Mountain Creek Resort, Inc. and Mountain Leasing LLC

ye gS

FOR PUBLICATION ve □□ □

Yay □□

UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF NEW JERSEY □□ ed on March 11, 2020

y Clerk,

U.S. Bankruptcy Court

District of New Jersey

In re: :

: CHAPTER 11

MOUNTAIN CREEK RESORT, INC., ef al.,!:

: CASE NO.: — 17-19899 (SLM)

Debtors. :

OPINION

APPEARANCES:

Jeffrey D. Prol, Esq.

Jeffrey A. Kramer, Esq.

Lowenstein Sandler LLP

One Lowenstein Drive

Roseland, New Jersey 07068

Attorneys for Debtors, Mountain Creek Resort, Inc., et al.

Robert E. Nies, Esq.

Chiesa Shahinian & Giantomasi PC

One Boland Drive

West Orange, New Jersey 07052

Attorneys for Sussex County Board of Chosen Freeholders

' The last four digits of the Debtors’ taxpayer identification numbers in these Chapter 11 cases are as follows:

Mountain Creek Resort, Inc. (4557); Mountain Creek Services Inc. (3228); Mountain Creek Management, LLC

(1394); Mountain Creek Mountainslide, LLC (1545); Mountain Leasing LLC (6057); and Appalachian Liquors

Corporation (9542).

Marita S. Erbeck, Esq.

Faegre Drinker Biddle & Reath LLP

600 Campus Drive

Florham Park, New Jersey 07932

Attorneys for the Official Committee of Unsecured Creditors

Diane E. Vuocolo, Esq.

Alan Brody, Esq.

Greenberg Traurig, LLP

2700 Two Commerce Square

2001 Market Street

Philadelphia, Pennsylvania 19103

Attorneys for M&T Bank, also known as Manufacturers and Traders Trust Company

STACEY L. MEISEL, UNITED STATES BANKRUPTCY JUDGE

INTRODUCTION

Before the Court is a Motion for the Entry of an Order Expunging and Disallowing

Administrative Expense Request of Sussex County Board of Chosen Freeholders (the “Motion to

Expunge”),2 filed by debtors Mountain Creek Resort, Inc., et al., (the “Debtors” or “Mountain

Creek”) by and through its counsel, Lowenstein Sandler, LLP, in response to the administrative

expense claim at claim number 173 filed by Sussex County Board of Chosen Freeholders (“Sussex

County”), 3 by and through its counsel, Chiesa Shahinian & Giantomasi PC. Sussex County filed

opposition to the Motion to Expunge.4 The Debtors filed a reply.5 The Court heard oral argument

on the Motion to Expunge on January 27, 2020. The Court entered an Order Granting the Motion

to Expunge on February 24, 2020, indicating that an Opinion would follow setting forth the Court’s

2 Docket No. 1115.

3 Docket No. 1115-1 at Ex. A. Sussex County Board of Chosen Freeholders filed the claim with Prime Clerk, LLC.

Therefore, the claim number refers to the Prime Clerk assignment, rather than the Bankruptcy Court’s claims register.

4 Docket No. 1145.

5 Docket No. 1156.

reasoning.6

JURISDICTION AND VENUE

This Court has jurisdiction over this matter under 28 U.S.C. § 1334(b) and the Standing

Orders of Reference entered by the United States District Court for the District of New Jersey

dated July 23, 1984 and amended on September 18, 2012. This matter constitutes a core

proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A) and (B), as it concerns the administration of the

estate, and as it relates to administrative expenses, respectively. Venue is proper in this Court

under 28 U.S.C. § 1408. The Court issues the following findings of fact and conclusions of law

pursuant to Federal Rule of Bankruptcy Procedure 7052.

BACKGROUND AND PROCEDURAL HISTORY

The parties generally agree on the factual background and procedural history set forth in

the Motion to Expunge.7 Sussex County disagrees solely regarding the Debtors’ characterization

of Sussex County’s efforts in the two objections Sussex County filed to original settlement

agreement (the “Original Settlement Agreement”).8 This Court relies on the agreed upon facts

set forth in the Motion to Expunge. Accordingly, there is no need for the full recitation of these

cases’ history. The facts that are pertinent to this Court’s decision are narrated below.

