In re: Energy Future Holdings Corp. et al
Filing
43
MEMORANDUM ORDER: The Order denying Appellants' Substantial Contribution Application is Affirmed (***Civil Case Terminated). Signed by Judge Richard G. Andrews on 1/30/2019. (nms)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
In re
Chapter 11
Bankruptcy Case No. 14-10979
(CSS)
Jointly Administered
ENERGY FUTURE HOLDINGS CORP, et
al. ,
Debtors.
SHIRLEY FENICLE, INDIVIDUALLY,
AND AS SUCCESOR-IN-INTEREST TO
THE ESTATE OF GEORGE FENICLE, et
al. ,
Appeals from the Bankruptcy Court
Civil Action No. 18-877-RGA
BAP No . 18-33
Appellants,
Civil Action No. 18-878-RGA
BAP No. 18-34
V.
CONSOLIDATED APPEALS
THE EFH PLAN ADMINISTRATOR
BOARD, et al.,
Appellees.
SHIRLEY FENICLE, INDIVIDUALLY,
AND AS SUCCESOR-IN-INTEREST TO
THE ESTATE OF GEORGE FENICLE, et
al.'
Appellants,
V.
THE EFH PLAN ADMINISTRATOR
BOARD, et al.,
Appellees.
MEMORANDUM ORDER
Pending before the Court is an Appeal from an Order of the United States Bankruptcy
Court for the District of Delaware ("the Bankruptcy Court") denying Appellants ' Substantial
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Contribution Application. (No. 18-877, D .I. 1-1 ). 1 The issues have been fully briefed by the
parties. (D.I. 31; D.I. 35; D.I. 38, D.I. 39). The Court heard oral argument on November 20,
2018. (D.I. 42). For the following reasons, the Order denying Appellants' Substantial
Contribution Application is affirmed.
Appellants 2 assert that the Bankruptcy Court erred in denying their application when it
held that 1) Appellants could not receive reimbursement for attorney's fees because Appellants
did not pay those fees themselves and 2) that Appellants had not made a substantial contribution.
(D.I. 31 at 29-42). Appellees EFH Plan Administrator Board and United States Trustee assert
that the Bankruptcy Court did not err. (D.I. 38 at 17; D.I. 35 at 40).
This Court reviews legal determinations of the Bankruptcy Court de nova, and factual
determinations for clear error. US. Bank Nat 'l Ass 'n ex rel. CWCapital Asset Mgmt. LLC v.
Village at Lakeridge, LLC, 138 S. Ct. 960, 966 (2018). "Whether a creditor has made a
substantial contribution within the meaning of (11 U.S .C.] § 503(b)(3)(D) is a question of fact,
' and it is the bankruptcy court that is in the best position to perform the necessary fact finding
task. "' In re Tropicana Entm 't LLC, 498 F. App' x 150, 152 n.3 (3d Cir. 2012) (quoting Lebron
v. Mechem Fin. , Inc. , 27 F.3d 937, 946 (3d Cir. 1994)).
Section 503(b)(4) of the Bankruptcy Code allows "reasonable compensation for
professional services rendered by an attorney .. . of an entity whose expense is allowable" under
subparagraph (b)(3)(D), and "reimbursement for actual, necessary expenses incurred by such
attorney." Section 503(b)(3)(D) allows a creditor's expenses where the creditor has made a
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All docket item references in this opinion refer to C.A. No. 18-877 unless otherwise specified.
Appellants Fenicle and Fahy are creditors in the bankruptcy proceedings who filed timely proofs of claim. (D.I. 31
at 22). Appellants Jones, Heinzmann, Bissel, Carso), Albini , and Bergschneider are Unmanifested Asbestos
Claimants. (Id. at 26). Appellants Charlotte and Curtis Liberda moved the Bankruptcy Court to appoint a legal
representative for the Unmanifested Asbestos Claimants in 2015. (Id. at 24 ).
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"substantial contribution" in a Chapter 11 case. To show that it has made a "substantial
contribution" under§ 503(b)(3)(D), the applicant must show that its efforts "resulted in an actual
and demonstrable benefit to the debtor's estate and the creditors." Lebron, 27 F.3d at 944. The
Bankruptcy Court determined that Appellants failed to make this required showing. I agree.
