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testimony of the current rate of inflation). The court then determined the discount rate to be the mid-point between the debtor's proposed discount rate (which captured only the industry-wide risks inherent with a stream of income) and the indenture trustee's proposed rate (which captured the local risks inherent with this stream of income). The court then set forth its calculations in a table using these rates and values. The court concluded that the replacement value of the collateral was the resulting sum from the table. No, Judge Wedoff does not wear his green visor in open court.
* In re Carolina Tobacco Co., 375 B.R. 602 (Bankr. D. Or. Aug. 2007) (Perris, J.)
Claim was disallowed because of the claimant's failure of proof and "utter lack of credibility." Years before the commencement of the case, the claimant entered into an oral transaction with the debtor's parent company. Just before the petition date, the parent company moved the debt onto the debtor's balance sheet. The debtor even scheduled the debt in as being owed to the claimant. Nevertheless, several interested parties became suspicious of the transactions giving rise to the claim and so objected to the claim. During discovery, the claimant, the debtor, and the parent company's principals changed their stories about the nature of the debt several times and could not come up with a single, comprehensible story. The court ultimately sustained the claim objection, concluding that none of the claimant's evidence was credible and that the claimant had failed to prove that its claim was valid.
* Brown & Cole Stores, LLC v. Associated Grocers, Inc. (In re Brown & Cole Stores, LLC), 375 B.R. 873 (9th Cir. B.A.P Aug. 2007) (Montali, J.)
Debtor could setoff its unsecured claim against the creditor's "special" administrative expense claim. After allowing the creditor's claim for goods supplied to the debtor within 20 days of the petition date as an administrative expense under new section 503(b)(9), the bankruptcy court denied the debtor's right to setoff its claim for pre-petition breach of contract against the creditor's administrative claim.
On appeal, the B.A.P. reversed the latter ruling, holding that the general rule under section 553(a) precludes setoff against administrative priority claims because, generally speaking, administrative expenses are debts incurred post-petition. This "new category" of administrative expense claims under new section 503(b)(9), however, is different from all other administrative expenses. Section 503(b)(9) claims are debts incurred pre-petition -- in fact, by definition, they must be incurred within the 20 days before the petition date. Thus, concluded the panel, because these 503(b)(9) expense claims are incurred pre-petition, they are now subject to setoff under section 553(a) ("a mutual debt owing by such creditor to the debtor that arose before the commencement of the case") -- perhaps, another of BAPCPA's "intended" consequences.
