                                                                                                                           Opinions of the United
1998 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-23-1998

In Re: Continental
Precedential or Non-Precedential:

Docket 97-7109




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Recommended Citation
"In Re: Continental" (1998). 1998 Decisions. Paper 54.
http://digitalcommons.law.villanova.edu/thirdcircuit_1998/54


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Filed March 23, 1998

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 97-7109

IN RE: CONTINENTAL AIRLINES,

         Debtor

UNITED STATES OF AMERICA,

         Appellant

v.

CONTINENTAL AIRLINES

     THOMAS E. ROSS,

         Trustee

An Appeal from the United States District Court
for the District of Delaware
Civil Action No. 93-cv-00485

Argued December 2, 1997
Decided January 20, 1998

Before: COWEN, McKEE and ROSENN, Circuit Judges.

(As Amended March 23, 1998)
ORDER AMENDING OPINION

The opinion of the court filed in the above entitled case
on January 20, 1998, is herewith amended as follows:

1) Slip opinion, page 4, second full paragraph, the first
two sentences should now read as follows:

        The Government argues that the $4.8 million in
       funds it held at the time of confirmation and
       subsequently deposited into the registry of the
       bankruptcy court, and which the Government alleged it
       was entitled to set-off1 against the $14.5 million owed
       by Continental, was not "property of the [bankruptcy]
       estate." The Government contends that the bankruptcy
       court's confirmation of Continental's reorganization
       plan did not extinguish its right of set-off vis-a-vis the
       $4.8 million in funds because it still held them at the
       time of confirmation.2

2) Slip opinion, page 6, line 7, delete "in the registry of
the court" and substitute "by the Government."

3) Slip opinion, pages 6-7, revise and combine the last
paragraph on page 6 and the first full paragraph of page 7
to read:

        Finally, the Government's contention that the Norton
       court "incorrectly considered the funds held by the
       creditor to be property of the estate" which led to its
       "erroneous ruling that confirmation of the plan
       extinguishes a creditor's set-off rights" is without merit.
       (citing 11 U.S.C. SS 1141(b) and 1327, and Norton, 717
       at 774). The Government's argument thus misses the
       cumulative effect of the Norton and Strumpf holdings.
       Although Norton implicitly held that the funds withheld
       by the creditor subject to set-off were "property of the
       estate," today under Strumpf, the relevant "property of
       the estate" is instead the bankrupt debtor's claim to
       the funds as opposed to the possession of the physical
       funds themselves. Even though the actual funds
       themselves may not have passed as property of the
       bankruptcy estate, upon confirmation of the plan,

                                2
       Continental did acquire a claim or interest in them
       subject only to final resolution of the Government's
       appeal. Thus, contrary to the Government's assertion,
       its set-off rights in the funds did not remain unaffected
       by confirmation of the plan because, under Norton, its
       set-off right was extinguished by the confirmation of
       the plan. Norton continues to have vitality and survives
       Strumpf.

       BY THE COURT:

       /s/ Max Rosenn

       Circuit Judge

March 23, 1998

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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