Boruff v. Cook Inlet Energy LLC

Case Type:
Case Status:
AK-17-1285-JuBL (9th Circuit, Apr 24,2018) Published
The amount of compensation determined under a prepetition employment contract that is rejected is not presumptive evidence for the officer's or employee's section 506(b)(1)(A)(i) administrative expense claim. Rather, the terminated officer or employee bears the burden of proving the value of his or her contribution to the estate.
Procedural context:
The bankruptcy court ruled that an officer of a bankrupt company, whose employment contract was rejected in the bankruptcy case, was not entitled to an administrative expense claim in the amount of his contractual compensation. The former officer appealed.
On August 6, 2015, an involuntary chapter 11 petition was filed against Cook Inlet Energy, LLC (Cook). Cook consented to the entry of an order for relief on October 1, 2015, and its parent (Miller Energy Resources, Inc.) and certain affiliates filed chapter 11 petitions. The cases were jointly administered. The appellant, Scott M. Boruff, was a member of Miller's senior management team and was compensated pursuant to an employment contract. After filing its petition, Miller filed a motion to allow compensation of certain officers and employees, but excluded Boruff from the motion. Miller then filed a notice of its intent to reject certain contracts, including Boruff's employment contract. The plan was confirmed, and Boruff's employment contract was rejected. Boruff timely filed an administrative expense application in an amount equal to his contractual compensation. Miller objected to Boruff's application, arguing that the burden was on Boruff to show that he provided value to the bankruptcy estate. Boruff argued that: (1) he continued to perform the duties of executive chairman until the confirmation date and (2) the contract and evidence that he worked after the petition date were legally sufficient to establish his right to an administrative expense claim in the amount of his contractual compensation.
JURY*, BRAND, and LAFFERTY (*sitting by assignment)

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