland West and
resulting mass layoffs. On July 30, 2001, the bankruptcy court approved a modified
labor agreement (“MLA”) entered into by LTV Steel and the USWA. The MLA, which
the USWA’s membership ratified, rescinded the April 2001 WARN notice. LTV Steel,
however, never reopened the Cleveland West plant. Following the closing of Cleveland
West, McMillan accepted work at other LTV facilities which, in at least one instance,
involved a reduced rate of pay, in order to avoid layoff. Despite his efforts to remain
employed, McMillan was laid off on August 25, 2001, and never returned to work.
In a letter dated November 13, 2001, McMillan and other employees at the
Cleveland West plant received notification of LTV Steel’s intention to permanently shut
down Cleveland West. The letter informed the employees that, under the terms of the
MLA, they could exercise one of four options associated with the permanent shutdown:
(1) accept a severance allowance; (2) accept pension options and agree to terminate
employment with LTV Steel no later than November 30, 2001; (3) transfer permanently
to the East Side Plant, which would result in a new date of continuous service2 of August
1, 2001; or (4) remain on layoff. LTV Steel requested that the employees return the
1
The WARN Act requires certain employers to provide a written notice sixty days in advance of
a plant closing or mass layoff. 29 U.S.C. § 2102(a).
2
McMillan notes in his brief that, if he had elected to transfer to the East Side Plant, he would
have relinquished his thirty-one years of seniority by accepting a new continuous-service date, which is
used to determine seniority. Thus, because under the collective bargaining agreement employees were
called back to work based on seniority, transferring to the East Side Plant would have placed him near the
bottom of the call-back list.
No. 07-4370 McMillan v. LTV Steel, Inc. Page 4
Irrevocable Election Form no later than November 23, 2001. On December 11, 2001,
McMillan elected to retire with pension benefits, and received a $10,000 lump-sum
payment.3
In an attempt to secure the funds necessary to continue its operations, LTV Steel
sought a $250 million loan under the Federal Emergency Loan Guarantee Program.
Receipt of the loan depended on LTV Steel obtaining wage and benefit concessions from
the USWA, but negotiations regarding concessions broke down on November 19, 2001.
As a result, the Federal Loan Guarantee Board refused to grant preliminary approval of
the loan, and LTV Steel decided to cease operations due to a lack of funds. On
November 20, 2001, LTV Steel issued a WARN notice, informing LTV Steel employees
that it was terminating all steelmaking operations and eliminating all hourly jobs. LTV
Steel also sought approval of an Asset Protection Plan in the bankruptcy court
permitting the sale of substantially all of LTV Steel’s assets outside of the ordinary
course of business. On December 7, 2001, the bankruptcy court approved the Asset
Protection Plan and, as proposed, LTV Steel sold its assets. Although the proceeds from
the sale were sufficient to satisfy the debts owed to secured creditors, LTV Steel
remained unable to pay the administrative and other unsecured claims against its estate.
Accordingly, LTV Steel declared itself administratively insolvent and therefore unable
to confirm a plan of reorganization. See 11 U.S.C. § 1129(a)(9)(A) (providing that full
payment of administrative expenses is a prerequisite to confirmation of a reorganization
plan).
In addition to declaring itself administratively insolvent, LTV Steel also was
unable to fund the payments as required under the terms of the Defined Benefit Plan.
As a result, the Pension Benefit Guaranty Corporation (“PBGC”) terminated the Defined
Benefit Plan and assumed “all of the rights and powers of a trustee specified . . . , or
otherwise granted by law,” beginning March 31, 2002. (J.A. 390.) PBGC continues to
administer the unpaid benefits of McMillan and other LTV Steel retirees.
3
The parties do not dispute that McMillan retired on this date, or that his election was effective
despite his late return of the election form.