During the pendency of the bankruptcy cases, the Vernon Parties9 asserted significant

claims against the Debtors, which allegedly arose from the Debtors’ obligations under certain

sewer agreements. Naturally, the Debtor’s disputed the Vernon Parties’ contentions. The Debtors’

and the Vernon Parties engaged in litigation, which led to Court ordered mediation. After

6 Order Granting Motion to Expunge Claim of Sussex County Board of Chosen Freeholders (the “Order Granting

the Motion to Expunge”), Docket No. 1214.

7 Docket No. 1145 at fn. 3.

8 Id.

9 The Vernon parties consist of the Township of Vernon and the Vernon Township Municipal Utilities Authority

(the “Vernon Parties”).

extensive and protracted mediation, the parties reached the Original Settlement Agreement

resolving Vernon Parties’ claims against Mountain Creek.10

The Debtors filed a motion to settle those issues.11 None of the Debtors’ creditors objected.

Sussex County—although neither a party to the litigation nor a creditor in the case—objected to

the settlement and argued that the terms of the Original Settlement Agreement were contrary to

state law.12 In its objection, Sussex County makes clear that there existed only a “remote

possibility” of Sussex County incurring damages if the Court approved the Original Settlement

Agreement.13 Sussex County only incurs liability if: (1) Mountain Creek fails to pay its sewer

obligation to Vernon; (2) Vernon then defaults on the annual charges due to Sussex County

Municipal Utilities Authority (“SCMUA”); (3) Vernon’s default then causes SCMUA to have a

deficiency in sewer revenues; and (4) Sussex County then honors its guarantee of SCMUA’s

obligations.14 Despite the remoteness of Sussex County incurring any liability, Sussex County

asserts that it objected to the Original Settlement Agreement because of its concern either that the

Debtors would confirm a plan of reorganization that contained an allegedly illegal settlement

agreement or that the Debtors would be unable to confirm a plan of reorganization for the same

reason.15

The parties went back to mediation to address Sussex County’s objection to the Original

Settlement Agreement and the concerns raised by the State of New Jersey. Again, the Debtors and

the Vernon Parties reached a settlement to which Sussex County blessed, resolving the outstanding

issues (the “Revised Settlement Agreement”). A number of the provisions changed in the

10 The Honorable Michael B. Kaplan, U.S.B.J., mediated the dispute and assisted the parties in reaching the resolution

memorialized in the Original Settlement Agreement.

11 Docket No. 777.

12 Docket Nos. 805 and 810.

13 Docket No. 1145-1 at paragraph 8.

14 Id.; Docket No. 1145 at paragraph 37; Docket No. 1115 at paragraph 31.

15 Docket No. 1145-1 at paragraph 8.

Revised Settlement Agreement were the same provisions objected to by Sussex County. Sussex

County argues that it made a substantial contribution to the Debtors’ cases because its objection to

the Original Settlement Agreement caused the Debtors to make certain modifications to the

proposed settlement. The Debtors argue, however, that addressing Sussex County’s objection was

time consuming and expensive to the Debtors’ estates and created no benefit for the Debtors’

estates or their creditors—especially since the Vernon Parties agreed to the Original Settlement

Agreement. Ultimately, the Court approved the Revised Settlement Agreement.16

Sussex County filed a claim for administrative expenses in the amount of $197,767.95

incurred in connection with its efforts in: (1) objecting to Mountain Creek’s Original Settlement

agreement; and (2) ensuring that any settlement formulated after its objection was legal and

enforceable.17 Sussex County indicates that the basis for its claim is “[r]eimbursement of legal

expenses and costs under 11 U.S.C. [§] 503(b).”18 Although Sussex County failed to expressly

designate a subsection of § 503(b) to support its alleged administrative expense, Sussex County

contends that its efforts benefited the Debtors’ estate and their creditors in numerous ways.19 The

Debtors filed the Motion to Expunge seeking to expunge and disallow Sussex County’s

administrative claim.20 The Debtors argue Sussex County lacks standing to assert an

administrative expense claim and Sussex County failed to make a substantial contribution as

required by § 503(b)(3)(D).21 According to the Debtors, the Debtors estate is not required to pay

the tab for Sussex County’s alleged administrative expenses. The Debtors also argue that Sussex

