890 F.

2d 1255
58 USLW 2346, 21 Collier Bankr.Cas.2d 1324,
19 Bankr.Ct.Dec. 1835, Bankr. L. Rep. P 73,140

In re GULL AIR, INC., Debtor.

FEDERAL AVIATION ADMINISTRATION, Plaintiff,
Appellant,
v.
GULL AIR, INC., Defendant, Appellee.
No. 88-1780.

United States Court of Appeals,

First Circuit.
Heard April 5, 1989.
Decided Dec. 7, 1989.

Bea L. Witzleben, Civil Div., Dept. of Justice, with whom John R. Bolton,
Asst. Atty. Gen., Washington, D.C., Frank L. McNamara, Jr., U.S. Atty.,
Boston, Mass., M. Ellen Carpenter, Asst. U.S. Atty., David Bennett, Dept.
of Transp., J. Christopher Kohn and Tracy J. Whitaker, Civil Div., Dept.
of Justice, Washington, D.C., were on brief for plaintiff, appellant.

Peter J. Haley with whom Stephen F. Gordon and Gordon & Wise, Boston,
Mass., were on brief, for defendant, appellee.

Before CAMPBELL, Chief Judge, BOWNES, Circuit Judge, and CAFFREY,*

Senior District Judge.

CAFFREY, Senior District Judge.

This is an appeal from an order of the United States District Court for the
District of Massachusetts which affirmed two orders entered by the United
States Bankruptcy Court for the District of Massachusetts. In its first order,
issued on July 15, 1987, the bankruptcy court authorized the debtor, Gull Air,
to sell certain arrival and departure slots at LaGuardia Airport, ruling that the
automatic stay provisions of the Bankruptcy Code prohibited the Federal

Aviation Administration ("FAA") from withdrawing these slots from Gull Air.
On July 29, 1987, the bankruptcy court issued its second order approving Gull
Air's private sale of these slots. The FAA appealed both orders of the
bankruptcy court to the district court. On April 27, 1988, the district court
affirmed the bankruptcy court's decisions without an opinion. The FAA now
appeals the district court's affirmance to this Court. We reverse.
I.
5

Congress enacted the Federal Aviation Act for the purpose of centralizing in a
single authority the power to frame rules for the safe and efficient use of the
nation's airspace. French v. Pan Am Express, Inc., 869 F.2d 1, 5 (1st Cir.1989);
Pension Benefit Guaranty Corp. v. Braniff Airways, Inc. (In re Braniff
Airways, Inc.), 700 F.2d 935, 941 (5th Cir.1983); Air Line Pilots Association,
International v. Quesada, 276 F.2d 892, 894 (2d Cir.1960). In the Act,
Congress authorized the Secretary of Transportation to develop plans for and
formulate policy with respect to the use of the navigable airspace. 49
U.S.C.App. Sec. 1348(a), (c). Congress further directed the Secretary to assign
the use of the navigable airspace under such terms, conditions and limitations as
deemed necessary to insure the safety of aircraft and the efficient utilization of
such airspace. 49 U.S.C.App. Sec. 1348(a). Congress empowered the Secretary
to prescribe rules and regulations to perform these functions. 49 U.S.C.App.
Sec. 1348(c).

The Secretary of Transportation delegated to the Federal Aviation

Administrator the authority to carry out its powers and duties regarding the
safety and utilization of the nation's navigable airspace. 49 U.S.C.App. Sec.
1655(c)(1); 49 C.F.R. 1.47 (1988). Pursuant to its authority, the FAA
promulgated a comprehensive scheme of federal regulations governing all
aspects of air travel, including operations at high density airports. 14 C.F.R.
Sec. 1-199 (1989). The FAA's regulations prescribe rules governing the
allocation, withdrawal and transfer of arrival and departure slots to individual
air carriers and commuter operators at the high density airports. 14 C.F.R. Sec.
93.211 (1989). A "slot" is the operational authority to conduct one landing or
takeoff operation each day during a specific hour or thirty-minute period. 14
C.F.R. Sec. 93.213(a)(2) (1989).