No. 07-4370 McMillan v. LTV Steel, Inc. Page 5
On December 20, 2001, LTV Steel and the USWA agreed to modify numerous
aspects of preexisting agreements, effective December 19, 2001. Among other
modifications, the parties agreed that LTV Steel’s obligations under “any and all of the
collective bargaining agreements, including any benefit programs, . . . shall be modified”
to provide that “[t]he provisions on Severance Allowance” would “no longer be in effect
for Employees at Basic Steel Facilities,” including employees at the Cleveland West
plant. (J.A. 1170, 1174.)
C. The USWA’s Claims
On June 27, 2002, the USWA filed a proof of claim for administrative expenses
against LTV Steel’s estate. The proof of claim stated that “Debtors,” including LTV
Steel, had failed to fulfill their obligations to the USWA, including the obligation to pay
severance, to pay amounts resulting from WARN Act liability, and to contribute to
retiree benefits. LTV Steel and its affiliates settled the USWA’s administrative expense
claim and, on December 16, 2003, the bankruptcy court entered a stipulation and order
embodying the parties’ settlement (the “2003 Stipulation”). The 2003 Stipulation
provided that the USWA’s claim “shall be allowed as an administrative expense claim
against the estate of LTV Steel in the amount of $15 [million] in full satisfaction of that
claim.” (J.A. 706.) In addition, the 2003 Stipulation directed LTV Steel to make pro
rata payments to “all of the former LTV Steel employees listed on Exhibit A . . . , such
that each [e]mployee receives an equal gross amount of any distributions” stemming
from the USWA’s administrative expense claim. (J.A. 706.) The 2003 Stipulation
explicitly noted that the list of employees “in the attached Exhibit A excludes those on
layoff from the Cleveland West operation (on behalf of whom WARN notice was given
at an earlier time) and all other employees on layoff on or before November 20, 2001.”
(J.A. 706.) In exchange for its allowed administrative expense claim and LTV Steel’s
pro rata payments to LTV Steel employees, the USWA
irrevocably and unconditionally release[d] . . . the LTV Parties . . . from any and
all claims (including any proofs of claim or administrative claims asserted
against any of the LTV Parties’ estates) . . . , and any causes of action of any
kind or nature . . . , including, but not limited to, claims arising from any
No. 07-4370 McMillan v. LTV Steel, Inc. Page 6
relationship, contract, agreement, . . . or other connection between the USWA
and the LTV Parties . . . .
(J.A. 708.)
Because McMillan was laid off on August 25, 2001 and never returned to work,
McMillan was not included among “all former hourly LTV Steel employees who were
actively employed and working at certain of LTV Steel’s facilities on November 20,
2001” listed in Exhibit A. (J.A. 706.) As a result, under the terms of the 2003
Stipulation, McMillan was not entitled to receive any of the pro rata payments. The
USWA did not direct LTV Steel to provide McMillan with notice of the 2003
Stipulation, and neither McMillan nor his attorney were provided with direct notice of
the 2003 Stipulation.
D. Copperweld Settlement
On December 3, 2002, McMillan filed a proof of claim with the bankruptcy
court. McMillan asserted a general unsecured claim in the amount of $317,293.81
against LTV Steel, LTV Corporation, and Copperweld. McMillan claimed entitlement
to wages and employee benefits, including $33,708.62 from his Defined Contribution
Pension Plan account. Debtors, including LTV Corporation, Copperweld, and LTV
Steel, objected to McMillan’s claim, arguing that the claim was improper as to
Copperweld and LTV Corporation and that McMillan could assert his claim against only
LTV Steel. The bankruptcy court sustained the objection, noting that there was “no
evidence” that LTV Steel, LTV Corporation, and Copperweld “operated as an integrated
enterprise” as McMillan had claimed. (J.A. 907-08.) McMillan appealed the bankruptcy
court’s ruling.
