In re Trans World Airlines

Trans World Airline (TWA) was a major airline. TWA was subject to several employment-discrimination lawsuits by its flight attendants. As a result of the lawsuits, TWA was required to provide travel vouchers to eligible flight attendants. TWA later filed for bankruptcy. American Airlines agreed to purchase TWA. At the time of the sale, TWA faced several additional discrimination claims. The bankruptcy court approved the sale and determined that there was no basis for successor liability on the part of American; the flight attendants’ claims could be treated as unsecured claims. The sale order thus extinguished successor liability on the part of American for the travel-voucher program and any pending discrimination charges. The Equal Employment Opportunity Commission (the commission) (plaintiff), which was charged with handling the claims against TWA, appealed the sale order in federal district court. The district court affirmed the bankruptcy court’s holding that the claims against TWA were interests in property under § 363(f) of the Bankruptcy Code. Therefore, according to the court, TWA’s assets could be transferred free and clear of those claims. The commission appealed, asserting that the travel-voucher program and the pending charges were not interests in property and that the claims were therefore improperly extinguished by the sale order. The case was heard by the United States Court of Appeals for the Third Circuit.