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administrative expenses of the kind specified in section 503(b) or 507(b) of this title." Parsing the language of this provision while comparing it to the escalating levels of risk in the other subsection of section 364, the court concluded that section 364(c)(1) granted the post-petition lenders something other than administrative expense claims, but not quite secured claims. What effect? See infra, Part IV.D. (Standing to Object to Plan Confirmation).
* In re Sheehan Memorial Hosp., 377 B.R. 63 (Bankr. W.D.N.Y. Oct. 2007) (Bucki, J.)
Employee was not entitled to administrative priority on her wrongful termination claim.
A former employee filed a proof of claim against the chapter 11 debtor arising from the employees early termination without receiving notice as required by the pre-petition employment agreement. The claimant requested the allowance of her claim under the wrongful termination of employment as an administrative priority claim. The court allowed the proof of claim as a general unsecured claim, but rejected the claim for administrative priority. Said the court, the claimant's contractual rights vested pre-petition when she executed the agreement, and her damages were not for services actually performed, but rather for services she was not allowed to perform by way of the wrongful termination. The court further noted that the debtor's rejection of all executory contract under the terms of the confirmed plan constituted a breach as of the day before the filing of the chapter 11 petition, further lending to the conclusion that her rights vested pre-petition. See 11 U.S.C. S 365(g)(1). Thus, the court concluded that administrative priority could not have attached to the claim.
* In re Security Aviation, Inc., 374 B.R. 720 (Bankr. D. Alaska Aug. 2007)
(MacDonald, J.) Attorney's fees did not qualify as administrative expense. Months before the commencement of the chapter 11 bankruptcy case, the debtor instigated a state court action against several defendants. Once in bankruptcy, one of the defendants filed a proof of claim against the debtor asserting that it held a contingent claim against the debtor for fees incurred in the state court law suit -- state rules require the losing party to pay the successful party's litigation costs. The defendant claimed its attorney fees as an administrative expense under section 503(b)(1). The debtor objected. The court found that, to the extent that the defendant held a claim for attorney's fees and costs under the state procedural rules, that claim would be a general unsecured claim rather than an administrative expense. Said that court, the fees incurred post-petition based on litigation commenced pre-petition did not arise from a postpetition transaction, nor were they directly and substantially beneficial to the estate. Furthermore, even under the "fundamental fairness doctrine" of Reading Co. v. Brown, 391 U.S. 471, 88 S.Ct. 1759, 20 L.Ed.2d 751 (1968) and in light of the American rule, the court found that it would not be fundamentally unfair to treat a claiming litigant's fees incurred post-petition as a general unsecured claim.
