Bertram Communications LLC v. Netwurx Inc

Filing 30

ORDER signed by Judge J P Stadtmueller on 7/29/10 dismissing this appeal. See Order. (cc: all counsel)(nm)

Bertram Communications LLC v. Netwurx Inc

Doc. 30

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN
____________________________________________ B E R T R A M COMMUNICATIONS LLC, A p p e l la n t , v. N E T W U R X , INC., A p p e lle e . ____________________________________________ Case No. 09-CV-1037

ORDER
O n November 4, 2009, Bertram Communications, LLC ("Bertram"), pursuant to 28 U.S.C. § 158(a), appealed two decisions made by the United States B a n k r u p tc y Court for the Eastern District of W is c o n s in ("bankruptcy court") in case n u m b e r 08-26131, In re: Netwurx, Inc. (Docket #1). Three months later, on February 1 8 , 2010, this court dismissed one of the issues on appeal, whether the bankruptcy c o u rt "erred in confirming the Chapter 11 Plan of Reorganization" proposed by the a p p e lle e , Netwurx, Inc. ("Netwurx"). (Docket #24). The only issue remaining for this c o u rt to examine is "whether the Bankruptcy Court erred in disallowing Bertram C o m m u n ic a tio n s , LLC's request for an administrative claim for post-petition services re n d e re d ." (Appellant's Br. 1). With the benefit of the parties' briefs, the court

a d d re s s e s the remaining issue on appeal. The court begins by providing the factual b a c k g ro u n d that precipitated the dispute with respect to the remaining issue on a p p e a l.

Dockets.Justia.com

B AC K G R O U N D N e tw u rx is an internet service provider ("ISP") located in southeastern W is c o n s in , "providing telecommunications services to end users." (Appellant's Br. 2 ). Bertram is a wireless internet provider, who, as a wholesaler, sells the ability to c o n n e c t to the internet to retailers, such as Netwurx. Starting in 2007 and ending in th e summer of 2008, Bertram sold to Netwurx connection space, which the appellee, in turn, sold to its retail customers. In the midst of the period when Bertram was p ro vid in g telecommunication services to Netwurx, on June 5, 2008, the appellee filed a voluntary petition for Chapter 11 reorganization. On July 1, 2008, James Bertram, the appellant's president and owner, filed a letter directed to the bankruptcy court "in fo rm in g " the court that Netwurx owed Bertram Communications for service fees a n d late fees totaling $54,089.16 related to the appellant providing Netwurx with in te rn e t service during May, June and July of 2008. Several months later, on O c to b e r 30, 2008, Bertram filed an administrative expense claim for post-petition s e rvic e s , totaling $18,844.75, which the debtor objected to on November 11, 2008. O n January 30, 2009, the bankruptcy court conducted an evidentiary hearing o n the claim objections to determine the factual basis for Bertram's administrative c la im . First, the appellant's chief financial officer, Gina Bertram, testified. Ms. B e r tra m stated that Bertram's relationship with Netwurx began in February of 2007, a n d Netwurx "stopped paying" in April of 2008. (Tr. 14:15-16).1 The witness further

1

All citations to a transcript in this order are to the transcript of the January 30, 2009

hearing.

-2-

n o te d that Netwurx never executed a written contract for the services that Bertram p r o v id e d to the appellee. (Tr. 25:10; 27:20-22). Perhaps most importantly, Ms. B e rtra m testified with regard to a May 30, 2008 meeting that the appellant's re p re s e n ta tive s had with Peter Maher ("Maher"), the chief executive officer of N e tw u rx. The witness stated that at the meeting the parties talked about selling N e tw u rx to Bertram. (Tr. 29:3-4). Moreover, Ms. Bertram testified that she was u n s u re if Mr. Maher "told us that he wasn't going to pay . . . [for] the services."2 (Tr. 2 9 : 5-8). Ms. Bertram further disclosed that the appellant "continued the service" a fte r that meeting as Bertram was "trying to work with [Mr. Maher] to see if . . . [it] w a s an option for [the appellant] to buy the customer base." (Tr. 29:5-15). The w itne s s noted that it was within the appellant's abilities to "turn off" service. (Tr. 3 1 :2 ; 32:6). Additionally, Ms. Bertram testified that the decision was made to

c o n tin u e service to Netwurx after it filed for bankruptcy, in part, because they relied o n a statement3 by Mr. Maher that "you couldn't shut customers off after [the c o m p a n y was] in Chapter 11."4 (Tr. 31: 22-23). The witness then concluded her te s tim o n y by stating that Mr. Maher's statement prompted her to inquire into the legal va lid ity of Mr. Maher's claim, and once the appellant "found out it was okay" to shut

Ms. Bertram further testified "I don't think he said that he was not going to pay us at all, because he was discussing selling his business." (Tr. 29:16-18).
3

2

Its unclear from Ms. Bertram's testimony when exactly Mr. Maher made this statement.