County cannot be reimbursed for its legal fees because nothing in the Bankruptcy Code22 permits

16 Docket No. 986.

17 Id.

18 Docket No. 1115-1 at Ex. A.

19 Id.

20 Docket No. 1115.

21 Id.

22 Title 11 of the United States Code (the “Bankruptcy Code”).

such reimbursement. Sussex County asserts that all of its actions, litigious or otherwise, were for

the betterment of the estate and the public (namely county residents) and, therefore, it may recover

its expenses from the Debtors’ estate. So, the Court must decide if a so-called “Good Samaritan”—

one who is not expressly delineated in § 503(b)(3)(D)—is entitled to an administrative expense

under the statute. If so, is the Good Samaritan also entitled to reimbursement of its legal fees under

§ 503(b)(4)?

The issue presented to the Court in the Motion to Expunge is one of first impression to this

Court. Both parties agree that there is no decision from a bankruptcy court or district court in the

District of New Jersey, or from the Third Circuit Court of Appeals allowing an administrative

claim in favor of a claimant that is not one of the listed entities in § 503(b)(3)(D). Sussex County

asserts, however, that this Court should view the enumerated categories as illustrative, focus on

the results Sussex County purportedly achieved, find that Sussex County made an extraordinary

contribution to these cases, and then go back and review the issue of standing in that context. This

Court disagrees with Sussex County’s approach. Statutory standing must be firmly established as

a prerequisite to any recovery permitted under § 503(b)(3)(D). If Sussex County cannot

demonstrate that it possesses statutory standing under § 503(b)(3)(D), it is of no consequence as

to whether it made any contribution—substantial or otherwise—to the estate.

DISCUSSION

Section 503(b)(4) authorizes reasonable compensation for legal fees “only in situations

coming within the scope of § 503(b)(3) . . . .”23 Specifically, the court is authorized to allow an

administrative claim, after notice and a hearing, for reasonable compensation for attorneys’ fees

incurred by “a creditor, an indenture trustee, an equity security holder, or a committee representing

23 Lebron v. Mechem. Fin., Inc., 27 F.3d 937, 943 (3d Cir. 1994); See 11 U.S.C. § 503(b)(4).

creditors or equity security holders other than a committee appointed under [§] 1102 of this title”

while “making a substantial contribution” to a Chapter 11 case.24 If an entity has an allowable

expense under § 503(b)(3)(D), then the Court may also allow reimbursement for professional fees

of that entity under § 503(b)(4). Therefore, this Court will focus first on whether Sussex County

meets the requirements of § 503(b)(3)(D).

The Third Circuit’s decision in Lebron v. Mechem Financial Inc. guides this Court in its

analysis of § 503(b)(3)(D). The Third Circuit sets forth twin objectives to consider when

scrutinizing claims under § 503(b)(3)(D): (1) encouraging “meaningful creditor participation in

the reorganization process,”25 and (2) “keeping fees and administrative expenses at a minimum so

as to preserve as much of the estate as possible for the creditors.”26

I. SUSSEX COUNTY’S ADMINISTRATIVE EXPENSE CLAIM IS DISALLOWED

BECAUSE SUSSEX COUNTY LACKS STANDING UNDER § 503(b)(3)(D)

The Court’s starting point for its analysis is whether Sussex County has standing pursuant

to 11 U.S.C. § 503(b)(3)(D). Sussex County urges this Court to first examine the merits of the

administrative claim to determine whether Sussex County made a substantial contribution and then

examine standing. The Third Circuit, however, reviewed standing first when it analyzed an

administrative claim under § 503(b)(3)(D).27 This Court never reaches the issue of substantial

contribution if Sussex County lacks standing. Sussex County’s suggestion on how to proceed is

backwards and akin to putting the cart before the horse. The cart does not roll without the horse.

Likewise, one cannot collect under § 503(b)(3)(D) without standing. Accordingly, Sussex County

24 In re TCI 2 Holdings, LLC, 428 B.R. 117, 146 (Bankr. D.N.J. Apr. 12, 2010).

25 Lebron, 27 F.3d at 944 (citing In re Richton Int’l Corp., 15 B.R. 854, 855–56 (Bankr. S.D.N.Y. 1981)) (emphasis

added).

