Petition — Toshiba America, Inc. v. Copy-Data Systems, Inc.

83-100 4 bee

Docket No. DEC 1983

—_—_ ieiecepcicns, ALEXANDE: STEVAS,

IN THE as

Supreme Court of the United States

October Term, 1983

In the Matter of

COPY-DATA SYSTEMS, INC.,

Bankrupt.

TOSHIBA AMERICA, INC.,

Petitioner,

—against—

COPY-DATA SYSTEMS, INC. and ELLIOT SCHER,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

COURT OF APPEALS FOR THE THIRD CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

JOHN J. WITMEYER III

120 Wall Street

New York, New York 10005

Counsel for Petitioner

Of Counsel:

CHARLES A. BOOTH

FoRD MARRIN EsPosITO & WITMEYER

120 Wall Street

New York, New York 10005

December 14, 1983

i

Questions Presented For Review

1. When a trustee in bankruptcy elects to pursue a

suit and has judgment rendered and costs taxed against

him, must the trustee pay those costs (consistent with a

rule of law established by this court and unassailed for

over 100 years), or instead is the Third Circuit correct

that the trustee should now for the first time be held to

be immune from such customary risks of litigation?

2. Must a trustee in bankruptcy treat all claims

equally that are in the same category of claims (as trus-

tees have always been required to do under the bank-

ruptcy laws), or instead is the Third Circuit correct that

trustees may now for the first time ‘arbitrarily choose

certain administrative expenses to pay in full, and others

to leave totally unpaid?

ii

Statement Pursuant to Supreme Court Rule 28.1

Toshiba Corporation, Parent Company of Toshiba

America, Inc.

Consolidated Subsidiaries of Toshiba Corporation:

Toshiba Electric Equipment Corp.

Onkyo Corporation

Toshiba Battery Co., Ltd.

Toshiba Heating Appliances Co., Ltd.

Toshiba Electric Appliances Co., Ltd.

Toshiba Engineering & Construction Co., Ltd.

Shibaura Engineering Works Co., Ltd.

Nishishiba Electric Co., Ltd.

Kitashiba Electric Co., Ltd.

Toshiba International Corporation

Toshiba Medical Systems Co., Ltd.

Toshiba Business Machine Co., Ltd.

Tokyo Electric Co., Ltd.

Toshiba Electronic Systems Co., Ltd.

Marcon Electronic Co., Ltd.

Toshiba Components Co., Ltd.

Toshiba Machine Co., Ltd.

Toshiba Seiki Co., Ltd.

Toshiba Steel Tube Co., Ltd.

Tokyo Optical Co., Ltd.

Toshiba Ceramics Co., Ltd.

Toshiba Tungaloy Co., Ltd.

Toshiba Chemical Products Co., Ltd.

Toshiba Silicone Co., Ltd.

Toshiba Glass Co., Ltd.

Toshiba Cold Chain Co., Ltd.

Toshiba House and Living Industry Co., Ltd.

Toshiba Credit Corporation

Toshiba Physical Distribution Co., Ltd.

Toshiba Shoji Co., Ltd.

Nikko Jitsugyo Co., Ltd.

iil

TABLE OF CONTENTS

PAGE

Questions Presented For Review ...... .......... i

Statement Required Pursuant To Supreme Court

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as as i's sips dae N oie kae oe bieea’ 2

Statutory Provisions Involved ................... 2

TE I on Fs 055 sss pees vaecuereess 2

Proceedings in Bankruptcy Court ............ 3

Proceedings in District Court ................ 4

Proceedings in the Court of Appeals .......... 4

Reasons For Allowing the Writ .................. 4

1. The Decisions of the Courts Below Conflict

With a Decision of This Court ............ 4

2. The Decision Below Vastly Deviates From

the Accepted and Well Established Policy

Underlying the Bankruptcy System ....... 5

ds a Sikb cop oe wes oben vad Abn bb00 > Re ENS 6

ae bis eek a We nan.e oR pete A-1, B-1, C-1, D-1

Appendix “A”—Judgment Order of the Court of

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Se cee ead k ees Ree eae 4a

iv

PAGE

Appendix “C”—Order and Letter Opinion of the

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Appendix ‘“D”—Statutory Provisions Involved . 17a

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TABLE OF AUTHORITIES

Cases:

Babbitt v. Read, 236 F. 42 (2d Cir. 1916), cert. de- -

WOU, Bee Ca OD AEEES oven cccvascnccuee’s 5

Copy-Data Systems, Inc. v. Toshiba America, Ine.,

oe: Pe GOB: (BG Cir. IGE) oc ewececctccsinn 3

In Re Columbia Ribbon Co., 117 F.2d 999 (3d Cir.

