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* Zurich American Insurance Co. v. Lexington Coal Co. (In re HNRC Dissolution Co.), 371 B.R. 210 (E.D. Ky. July 2007) (Bunning, J.)
Claim estimation under section 502(c) was inapplicable to administrative expense claims.
In a case of first impression in the Sixth Circuit, the Kentucky district court held that the ability to estimate claims under section 502(c) could not be applied in the post-petition context to estimate post-petition administrative expense claims. The creditors here were insurance carriers whose claims were based on actuarial judgment and could not be calculated with any real precision. The claims had been collateralized by a series of bonds which ultimately failed to cover the entire claim. The carriers sought to recover the deficiency as an administrative expense, thinking that the entire claim would be allowed under section 503. The district court held, to the contrary, that these claims were not entitled to administrative priority because they were not "actual" costs. As a matter of policy, the court further concluded that the insurance carriers, rather than the other creditors, should bear the risk for the devaluation of collateral for which they had bargained at arms' length.
* In re Liberty Fibers Corp., 383 B.R. 713 (Bankr. E.D. Tenn. Jan. 2008) (Parsons, J.)
Speculative benefit to the estate did not warrant administrative priority for an indirect claim. The debtor in this case owned real estate which contained several different facilities, including a waste water treatment plant. After conversion to chapter 7, the trustee sold the rights to dismantle and remove property from one of the facilities to an entity called A&E. The trustee excluded the real estate and the water treatment facilities from the sale to A&E. During A&E's salvage efforts, however, A&E discharged waste water which then passed through the debtor's waster water treatment facilities, incurring costs. The trustee tried to collect payment from A&E for those costs, but A&E refused to pay and further refused to shut off the water. The trustee then sold the waste water treatment facilities to a second purchaser MPLG. Because A&E continued to discharge waste water, MPLG attempted to collect payment from A&E, but to no avail. When A&E refused to pay, MPLG sought payment from the trustee, claiming that the costs incurred by A&E were administrative expenses under section 503(b)(1)(A).
In disallowing MPLG's request, the court held that the claim failed the well-accepted "benefit of the estate" test because, as a threshold matter, the claim did not arise from a transaction with the bankruptcy estate. Instead, said the court, the claim arose from A&E's salvaging efforts and so should have been borne by A&E, not the estate. The court did acknowledge that MPLG's treatment of A&E's waste water may have provided some benefit to the estate to add value to the real property. That value, however, was "speculative at best" and in no way "substantial" as required by the applicable test. The court finally found the Reading exception inapplicable on these facts because the claim did not arise from the trustee's post-petition negligence and so could not be classified "a cost ordinarily incident to the operation of a business."
* In re Mayco Plastics, Inc., 379 B.R. 691 (Bankr. E.D. Mich. Jan. 2008) (Shefferly, J.)
Post-petition lenders' claims were not administrative expense claims under section 503(b).
The court entered an interim order and then a final order approving post-petition financing under section 364(c)(1), which provided the lenders allowed claims "with priority over any or all