26 Lebron, 27 F.3d at 944 (citing Otte v. U.S., 419 U.S. 43, 53, 95 S.Ct. 247, 254, 42 L.Ed.2d 212 (1974)) (emphasis

added).

27 See Id. at 943. This Court notes that standing was not at issue in Lebron.

must first demonstrate that it has standing under § 503(b)(3)(D). Otherwise, its request for

payment must fail.

To establish statutory standing, a party must demonstrate that Congress conferred it certain

rights under a statute.28 “Statutory standing is a threshold issue that determines whether a party is

properly before the court.”29 Therefore, this Court must analyze whether § 503(b)(3)(D) provides

standing for Sussex County to recover its administrative expense claim in the Debtors’ cases.

Section 503(b)(3)(D) provides:

(b) After notice and a hearing, there shall be allowed administrative

expenses, other than claims allowed under section 502(f) of this title,

including—

(3) the actual, necessary expenses, other than compensation

and reimbursement specified in paragraph (4) of this

subsection, incurred by—

(D) a creditor, an indenture trustee, an equity security holder,

or a committee representing creditors or equity security

holders other than a committee appointed under section 1102

of this title, in making a substantial contribution in a case

under chapter 9 or 11 of this title[.]30

Therefore, the four categories of entities that may apply for reimbursement of administrative

expenses are: (1) creditors; (2) indentured trustees; (3) equity security holders; and (4) creditor and

equity holder committees other than official committees appointed under § 1102 of the Bankruptcy

Code.31

The claimant seeking reimbursement of administrative expenses bears the burden of

proof.32 Here, Sussex County asserts that it has standing as an “indirect creditor”, as an “interested

28 See Leyse v. Bank of Am. Nat. Ass’n, 804 F.3d 316, 320 (3d Cir. 2015).

29 United States v. $8,221,877.16 in U.S. Currency, 330 F.3d 141, 150 n.9 (3d Cir. 2003) (emphasis in original).

30 11 U.S.C. § 503(b)(3)(D).

31 Id.

32 In re Tropicana Entm’t LLC, 498 F. App’x 150, 152 (3d Cir. 2012) (citing In re Columbia Gas Sys. Inc., 224 B.R.

540, 548 (Bankr. D. Del. 1998)).

party”/“party-in-interest”, and as a result of its direct interest of the Sussex County residents.33

Specifically, Sussex County states that “[c]ertainly, Sussex County is indirectly a creditor of

Debtors - - as taxpayers.”34 Sussex County then asserts that “. . . it is indisputable that Sussex

County is a party-in-interest in this case.”35 Lastly, Sussex County argues that it “has a direct

interest in preserving the economic health of its residents - - which potentially would have been

devastated by approval of the Original Settlement Agreement.”36 None of Sussex County’s

descriptions fall within the statutory definition of entities entitled to expenses under

§ 503(b)(3)(D).

Sussex County never asserts that it is an indenture trustee, equity security holder, creditor

committee, or equity security holders committee—all categories of entities with standing to seek

recovery of expenses under § 503(b)(3)(D). Therefore, the Court need not address those

categories.

A. Sussex County is Not a Creditor

Sussex County attempts to slot itself into § 503(b)(3)(D) by asserting that it is “a

contingent, unliquidated and remote creditor.”37

“Creditor” is expressly defined in the Bankruptcy Code. A creditor is an:

(A) entity that has a claim against the debtor that arose at the time

of or before the order for relief concerning the debtor;

(B) entity that has a claim against the estate of a kind specified in

section 348(d), 502(f), 502(g), 502(h) or 502(i) of this title; or

(C) entity that has a community claim.38

33 Docket No. 1145 at paragraph 48.

34 Id. at paragraph 48.

35 Id.

36 Id.

37 Id. at paragraph 8.

38 11 U.S.C. § 101(10).