Ee oak cscs wep heks bi t0ae bone myanean 6

Norton v. Switzer, 93 U.S. 355 (1876) ............ 4

Statutes and Rules of Procedure:

SC uC ek wa dee wh Wi004cheeeeee «i 2

I ONE OE BU, BO sess ceVersiececsnuces 3

Bankruptcy Act of 1898, § 62(a) (1) ...... se ee eee’ 2

Bankruptcy Act of 1978, § 403, 11 U.S.C. prec.

De UE N rs wict'cu dc daceeneeee eee 2, 3,5

ee PS eee eee eee eer ee 3

es ee SE oR GE OOACO) vec ccccecevncsnee 3

Other Authorities:

8A Collier on Bankruptcy § 62.09 (1975) .......... 5

IN THE

Supreme Court of the United States

October Term, 1983

Docket No.

In the Matter of

Copy-DATA SYSTEMS, INC.,

Bankrupt.

TOSHIBA AMERICA, INC.,

Petitioner,

—against—

Copy-DATA SYSTEMS, INC. and ELLIOT SCHER,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE HONORABLE, THE CHIEF JUSTICE OF

THE UNITED STATES AND THE ASSOCIATE JUS-

ICES OF THE SUPREME COURT OF THE UNITED

STATES:

Petitioner, Toshiba America, Inc. (“TAI”), petitioning

for the issuance of a writ of certiorari to the United

States Court of Appeals for the Third Circuit, respectfully

shows:

Decisions Below

The decisions of the United States Court of Appeals

for the Third Circuit, of the United States District Court

for the District of New Jersey, and the United States

2

Bankruptcy Court for the District of New Jersey, are all

unreported. Copies of all of the opinions are appended.

Basis of Jurisdiction

This Court has jurisdiction under 28 U.S.C. § 1254.

The judgment sought to be reviewed was entered by the

Clerk of the United States Court of Appeals for the Third

Circuit on September 15, 1983. This petition for a writ

of certiorari is timely filed within the prescribed ninety

day period.

Statutory Provisions Involved

The statutory provisions involved on this appeal are

produced in full text in Appendix “D”. Those provisions

are $$62(a)(1) and 64(a) of the Bankruptcy Act of

1898 as amended (formerly 11 U.S.C. §§ 102(a)(1) and

104(a)) and § 403 of the Bankruptcy Act of 1978, 11

U.S.C. prec. 101 note (1979).

Statement of the Case

The Trustee (defendant Elliot Scher) on behalf of the

estate of The Bankrupt (defendant Copy-Data Systems,

Inc.), has, over the last eight years, pursued alleged anti-

trust claims against TAI in the United States District

Court of the Southern District of New York. From time

to time as he pursued that suit, the Trustee applied to the

United States Bankruptcy Court for the District of New

Jersey for orders authorizing him to use the assets of the

bankrupt’s estate to fund the litigation as administrative

expenses; the bankruptcy court routinely granted those

applications.

The result of all this litigation was a ruling by the

United States Court of Appeals for the Second Circuit,

after a full trial in the lower court, that the alleged anti-

trust claims so vigorously pursued by the Trustee—both as

3

urged by him at trial and as alleged in the Bankrupt’s

Complaint—failed even to state any viable antitrust claim

against TAI, even if everything the Trustee claimed was

deemed true. See Copy-Data Systems, Inc. v. Toshiba

America, Inc., 663 F.2d 405 (2d Cir. 1981) .

In completely dismissing the Bankrupt’s antitrust

claims, the Second Circuit awarded TAI costs on appeal,

which were taxed in the aggregate sum of $16,747.07,

in accordance with Fed. R. App. P. 39. All of these

costs have been due and payable since January 26, 1982.

