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plan under ERISA's distress provisions. The fact that ERISA does not compel payment of those premiums until the debtor obtains its discharge in bankruptcy (or has its case dismissed) does not affect when PBGC's claim arises, said the court. The "right to payment," though contingent upon the debtor's actual plan termination, arises under the statute when the debtor and the PBGC first contemplate the debtor's possible distress termination.
Second, the court compared the DRA's premium obligations to contractual and tort liabilities. Contractual liability arise when the contract is executed and may be contingent upon some later event contemplated by the parties. Tort liability, on the other hand, arises when the tort is committed and is usually fixed at that time. Statutory liability, said the court, falls somewhere in between those two extremes. In this particular case, the court recognized that the debtor had met with PBGC at least twice before filing bankruptcy. During those meetings, the parties discussed the possibility that the debtor may terminate its pension plans. In fact, the court found that the debtor actually did intend to terminate its pension plans before filing for bankruptcy. Under those facts, the court concluded that the PBGC's claims were satisfied by the terms of the plan and otherwise discharged as a general, unsecured pre-petition claim.
* Nester v. Gateway Access Solutions, Inc. (In re Gateway Access Solutions, Inc.), 374 B.R 556 (Bankr. M.D. Pa. Sept. 2007) (Opel, J.)
Court converted a case to chapter 7 when movants established cause and the debtor failed to demonstrate unusual circumstances. In this case, the movants successfully established cause to convert the case to chapter 7 by demonstrating that the estate was continuing to suffer losses and that the debtor had no reasonable likelihood of rehabilitation. See 11 U.S.C. S 1112(b)(4)(A). Specifically, the court found that the monthly operating reports demonstrated an undisputed downward trend in the debtor's cash flow and accounts receivable. Furthermore, the exclusivity period lapsed without the debtor having filed disclosure statements or a plan of reorganization. As further cause to convert, the court found evidence of gross mismanagement. See id. S 1112(b)(4)(B). Said the court, the debtor's only true principal was a full-time anaesthesiologist, and, while his intentions may have been genuine, he was unable to marshal adequate time to usher the debtor toward rehabilitation. The burden thus shifted to the debtor to demonstrate specific unusual circumstances that would outweigh the foregoing causes to convert. The debtor, however, could not elucidate any such circumstances. The fact that the debtor's officers resigned prior to the commencement of the case was hardly unusual, said the court. Also unavailing was the debtor's contention that the movants sought to delay the debtor's rehabilitation by filing abusive pleadings. The court found it disingenuous of the debtor, without also moving for sanctions under Bankruptcy Rule 9011, to argue that these pleadings were abusive, filed in bad faith, or for illegitimate purposes. Finally, the court found the broad support of conversion to be a better barometer of the creditors' best interests when compared to the debtor's unsubstantiated arguments to the contrary.
