In what is described as a case of first impression, the U.S. Court of Appeals for the Third Circuit has determined that the portion of an employer’s withdrawal liability that is attributable to the period after the date of the petition for bankruptcy is an administrative expense and entitled to priority under bankruptcy law. In the particular case, the employer filed for Chapter 11 bankruptcy protection on November 30, 2006. The employer participated in a multiemployer defined benefit plan. On May 30, 2008, the debtor sold its assets and ceased to employ any of the covered employees. As a result of the cessation of obligation to contribute to the multiemployer plan, a claim for the complete withdrawal liability in the amount of approximately $5.9 million was filed. The multiemployer plan asserted that the full withdrawal liability was entitled to administrative expense. The bankruptcy court initially classified the entire claim as a general unsecured claim. In a subsequent decision, the district court reversed the bankruptcy court and divided the withdrawal liability into pre- and post-petition amounts. This allowed a portion of the withdrawal liability to be given preference as an administrative expense. The Third Circuit upheld the lower court decision and found that withdrawal liability may be apportioned into the pre-petition as well as the post-petition period and the amount attributable to the post-petition period is an administrative expense claim under the bankruptcy code. The court found that the debtor corporation or debtor employer benefited from the post-petition services performed by employees and therefore this constituted a post-petition administrator expense. The Third Circuit’s decision is the first Court of Appeals decision to apply this apportionment approach. It is important to note that the Third Circuit includes Delaware where many bankruptcy cases are filed. Therefore, those involved in bankruptcy cases filed in Delaware, or elsewhere within the Third Circuit, should consider the effect of this apportionment between pre- and post-petition withdrawal liability. (In re: Marcal Paper Mills Inc., 3rd Cir. 2011)