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Claimants were laid off by the debtor on August 16, 2007 without receiving 60 days' advance notice; the Debtor then filed chapter 11 on August 21, 2007. The Claimants allege that the 60-day liability period for the WARN Act violation runs from August 16, 2007 and into the post-petition period and that, therefore, the post-petition portion of their claims are entitled to administrative expense status.
Issues: Whether § 503(b)(1)(A)(ii) grants an administrative expense claim under the confirmed chapter 11 plan to Claimants laid off prepetition alleging damages under the WARN Act.
Rules: Generally, a claimant asserting an administrative expense under § 503(b)(1)(A) must show that the claim was incurred (i) post-petition, and (ii) that it directly and substantially benefitted the estate and that the expense was actual and necessary. The "type of award contemplated by § 503 must originate from a federal court of general jurisdiction."
Holding: The Claimants are not entitled to an administrative expense claim for the post-petition portion of their Claims because "by definition, a WARN Act claim, for an employee terminated prepetition, can never be an actual and necessary expense of preserving an estate... because the claim did not originate post-petition, and the employee did nothing to preserve the bankruptcy estate. The claim is rooted entirely in prepetition conduct."
Reasoning: The WARN Act, passed in 1988, mandates that certain employers provide their employees with 60 days' written notice of a layoff or plant closing. Subsection (ii) of § 503(b)(1)(A) was a recent addition by BAPCPA and the legislative history is sparse. However, subsections (i) and (ii) are joined by the word 'and,' which "would require that both parts of the subsections must exist in order for a claimant to be entitled to an administrative expense." Here, the only post-petition attribute of the Claims is purely a calculation of liability. Therefore, the Claimants, who were fired prepetition, are unable to show that they provided post-petition services as required under subsection (i). Moreover, the Claimants are unable to meet the requirements of subsection (ii) because the Claimants did not receive an award by the National Labor Relations Board or any other court for the damages asserted in the Claims. Lastly, the court said that it did not have "the power to adjudicate, in the first instance, whether a pre-petition penalty can be liquidated post-petition, and then be accorded administrative status, which status then comes ahead of specific priority wage claims under § 503(a)(4)." The Claimants are treated fairly under the Bankruptcy Code in two ways: First, they are given a priority up to the cap of $10,950 if they were employed pre-petition, and second, if they were employed post-petition, they are granted an administrative claim for such work.
Facts: A number of parties filed claims for administrative expenses under § 503(b)(9) and the Debtor objected on the basis that the application of § 502(d) precludes such an administrative claim.
Issues: Whether § 502(d) of the Bankruptcy Code may be used to disallow an administrative expense claim under § 503(b)(9).
Rules: Section 502(d) does not apply generally to § 503(b) administrative expense claims and may not be used to disallow an administrative expense claim filed pursuant to § 503(b)(9).
Holding: The Debtors' objections are denied.
Reasoning: The court first discusses § 503(b)(9) generally, including its effects, and then steps through cases (which are split) that dealt with whether § 502(d) applies to § 503(b) generally. The court notes that an administrative expense under § 503(b)(9) is a prepetition debt and that § 502(d) is designed to make sure that there is equality of distributions by prohibiting or delaying payments to a creditor that has not repaid an avoidable transfer or turned over property of the estate. For a