On the same day that costs were taxed, TAI filed its

Proof of Claim for the payment of the taxed costs as an

administrative expense of the estate, just as the Trustee

had up until then funded the litigation against TAI

through supposed “administrative expenses.” The Trus-

tee refused to pay those costs, and refused even to enter-

tain TAI’s formal application for payment under Fed.

R. Bankr. P. 219 & 901(4).

Proceedings in Bankruptcy Court

On March 19, 1982, TAI commenced proceedings

against the Trustee in the bankruptcy court to compel

payment of the lawfully taxed costs.* The Trustee op-

posed, arguing that because he had already exhausted the

estate (in futilely prosecuting the antitrust suit against

TAI), and because he would not accept his own personal

liability for those costs, TAI had no remedy. The bank-

ruptcy court denied TAI’s motion on September 21, 1982

based upon a letter opinion it had rendered on September

1, 1982.

* As a proceeding in or relating to a case commenced under

the Bankruptcy Act of 1898 as amended, the Bankruptcy Court

had jurisdiction over the proceeding pursuant to Bankruptcy Act

of 1898 §2, and Bankruptcy Act of 1978, §403(a), 11 U.S.C.

prec. 101 note (1979).

4

Proceedineas in the District Court

On appeal, the district court held that TAI’s lawfully

taxed costs constituted a proper administrative expense of

the Bankrupt’s estate. However, unlike the administra-

tive expenses allowed to the Trustee to fund the ground-

less antitrust litigation in the first place, the district court

ruled that this particular expense need not be paid.

Proceedings in the Court of Appeals

TAI then appealed to the United States Court of Ap-

peals for the Third Circuit, arguing primarily that (1)

under clear precedent of the United States Supreme Court,

a trustee in bankruptcy, just like any other litigant who

elects to pursue a suit, and has judgment rendered and

costs taxed against him, must pay those costs, and (2)

the whole concept for the bankruptcy system has always

been that the trustee must equally treat all claims within

a given category of claim (eg., all “administrative

claims”).

The court of appeals affirmed the judgment of the

district court without opinion.

REASONS FOR ALLOWING THE WRIT

1. The Decisions of the Courts Below Conflict With

a Decision in This Court.

The courts below have ruled that a trustee in bank-

ruptcy, who elects to pursue a suit and has judgment

rendered and costs taxed against him, is somehow exempt

from having to pay those costs. But the Supreme Court

of the United States addressed the question long ago and

stated that “of course, he is liable” for those costs. Norton

v. Switzer, 93 U.S. 355, 366 (1876). Since then, this has

5

been the law which governed in those rare cases when a

trustee refused to pay. Accord, Babbitt v. Read, 236 F.

42 (2d Cir. 1916), cert. denied, 243 U.S. 648 (1917)

(Learned Hand, C.J.).

But the lower courts in this case have abrogated that

rule, and created in its place a new rule that trustees bear

none of the customary risks of litigation—not even li-

ability for lawfully taxed costs. This is an extremely

false and dangerous proposition, and is directly contrary

to law that has been established by this Court and has

been unassailed for over 100 years.

Indeed, there has been no question until now that a

trustee in bankruptcy personally answers for expenses

incurred by him in his administration of the estate. See

3A Collier on Bankruptcy § 62.09, at 1446 (1975). To

obtain reimbursement for such costs, the trustee must

justify them to the court. See Bankruptcy Act of 1898,

§ 62(a) (1); 11 U.S.C. §503(b) (Supp. 1979). If the

court approves the costs, then the trustee may be reim-

bursed from the estate; if the court disapproves the costs,

the trustee will not be reimbursed. Jd. It is that simple.

But in the Third Circuit, that system is now negated by

one of absolute immunity of the trustee, which finds no

support in the law.

2. The Decision Below Vastly Deviates From the

Accepted and Well Established Policy Underly-

ing the Bankruptcy.

The whole structure of bankruptcy law calls for all

claims within a category of claims (e.g., all “administra-

tive claims”) to be treated equally. The lower courts,

however, in this case have made a radical departure from

that established and basic rule of law. Those courts have

allowed this trustee to pay (in full and on a current

6

basis) his own lawyers, who are administrative claimants,

and to leave other administrative claimants to share (per-

haps years down the road) in whatever (if anything) the

trustee ultimately leaves in the estate.