Sussex County is not a creditor, nor does it pretend to be one. Yet, it still asserts it possesses

standing necessary to recover under § 503(b)(3)(D). Debtors compare this case with another case

within the Third Circuit to exemplify that Sussex County lacks standing. In In re Energy Future

Holdings Corp., the subsidiary of a creditor filed a claim for reimbursement of administrative

expense.39 The bankruptcy court found that the claimant failed to show that it was a creditor of

the debtor and, therefore, it was not entitled to an administrative claim.40

Similarly, Sussex County failed to demonstrate that it is a creditor of the Debtors’ estate.

Sussex County’s categorization of its status in relation to the Debtors fails to fit within the

definition of creditor in § 101(10). Further, Sussex County never filed a proof of claim in these

Chapter 11 cases nor did the Debtors list Sussex County on its schedules as a creditor or an equity

security holder. A number of things must go wrong for Sussex County to have any potential

liability to SCMUA.41 But even SCMUA—the party potentially liable to Sussex County—asserts

that it “is not a party to this bankruptcy case or the adversary proceeding to which the Revised

Settlement Agreement relates, is not a creditor of the Debtors, and has not asserted claims or causes

of action against the Debtors or their bankruptcy estates.”42 SCMUA’s position is contrary to

Sussex County’s that it is an alleged indirect creditor through SCMUA. Further, Sussex County

cannot establish creditor status through Vernon Township, which is one of Debtors’ recognized

creditors and may have potential liability to Sussex County. Even if Vernon Township is liable to

Sussex County, creditors of creditors generally lack standing to participate in bankruptcy cases.43

39 In re Energy Future Holdings Corp., 588 B.R 371, 386 (Bankr. D. Del. 2018).

40 Id. at 388.

41 As a reminder, as previously discussed, Sussex County admits it would only incur liability if: (1) the debtor

Mountain Creek fails to pay its sewer obligation to Vernon; (2) Vernon then defaults on the annual charges due to

Sussex County Municipal Utilities Authority; (3) Vernon’s default then causes SCMUA to have a deficiency in sewer

revenues; and (4) Sussex County then honors its guarantee of SCMUA’s obligations.

42 Docket No. 969 at paragraph 1.

43 In re Lifeco Inv. Grp., Inc., 173 B.R. 478, 487 (Bankr. D. Del. 1994) (“I find no statutory or judicial support to

conclude that a creditor of a creditor has standing in a bankruptcy case. Indeed, numerous cases state the contrary.”).

Under no scenario has Sussex County demonstrated that it is a creditor. The Bankruptcy

Code does not recognize the terms “remote creditor or indirect creditor,” nor does this Court. It is

that very “remoteness” or “indirectness” that makes it clear that Sussex County is not a creditor in

this case.

B. Section 503(b)(3)(D) is Clear and Unambiguous

Sussex County alternatively argues that it is a party in interest/interested party to the

Debtors’ bankruptcy cases. Sussex County asserts that it has standing as an interested party

because § 503(b)(3)(D) is ambiguous and nonexclusive. Sussex County supports this position by

pointing to the term “including” used in subsections (b) and (b)(1) of § 503. It further argues that

the Third Circuit’s use of the term “interested party” in Lebron demonstrated an expansive view

on the parties bestowed with standing under the statute.44 Conversely, the Debtors assert that the

statute is plain and unambiguous in listing the four categories of persons who may apply for

expense reimbursements under § 503(b)(3). The parties’ disagreement requires this Court to

examine the statutory construction of § 503(b) as informed by applicable case law.

“[C]ourts must presume that a legislature says in a statute what it means and means in a

statute what it says there. When the words of a statute are unambiguous, then this first canon [of

statutory construction] is also the last: ‘judicial inquiry is complete.’”45 Therefore, this Court must

determine whether § 503(b) is unambiguous.