Pursuant to its regulations, in April of 1986 the FAA held a random lottery of
arrival and departure slots to determine their distribution. 14 C.F.R. Sec. 93.225
(1989). By this lottery, the FAA allocated four slots at LaGuardia Airport to
Gull Air, a regional commuter airline. Gull Air utilized these takeoff and
landing slots until March 10, 1987 when Gull Air filed a voluntary petition for

relief under Chapter 11 of the Bankruptcy Code.1 Upon filing, Gull Air ceased
all active flight operations.
8

On July 7, 1987, the FAA notified Gull Air that its slots at LaGuardia had been
withdrawn for nonuse. See 14 C.F.R. Sec. 93.227(a), (d) (1989). The FAA
specified that the effective date of withdrawal was July 17, 1987. The FAA
planned to reallocate the slots to another carrier at a lottery to be held on July
22, 1987. On July 10, after receiving notification of withdrawal from the FAA,
Gull Air filed with the bankruptcy court a motion for authority to sell landing
slots and to enjoin the FAA from obtaining property of the estate, arguing that
the automatic stay provision of the Bankruptcy Code protected the slots against
FAA action. See 11 U.S.C. Sec. 362(a).

At a motion hearing held on July 15, 1987, the bankruptcy court ruled that
pursuant to the automatic stay provision of the Bankruptcy Code, which the
court found applicable, Gull Air's bankruptcy petition operated as a stay on any
action the FAA sought to take regarding Gull Air's slots at LaGuardia. During
the hearing the bankruptcy court articulated two separate grounds for its ruling
that the automatic stay applied. First, the bankruptcy court stated that the
automatic stay applied because "this [was] a post petition attempt by the FAA
to take action against a debtor ... to deprive it of whatever license it may have to
use these slots." See 11 U.S.C. Sec. 362(a)(1). The bankruptcy court then
rejected the FAA's argument that its action qualified as a regulatory exception
to the automatic stay. Although the FAA action was purely regulatory in nature,
the bankruptcy court did not believe it was established to protect the health and
safety of the general public. See 11 U.S.C. Sec. 362(b)(4). Second, the
bankruptcy court articulated another independent rationale for its ruling that the
automatic stay provision applied: "Because it is a property right that you
attempt to foreclose on. Basically, in essence, the action of the FAA is an
attempt to foreclose upon this license." See 11 U.S.C. Sec. 362(a)(3).
Regarding the nature of the slots, the bankruptcy court stated,

10This may well be a property right. But I did not want to in effect say that, because
...
I didn't want, necessarily, to have the FAA stuck with an off the bench opinion based
upon what I had before me. But, if the FAA wants to know what the feeling of the
Court is, and once again gentlemen counsel, please remember that it is only what
you have given me orally here, I am inclined to the proposition that, pressed to the
wall, this would be a property right. But I don't know that I have to find that it is a
property right in its total sense. It's a license in which the debtor has a proprietary
interest since the regulation gives the debtor the privilege to sell it (emphasis
added).

11

12

Thus ruling that the automatic stay provision applied, the bankruptcy court
granted Gull Air's motion for authority to sell, subject to FAA approval. The
bankruptcy court, however, denied the motion to enjoin the FAA because its
ruling on the automatic stay's applicability already protected Gull Air.
Subsequently, Gull Air filed a notice of private sale of the slots for $80,000; the
FAA filed an objection to the sale. At a hearing held on July 29, 1987, the
bankruptcy court approved the sale on the condition that Gull Air would not act
before giving the FAA a reasonable period of time within which to file a motion
for stay pending appeals. On August 20, 1987, the bankruptcy court granted the
FAA's motion for stays pending appeals and consolidated the appeals of both of
its orders. On appeal, the district court affirmed both orders of the bankruptcy
court without opinion. The FAA now appeals the district court's affirmance to
this court.

II.
13

The instant appeal requires this court to rule on whether the automatic stay
provision of the Bankruptcy Code prevents the FAA from withdrawing and
reallocating Gull Air's takeoff and landing slots at LaGuardia Airport. See 11
U.S.C. Sec. 362. Section 362(a) of the Bankruptcy Code provides an automatic
stay of certain actions against the debtor upon the filing of the bankruptcy
petition. 11 U.S.C. Sec. 362(a). Pursuant to section 362(a), the filing of the
petition operates as a stay of:

14

(1) the commencement or continuation, including the issuance or employment

of process, of a judicial, administrative, or other action or proceeding against
the debtor that was or could have been commenced before the commencement
of the case under this title, or to recover a claim against the debtor that arose
before the commencement of the case under this title.