This is an unprecedented power to bestow upon trus-

tees in bankruptcy, and is a power that runs counter to

the whole structure of the bankruptcy law. In re Colum-

bia Ribbon Co., 119 F.2d 999 (3d Cir. 1941).

If these improper rulings (and the ruling of immunity

from lawfully taxed costs) are not reversed, trustees in

bankruptcy (at least in the Third Circuit) will have vast

and unbridled powers that they never before enjoyed—

powers indeed that the United States Supreme Court and

the Courts of Appeals have expressly denied trustees in

the past.

CONCLUSION

For all the foregoing reasons, a writ of certiorari

should issue to the United States Court of Appeals for

the Third Circuit.

Respectfully submitted,

JOHN J. WITMEYER III

120 Wall Street

New York, New York 10005

Counsel for Petitioner

Of Counsei:

CHARLES A. BooTH

FoRD MARRIN EsposiTo & WITMEYER

120 Wall Street

New York, New York 10005

December 14, 1983

APPENDICES

la

Appendix “A”

Judgment Order of the Court of Appeals

2a

UNITED STATES COURT OF APPEALS

For THE THIRD CIRCUIT

No. 83-5050

In the matter of:

Copy-DATA SYSTEMS, INC.,

Debtor,

TOSHIBA AMERICA, INC.,

Appellant,

=

Copy-DATA SYSTEMS, INC.,

(Civil No. 82-3525—D.N.J.—Newark)

District Judge: Honorable Clarkson S. Fisher

Submitted Under Third Circuit Rule 12(6)

September 14, 1983

Before: SEITZ, Chief Judge, GIBBONS and ROSENN, Circuit

Judges.

Judgment Order

After consideration of the contentions raised by appel-

lant, it is

ADJUDGED AND ORDERED that the judgment of

the district court be and is hereby affirmed.

Cost taxed against appellant.

3a

By the Court,

(SEITZ)

/s/ COLLINS J. SEITZ

seco 0.0 OEP O8 2246 28s

Chief Judge

ATTEST:

/s8/ SALLY MAyos

Savant € aed C9 TE 668

SALLY MAyos, Clerk

DATED: SEP 15 1983

Certified as a true copy and issued in lieu

of a formal mandate on October 7, 1983.

Test: M ELIZABETH FERGUSON

Chief Deputy Clerk, United States Court of Appeals

for the Third Circuit

4a

Appendix ‘’B”’

Order and Opinion of the District Court

5a

ORDER AFFIRMING BANKRUPTCY ORDER OF

SEPTEMBER 21, 1982.

Cole, Schotz, Bernstein,

Meisel & Forman

A Professional Corporation

365 West Passaic Street

Rochelle Park, New Jersey 07662

(201) 368-0100

Attorneys for Elliot Scher,

Trustee for Copy-Data Systems Inc., Bankrupt

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

Civil Action No. 82-3525 F

errr

TOSHIBA AMERICA, INC..,

4 Plaintiff-Appellant,

vs.

Copy-DATA SYSTEMS, INC.,

Defendant-A ppellee.

Plaintiff-Appellant, Toshiba America, Inc. (TAI),

having appealed from an Order of the United States

Bankruptcy Court for the District of New Jersey (1)

requiring TAI to await its proportionate share of re-

covery of certain administrative expenses until final dis-

tribution of the estate of the defendant, Copy-Data

Systems, Inc. (Copy-Data), and (2) finding that the

trustee of the bankrupt estate is not personally liable for

the aforementioned costs; and, this Court having reviewed

the report and considered the briefs and argument of

counsel; and, for the reasons stated in this Court’s

opinion filed December 7, 1982;

It is, on this 15th day of December 1982,

ORDERED, that the Bankruptey Court’s Order of

September 21, 1982 (1) requiring plaintiff-appellant,

6a

Toshiba America, Inc. to await its proportionate share

of recovery of certain administrative expenses until final

distribution of the estate of the defendant, Copy-Data

Systems, Inc., and (2) finding that the trustee of the

\bankruptcy estate is not personally liable for the afore-

/mentioned costs be and hereby is affirmed in all respects.

No costs.

/s/ CLARKSON §S. FISHER

HoN. CLARKSON §. FISHER, U.S.D.C.J.

