  |
  |
  |
    
  
   |
 | |||
|
|
|
|
| |||
number of reasons, § 502(d) does not apply to § 503: first, under the plain language of § 502, although § 502(d) does apply to post-petition claims (but only those governed by § 501 and § 502) it is entirely separate from § 503. Second, administrative expenses are specifically filed under § 503 (not § 501) which is the sole method of allowing administrative expenses and which contains different procedures for the allowance of such claims. Third, to adopt a position in which § 502(d) applies to § 503(b)(9) results in a direct contradiction of two mandatory provisions: §§ 502(d) and 503(b). The qualifying clause in § 502(d) does not mention § 503(b) and there is no other provision in the code that harmonizes these two sections. Fourth, § 503(b)(9) claims are not the only prepetition claims given administrative status, and thus, their status as such is not dispositive. Fifth, § 503(b)(9) claims do not have some special status under which they may be treated differently than other § 503(b) claims, and if Congress intended to give them special treatment, it could have easily done so.
Facts: On March 10, 2008, the debtors sold all of their assets and terminated all their employees. On March 17, 2008, the debtors declared chapter 11 bankruptcy. On April 3, 2008, the employees sued for violations of the WARN Act.
(1) What type of claims do the plaintiff-employees hold when they are terminated prepetition in violation of the WARN Act? In other words, are the WARN Act claims entitled to administrative priority under § 503(b)(1)(A)(ii)?
(1) "If a claim vests pre-petition, then the back pay is attributable to the time occurring prior to the commencement of the case and therefore it is not an administrative expense claim. If, on the other hand, a claim vests post-petition, the back pay is attributable to the time occurring after the commencement of the case and therefore it is an administrative expense claim. When the unlawful conduct occurred and/or services rendered does not affect this determination."
Holding: Claims for prepetition violation of the WARN Act are not administrative claims and are subject to priority status as set forth in § 507(a)(4).
Reasoning: Based on the language of the statute, the court did not believe that both §§ 503(b)(1)(A)(i) and (ii) need to be met for a claimant to be entitled to an administrative claim. Instead, the court reads the "and" between subsections (i) and (ii) to mean that both can be categories of allowable administrative expenses. Although the statute refers to the period of time to which back pay is attributable and the time of the occurrence of the unlawful termination, the only relevant time frame is when the back pay is attributable, which is when the claims vest or accrue to the employee. WARN damages are similar to payments that are made at termination in lieu of notice. Therefore, the rights of workers that are discharged in violation of the WARN Act accrue entirely upon their termination. In addition, the court notes that pre-BAPCPA, similar treatment was accorded to WARN Act claimants. And, because this addition to BAPCPA has precious little legislative history, the court does not believe that affording WARN Act claimants administrative priority in all cases would be in accord with Congressional intent. An opposite reading would drastically change the value of wage claims and may cripple debtors' abilities to reorganize.
In re Stone Barn Manhattan LLC f/k/a Steve & Barry's LLC, et. al., 2008 WL 5265739 (Bankr.
Facts: Prior to filing for bankruptcy, under the terms of each relevant nonresidential real property leases, the Debtors were required to pay rent and certain other charges in advance - on the first day of each month. The Debtors had not paid their July 2008 rent when they filed for bankruptcy on
