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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1984
- **Citation:** 465 U.S. 1026

## Text

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
CE Soe crea abb ss akan eae aes i
ree iv
ine as 5 wns kc dba ba 6s ork e RE eet 1
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
ER ccivc vs coc weosecccen iepoubnuseseuss la

Se cee ead k ees Ree eae 4a

iv

PAGE
Appendix “C”—Order and Letter Opinion of the
PS CHR hve chaos tees neciaeens lla
Appendix ‘“D”—Statutory Provisions Involved . 17a
oS Se ree ee pe 2la
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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_0960%3A1. Public record. Not legal advice.