Kirschenbaum v. U.S. Dept. of Labor (In the Matter of Robert Plan Corp.)

No. 14-1144 (2d Cir.) (Feb. 5, 2015)
Although the trustee is required to administer the debtor corporation's ERISA plan under 11 U.S.C. 704(a)(11), the bankruptcy court lacks jurisdiction to award compensation from the assets of the plan to the trustee and his professionals for services performed administering the plan. (The court did not address whether the bankruptcy court has jurisdiction to award such compensation from the assets of the bankruptcy estate.) Since the assets of the ERISA plan are excluded from the bankruptcy estate (11 U.S.C. 541(b)(7)) compensation of professionals using those assets could not conceivably have had any effect on the estate and, thus, no "related to" jurisdiction exists. "Arising in" jurisdiction does not exist because compensation of plan administrators is an issue that arises outside of bankruptcy and does not depend upon bankruptcy for its existence. Finally, "arising under" jurisdiction is lacking because 11 U.S.C. 704(a)(11) establishes no substantive rights regarding ERISA plans, but merely procedural vehicle to the assertion of rights created by ERISA law.
Procedural context:
Appeal from district court order reversing bankruptcy court order that granted compensation from ERISA plan assets.
Bankruptcy trustee in corporate chapter 7 case hired professionals to assist him in terminating the debtor's ERISA plan pursuant to his duty to administer the plan. Trustee sought compensation for his services and those of his professionals from both the ERISA plan assets and from the bankruptcy estate, to the extent not compensated from plan assets. The bankruptcy court granted the request. The Department of Labor appealed on the grounds that the bankruptcy court lacked jurisdiction to order compensation from plan assets.
Katzman, Lohier & Droney

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