***
15
16

(3) any act to obtain possession of property of the estate or of property from the
estate or to exercise control over property of the estate.

17

11 U.S.C. Sec. 362(a)(1), (a)(3). 2 Section 362(b) specifies several exceptions to

the automatic stay. 11 U.S.C. Sec. 362(b). The exception relevant to this appeal
is found in section 362(b)(4) which provides:

18

(b) The filing of a petition ... does not operate as a stay--

***
19
20

(4) under subsection (a)(1) of this section, of the commencement or

continuation of an action or proceeding by a governmental unit to enforce such
governmental unit's policy or regulatory power.

21

This court notes, however, that this exception only applies to those actions
which would be stayed under section 362(a)(1).

22

In this appeal, we first address whether the FAA's action regarding the slots is
automatically stayed as an act against property of the estate under section
362(a)(3). 11 U.S.C. Sec. 362(a)(3). Concluding that section 362(a)(3) does not
stay the FAA's action, we then consider whether the FAA's action qualifies as a
post-petition proceeding against the debtor automatically stayed under section
362(a)(1). 11 U.S.C. Sec. 362(a)(1). We likewise decide that the FAA's action
regarding the slots does not come within the stay of section 362(a)(1). Thus,
concluding that FAA withdrawal and reallocation of Gull Air's slots are not
stayed under either of these subsections of the Bankruptcy Code's automatic
stay provision, we reverse.

A.
23

We will first address whether the FAA's withdrawal and reallocation of the four
slots at LaGuardia airport constitutes an action against "property of the estate"
automatically stayed under section 362(a)(3) of the Bankruptcy Code. On
appeal, the FAA asserts several alternative arguments as to the inapplicability
of the automatic stay provision. The FAA argues that slots are not property of
the carrier to which they are allocated, but rather operating privileges subject to
absolute FAA control. Because these slots do not represent a property right, the
argument continues, they do not constitute "property of the estate," and the
FAA's actions regulating the slots are not within the purview of section 362(a)
(3)'s automatic stay. Alternatively, the FAA argues that even if Gull Air
possessed some limited proprietary interest in the slots, that interest terminated
automatically by force of regulation, and therefore, the FAA's reallocation of
the slots does not constitute an act to obtain property of the estate.

24

Section 541 of the Bankruptcy Code specifies the types of property which
comprise the debtor's estate. 11 U.S.C. Sec. 541. Pursuant to section 541,
property of the estate includes "all legal or equitable interests of the debtor in
property as of the commencement of the case."3 11 U.S.C. Sec. 541(a)(1). In
determining whether Gull Air's landing slots constitute property of its estate,

therefore, the fundamental question is whether Gull Air has any proprietary
interest in these slots at all, or whether the slots simply represent a privilege to
operate as the FAA asserts.
25

In 1983 the Court of Appeals for the Fifth Circuit addressed the precise issue of
whether arrival and departure slots constitute property. Pension Benefit
Guaranty Corp. v. Braniff Airways, Inc. (In re Braniff Airways, Inc.), 700 F.2d
935, 942 (5th Cir.1983). In In re Braniff, the court ruled that the bankruptcy
court did not have jurisdiction under section 105 of the Bankruptcy Code to
issue orders protecting slots allocated to Braniff from withdrawal by the FAA
because such slots were not property. Id. As the court stated,

26 cannot accept Braniff's characterization of the slots as its property.... The slots
We
are actually restrictions on the use of property--airplanes; not property in themselves.
As such, they are not within the jurisdiction of the [b]ankruptcy [c]ourt under Sec.
105 of the Code.
27

Id. The court added that even if the slots gave rise to some limited proprietary
interest, such a determination might at most allow a debtor to transfer them to
another carrier, but the FAA would have to approve the transfer. Id.