7a

OPINION

UNITED STATES DISTRICT COURT

Appearances :

DISTRICT OF NEW JERSEY

Civil Action No. 82-3525

TOSHIBA AMERICA, INC.,

Plaintiff-Appellant,

—_

Copy-DATA SYSTEMS, INC.,

Defendant-A ppellee.

WILLIAM P. Forp, Esq.

By: CHARLES A. BooTH, Esq.

85 North Fullerton Avenue

Montclair, NJ 07042

(Attorney for Plaintiff)

COLE, SCHOTZ, BERNSTEIN,

MEISEL & FORMAN, P.C,

By: MICHAEL S. MEISEL, Esq.

STEVEN R, KLEIN, Esq.

365 West Passaic Street

Rochelle Park, NJ 07662

(Attorney for Defendant)

FISHER, Chief Judge.

Plaintiff-appellant, Toshiba America, Inc. (TAI), ap-

peals from an order of the United States Bankruptcy

Court for the District of New Jersey (1) requiring TAI

to await its proportionate share of recovery of certain

administrative expenses until final distribution of the

estate of the defendant, Copy-Data Systems, Inc, (Copy-

Data), and (2) finding that the trustee of the bankrupt

estate is not personally liable for the aforementioned

costs. For the reasons stated herein, the order of the

bankruptcy court is upheld.

8a

On May 23, 1975, Copy-Data commenced an action in

the United States District Court for the Southern Dis-

trict of New York against TAI. Copy-Data based its

claims on both the state-law tort and federal-law anti-

trust principles. After the institution of that suit, an

involuntary petition in bankruptcy was filed against Copy-

Data and Elliot Scher was appointed trustee.

The trustees elected to pursue the bankrupt’s claim

against TAI. After trials on liability and damages, the

district court awarded treble damages in the amount of

$1,320,000. On appeal, the court of appeals reversed the

district court’s ruling with respect to the anti-trust

claims. The state-law claims were remanded to the

district judge for further consideration and are now

pending.

As a result of the appeal process involving the anti-

trust issues, costs were taxed against the bankrupt estate

in the amount of $16,747.07. TAI brought a motion in

bankruptcy court to obtain immediate payment of these

costs, as administrative priority expenses, and to sur-

charge the trustee personally in the event that there were

insuffiicent monies in the bankrupt estate to pay the

taxed costs.

On September 21, 1982, the bankruptcy court (DeVito,

B.J.) denied TAI’s motion, ordering that, although the

costs were administrative expenses, TAI must await its

proportionate share of recovery upon final distribution

of the estate. The court found that, neither at the

instant of bankruptcy nor at any instant prior to the

pro rata distribution to creditors of the assets of the

bankrupt estate, is any creditor entitled to receive or

demand payment of a claim from the trustee. In addi-

tion, Judge DeVito stated that there was no showing

that the litigation was conducted vexatiously, wantonly

or in bad faith as to warrant holding the trustee per-

sonally liable.

9a

The defendant-appellee contends -hat the bankruptcy

court’s order of September 21, 1982, should not be upset

by this court. It argues that it is interlocutory in nature

and thus its appealability under the Bankruptcy Act is

committed to the discretion of this court. See section

39(c) Bankr, Act, 11 U.S.C. $67. In making the deter-

mination whether an order is interlocutory or final in

nature, the effect of the order must be analyzed. An

order is considered to be final when it “ends the litigation

on the merits and leaves nothing for the court to do but

execute the judgment.” /n re Geiger Enterprises, Inc.,

17 B.R. 482 (W.D.N.Y. 1982); Catlin v. United States,

324 U.S. 229, 233 (1945).

The facts of this case indicate that the September 21

order is not interlocutory in nature. Implementation of

this order will determine, with finality, the issues of the

trustee’s liability and the rights to collection of costs.

These findings will not affect or disrupt the litigation

still pending in the state and bankruptcy courts.

The defendant further contends that the order of the

bankruptcy court should not be upset unless it is clearly

erroneous. It is true that the clearly erroneous test ap-

plies only to findings of fact. This court must indepen-

dently determine the accuracy of the bankruptcy’s court’s

legal conclusions. I find that both are sound.