1. Section 503(b)(3)(D)’s Enumeration of the Parties is Exhaustive

i. Section 503(b) and § 503(b)(1)’s Use of the Term “Including” Does Not Extend

to § 503(b)(3)

Sussex County argues that Congress’s use of “including” in § 503(b) and (b)(1) illustrates

44 Docket No. 1145 at paragraph 33; See Lebron, 27 F.3d at 944.

45 Monzon v. De La Roca, 910 F.3d 92, 101 (3d Cir. 2018) (quoting Conn. Nat'l Bank v. Germain, 503 U.S. 249,

253–54, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992) (citations omitted)).

that Congress intended for bankruptcy courts to evaluate the standing of a claimant on a case-by-

case basis. Sussex relies on the Sixth Circuit’s decision in In re Connolly, wherein the court took

an expansive approach with what types of expenses could be administrative expense claims under

the statute.46 The Connolly court allowed an administrative expense claim under § 503(b)(3)(D)

in a Chapter 7 case despite no mention of Chapter 7 in that section.47 Sussex County encourages

the Court to use Connolly as a benchmark that § 503(b)(3)(D)—in its entirety—should be read

expansively even thought the Sixth Circuit focused on the discrete issue of whether a substantial

contribution claim may be allowed in a Chapter 7 case.

The Debtors disagree and contend that Congress would have used the term “including” for

§ 503(b)(3) if it intended to broaden the parties conferred standing under § 503(b)(3)(D), just like

it did under subsections (b) and (b)(1). The Debtors distinguish this case from Connolly by

highlighting that the Connolly court expanded § 503(b) to permit administrative expense claims in

a Chapter 7 case rather than just Chapters 9 and 11. The Debtors also contend that Connolly did

not expand the type of entity allowed to seek reimbursement for administrative expenses—the

expansion was limited to the case type. The Debtors assert that the dissent in Connolly is

particularly instructive because the dissent aligns its position with the Third Circuit’s interpretation

of § 503(b) in Lebron and explains why § 503(b)(3)(D) must be narrowly construed.

This Court finds the dissent in Connolly and the Energy Future Holdings decision

persuasive and is guided by them in adhering to a strict interpretation of the statute. Reaching this

decision requires an examination of how the word “including” is utilized in § 503. The Bankruptcy

Code clearly states that the use of the words “including” and “includes” is not limiting.48 Section

46 In re Connolly N. Am., LLC, 802 F.3d 810, 816 (6th Cir. 2015).

47 Id. at 816–17.

48 See 11 U.S.C. § 102(3).

503(b) states:

(b) After notice and a hearing, there shall be allowed administrative

expenses, other than claims allowed under section 502(f) of this title,

including —

(1) (A) the actual, necessary costs and expenses of preserving the

estate including—

(i) wages, salaries, and commissions for services rendered

after the commencement of the case; and

(ii) wages and benefits awarded pursuant to a judicial

proceeding or a proceeding of the National Labor Relations

Board as back pay attributable to any period of time

occurring after commencement of the case under this title, as

a result of a violation of Federal or State law by the debtor,

without regard to the time of the occurrence of unlawful

conduct on which such award is based or to whether any

services were rendered, if the court determines that payment

of wages and benefits by reason of the operation of this

clause will not substantially increase the probability of layoff

or termination of current employees, or of nonpayment of

domestic support obligations, during the case under this title;

…

(3) the actual, necessary expenses, other than compensation and

reimbursement specified in paragraph (4) of this subsection,

incurred by—

(A) a creditor that files a petition under section 303 of this

title;

(B) a creditor that recovers, after the court’s approval, for the

benefit of the estate any property transferred or concealed by

the debtor;

(C) a creditor in connection with the prosecution of a

criminal offense relating to the case or to the business or

property of the debtor;

(D) a creditor, an indenture trustee, an equity security holder,

or a committee representing creditors or equity security

holders other than a committee appointed under section 1102

of this title, in making a substantial contribution in a case

under chapter 9 or 11 of this title;

(E) a custodian superseded under section 543 of this title,

and compensation for the services of such custodian; or

(F) a member of a committee appointed under section 1102

of this title, if such expenses are incurred in the performance

of the duties of such committee;49

Sections 503(b) and 503(b)(1) both use the word “including”. This Court agrees with the Debtors

that Congress’s use of the term “including” in subsections (b) and (b)(1) indicates that those

specific subsections are not limited. On the other hand, subsection (b)(3)(D) is extremely limited

to a list of defined categories. If Congress intended to expand the list of entities delineated in

§ 503(b)(3)(D), then Congress would have followed the format used for subsections (b) and (b)(1)

by inserting the word “including” to that subsection as well. Instead, § 503(b)(3)(D) purposefully

limits who may recover. As analyzed below, Congress had multiple opportunities to amend

