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In re Trans World Airlines

September 25, 1996

IN RE:

TRANS WORLD AIRLINES INCORPORATED,

DEBTOR

STANLEY BERGER; BEVERLY BERGER,

APPELLANTS

v.

TRANS WORLD AIRLINES, INCORPORATED

THOMAS E. ROSS,

TRUSTEE

IN RE:

TRANS WORLD AIRLIINES, INCORPORATED,

DEBTOR

LONDON INTERNATIONAL TRAVEL, LTD.; LATIN AMERICAN TRAVEL, INC.,

APPELLANTS

v.

TRANS WORLD AIRLINES, INCORPORATED

THOMAS E. ROSS, TRUSTEE



ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

(D.C. Civ. Nos. 94-00641/642/643)

Before: GREENBERG, NYGAARD, Circuit Judges, and LAY, Senior Circuit Judge *fn*

NYGAARD, Circuit Judge.

Argued January 31, 1996

Filed September 25, 1996)

OPINION OF THE COURT

London International Travel, Ltd., Latin American Travel, Inc., and Stanley and Beverly Berger, previously the sole owners of London and Latin, appeal several orders entered in the bankruptcy of the debtor, Trans World Airlines, Inc.

The bankruptcy court denied the following motions: 1) the Motion to Proceed; that is, to recognize their compulsory counterclaim as an informal proof of claim, or alternatively, for leave to file a proof of claim out of time, and for relief from the discharge injunction to prosecute their claims to judgment; and, 2) the motion to bar the claims of TWA against London/Latin and the Bergers. The district court affirmed. We will reverse in part, affirm in part and remand.

I.

On January 31, 1992, TWA filed a voluntary Chapter 11 petition. The bankruptcy court set May 15, 1992 as the claims bar date. The Bergers presented no claim by that date. On August 12, 1993, the bankruptcy court confirmed TWA's Second Amended Plan of Reorganization, effective November 3, 1993.

On April 7, 1993, TWA sued the Bergers, London and Latin in the United States District Court for the Eastern District of Missouri, asserting a federal RICO claim and several state law causes of action. The Bergers filed a compulsory counterclaim in response on April 22, alleging defamation. TWA filed its answer on May 12.

In March 1994, the district court dismissed TWA's RICO claim with prejudice and declined to exercise supplemental jurisdiction over the parties' state law claims. The parties then refiled their respective state law claims in Missouri state court.

The Bergers allege that TWA made defamatory statements about them between October 1990 and December 1992. For its part, TWA asserted claims of fraud, money had and received, and breach of contract. TWA filed a motion in state court to dismiss the Bergers' defamation claim, on the ground that the bankruptcy court had discharged TWA from all debts, except as otherwise provided in the Confirmation Order, that the Confirmation Order did not except the Bergers' claim from discharge, and that the Bergers were enjoined by 11 U.S.C. Section(s) 524(a)(2) from commencing or continuing their suit. Subsequently, the Bergers and London/Latin moved the bankruptcy court for leave to proceed to judgment on their claims and to bar TWA's. The bankruptcy court denied these ...


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