In re Trans World Airlines, Inc. (2003)
Citation: 322 F.3d 283 · Court: U.S. Court of Appeals for the Third Circuit · Decided: March 13, 2003 · Opinion: Fuentes, Circuit Judge.
Source note (2026-10-18):
- source replaced 2026-10-18: static.case.law robots-disallowed; official copy at U.S. Court of Appeals for the Third Circuit opinion archive (No. 01-1788) (replaces
https://static.case.law/f3d/322/cases/0283-01.json; retrieval dates stated elsewhere on this page refer to the earlier copy).
Case page. Legal information, not legal advice. Last verified: 2026-10-16.
Facts
TWA sold substantially all of its assets to American Airlines under 11 U.S.C. § 363. The sale order extinguished American’s successor liability for (1) a Travel Voucher Program awarded to TWA flight attendants in settlement of a sex-discrimination class action and (2) employment discrimination charges pending before the EEOC, and “enjoined all persons from seeking to enforce successor liability claims against American.” The EEOC and the flight-attendant class appealed, arguing that “interests in property” under § 363(f) are limited to liens, mortgages and similar in rem interests. (Source: https://www2.ca3.uscourts.gov/opinarch/011788p.pdf , retrieved 2026-10-16.)
Holding
“Because section 363(f) of the Bankruptcy Code permits a sale of property ‘free and clear’ of an ‘interest in such property,’ and because the claims against TWA here were connected to or arise from the assets sold, we affirm the Bankruptcy Court’s order approving the sale ‘free and clear’ of successor liability.”
Reasoning
- Relying on In re Leckie Smokeless Coal Co., 99 F.3d 573 (4th Cir. 1996) and its own prior decision in Folger Adam, the court reiterated that “the term ‘any interest’ is intended to refer to obligations that are connected to, or arise from, the property being sold.” The claims were “not interests in property in the sense that they are not in rem interests,” but were interests “within the meaning of section 363(f) in the sense that they arise from the property being sold.”
- Alternatively, “the priority scheme of the Bankruptcy Code supports the transfer of TWA’s assets free and clear of the claims”: allowing successor claims against American “while limiting other creditors’ recourse to the proceeds of the asset sale would be inconsistent with the Bankruptcy Code’s priority scheme.”
- The record showed it “was unlikely that debtors and American would have consummated the sale if appellants’ claims were not extinguished” and, absent the sale, TWA “would have been liquidated”; the sale preserved “some 20,000 jobs.”
Practical impact
For a buyer of a going concern in bankruptcy, the case supports a sale order that bars successor-liability claims arising from the debtor’s pre-sale operations, at least in the Third Circuit (which includes the District of Delaware). The Second Circuit later adopted the same reading in in-re-chrysler-2009 (vacated as moot), and limited enforcement against claimants who lacked adequate notice in elliott-v-general-motors-2016. For claimants, the claim is redirected to the estate as an unsecured claim.
Good-law status
No citator check was run this session (needs_verification). The decision is cited and
followed in in-re-chrysler-2009 (retrieved).
Applies in →
businesses-and-going-concerns, bankruptcy-363-sales
Legal information, not legal advice. Verify against the current primary source before relying on this summary.