Before the bankruptcy court ruled on the appeal, however, McMillan settled with
Copperweld. The settlement agreement (the “Copperweld Settlement”) allowed
McMillan an unsecured priority claim totaling $4,650.00 and a general unsecured claim
No. 07-4370 McMillan v. LTV Steel, Inc. Page 7
in the amount of $312,643.81.4 The Copperweld Settlement provided that Copperweld’s
“[p]ayment of the settlement amount shall constitute full satisfaction of any and all
liabilities” with respect to McMillan’s claims. (J.A. 715.) McMillan also agreed to
release all claims against Copperweld, but did not waive “any claim . . . against LTV
Steel Company, Inc. or LTV Corporation.” (J.A. 715-16.) Pursuant to the terms of the
Copperweld Settlement, McMillan filed a motion to dismiss his appeal. The bankruptcy
court granted the motion, and dismissed McMillan’s appeal on October 29, 2004. In its
order of dismissal, the bankruptcy court explicitly stated that the dismissal of the appeal
“shall not affect in any manner [McMillan’s] ability to seek relief against the LTV Steel
Company, Inc.”
E. McMillan’s Administrative Claim
In 2004, McMillan sought and the bankruptcy court granted leave to file an
administrative expense claim against LTV Steel in the amount of $42,596.62.
McMillan’s claim, which is the subject of this appeal, consisted of three components:
(1) $33,708.62 representing the unpaid balance in his Defined Contribution Pension Plan
account (“DCP component”); (2) $7,888 in unpaid severance benefits (“Severance
component”); and (3) $1,000 in backpay, to which McMillan claims he is entitled under
the WARN Act (“WARN Act component”). McMillan asserted that each component
of his claim constituted an administrative expense as defined in 11 U.S.C. § 503(a).
LTV Steel objected to the claim. On January 6, 2006, the bankruptcy court sustained
LTV Steel’s objections and denied McMillan’s administrative expense claim.
On January 17, 2006, McMillan filed a motion to amend and supplement the
bankruptcy court’s findings and a motion for reconsideration of the bankruptcy court’s
order of January 6, 2006. The bankruptcy court considered McMillan’s motion as a Rule
59(e) motion to amend or alter the judgment and a motion for reconsideration of the
4
Copperweld was able to restructure its debts and continue operations. On November 7, 2003,
the bankruptcy court confirmed Copperweld’s plan of reorganization. The settlement agreement provided
that Copperweld would make payments to McMillan pursuant to the plan of reorganization.
No. 07-4370 McMillan v. LTV Steel, Inc. Page 8
disallowance of a claim under 11 U.S.C. § 502(j). After concluding that McMillan failed
to meet his burden, the bankruptcy court denied McMillan’s motions in their entirety.
McMillan appealed to the district court, arguing that the bankruptcy court
inappropriately denied his administrative expense claim.5 McMillan contended that the
bankruptcy court failed to consider the fact that the balance in his DCP account “vested”
prior to the 1999 Agreement, which he argued entitled him to the value of the funds in
DCP account just prior to the 1999 Agreement. McMillan also argued that the
bankruptcy court erred in denying his motion to reconsider. The district court rejected
McMillan’s arguments, concluding that he had failed to establish that the various
components of his claims were entitled to treatment as administrative expenses under 11
U.S.C. § 503(b). McMillan appealed.
II. MCMILLAN’S CLAIM FOR ADMINISTRATIVE EXPENSES
A. Standard of Review
On appeal from a district court’s judgment affirming an order of the bankruptcy
court, this Court reviews the bankruptcy court’s order directly, and gives no deference
to the district court’s decision. In re Hamilton, 540 F.3d 367, 371 (6th Cir. 2008). This
Court reviews the bankruptcy court’s findings of fact for clear error, “asking only
whether [this Court is] left with a definite and firm conviction that a mistake has been
committed.”
Id. The bankruptcy court’s legal conclusions are reviewed de novo. Phar-
Mor, Inc. v. McKesson Corp.,
534 F.3d 502, 504 (6th Cir. 2008).
5
As the district court noted, McMillan argued that the bankruptcy court erred in determining that
“the DCP Component of his claim was: (a) barred as duplicative of a portion of his general unsecured
claim; (b) fully satisfied and dismissed with prejudice as a result of the Copperweld Settlement; and[]
(c) not entitled to administrative expense status.” McMillan also asserted that the bankruptcy court
erroneously determined that the Severance and WARN Act Components of his claim were “released
pursuant to terms of the Stipulation and Order reached by [LTV Steel] and the USWA.” (J.A. 8.)