§ 503(b)(3)(D) to expand its scope but elected not to do so.

ii. This Court Lacks Authority to Expand § 503(b)(3)(D) to Include Interested

Party or Party in Interest

Next, Sussex County argues that a party in interest/interested party is accorded standing

under a broad interpretation of § 503(b)(3)(D). Sussex County argues that the Lebron court,

although in dicta, uses the term “interested party”, thereby expanding the list in § 503(b)(3)(D).50

Sussex County argues that the Third Circuit’s use of “interested party” demonstrates a broad

reading of the statutory section. This Court agrees that the Third Circuit’s use of “interested party”

was dicta. However, this Court disagrees with Sussex County’s conclusion that the Third Circuit

intended to expand the list of parties entitled to standing. Standing was never an issue in Lebron.

While standing was not a bone of contention in Lebron, it was established prior to the Third Circuit

49 11 U.S.C. § 503(b) (emphasis added).

50 Lebron, 27 F.3d at 944 (“Most activities of an interested party that contribute to the estate will also, of course,

benefit that party to some degree, and the existence of a self-interest cannot in and of itself preclude reimbursement.”)

(emphasis added).

examining whether the claimant made a substantial contribution. The Third Circuit’s use of

“interested party” should not be interpreted as an expansion of the parties bestowed with standing

under the statute. Again, the Lebron Court focused on substantial contribution—part two of the

analysis.

Notably, the Bankruptcy Code uses the phrase “party in interest” approximately eighty-

three times. The Bankruptcy Code uses the phrases “interested party” and “interested parties”

approximately fifty-six times. Significantly, § 502, which directly precedes § 503(b), uses the

phrase “party in interest.” Section 502(a) states, “[a] claim or interest, proof of which is filed under

section 501 of this title, is deemed allowed, unless a party in interest, including a creditor of a

general partner in a partnership that is a debtor in a case under chapter 7 of this title, objects.”51 If

Congress intended to extend standing to a party in interest, it would have used that term in the

§ 503(b)(3)(D) the same way it did in § 502(a). Ironically, § 503(b) refers to § 502(f), leading this

Court to believe that Congress knew that other sections of the Bankruptcy Code provided standing

or other rights to parties in interest. Congress simply chose not to incorporate the phrase into

§ 503(b)(3)(D).52

Sussex County also relies on In re S&Y Enters., LLC and In re Frog and Peach, Ltd. to

support its position that the statute is ambiguous.53 This Court finds that both of these cases are

distinguishable from this one. The S&Y Enterprises court found the categories of parties in

§ 503(b)(3)(D) to be illustrative and non-exclusive.54 In that case, the claimant was an

unsuccessful bidder that argued it was entitled to administrative expenses because it caused the

51 11 U.S.C. § 502(a) (emphasis added).

52 See 11 U.S.C. § 503(b).

53 See in re S&Y Enters., LLC, 480 B.R. 452 (Bankr. E.D.N.Y. 2012); see also In re Frog and Peach, Ltd., 38 B.R.

307 (Bankr. N.D. Georgia 1984).

54 S&Y Enterprises, 480 B.R. at 461.

successful bidder to increase its offer for the property sale, which paid for the equity security

holders’ counsel fees and expenses.55 The S&Y Enterprises court adopted an expansive view of

the categories in § 503(b)(3)(D).56 The court found the claimant possessed standing because of

the specific facts in the case.57 This Court respectfully disagrees that the categories of claimants

eligible to recover under § 503(b)(3)(D) should be expanded because such an expansion sets the

bar for standing too low and spreads the benefits too wide, which is contrary to the Third Circuit’s

recognition of the important balance between encouraging valuable creditor participation and

keeping administrative expenses low in order to preserve the estate.58

In Frog and Peach, the bankruptcy court analyzed the standing of an unsuccessful bidder.59

The court found the applicant failed to meet the statutory requirement for standing.60 It denied the

claimants application for allowance of an administrative expense claim because it found the

claimant acted in its own self-interest.61 The court opined that non-creditor claimants with

meritorious contributions may have an allowable administrative claim, but expressed serious

concern about opening the floodgates to non-creditor claimants.62 This Court shares the concern

of extending standing those that are not expressly authorized by § 503(b). Although the Court

disagrees with the expansive interpretation that the Frog and Peach court ultimately adopted, this