After reviewing the decision in Copy-Data Systems,

Inc. v. Toshiba America, Inc., 663 F.2d 405 (2d Cir. 1981),

it is clear that the Second Circuit reversed the district

court on a close question of anti-trust law. There is no

evidence that the trustee brought the litigation in bad

faith. The general rule is that trustees are liable only

for actions beyond the scope of their authority or for

negligence while acting within their authority. In the

Matter of Charles R. Turner v. Millard Aviation, Inc.,

13 B.R. 15 (D. Neb. 1981). A trustee must exercise

reasonable diligence in the performance of his duties in

administering the bankrupt’s estate. Carson, Pirie, Scott

10a

& Co. v. Turner, 61 F.2d 693, 694 (6th Cir. 1932). The

standard or measure of care required is that of an

ordinarily prudent person in the conduct of his private

business under similar circumstances and with a similar

goal. In re Schwen’s Inc. v. Lovett, 19 B.R. 681, aff'd,

20 B.R. 638 (D. Minn 1982) There is no evidence that

the trustee failed to satisfy this standard.

The next question is whether the taxed costs, which

are concededly administrative expenses, may be demanded

by TAI for immediate payment. The bankruptcy court

has the authority to place conditions upon the payment of

such costs. The court has ordered that TAI must await

its proportionate share of recovery until final distribution

of the estate. I find no error in the bankruptcy court’s

findings and will not disrupt its order. Accordingly, the

bankruptcy court’s order of September 21, 1982, is up-

held. Defendant-appellee will submit an order within 10

days. No costs.

December 7, 1982.

lla

Appendix “C”’

Order and Letter Opinion of the Bankruptcy Court

12a

ORDER DENYING TOSHIBA’S MOTION FOR ORDER DIRECTING

PAYMENT OF ADMINISTRATIVE LXPENSE

Cole, Schotz, Bernstein,

Meisel & Forman

A Professional Corporation

365 West Passaic Street

Rochelle Park, New Jersey 07662

(201) 368-0100

Attorneys for

Copy-Data Systems, Inc., Bankrupt

UNITED STATES BANKRUPTCY COURT

DISTRICT OF NEW JERSEY

No. B-76-2082

In Bankruptcy

In the Matter of

Copy-DATA SYSTEMS, INC.,

Bankrupt.

THIS MATTER having been opened to the Court by

Toshiba America Inc. for entry of an Order: (a) Direct-

ing the Trustee to pay to Toshiha America Inc. the sum

of $16,747.07, representing costs taxed against the Bank-

rupt by the United States Court of Appeals for the

Second Circuit and the United States District Court for

the Southern District of New York; (b) Directing the

Trustee to pay the same personally if the funds of the

estate are insufficient to do so; and (c) Granting such

other and further relief as may be just and proper; and,

the Court having read and considered the moving and

opposing papers and the argument of counsel; and, for

the reasons stated in its letter opinion dated September

1, 1982;

It is, on this 21st day of September 1982,

13a

ORDERED, that the subject costs are administrative

expenses, but that movant must await its proportionate

share of recovery upon final distribution; and, it is

further

ORDERED, that the Trustee shall not be personally

liable for all or any part of the aforesaid administrative

claim.

s’ D. JosepH DE VITO

Hon. D. JOSEPH DE VITO

Bankruptcy Judge

l4a

LETTER OPINION

UNITED STATES BANKRUPTCY COURT

DISTRICT OF NEW JERSEY

U. S. Court House & Post Office Building

Newark, New Jersey 07102

201 645-2630

D. JOSEPH DE VITO

BANKRUPTCY JUDGE

September 1, 1982

Michael S. Meisel, Esq.

Cole, Schotz, Bernstein, Meisel & Forman

365 West Passaic St.

Rochelle Park, N. J. 07662

William P. Ford, Esq.

35 North Fullerton Ave.

Montelair, N. J. 07042

Gentlemen:

Re: Copy-Data Systems, Inc.—Toshiba America, Inc.

No. B-76-2082

Toshiba America, Inc. (TAI) moves for an order (1)

directing the trustee to pay to TAI forthwith the sum of

$16,747.07 representing costs heretofore taxed against the

bankrupt by the Untied States Court of Appeals for the

Second Circuit and the United States District Court for

the Southern District of New York; and (2) directing

the trustee to pay the same personally if the funds of

the estate are insuffiicent to do so.