No. 07-4370 McMillan v. LTV Steel, Inc. Page 9
B. Analysis
McMillan argues that the bankruptcy court improperly denied his administrative
expense claim when it sustained LTV Steel’s objections to his claim. McMillan further
contends that the bankruptcy court erred in concluding his administrative expense claim
was barred by the 2003 Stipulation between LTV Steel and the USWA, and also by the
Copperweld Settlement.
1. DCP Component
In addressing McMillan’s arguments, the bankruptcy court framed the issue as
“whether McMillan has met his burden of proving his entitlement to an allowance of an
administrative claim,” and set forth the applicable law. (J.A. 256-57.) The bankruptcy
court’s analysis, however, focused on other grounds for disallowing McMillan’s claim.
The bankruptcy court concluded that the 1999 Agreement between LTV Steel and the
USWA regarding revisions to the structure of employees’ pension benefits “released”
the DCP component of McMillan’s claim. The 1999 Agreement provided that
employees’ DCP accounts would be transferred to Defined Benefit accounts, which the
PBGC now administers. As a result, the bankruptcy court found that McMillan could
not assert a claim against LTV Steel, but had recourse only against the PBGC.
As an alternative basis for its conclusion, the bankruptcy court determined that
the Copperweld Settlement, which allowed McMillan a $312,643.81 general unsecured
claim to be distributed in accordance with Copperweld’s plan of reorganization, satisfied
the DCP component of McMillan’s claim. The bankruptcy court further concluded that
a portion of the DCP component was duplicative of a portion of the general unsecured
claim that McMillan previously asserted against LTV Steel, Copperweld, and LTV
Corporation and, accordingly, was barred by collateral estoppel.
No. 07-4370 McMillan v. LTV Steel, Inc. Page 10
a. Administrative Expense Priority Status
The Bankruptcy Code assigns priority to certain administrative expenses,
including “the 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. § 503(b)(1)(A). Under the Bankruptcy Code, administrative expenses
are “entitled to priority over prepetition unsecured claims.” Hartford Underwriters Ins.
Co. v. Union Planters Bank, N.A., 530 U.S. 1, 5 (2000) (citing 11 U.S.C. §§ 507(a)(1),
726(a)(1), 1129(a)(9)(A)).
This Court applies a two-part test to determine whether a claim is entitled to
administrative expense priority status under § 503(b). A debt constitutes an actual,
necessary administrative expense “‘only if (1) it arose from a transaction with the
bankruptcy estate and (2) [it] directly and substantially benefitted the estate.’” In re
Eagle-Picher Indus., Inc., 447 F.3d 461, 464 (6th Cir. 2006) (quoting Pension Benefit
Guar. Corp. v. Sunarhauserman, Inc. (In re Sunarhauserman, Inc.),
126 F.3d 811, 816
(6th Cir. 1997)). Thus, a debt must arise after the debtor files for bankruptcy—“post-
petition[—]in order to be accorded administrative expense priority.” In re
Sunarhauserman,
Inc., 126 F.3d at 817. McMillan, as the claimant, has the burden of
proving that his claim constitutes an administrative expense. E.g., In re White Motor
Corp.,
831 F.2d 106, 110 (6th Cir. 1987) (noting that “a claimant must prove” that the
debt arose post-petition, and that the debt directly and substantially benefitted the estate).
McMillan argues that the DCP component of his claim—the portion representing
retirement benefits he claims remain in a DCP account—is an administrative expense
entitled to priority status under § 503(b) and § 507(a). The DCP component of
McMillan’s administrative expense claim relates to funds he argues he became entitled
to prior to August 1, 1999, because his benefits had “vested” prior to that date.
Regardless of whether his benefits were “vested,” LTV Steel did not file bankruptcy
until December 2000. Thus, any liability that LTV Steel might have arose pre-petition
and, accordingly, does not constitute an administrative expense. See In re
Sunarhauserman, Inc., 126 F.3d at 819.