Court agrees that it “can find no justification for reading between the lines of the statute to permit

[the] claim.”63

55 Id. at 461–62.

56 Id.

57 Id.

58 Lebron, 27 F.3d at 944.

59 Frog and Peach, 38 B.R. at 309.

60 Id. at 310.

61 Id.

62 Id. at 308–10.

63 Id. at 310.

iii. The Combination of Legislative History and the Third Circuit’s Analysis of

§503(b)(4) Demonstrate that § 503(b)(3)(D) is Unambiguous and Exclusive

In 1994, Congress enacted the Bankruptcy Reform Act, which amended § 503 of the

Bankruptcy Code to add a member of a creditors committee as a party authorized to receive

reimbursement for administrative expenses incurred.64 Notably, Congress did not add “party in

interest” to the list of parties with standing under § 503(b)(3)(D). If the list was already non-

exclusive, it begs the question as to why Congress would amend the list to add an additional

enumerated party. Subsequently, Congress passed the Bankruptcy Abuse Prevention and

Consumer Protection Act of 2005 where it once again reviewed § 503(b) and amended § 503(b)(4).

Congress added language to permit “reasonable compensation for professional services rendered

by an attorney or an accountant of an entity whose expense is allowable under subparagraph (A),

(B), (C), (D), or (E) of paragraph (3) of [§ 503(b)] . . . .”65

In First Merchants, the Third Circuit addressed the issue of whether attorneys for a member

of the creditors committee could seek reimbursement of legal fees as an administrative claim

pursuant to § 503(b)(4).66 The Third Circuit utilized a straightforward approach to review

§ 503(b)(3)(F) and § 503(b)(4) in determining the treatment of administrative expenses incurred

by a member of a creditors committee.67 The Third Circuit scrutinized Congress’s amendments to

§ 503(b)(3) and determined that attorney’s fees for a member of the creditor’s committee may be

allowable under § 503(b)(4).68 Ultimately, the Third Circuit concluded that the language of § 503

is unambiguous and refused to “turn the language upside down and inside out” to find otherwise.69

64 See 11 U.S.C. § 503(b)(3)(F).

65 11 U.S.C. § 503(b)(4).

66 First Merch. Acceptance Corp. v. J.C. Bradford & Co. (In re First Merchants), 198 F.3d 394, 395 (3d Cir. 1999).

67 Id. at 398.

68 Id.

69 Id. at 398–99.

The Court finds the legislative history of the statute instructive in demonstrating that

Congress only meant to confer standing to the enumerated parties listed in the statute. In light of

the legislative history and the Third Circuit’s decisions in Lebron and First Merchants, the Court

concludes that a party in interest is not eligible to receive an administrative expense under

§503(b)(3)(D).

2. Sussex County’s Attorneys Cannot Receive Reimbursement Under § 503(b)(4)

Because Sussex County Lacks Standing Under § 503(b)(3)(D)

After analyzing both the statutory construction and legislative history, this Court holds that

the list of enumerated parties under § 503(b)(3)(D) is exhaustive and unambiguous. Therefore,

“judicial inquiry is complete.”70 Sussex County lacks standing required to receive payment for an

administrative expense claim under § 503(b)(3)(D). Since Sussex County cannot recover an

administrative claim, its legal fees are not recoverable under § 503(b)(4).

II. THE COURT WILL NOT ADJUDICATE THE ISSUE OF WHETHER SUSSEX

COUNTY MADE A SUBSTANTIAL CONTRIBUTION

The Court already decided that Sussex County lacks standing to assert an administrative

expense claim pursuant to § 503(b)(3)(D). Therefore, the Court need not address whether Sussex

County satisfied the substantial contribution requirement for an administrative claim.

70 Monzon, 910 F.3d at 101.

CONCLUSION

Based on the foregoing, the Court entered an Order Granting the Motion to Expunge on

February 24, 2020.”

Dated: March 11, 2020 Lito X Prove~

Honorable Stacey L. Meisel

United States Bankruptcy Judge

™ Docket No. 1214.

19