28

Since the Fifth Circuit decided this issue in In re Braniff, three bankruptcy
courts have considered whether slots constitute property of the estate. See Air
Illinois, Inc. v. FAA (In re Air Illinois), 53 B.R. 1, 2-3 (Bankr.S.D.Ill.1985);
American Central Airlines, Inc. v. O'Hare Regional Carrier Scheduling
Committee (In the Matter of American Central Airlines), 52 B.R. 567, 570-71
(Bankr.N.D. Iowa 1985); In re McClain Airlines, Inc., 80 B.R. 175, 178
(Bankr.D.Ariz.1987). The court in In re Air Illinois followed In re Braniff,
holding that no proprietary interest is conveyed when an airline is authorized to
use landing and take-off slots. In re Air Illinois, 53 B.R. at 2. Finding that the
slots did not constitute property and thus, not property of the estate, the In re Air
Illinois court ruled that the automatic stay of section 362(a) did not stay the
FAA's revocation of the debtor's slots. Id. at 2-3.

29

The courts in American Central Airlines and In re McClain Airlines, however,

disagreed with the In re Braniff court as to the nature of arrival and departure
slots. American Central Airlines, 52 B.R. at 570-71; In re McClain Airlines, 80
B.R. at 178-79. In American Central Airlines, in which the court held that
procedures employed by an airport scheduling committee to reallocate the
debtor's slots constituted a "proceeding against the debtor" in violation of the
automatic stay of section 362(a)(1), the court expressed the opinion, although
unnecessary to decide the case, that the slots constituted property of the estate

protected by the automatic stay of section 362(a)(3). 52 B.R. at 570-71. The

court stated that "possession of an airport slot also entitles the holder to airport
access ..." and that "[s]uch a possessory interest must constitute property of the
estate." Id. at 571.
30

Similarly, in In re McClain Airlines, the court ruled that the debtor's slots
constituted property of the estate. 80 B.R. at 179. The facts in In re McClain
Airlines are most analogous to the facts of the dispute between Gull Air and the
FAA; in that case, the FAA had similarly withdrawn the debtor's slots for
nonuse pursuant to its regulations. Id. at 177. The debtor argued that it
continued to possess rights in the slots because the FAA's withdrawal was
improper. Id. at 179. The court held that the debtor did possess property rights
in the slots, but that it had lost those rights if the FAA had properly and
permanently withdrawn them.4 Id. In holding that the slots were property, the
court was influenced by the FAA's 1986 amendment to its regulations
providing for the transfer of slots among carriers in exchange for money. Id. at
179; see 14 C.F.R. Sec. 93.221(a) (1989).

31

We must agree with the court in In re McClain Airlines that administrative

developments since the Fifth Circuit's decision in In re Braniff affect the nature,
and influence our characterization, of arrival and departure slots. By
amendment to its regulations, effective April 1, 1986, the FAA provided that
"slots may be bought, sold or leased for any consideration and any time
period...." 14 C.F.R. Sec. 93.221(a) (1989). Pursuant to the regulations, such
transfers must comply with certain conditions, including FAA approval. See 14
C.F.R. Sec. 93.221 (1989). In adopting this amendment, the Department of
Transportation stated:

32 Department has decided to adopt the "buy-sell" proposal to permit maximum

The
reliance on market forces to determine slot distribution following the initial
allocation of slots. The Department believes that the rule minimizes the need for
government intervention in the continuing allocation and distribution of slots....
Finally, the Department believes that a market in slots will permit long-range
stability in carrier planning and marketing that would not be available if slots were
periodically reallocated using another mechanism such as lotteries or auctions.
33

High Density Traffic Airports; Slot Allocation and Transfer Methods; Final
Rule, 50 Fed.Reg. 52,180, at 52,184 (1985).

34

In light of this "buy/sell" provision, which did not exist when the Fifth Circuit
decided In re Braniff, we must conclude that by granting carriers the right to
buy and sell slots with the intent of maximizing reliance on market forces and

minimizing government involvement regarding slot distribution, the FAA

grants to carriers a limited proprietary interest in slots. See Continental Air
Lines, Inc. v. Hillblom (In re Continental Air Lines, Inc.), 61 B.R. 758, 784 n.
51 (S.D.Tex.1986). We reach this conclusion despite the FAA's provision that "
[s]lots do not represent a property right but represent an operating privilege
subject to absolute FAA control...." See 14 C.F.R. Sec. 93.223(a) (1989). This
declaration by the FAA does not detract from the reality that a market for these
slots exists in which carriers may buy and sell these slots. We cannot deny that
a carrier possesses a proprietary right in allocated slots, even if limited as to the
superior rights of the FAA. Accordingly, upon allocation by lottery in April of
1986, Gull Air received a proprietary interest in the four slots at LaGuardia
airport.
35

