New Bankruptcy Opinion: IN RE CONNOLLY NORTH AMERICA, LLC – Bankr. Court, ED Michigan, 2016

In re: CONNOLLY NORTH AMERICA, LLC, Chapter 7, Debtor.

Case No. 01-57090.

United States Bankruptcy Court, E.D. Michigan, Southern Division.

January 8, 2016.


THOMAS J. TUCKER, Bankruptcy Judge.

I. Introduction and background

This case is now before the Court after an appeal, and a remand from the United States Court of Appeals for the Sixth Circuit, and from the United States District Court for the Eastern District of Michigan. On remand, this case is once again before the Court on the application filed by Coface Argentina and Mediofactoring, entitled “Application for Allowance of Administrative Expense” (Docket #1136, the “Application”).

The United States Trustee objected to the Application. No creditor or other party in interest objected to the Application. The successor Chapter 7 Trustee, Bruce C. French, supported the Application.

The Court held a hearing on the Application on August 29, 2012. On September 17, 2012, this Court entered an Amended Order denying the Application (Docket #1166), for the reasons stated in this Court’s amended written opinion filed the same day (Docket #1165; In re Connolly North America, LLC, 479 B.R. 719 (Bankr. E.D. Mich. 2012) ).

Coface Argentina and Mediofactoring (the “Applicants”) appealed. The district court affirmed this Court’s decision, on October 1, 2013. (Docket #1206; In re Connolly North America, LLC, 498 B.R. 772 (E.D. Mich. 2013) ). The Applicants appealed the district court’s decision to the Sixth Circuit. In an opinion filed on September 21, 2015, the Sixth Circuit reversed the district court’s decision, and remanded. In re Connolly North America, LLC, 802 F.3d 810 (6th Cir. 2015) .

After the Sixth Circuit issued its mandate on October 14, 2015, the district court entered an order on October 21, 2015 remanding the matter back to this Court. (“Order of Remand to Bankruptcy Court,” Docket #1227). The Sixth Circuit later recalled its mandate, however, on October 30, 2015. After the United States Trustee did not file a petition for rehearing or rehearing en banc by its extended deadline of December 7, 2015, the Sixth Circuit reissued its mandate, on December 16, 2015. The district court’s earlier order remanding the matter to this Court remains in effect.

It appears that the United States Trustee has not filed a petition for a writ of certiorari in the United States Supreme Court, and that the time for such a filing has expired.

The Application is now before this Court on remand, and this Court must consider and rule again on the Application, in light of and consistent with the Sixth Circuit’s decision and mandate. The Court concludes that no further hearing is necessary, and that the matter is ready for decision.

II. Discussion

A. The Application is now, in effect, unopposed

The only argument against the Application, made by the only party who made any objection to the Application — the United States Trustee — was that this Court had no legal authority to allow the Applicants any administrative expense, under 11 U.S.C. § 503(b) or otherwise. This Court and the district court both agreed with the United States Trustee’s argument. But the Sixth Circuit rejected that argument, and held that “administrative expenses are allowable” to the Applicants in the circumstances of this Chapter 7 case, “under § 503(b).” 802 F.3d at 813 . In so doing, the Sixth Circuit has rejected the only objection made against the Application by anyone. The Application therefore now stands, in effect, as unopposed (and as being supported by the successor Chapter 7 Trustee, as noted above.)

Having held that the Applicants’ request for administrative expense allowance may be granted under § 503(b), and is not barred as a matter of law under the Bankruptcy Code, the Sixth Circuit directed that on remand this Court must consider the merits of the request. See 802 F.3d at 813, 819, 819 n.9 . And the district court’s remand order requires the same thing of this Court.

B. The Application is well-taken

Considering the merits of the now-unopposed Application, the Court finds and concludes that the Application should be granted, under 11 U.S.C. § 503(b), in the full amount requested.

The Court now incorporates by reference, into this opinion, all of the background and other facts about the history of this bankruptcy case that the Court stated in its September 17, 2012 amended opinion (Docket #1165).

In the Application, the Applicants seek allowance of an administrative expense of $164,336.28. Applicants say that they spent this much on attorney fees and related expenses in this case, for legal work performed from April 2009 forward, “for the costs and fees [they] incurred in removing the Predecessor Trustee and for [their] role in prosecuting and resolving the estate’s claims against the Predecessor Trustee.” Applicants contend that this legal work that they incurred and paid for directly and substantially increased the funds available for distribution to unsecured creditors in this case, and substantially benefitted the bankruptcy estate and the unsecured creditors. [1]

This Court fully agrees with these contentions by the Applicants. In addition, the Court reiterates the following statement that it made in its September 17, 2012 amended opinion, in which the Court noted one example of the way in which the legal work paid for by the Applicant substantially benefitted the bankruptcy estate:

It is undisputed, and it is clear to the Court, that at least some of the work that Coface paid its attorneys to do in this case substantially benefitted the bankruptcy estate and the unsecured creditors, and contributed greatly to there being a significant increase [in] the amount of funds that the unsecured creditors will receive in this case. For example, it was Coface that filed and successfully prosecuted the motion to remove the former trustee in 2009. But for those actions, the estate would have been closed without ever recovering the substantial additional sums that the successor trustee French has recovered since that time.

(Docket #1165 at 4).

Now that the legal issue raised by the United States Trustee’s objection has been resolved by the Sixth Circuit in favor of the Applicants, this Court finds the Applicants’ case for allowance of the requested administrative expense to be a very strong one. And having reviewed the record, including the fee itemizations contained in the Applicants’ exhibits, the Court finds and concludes that the amount requested in the Application is reasonable and should be allowed in full as an administrative expense. This conclusion is greatly bolstered when one compares the amount requested by the Application to the much higher and very substantial additional amount of money brought into this estate largely because of the legal work covered by the Application.

III. Conclusion

For these reasons, the Court will enter a separate order granting the Application in full.

[1] See Application (Docket #1136) at 1, and Exhibits 1-3.

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