No. 07-4370 McMillan v. LTV Steel, Inc. Page 11
To avoid this result, McMillan relies on 11 U.S.C. § 1114(e)(2) to argue that his
retirement benefits are administrative expenses. We note that McMillan has forfeited
this argument by failing to raise it in the courts below. See NicSand, Inc. v. 3M Co., 507
F.3d 442, 456-57 (6th Cir. 2007). Even if we considered McMillan’s argument that
§ 1114(e)(2) requires the DCP component of his claim to be treated as an administrative
expense, McMillan’s argument would fail. While § 1114(e)(2) provides that “any
payment for retiree benefits” “has the status of an allowed administrative expense,” the
type of “benefit” involved in McMillan’s claim is not a “retiree benefit” within the
meaning of § 1114. “Retiree benefits” include only “payments to any . . . person . . . for
the purpose of providing or reimbursing payments for retired employees and their
spouses and dependents, for medical, surgical, or hospital care benefits, or benefits in
the event of sickness, accident, disability, or death under any plan, fund, or program”
that is “maintained or established in whole or in part by the debtor prior to filing a
petition commencing a case under this title.” 11 U.S.C. § 1114(a). While the pension
program was “maintained or established . . . by [LTV Steel] prior to filing” its
bankruptcy petition, the program does not provide payments for medical, surgical, or
hospital-care benefits as required by § 1114(a). Thus, § 1114 does not apply to LTV
Steel’s benefit program directed at administering pensions. See Adventure Res., Inc. v.
Holland,
137 F.3d 786, 795 (4th Cir. 1998) (concluding that § 1114 does not apply to
a program that “administer[s] only pension benefits and noting that § 1114 was passed
“in response to a perceived threat to . . . retiree health benefits posed by the bankruptcy
reorganization of numerous large employers”).
Accordingly, we conclude that McMillan cannot demonstrate that the DCP
component of his claim is entitled to priority treatment as an administrative expense.
b. LTV Steel as a Proper Party
The bankruptcy court denied the DCP component of McMillan’s claim because
it concluded that the 1999 Agreement transferred the balance of McMillan’s Defined
Contribution Plan account to a Defined Benefit account. The bankruptcy court found
No. 07-4370 McMillan v. LTV Steel, Inc. Page 12
that, because PBGC now administers LTV Steel’s Defined Benefit plan, McMillan has
recourse against only PBGC and, thus, his claim against LTV Steel was improper.
The bankruptcy court’s findings regarding the effect of the 1999 Agreement are
not clearly erroneous. Under the terms of the 1999 Agreement, “[i]ndividual Company
Contribution Accounts . . . [were] transferred into the defined benefit pension plan, [and]
invested with the [defined benefit] assets.” (J.A. 323.) The 1999 Agreement further
provides that, “at retirement[,] the DCP annuities [will be] paid from the DB plan . . . .”
(J.A. 323.) Such support in the record does not leave this Court with “a definite and firm
conviction that a mistake has been committed” and, as a result, we uphold the
bankruptcy court’s factual findings. See In re Hamilton, 540 F.3d at 371. Therefore, we
conclude that the bankruptcy court correctly determined that McMillan could assert the
DCP component of his claim against only PBGC.
McMillan has failed to satisfy his burden of demonstrating that the DCP
component of his claim is an administrative expense and, because PBGC now
administers the DB plan, has improperly asserted the DCP component of his claim
against LTV Steel. Thus, because these grounds support the bankruptcy court’s
conclusions, we do not consider McMillan’s arguments with respect to the alternative
bases for the bankruptcy court’s holding with respect to the DCP component.
2. Severance Payments and WARN Act Liability
The bankruptcy court concluded that the WARN Act and Severance components
of McMillan’s claim were “released pursuant to the [2003] Stipulation and Order with
the USWA” because the USWA acted as McMillan’s agent in negotiating the 2003
Stipulation. (J.A. 260.) McMillan argues that this finding is not supported by the terms
of the 2003 Stipulation, and that his due process rights were violated because he did not
receive notice of the 2003 Stipulation that purported to waive his right to pursue claims
against LTV Steel.