Gull Air's interest in the slots, however, is a limited interest encumbered by

conditions that the FAA imposed in its regulations. See 14 C.F.R. Sec. 93.211229 (1989). One condition placed on a carrier's rights in slots is the mandatory
use requirement. See 14 C.F.R. Sec. 93.227 (1989). The regulations provide
that "any slot not utilized 65 percent of the time over a two-month period shall
be recalled by the FAA." 14 C.F.R. Sec. 93.227(a) (1989). When a carrier fails
to comply with this "use or lose" provision, its interest in the unused slots
terminates. The slots are withdrawn and the FAA may reallocate them to other
carriers. See 14 C.F.R. Sec. 93.227 (1989).

36

In this case, Gull Air failed to satisfy this condition; Gull Air ceased using the
four slots at LaGuardia airport upon filing its bankruptcy petition on March 10,
1987. For the first 60 days after filing its petition, Gull Air was exempted from
complying with the "use or lose" provision. See 14 C.F.R. Sec. 93.227(d)
(1989). Gull Air's "grace period" ended on May 9, 1987, after which Gull Air
was required to comply with the "use or lose" provision to assure its continued
possession of the slots. Gull Air, however, never resumed use of the four
LaGuardia slots, thus failing to utilize the slots 65 percent of the time over a
two-month period.5 Having failed to satisfy this condition, its interest in the
slots terminated at the latest on July 8, 1987.

37

Gull Air argued that termination of its proprietary interest in the slots for nonuse did not occur automatically by operation of contract or law, but rather
required an affirmative and discretionary act by the FAA to withdraw the slots.
The FAA's affirmative act of withdrawal, Gull Air contended, constituted an act
to obtain possession of property of the estate stayed by Sec. 362(a)(3) of the
Bankruptcy Code. We are unpersuaded that termination of Gull Air's rights to
the slots required an affirmative act of withdrawal. Withdrawal of slots for nonuse does not involve a discretionary decision by the FAA, but is mandatory; the

regulation states that slots "... shall be recalled by the FAA" for non-use. See 14
C.F.R. Sec. 93.227(a) (1989). Since the FAA is given no discretion, but rather
must recall the slots, we believe that Gull Air's proprietary interest in the slots
ceased for all practical purposes when Gull Air failed to satisfy a necessary
condition to its continued possession of the slots, namely use of the slots.6 Gull
Air's interest in the slots thus terminated by force of regulation with no need for
affirmative action by the FAA. See 14 C.F.R. Sec. 93.227(a) (1989).
Accordingly, Gull Air's proprietary interest in the slots had expired as of July 8,
1987.7
38

Regardless of whether Gull Air's proprietary interest in the slots rises to the
level of "property of the estate" within the meaning of the bankruptcy laws,8
Gull Air lost its limited proprietary interest by its failure to satisfy a qualifying
condition. The Bankruptcy Code does not create or enhance property rights of a
debtor. Moody v. Amoco Oil Company, 734 F.2d 1200, 1213 (7th Cir.), cert.
denied, 469 U.S. 982, 105 S.Ct. 386, 83 L.Ed.2d 321 (1984); In re Advent
Corp., 24 B.R. 612, 614 (Bankr. 1st Cir.1982); United States v. Professional
Sales Corp. (In re Professional Sales Corp.), 56 B.R. 753, 764
(Bankr.N.D.Ill.1985); Shell Oil Company v. Anne Cara Oil Co., Inc. (In re
Anne Cara Oil Company), 32 B.R. 643, 647-48 (Bankr.D.Mass.1983); D.H.
Overmyer Telecasting Co., Inc. v. Lake Erie Communications, Inc. (In re D.H.
Overmyer Telecasting Co., Inc.), 35 B.R. 400, 404 (Bankr.N.D. Ohio 1983).
Thus, when a debtor's proprietary interest expires by operation of an express
condition, the Bankruptcy Code does not preserve that interest and prevent
termination. See Good Hope Refineries, Inc. v. Benavides, 602 F.2d 998, 100103 (1st Cir.), cert. denied, 444 U.S. 992, 100 S.Ct. 523, 62 L.Ed.2d 421 (1979);
In re P.I.N.E., Inc., 52 B.R. 463, 470 (Bankr.W.D.Mich.1985); In re Crabb, 48
B.R. 165, 167 (Bankr.D.Mass.1985). Accordingly, Gull Air's filing of a
bankruptcy petition did not preserve Gull Air's interest in the LaGuardia slots
and prevent that interest from automatically expiring upon Gull Air's failure to
use the slots as required.

