New Bankruptcy Opinion: IN RE TRIBUNE MEDIA COMPANY – Bankr. Court, D. Delaware, 2015

In re: TRIBUNE MEDIA COMPANY, et al., [1] , Chapter 11, Reorganized Debtors.

Case No. 08-13141 (KJC).

United States Bankruptcy Court, D. Delaware.

November 19, 2015.


(D.I. 13338; 14028)

KEVIN J. CAREY, Bankruptcy Judge.

Wilmington Trust Company (“WTC”) included postpetition attorney fees and costs of more than $30 million in its unsecured Class 1F Claim that will receive a partial distribution under the confirmed Plan. The Reorganized Debtors object to this portion of WTC’s Class 1F Claim, arguing that a majority of courts have decided that unsecured creditors cannot include postpetition attorney’s fees in their claims against the bankruptcy estate. [3] In response, WTC argues that the 2007 United States Supreme Court Travelers decision [4] rejected this rule and determined that postpetition attorney’s fees may be included in an unsecured claim if recovery of the fees are permitted by an enforceable prepetition contract. After consideration of Travelers, along with a textual analysis of Bankruptcy Code sections 502(b), 506(a) and 506(b), and consistent with the Mediator’s Report and Recommendation, the Debtors’ objection will be sustained and WTC’s claim for postpetition attorney’s fees and costs will be disallowed.


On December 8, 2008, Tribune Company and certain affiliates (the “Debtors”) filed voluntary petitions under chapter 11 of the Bankruptcy Code. On July 23, 2012, this Court entered the Order Confirming the Fourth Amended Joint Plan of Reorganization (the “Plan”) for Tribune Company and Its Subsidiaries Proposed by the Debtors, the Official Committee of Unsecured Creditors, Oaktree Capital Management, L.P., Angelo, Gordon & Co., L.P. and JP Morgan Chase Bank, N.A. (the “Confirmation Order”) (D.I. 12074). The Effective Date of the Plan was December 31, 2012. [5]

WTC served as the indenture trustee for the PHONES Notes, which were unsecured subordinated securities. [6] After the Debtors’ bankruptcy filing, WTC retained Brown Rudnick LLP, as well as other professionals, to represent WTC and the interests of the PHONES Noteholders in the bankruptcy case. [7] The Plan permits WTC to seek a general unsecured claim, classified as an Other Parent Claim under Class 1F of the Plan, “for fees, expenses arising under Section 6.07 of the PHONES Notes Indenture.” [8]

In Section 6.07 of the PHONES Notes Indenture, Tribune agreed (1) to pay the Trustee [WTC] . . . reasonable compensation . . . for all services rendered by it hereunder . . . [and] (2) except as otherwise expressly provided herein, to reimburse the Trustee . . . for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel). . . .” [9] WTC argues that two other provisions of the Indenture also support its Class 1F Fee Claim:

(1) Section 5.03 of the Indenture provides that in the event of certain enumerated defaults, “the Company [which is defined as Tribune Company and any successor corporation] will upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, . . . such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursement and advances of the Trustee, its agents and counsel.”

(2) Section 5.04 of the Indenture further allows the Trustee to file and prove a proof of claim in bankruptcy proceedings “in order to have the claims of the Trustee (including any claims for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceedings” and to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same. . . .”

Pursuant to a stipulated procedure, [10] on January 2, 2013, WTC provided the Reorganized Debtors with its Class 1F Claim, which included fees and expenses in the amount of $30,289,093.33, under Bankruptcy Code § 502(b) (the “Fee Claim”). The Reorganized Debtors objected informally to the Fee Claim through a letter outlining their arguments for disallowance and/or limitation of the Fee Claim. Subsequent negotiations failed and the Reorganized Debtors filed a formal Objection to the Fee Claim on March 18, 2013 (D.I. 13338). WTC opposed the Objection.

By Order dated June 26, 2013 (D.I. 13642), upon agreement of the parties, I appointed Joseph J. Farnan, Jr., a retired Delaware District Court Judge (the “Mediator”), pursuant to Local Rule 9019-5, to mediate the Reorganized Debtors’ Objection to WTC’s Fee Claim, along with other contested fee matters. The Mediator’s Report and Recommendation, dated October 24, 2014 (the “Mediator


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