No. 07-4370 McMillan v. LTV Steel, Inc. Page 13
a. Effect of the 2003 Stipulation
On appeal, McMillan does not contest that the terms of the 2003 Stipulation
“irrevocably and unconditionally release[d] . . . the LTV Parties . . . from any and all
claims (including proofs of claim or administrative claims asserted against any of the
LTV Parties’ estates).” Instead, he maintains that the 2003 Stipulation does not bar his
claims for two reasons. First, McMillan asserts that the USWA has no right to represent
retirees because retirees are not members of the USWA. Therefore, according to
McMillan, the 2003 Stipulation does not preclude his administrative expense claim.
McMillan, however, has not argued previously that his status as a retiree
precludes the USWA from representing him, or that the USWA was not authorized to
represent him. In his argument to the bankruptcy court, McMillan stated that he did not
waive his statutory rights “under the WARN Act” because McMillan “cannot be bound
by the December 16, 2003 Order absent a ‘clear and unmistakable waiver of [his] rights
to a judicial forum.’” (J.A. 275) (alteration in original). McMillan’s district court brief
also advanced this argument, asserting that McMillan’s “WARN Act and severance
claims are grounded in statutory rights which the Sixth Circuit has held cannot be
released by a union without a clear and unmistakable waiver by the employee.” (J.A.
46) (emphasis omitted). He further argued that, “while a union had standing to sue to
enforce its members’ right to payment of wage claims and claims under the WARN Act,
the union does not own its members’ wage and WARN claims.” (J.A. 46) (emphasis
omitted).
With respect to whether the USWA was authorized to represent him with respect
to the 2003 Stipulation, the bankruptcy court found that McMillan did not contest that
the USWA could represent him.6 The arguments McMillan points to in his briefs to the
bankruptcy and district courts address whether the union had authority to “bargain away”
his retirement benefits and do not relate to the 2003 Stipulation. Because McMillan has
not raised arguments with respect to whether the USWA could represent him—either
6
The bankruptcy court’s order states that “[i]t is undisputed that the USWA was the exclusive
bargaining agent of LTV Steel employees, including [McMillan].” (J.A. 259.)
No. 07-4370 McMillan v. LTV Steel, Inc. Page 14
because he was a retiree at the time or because the USWA was not authorized to act on
his behalf—McMillan has waived his right to make these arguments on appeal.
NicSand, Inc., 507 F.3d at 456-57.
Second, McMillan argues that the 2003 Stipulation does not preclude his claims
because he did not provide a “clear and unmistakable waiver” of his WARN Act rights.
To support his argument, McMillan relies on a series of cases that address under what
conditions a court will conclude that a union member has waived rights to pursue claims
in a judicial forum or against the employer. LTV Steel argues that, because none of
these cases were decided in the context of bankruptcy proceedings or involved the
WARN Act, their holdings are inapplicable to the present case. Specifically, LTV Steel
notes that, once an employer declares bankruptcy, a union has authority to negotiate with
the employer regarding necessary modifications to a collective bargaining agreement.
LTV Steel also argues that the WARN Act authorizes unions to pursue claims on behalf
of former employees, authority that unions do not have with respect to other statutory-
based claims.
For the first time on appeal, McMillan cites Cleveland Electric Illuminating Co.
v. Utility Workers Union of America, 440 F.3d 809, 818 (6th Cir. 2006), and United Steel
Workers of America v. Cooper Tire & Rubber Co.,
474 F.3d 271 (6th Cir. 2007). He
argues that Cleveland Electric establishes that the USWA was required to obtain his
consent to settle any statutory claims he might have had against LTV Steel. This Court
has held that, in order to arbitrate a retiree’s statutorily granted benefits, a union must
obtain the consent of the retiree. Cleveland
Elec., 440 F.3d at 818. McMillan, however,
did not argue the issue of consent to either the bankruptcy court or the district court.