39

Gull Air's interest in the slots having automatically ceased prior to Gull Air's
request for authority to sell the slots, Gull Air no longer possessed any interest
in the slots which it could sell. Thus, the bankruptcy court erred in granting
Gull Air authority to sell the slots and approving a private sale. Moreover,
because Gull Air lost its proprietary interest in the slots without any affirmative
act of withdrawal by the FAA, the FAA's withdrawal and reallocation of the
slots do not constitute acts to obtain possession of property of the estate under
section 362(a)(3) of the Bankruptcy Code. We conclude, therefore, that the
automatic stay of section 362(a)(3) does not prevent the FAA from reallocating
the four LaGuardia slots.

B.
40

We will next consider whether the FAA's withdrawal and reallocation of the
LaGuardia slots are automatically stayed under section 362(a)(1) of the
Bankruptcy Code. Again, section 362(a)(1) stays "the commencement or
continuation, including the issuance or employment of process, of a judicial,
administrative, or other action or proceeding against the debtor...." 11 U.S.C.
Sec. 362(a)(1). On appeal, the FAA argues that its withdrawal and reallocation
of the slots is excepted from the stay of section 362(a)(1) pursuant to section
362(b)(4) which provides that "[t]he filing of a petition ... does not operate as a
stay ... of an action or proceeding by a governmental unit to enforce such
governmental unit's police or regulatory power." See 11 U.S.C. Sec. 362(b)(4).
Because we conclude that the FAA's withdrawal and reallocation of slots do not
qualify as administrative actions or proceedings against the debtor within the
purview of section 362(a)(1), we do not reach the FAA's arguments as to the
applicability of the section 362(b)(4) exception.

41

As the legislative history of the automatic stay provision reveals, the scope of
section 362(a)(1) is broad, staying all proceedings, including arbitration, license
revocation, administrative and judicial proceedings. H.R.Rep. No. 595, 95th
Cong., 1st Sess. 340 (1977), reprinted in 1978 U.S.Code Cong. & Admin.News
5787, 6297; S.Rep. No. 989, 95th Cong., 2d Sess. 50 (1978), reprinted in 1978
U.S.Code Cong. & Admin.News at 5836. The actions and proceedings which
courts have held stayed under section 362(a)(1) have involved affirmative
actions by governmental bodies or other acting entities taken after discretionary
decisions, deliberation, investigation and/or a hearing. See Corporacion De
Servicios Medicos Hospitalarios De Fajardo v. Mora, et al. (In re Corporacion
De Servicios Medicos Hospitalarios De Fajardo), 805 F.2d 440 (1st Cir.1986)
(department of health's termination of debtor's contract and revocation of
debtor's license to operate hospital); In re Advent Corporation, 24 B.R. 612
(Bankr. 1st Cir.1982) (action taken by surety and customs to cancel bond);
Advanced Professional Home Health Care, Inc. v. Blue Cross and Blue Shield
of Michigan (In re Advanced Professional Home Health Care, Inc.), 82 B.R.
837 (Bankr.E.D.Mich.1988) (Department of Health and Human Services
withholding medicare funds from debtor health care provider); Pester Refining
Company v. Insurance Company of North America (In the Matter of Pester
Refining Company), 58 B.R. 189 (Bankr.S.D.Iowa 1985) (insurance company's
cancellation of debtor's insurance policy); American Central Airlines, Inc. v.
O'Hare Regional Carrier Scheduling Committee (In the Matter of American
Central Airlines), 52 B.R. 567 (Bankr.N.D.Iowa 1985) (airport scheduling
committee's procedure to deprive debtor airline of landing slots); Wegner
Farms Company v. Merchants Bonding Company (In re Wegner Farms

