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govern rent payment obligations and precludes § 503(b)(1) priority.
Issues: Whether stub rent is an administrative expense claim under § 503(b)(1) or whether § 365 provides an exclusive mechanism under which a landlord may recover rent.
Rules: Section 365(d)(3) does not preclude the application of § 503(b) so that stub rent becomes an allowed administrative expense claim.
Holding: Affirmed. Stub rent is an administrative expense claim, and the bankruptcy court properly allowed the administrative expense claim in this case.
Reasoning: Section 365(d)(3) "struck a balance of equities. On the one hand, a commercial landlord may not evict his bankrupt tenant... for as long as seven months. On the other hand, a debtor-tenant must pay rent during this interim period; the landlord need not pursue a burdensome administrative expense claim to recover what he is owed under the lease. Additionally, the landlord's period of uncertainty, even if burdensome, is capped at seven months..." But, just "because § 365(d)(3) now makes post-petition rent automatically payable, does not mean that, when a debtor-tenant's postpetition occupancy and use of property is outside the ambit of § 365(d)(3), landlords may not recover under the traditional administrative expense procedure." Additionally, the language - the word 'notwithstanding' - of § 365 is not such that § 365 preempts other statutory sections of the Bankruptcy Code so that it precludes the allowance of an administrative expense claim. In fact, § 503(b) affirmatively "commands that rent must be recoverable under the administrative expense procedure..." and, although § 503(b) does list certain exceptions to its command, "notably absent from these exclusions is rent for post-petition occupancy and use." The legislative history and statutory interpretation canons support the court's reading of §§ 365(d)(3) and 503(b). Here, the stub rent met the requirements for allowance of § 503(b)(1) - it was an actual expense and was necessary for the preservation of the estate - the premises was rented to a liquidator to conduct what resulted in a profitable store-closing sale.
Facts: Eagle-Picher Technologies, LLC ("EP Tech") filed chapter 11 in 2005. The EPA filed a claim against EP Tech under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"). Under CERCLA, the government may recover the cost of cleaning up hazardous waste from the parties responsible for its release. EP Tech was incorporated in 1998; that same year, it acquired a division of EP Industries, Inc. ("EP Inc.") pursuant to an Assignment and Assumption Agreement (the "1998 Agreement"). A manufacturing plant in Socorro, NM (the "Socorro Plant") was among the property interests that EP Tech purchased. Additionally, the 1998 Agreement states that EP Tech "has agreed that it will accept such assignment and will assume all of the liabilities and obligations of the Assignor with respect to the Business... [and EP Tech] agrees to perform, pay, discharge and comply with all of the covenants, conditions, agreements, terms, obligations and restrictions to be performed or complied with on the part of the Assignor under or in connection with the Business or the Obligations arising from and after the date hereof..." Since 1963, goods that involved the use of trichlorethylene or TCE were being manufactured at the Socorro Plant; EP Tech contends that the goods it manufactured there did not use TCE. By 1990 TCE had been detected at the Orson Well, which was about a mile and a half from the Socorro Plant, but it was not until 2006-2007 that the TCE at the Orson Well was definitively linked to the Socorro Plant. In September 2007, the EPA put the Orson Well on its Superfund National Priorities List- the list of hazardous waste sites designated for a priority cleanup.