Although he attempts to include the “consent” argument as part of his argument that the
USWA’s waiver of his statutory rights was ineffective for failure to provide a clear and
unmistakable waiver, neither Cleveland Electric nor Cooper Tire involved the issue of
whether the employee provided a “clear and unmistakable waiver.” Thus, to the extent
he relies on these cases to argue that the union’s waiver was invalid for lack of consent,
McMillan has forfeited the argument by failing to assert it below. While it would not
No. 07-4370 McMillan v. LTV Steel, Inc. Page 15
be improper to cite these cases to this Court for the first time in support of an argument
he previously raised, McMillan cannot use this authority to support a theory not
presented to the lower courts. See B&H Med., LLC v. ABP Admin., Inc.,
526 F.3d 257,
268 (6th Cir. 2008). Thus, McMillan has forfeited his right to present the consent
argument to this Court—the only argument applicable to the Severance component7 of
his claim—and we therefore will address only his “clear and unmistakable waiver”
argument as it relates to the WARN Act component.
McMillan argues that Wright v. Universal Maritime Service Corp., 525 U.S. 70
(1998), supports his contention that the waiver in the 2003 Stipulation was ineffective
as to his WARN Act claims. In Wright, the Court concluded that “a union-negotiated
waiver of employees’ statutory right to a judicial forum for claims of employment
discrimination [under the ADA]” was invalid because there was no evidence of a “clear
and unmistakable waiver” by the union members.
Wright, 525 U.S. at 80. McMillan
contends that a waiver of his statutory right to a judicial forum for a WARN Act
violation is no different than a waiver of a right to file employment discrimination claims
for which the Court in Wright required a clear and unmistakable waiver.
McMillan, however, fails to recognize that, under the WARN Act, a union has
authority to bring claims alleging a violation of the WARN Act’s provisions on behalf
of its employee members. There is no equivalent provision under the ADA; only the
“person aggrieved” may bring an action under the ADA. Compare 29 U.S.C.
§ 2104(a)(5) (“A person seeking to enforce [WARN Act] liability, including a
representative of employees or a unit of local government aggrieved under paragraph
(1) or (3), may sue either for such person or for other persons similarly situated . . . .”),
with 42 U.S.C. § 12188(a)(1) (incorporating 42 U.S.C. § 2000a-3, which provides that
“a civil action for . . . relief . . . may be instituted by the person aggrieved. . . .”).
Further, the Supreme Court has interpreted § 2104 of the WARN Act as authorizing a
union to sue on behalf of aggrieved employees. The Court has noted that, “[s]ince the
union is the ‘representative of employees . . . aggrieved,’ it is a person who may sue on
7
The Severance component of McMillan’s claim is not based on a statutory entitlement.
No. 07-4370 McMillan v. LTV Steel, Inc. Page 16
behalf of the ‘persons similarly situated’ in order to ‘enforce such liability.’” United
Food & Commercial Workers Union Local 751 v. Brown Group, Inc., 517 U.S. 544,
549-50 (1996).
In addition, courts have recognized that a union’s settlement of WARN Act
claims with the employer precludes employees covered by the settlement from later
bringing a claim against the employer for WARN Act violations. E.g., Hardy v. Chicago
Hous. Auth., 189 F. App’x 510, 513 (7th Cir. 2006) (finding that a settlement agreement,
negotiated by the union, between the employer and the union “releas[ing] all claims”
against the employer prohibited former employees from later bringing WARN Act suits
against the employer). Further, although McMillan was no longer a member of the
union at the time the USWA and LTV Steel reached a settlement, the USWA remained
his authorized representative for purposes of the WARN Act claims. In United Food,
for example, the Court found that, under § 2104, the union had authority to bring claims
alleging violations of the WARN Act, even though the employees the union represented
were no longer employed. United Food, 517 U.S. at 549. As LTV Steel recognizes, the
“employees . . . aggrieved” almost always will be former employees, because a WARN
Act violation results when the employer fails to give sufficient notice before closing a
plant or laying off employees, actions that result in employees becoming former
employees.
