Keach v. New Brunswick Southern Railway Co. Ltd., No. 19-1161 (1st Cir. 2020)Annotate this Case
In this case arising out of a petition for bankruptcy filed by the Montreal Maine & Atlantic Railway (MMA) the First Circuit affirmed the decision of the Bankruptcy Appellate Panel (BAP) upholding the judgment of the bankruptcy court ruling that certain claims filed by creditor railroads should be given priority status pursuant to 11 U.S.C. 1171(b) because they were "Six Months Rule" claims, holding that the claims at issue were priority claims under section 1171(b).
In their claims, the creditor railroads sought to recover their share of payments that the MMA was to collect for charges that had been billed to customers that had shipped freight on routes that covered rail systems owned by the MMA and the creditor railroads. The creditor railroads argued that their claims qualified as Six Months Rule claims and so must be paid in full before other claims because the MMA incurred the debt for their share of these payments so close in time to the MMA's bankruptcy. The bankruptcy court agreed with the creditor railroads and concluded that the claims were entitled to priority under section 1171(b). The BAP affirmed. The First Circuit affirmed, holding that the claims were priority claims under the statute.