First, Appellants argue their assumption of "the role that ordinarily would have been
expected of a court-appointed representative, regardless of the success of their efforts"
constitutes a "substantial contribution." (D.I. 31 at 40). This argument is unavailing. The
Bankruptcy Court determined that an independent legal representative for the Unmanifested
Asbestos Claimants was not required. (D.I. 36 at USA238-239, Tr. at 115:16-116:1). In doing
so, the Bankruptcy Court pointed to the E-Side Committee's "vigorous representation of asbestos
related creditors." (Id., Tr. 115:24-116:1). Appellants did not appeal that determination. As the
Bankruptcy Court held, Appellants were therefore not acting in place of a representative, but in
duplication of the court-appointed representative, the E-Side Committee. 3
Furthermore, I agree with the Bankruptcy Court that "just being a committee or being a
representative isn't enough. That committee or representative capacity has to result in some
positive actions that benefit all creditors and the estates as a whole." (D.I. 34 at A1803, Tr.
105:20-24). "[E]xtensive participation in a Chapter 11 case, without more, is not a sufficient
basis for 503(b) status." In re KiOR, Inc., 567 B.R. 451 , 460 (D. Del. 2017); see also In re
Summit Metals, 379 B.R. 40, 53 (Bankr. D. Del. 2007). The cases cited by Appellants also
support this conclusion. See In re Williams, 49 F. App'x 845, 850 (10th Cir. 2002) (affirming
substantial contribution award where applicant's efforts helped obtain a conversion order, defend
that order on appeal, and obtain a change of venue); In re Bayou Group LLC, 431 B.R. 549, 564-
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Additionally, Appellants Fenicle and Fahy were both members of the E-Side Committee. (D.I. 31 at 22).
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65 (S.D.N.Y. 2010) (substantial contribution was made by unofficial creditors' committee when
it successfully moved for the appointment of a receiver) ; In re Gen. Electrodynamics Corp. , 368
B.R. 543 , 555-56 (Bankr. N.D. Tex. 2007) (finding that applicant's "efforts at least contributed
to (1) Debtors' proposal of a 100% plan; (2) various protections and a capital infusion that make
the Plan feasible; and (3) Debtor's attendance to its fiduciary duties"). Therefore, to grant a
substantial contribution application, the Court must have evidence that the participation of the
creditor in a representative capacity created "an actual and demonstrable" benefit.
Second, Appellants have not provided any evidence that their efforts "resulted in an
actual and demonstrable benefit." Lebron, 27 F.3d at 944. The Bankruptcy Court made the
following factual findings:
•
•
•
the Appellants have fought against the debtors' ability to reorganize for years ;
the Appellants' efforts on behalf of the Unmanifested Asbestos Claimants has
not resulted in any changes to the Plan or to the case benefitting those
Claimants;
the Appellants' efforts have not created "a material benefit" to either the estate
as a whole or to the majority of the asbestos creditors.
(D.I. 34 at A1804-05, Tr. at 106:24-107:1). The record supports these conclusions. The only
evidence Appellants submitted to the Bankruptcy Court with the Substantial Contribution
Application were fee records. (D.I. 33 at A994-97, Al439-41, A1477-80). Appellants argue that
they are not required to submit corroborating evidence from another party because the Court may
make factual findings from its own first-hand observance of the proceedings. (D.I. 39 at 12-13
(quoting In re Ocean Blue Leasehold Prop. LLC, 414 B.R. 798, 809 (Bankr. S.D. Fla. 2009))).
However, this argument further buttresses the Bankruptcy Court' s factual determinations in light
of Appellants ' failure to carry their evidentiary burden. Appellants submitted no evidence of
substantial contribution. The Bankruptcy Court drew on its observance of Appellants' activities
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in the case to determine that no substantial contribution was made. Appellants have not
demonstrated that the Bankruptcy Court clearly erred in determining that their efforts did not
result in an actual and demonstrable benefit.
Finally, Appellants argue that the Court should either 1) consider the possibility of
Appellants' success in their ongoing appeal of the Confirmation Order4 or 2) order the
Bankruptcy Court to postpone determination of the application until that appeal has concluded.
(D.I. 31 at 40-41, 49). The possibility of success on the ongoing appeal of the confirmation
order should not be considered here. The mere possibility of future success in an ongoing appeal
is not an "actual and demonstrable benefit" as required by the Bankruptcy Code. Moreover,
" [t]he substantial contribution test is applied in hindsight." See KiOR, 567 B.R. at 458.
Therefore, it is improper to consider future action or results thereof when considering a
substantial contribution application. Additionally, I do not think the Bankruptcy Court erred by
not deferring determination on the substantial contribution application until after the appeal of
the Confirmation Order.
For the foregoing reasons, 5 the Order denying Appellants' Substantial Contribution
Application (No. 18-877, D.I. 1-1) is AFFIRMED.
Entered this
4
JO day of January, 2019.
(No. 18-381, D.l. 1-1).
As I have determined that the Bankruptcy Court correctly assessed the merits of Appellants ' Substantial
Contribution Application, I will not address the Bankruptcy Court's alternative grounds for its decision.
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