Thus, the USWA’s settlement with LTV Steel constituted an effective waiver of
McMillan’s rights to bring the WARN Act component of his administrative expense
claim. The USWA’s claim, which it settled with LTV Steel in the 2003 Stipulation,
sought repayment of debt, including amounts owed to employees as a result of WARN
Act liability and severance payments, “on behalf of itself and present and former
employees” of LTV Steel. (J.A. 393.) In its claim, the USWA asserted that the “USWA
is and was the collective bargaining representative of certain employees of LTV Steel
. . . and was a party to collective bargaining agreements with [LTV Steel] covering
bargaining unit employees subject to the CBAs in effect as of the date of filing of [LTV
Steel’s] Chapter 11 bankruptcy petition on December 29, 2000.” (J.A. 392) (emphasis
No. 07-4370 McMillan v. LTV Steel, Inc. Page 17
added). Thus, the bankruptcy court correctly concluded that McMillan was barred from
asserting the WARN Act and Severance components of his administrative expense
claim. Because we find that McMillan is barred from asserting these claims, it is
unnecessary to address whether the bankruptcy court erred in determining that McMillan
was not entitled to receive severance pay, or to determine whether the WARN Act and
Severance components are entitled to administrative expense priority status.
b. Due Process
McMillan also argues that the failure of LTV Steel and the USWA to provide
him with notice of the 2003 Stipulation violated his due process rights. LTV Steel
argues in response that McMillan received notice through the USWA, his agent. The
bankruptcy court did not consider this argument. The district court, however, concluded
that McMillan “received adequate notice of the Stipulation and Order through the
USWA as a matter of law and, therefore, his due process rights were not violated.” (J.A.
25.)
This Court has not addressed whether notice to a union constitutes notice to the
employee member. In the context of an agency relationship, however, “a principal is
chargeable with the knowledge of, or notice to, his agent that is received by the agent in
the due course of his employment and is related to the matters within his authority.”
Aetna Cas. & Sur. Co. v. Leahey Constr. Co., 219 F.3d 519, 541 (6th Cir. 2000). Courts
have applied the agency concept to the relationship between a union and an employee.
For example, one court concluded that where an arbitral board fails to provide notice of
arbitration to employees, but provides the notice to the union representing the
employees, the employees’ due process rights are not violated. See Mitchell v. Cont’l
Airlines, Inc.,
481 F.3d 225, 233 (5th Cir. 2007).
We conclude that providing notice to the USWA constituted notice to McMillan.
Although at the time the USWA received notice McMillan no longer was employed at
LTV Steel, the USWA remained his agent for matters relating to the 2003 Stipulation
negotiated with LTV Steel. As noted above, the USWA’s claim sought WARN Act
liability and severance payments “on behalf of itself and present and former employees”
No. 07-4370 McMillan v. LTV Steel, Inc. Page 18
of LTV Steel. (J.A. 393.) The USWA stated that the “USWA is and was the collective
bargaining representative of certain employees of LTV Steel . . . and was a party to
collective bargaining agreements with [LTV Steel] covering bargaining unit employees
subject to the CBAs in effect as of the date of filing of [LTV Steel’s] Chapter 11
bankruptcy petition on December 29, 2000.” (J.A. 392) (emphasis added). Thus, the
USWA was acting as the agent of former employees, including McMillan, in negotiating
the 2003 Stipulation and, therefore, notice to the USWA constituted notice to McMillan.
Accordingly, McMillan’s due process rights were not violated.
Because McMillan’s arguments that the 2003 Stipulation does not preclude his
claims are without merit, the bankruptcy court did not err in finding that the WARN Act
and Severance components of McMillan’s claim were “released pursuant to the
Stipulation and Order with the USWA.” Further, the DCP component of McMillan’s
claim is not entitled to administrative expense priority status. Thus, the bankruptcy court
correctly denied McMillan’s administrative expense claim against LTV Steel’s estate.
III. CONCLUSION
We AFFIRM the bankruptcy court’s order denying McMillan’s administrative
expense claim.
