Mediofactoring v. McDermott (In re Connolly N. Am., LLC)

Summarized by Laura Bartell , Wayne State University Law School
10 years 5 months ago

Citation:

No. 13-2489 (6th Cir. Sept. 21, 2015)

Tag(s):

Ruling:

Administrative expenses are allowable under Section 503(b) to creditors who make a substantial contribution in a case under chapter 7 of the Bankruptcy Code.

Procedural context:

Appeal from decision of E.D. Mich. affirming decision of bankruptcy court for the E.D. Mich.; reversed.

Facts:

Three unsecured creditors successfully removed the bankruptcy trustee for misfeasance. The successor trustee then commenced an adversary proceeding against the predecessor trustee, and the case was settled, resulting in increased funds available for distribution to creditors in the bankruptcy case. Two of the creditors sought reimbursement of administrative expenses under Section 503(b) for making a substantial contribution in the case. Because the language of Section 503(b)(3)(D) provides for such reimbursement only for making a substantial contribution "in a case under chapter 9 or 11," the bankruptcy court denied the request, and the district court affirmed. The Sixth Circuit reversed, noting that Section 503(b) provides for the allowance of administrative expenses "including" those enumerated in the following subsections, and the actions of the creditors in removing the former bankruptcy trustee was the sort of action that warranted the award of administrative expenses.

Judge(s):

White, Donald and O'Malley.

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