Company), 49 B.R. 440 (Bankr.N.D.Iowa 1985) (bonding company's

cancellation of debtor's grain dealer's surety bond); In re Rath Packing Co., 35
B.R. 615 (Bankr.N.D.Iowa 1983) (state insurance commissioner's revocation of
debtor's self-insurance exemption).
42

As previously discussed, withdrawal of Gull Air's slots did not involve an

affirmative act on the part of the FAA. Gull Air's rights in the slots ceased
automatically without any FAA action because Gull Air failed to use them. See
14 C.F.R. Sec. 93.227(a) (1989). The FAA's July 7 letter was merely
notification to Gull Air that it had lost its rights in the slots.9 Nor did
withdrawal involve a discretionary decision or deliberation by the FAA;
withdrawal was automatic and mandatory upon Gull Air's failure to use the
slots as required. See 14 C.F.R. Sec. 93.227(a) (1989). Consequently, we
conclude that withdrawal of Gull Air's slots does not constitute an
administrative action or proceeding against the debtor falling within the
purview of section 362(a)(1) of the Bankruptcy Code. Additionally, once Gull
Air's rights in the slots had expired, any action the FAA might take to reallocate
the slots would not qualify as an action or proceeding against the debtor.10

43

Furthermore, proceedings or claims arising post-petition are not subject to the

automatic stay of section 362(a)(1). See Avellino & Bienes v. M. Frenville Co.,
Inc. (In the Matter of M. Frenville Co., Inc.), 744 F.2d 332, 335 (3d Cir.1984),
cert. denied, 469 U.S. 1160, 105 S.Ct. 911, 83 L.Ed.2d 925 (1985); In re
Anderson, 23 B.R. 174, 175 (Bankr.N.D.Ill.1982). Thus, even if withdrawal or
reallocation were to qualify as "an action or proceeding against the debtor," it
would not be stayed because it arose post-petition. Neither withdrawal, nor
reallocation of Gull Air's slots "was or could have been commenced before
commencement" of the bankruptcy case as required to stay the action under
section 362(a)(1). See 11 U.S.C. Sec. 362(a)(1) (1989). Gull Air did not fail to
comply with the "use or lose" provision of the regulations until after it filed for
bankruptcy. See 14 C.F.R. Sec. 93.227. Under its own regulations, therefore,
the FAA could not have withdrawn or reallocated Gull Air's slots because of
non-use prior to Gull Air's filing for bankruptcy and subsequent failure to
comply with the "use or lose" provision. See id. Thus, withdrawal and
reallocation of the LaGuardia slots are not stayed under section 362(a)(1) of the
Code because neither qualifies as an action or proceeding against the debtor
which was or could have been commenced before the commencement of the
bankruptcy case.

III.
44

In sum, the automatic stay provision of the Bankruptcy Code does not stay

withdrawal of Gull Air's slots or the FAA's reallocation of these slots. Although
Gull Air did possess a limited proprietary interest in the arrival and departure
slots at LaGuardia, that interest expired automatically upon Gull Air's failure to
use the slots as required by the FAA regulations. Cessation of Gull Air's interest
required no affirmative act or decision of withdrawal by the FAA, and thus
withdrawal of the slots did not constitute an act to obtain possession or control
over property of the estate stayed under section 362(a)(3). Likewise, once Gull
Air lost its proprietary interest in these slots, the FAA's reallocation of these
slots could not qualify as an act against property of the estate. The FAA,
therefore, is free to reallocate these slots. Gull Air, in contrast, cannot sell these
slots because it no longer possesses any interest to sell. Furthermore, the
automatic stay of section 362(a)(1) does not apply because withdrawal and
reallocation of these four slots are not actions or proceedings against the debtor
which could have been commenced before Gull Air filed for bankruptcy.
Accordingly, the district court erred in affirming the bankruptcy court's orders
authorizing Gull Air to sell the LaGuardia slots and approving a private sale of
these slots.
45

We reverse.