The issue at bar is, firstly, whether such taxed costs

are administrative expenses; secondly, whether such ex-

penses are to be paid immediately, as contended by TAI,

or upon distribution of the bankrupt estate, as argued

by the trustee; and thirdly, in the event the estate is

15a

inadequate to satisfy such claims, whether the trustee is

personally liable therefor.

This Court holds that subject costs arising from the

proceedings in the admiistration of the estate are, indeed,

administrative expenses within the purview of the statute;

see $62a of the Bankruptcy Act of 1898, 11 U.S.C.

§ 102a; see also In re Kyte, 189 F. 531 (D. Pa. 1911).

The Court further finds that neither at the instant of

bankruptcy nor at any instant prior to the pro rata dis-

tribution to creditors ‘including administrative claim-

ants) of the assets of the bankrupt estate is any creditor

(as distinguished from the trustee, who represents the

estate) entitled to receive or to demand from the trustee

payment of a fixed claim, see B & L Farms Co, v. United

States, 368 F.2d 571, 572 (5th Cir. 1966) (per curiam)

(Brown, J., dissenting), cert. denied, 389 U.S. 835

(1967).

Various state law claims asserted by the trustee

against TAI are still in litigation. To award TAI its

claimed costs now, while the ultimate surplus, if any,

from the estate is still in doubt would be premature and

very possibly prejudicial to other administrative claimants

who, like TAI, must await their proportionate share of

recovery upon distribution. This is basic. TAI has

neither alleged nor shown that it will be prejudiced in

any way as a result thereof.

Finally, the Court holds that the trustee is not per-

sonally liable. There has been no showing that the litiga-

tion in question was conducted vexatiously, wantonly, or

in bad faith. Indeed, the Southern District granted

judgment in favor of the trustee and against TAI, re-

versed on appeal. There is absolutely no evidence that

the trustee has exceeded his statutory authority. This

Court finds, to the contrary, that the trustee has done

nothing more than to discharge his obligations of proper

administration and liquidation of the estate, pursuant to

16a

§ 70a of the Bankruptcy Act, 11 U.S.C. §110a (repealed

October 1, 1979).

Accordingly, for all the foregoing reasons, TAI’s mo-

tion is denied. Submit an Order in accordance therewith.

Very truly yours,

D. JOSEPH DE VITO

Bankruptcy Judge

17a

Appendix “’D”

Statutory Provisions Involved

18a

Section 62a(1) of the Bankruptcy Act of 1898, July

1, 1898, 30 Stat. 562, as amended, provides as follows:

EXPENSES OF ADMINISTERING ESTATES; UNAUTHOR-

IZED SHARING OF FEES; WITHHOLDING ALLOWANCES.

a. (1) The actual and necessary costs and expenses in-

curred by officers, other than referees, in the administra-

tion of estates shall, except where other provisions are

made for their payment, be reported in detail under oath,

and examined and approved or disapproved by the court.

If approved, they shall be paid or allowed out of the

estates in which they were incurred.

Section 64(a) of the Bankruptcy Act of 1898, July 1,

1898, 30 Stat. 563, as amended, provides as follows:

DEBTS WHICH HAVE PRIORITY. a. The debts to have

priority, in advance of the payment of dividends to cred-

itors, and to be paid in full out of bankrupt estates, and

the order of payment, shall be (1) the costs and expenses

of administration, including the actual and necessary

costs and expenses of preserving the estate subsequent to

filing the petition; the fees for the referees’ salary and

expense fund; the filing fees paid by creditors in involun-

tary cases or by persons other than the bankrupts in

voluntary cases; where property of the bankrupt, trans-

ferred or concealed by him either before or after the

filing of the petition, is recovered for the benefit of the

estate of the bankrupt by the efforts and at the cost

and expense of one or more creditors, the reasonable costs

and expense of the recovery; the trustee’s expenses in

opposing the bankrupt’s discharge or in connection with

the criminal prosecution of an offense punishable under

chapter 9 of title 18 of the United States Code, or an

offense concerning the business or property of the bank-

rupt punishable under other laws, Federal or State; the

fees and mileage payable to witnesses as now or here-

after provided by the laws of the United States, and one

reasonable attorney’s fee, for the professional services

actually rendered, irrespective of the number of attorneys

19a

employed, to the bankrupt in voluntary and involuntary

cases, and to the petitioning creditors in involuntary cases,

and if the court adjudges the debtor bankrupt over the

debtor’s objection or pursuant to a voluntary petition

filed by the debtor during the pendency of an involuntary

proceeding, for the reasonable costs and expenses in-

curred, or the reasonable disbursements made, by them,

including but not limited to compensation of accountants

and appraisers employed by them, in such amount as the

court may allow. Where an order is entered in a proceed-

ing under any chapter of this Act directing that bank-

ruptcy be proceeded with, the costs and expenses of

administration incurred in the ensuing bankruptcy pro-

ceeding, including expenses necessarily incurred by a

debtor in possession, receiver, or trustee in preparing the

schedule and statement required to be filed by section

238, 378 or 483, shall have priority in advance of pay-

ment of the unpaid costs and expenses of administration,

including the allowances provided for in such chapter,

incurred in the superseded proceeding and in the sus-

pended bankruptcy proceeding, if any; (2) wages and

commissions, not to exceed $600 to each claimant, which

have been earned within three months before the date of

the commencement of the proceeding, due to workmen,

servants, clerks, or traveling or city salesmen on salary

or commission basis, whole or part time, whether or not

selling exclusively for the bankrupt; and for the purposes

of this clause, the term “traveling or city salesman” shall

include all such salesmen, whether or not they are inde-

pendent contractors selling the products or services of the

bankrupt on a commission basis, with or without a draw-

ing account or formal contract; (3) where the confirma-

tion of an arrangement or wage-earner plan or the

bankrupt’s discharge has been refused, revoked, or set

aside upon the objection and through the efforts and at

the cost and expense of one or more creditors, or, where

through the efforts and at the cost and expense of one

or more creditors, evidence shall have been adduced re-

20a

sulting in the conviction of any person of an offense

under Chapter 9 of Title 18 of the United States Code,

the reasonable costs and expenses of such creditors in

obtaining such refusal, revocation, or setting aside, or

in adducing such evidence; (4) taxes which became legally

due and owing by the bankrupt to the United States or

to any State or any subdivision thereof which are not

released by a discharge in bankruptcy: Provided, however,

That no priority over general unsecured claims shall

pertain to taxes not included in the foregoing priority:

And provided further, That no order shall be made for

the payment of a tax assessed against any property of

the bankrupt in excess of the value of the interest of

the bankrupt estate therein as determined by the court;

and (5) debts other than for taxes owing to any person,

including the United States, who by the laws of the

United States is entitled to priority, and rent owing to

a landlord who is entitled to priority by applicable State

law or who is entitled to priority by paragraph (2) of

subdivision ¢ of section 67 of this Act: Provided, however,

That such priority for rent to a landlord shall be re-

stricted to the rent which is legally due and owing for

the actual use and occupancy of the premises affected,

and which accrued within three months before the date

of bankruptcy.

Section 403(a) of the Bankruptcy Act of 1978, No-

vember 6, 1978, 92 Stat. 2682, codified at 11 U.S.C.

prec. 101 note (1979) provides as follows:

A case commenced under the Bankruptcy Act, and all

matters and proceedings in or relating to any such case,

shall be conducted and determined under such Act as if

this Act had not been enacted, and the substantive rights

of parties in connection with any such bankruptcy case,

matter, or proceeding shall continue to be governed by

the law applicable to such case, matter, or proceeding as

if the Act had not been enacted.

2la

Certificate of Service

The undersigned, a member of the bar of the Supreme

Court of the United States, hereby certifies that on this

day three copies of the foregoing Petition have been

served upon:

Cole, Schotz, Bernstein

Meisel & Forman

A Professional Corporation

365 West Passaic Street

Rochelle Park, New Jersey 07662

by depositing the same in a United States mail box, with

first class postage prepaid, addressed to counsel of record

at their post office address as shown above. I further

certify that all parties required to be served have been

served.

Dated: December 14, 1983.

JOHN J. WITMEYER III

Sworn to before me

this 14th day of

December, 1983

Notary Public