Of the District of Massachusetts, sitting by designation

On February 29, 1988, the bankruptcy court confirmed a reorganization plan

providing for the liquidation of Gull Air's assets and a pro rata distribution to
creditors

The bankruptcy court was ambiguous as to whether it held that FAA

withdrawal and reallocation of the slots were stayed under section 362(a)(1) or
section 362(a)(3). Consequently, this court considers the issue of whether the
FAA's action is stayed under both subsections

Section 541 also excepts certain property interests from the debtor's estate. For
example, subsection (b)(2) provides that "[p]roperty of the estate ... ceases to
include any interest of the debtor as a lessee under a lease of nonresidential real
property that has terminated at the expiration of the stated term of such lease
during the case." 11 U.S.C. Sec. 541(b)(2)

In In re McClain Airlines, the debtor contested the FAA's withdrawal of the

slots. 80 B.R. at 179. The court ruled that if the debtor had a right to contest the
withdrawal under federal law, this right to contest constituted property of the
estate. Id. Thus, the court held the FAA's withdrawal of the slots temporarily

stayed pending further proceeding in a forum of appropriate jurisdiction, an

administrative forum, to conclusively establish the debtor's slot rights. Id. at
180
5

The FAA and Gull Air direct our attention to different two-month periods over
which to analyze Gull Air's compliance with the "use or lose" condition. The
FAA uses the two-month period from May 1, 1987 to June 30, 1987. Gull Air
uses the two-month period immediately following Gull Air's grace period, from
May 9, 1987 to July 8, 1987. No matter which period we look at, Gull Air
obviously did not comply with the mandatory usage requirement; Gull Air did
not use the slots during either period at all. The FAA promulgated these
regulations and we would normally defer to its application of the regulation.
See High Density Traffic Airports; Slot Allocation and Transfer Methods; Final
Rule, 50 Fed.Reg. at 52,189 (1985). The 60-day grace period, however,
complicates the FAA's application of the "use or lose" provision because the
two-month period used by the FAA overlaps Gull Air's grace period. For the
purposes of determining when Gull Air's interest in the slots terminated,
therefore, we will recognize the later period identified by Gull Air.
Accordingly, because of non-use, Gull Air's interest in the slots ceased at the
earliest, on June 30, 1987, and at the latest on July 8, 1987

Gull Air's interest could be characterized as a determinable fee interest in the

slots, which interest reverts to the FAA upon failure to use the slots as
mandated in the regulations. Cf. Good Hope Refineries, Inc. v. Benavides, 602
F.2d 998, 1001 (1st Cir.), cert. denied, 444 U.S. 992, 100 S.Ct. 523, 62 L.Ed.2d
421 (1979)

Under our interpretation, the FAA's July 7 letter to Gull Air was not an act
withdrawing the slots, but was, in effect, merely notification to Gull Air that its
interest in the slots had terminated by force of regulation. Upon receipt of
notice a carrier must cease all use of those slots, 14 C.F.R. Sec. 93.227(e),
because it no longer has an interest in them. In this case the FAA specified in
its letter that the withdrawal would be effective July 17 for administrative
purposes and to allow Gull Air time to prepare for the loss of the slots

In this case, we need not decide the issue of whether a carrier's proprietary
interest in an arrival or departure slot constitutes "property of the estate" within
the meaning of the Bankruptcy Code. See 11 U.S.C. Sec. 362(a)(3); 11 U.S.C.
Sec. 541. Even if a carrier's interest in a slot rises to the level of "property of the
estate," the interest would cease to be "property of the estate" when the interest
expired by force of regulation. A carrier's interest in a slot is analogous to a
debtor's interest in a lease which ceases to be "property of the estate" when the
interest terminates at the expiration of the stated term of such lease during the

bankruptcy case. See 11 U.S.C. Sec. 541(b)(2); supra note 3

9
10

See supra note 7

The FAA's regulations do provide that in certain circumstances the FAA may
actively withdraw slots from carriers to provide such slots for international
operations, essential air services, or other operational needs. See 14 C.F.R.
Secs. 93.223, 93.227(h) (1989). Under these provisions, withdrawal of slots
does involve a discretionary decision and an affirmative act of withdrawal by
the FAA. Thus, withdrawal pursuant to these regulations might constitute an
action or proceeding against the debtor stayed under section 362(a) of the
Bankruptcy Code if the FAA did or could have taken the action prior to the
carrier's filing for bankruptcy. 11 U.S.C. Sec. 362(a). If the automatic stay did
apply in such a case, the issue would then be whether the FAA's action fell
within the exception of section 362(b)(4) for governmental enforcement of
police or regulatory powers. See 11 U.S.C. Sec. 362(b)(4). We leave that issue
for later determination in an appropriate case