Ms. Bertram further testified later in the hearing that "he said that post-bankruptcy you . . . are not allowed to shut off our customers." (Tr. 37:9-10).

4

-3-

o f f Netwurx's services, Bertram "shut the customers off" on the second or third of J u ly in 2008. (Tr. 37: 18-23). After Ms. Bertram concluded her testimony at the January 30, 2009 hearing, J a m e s Bertram was called to the stand. The witness testified that he did not "recall h e a rin g " Mr. Maher tell him "straight out that he was not going to pay [the] company for any more services provided to Netwurx" at the meeting in late May of 2008. (Tr. 5 0 :11 -1 4 ). Mr. Bertram further stated that after Netwurx filed for bankruptcy, Mr. M a h e r stated "I don't believe you can shut my customers off because its an estate." (T r. 41:7-8). The witness further testified that he "didn't know" what Mr. Maher's s ta te m e n t meant, but "didn't want to do something wrong" and "have ramifications b a c k ." (Tr. 41:8; 10-11). Notably, the witness knew that Mr. Maher was not an

a tto rn e y. (Tr. 49:15) Mr. Bertram then testified that he did some "research" on his o w n , which, in the words of the bankruptcy court, led him to "believe [he] couldn't s h u t [Netwurx] off." (Tr. 41:15-16; 42:22-24, 51:21-24). Peter Maher next testified at the January 30, 2009 hearing. Mr. Maher

u n e q u ivo c a lly stated that the debtor received the benefit of the services provided by B e r tra m both "pre and post petition." (Tr. 54:2-6). The witness further testified that h e told Bertram, before the appellee filed for bankruptcy, that "they would have to m a k e a decision whether they would like to continue to provide services, but [that N e tw u rx] would no longer pay them ever again." (Tr. 54:14-17). In fact, Mr. Maher e m p h a tic a lly repeated his comments throughout his testimony, stating that he

-4-

"a b s o lu te ly told" Bertram that, during the meeting on May 30, 2008, Netwurx would n o longer pay them (Tr. 55:9), with his "exact" words being "I will no longer pay you e ve r again." 5 (Tr. 55:25 - 56:1). The witness also testified that, after Netwurx had file d for Chapter 11 reorganization, he told Mr. Bertram that "I don't believe [you] can s h u t [Netwurx's customers] off." (Tr. 65:17-18). Mr. Maher admitted that he "was n o t clear of the law." (Tr. 65:16). David Roller, the director of operations for N e tw u rx, also testified with regard to the meeting that occurred on May 30, 2008, b e tw e e n the two company's officials, confirming Mr. Maher's testimony. (Tr. 110:14). T h e court took the testimony under advisement, and, on February 27, 2009, th e bankruptcy court issued a decision and order first finding that Bertram's claim for p o s t-p e titio n services could not be allowed as an administrative claim because the in d u c e m e n t occurred pre-petition. (Decision and Order on the Debtor's Objection to the Claims of Bertram Communication, LLC, Case No. 08-26131-SVK, Docket #96 ("D e c is io n ") 4). Second, the bankruptcy court stated that Bertram's post-petition e xp e n s e s of $18,844.75 could not be allowed as a general unsecured claim, as the c o u rt found that Bertram could not succeed under a theory of unjust enrichment or q u a n tu m meruit. (Decision 4-5). Third, the court found that Bertram was entitled to a general unsecured claim in the amount of $26,020.94 for pre-petition services. (D e c is io n 6-7). On November 11, 2009, Bertram filed a notice of appeal, arguing,

The relationship between Bertram and Netwurx was quite rocky. Mr. Maher explained during his testimony that he told Bertram that he no longer intended to pay the company because of "price increases, the lack of services, [and] the taking over of" a tower by Bertram. (Tr. 57:1-2).

5

-5 -

in relevant part, that the bankruptcy court erred by: (1) disallowing Bertram's request fo r an administrative claim for post-petition services rendered; and (2) disallowing B e r tra m 's request for post-petition expenses to be treated as a general unsecured c la im under a theory of unjust enrichment or quantum meruit. (Docket #1). The

c o u rt proceeds to examine the legal efficacy of the appellant's claim. D IS C U S S I O N T h is court has jurisdiction to hear an appeal of a bankruptcy court's order u n d e r 28 U.S.C. § 158(a). As the reviewing court, the district court must "apply a c le a r error standard to the bankruptcy court's factual findings and review its re s o lu tio n s of legal questions de novo." Ojeda v. Goldberg, 599 F.3d 712, 716 (7th C ir. 2010). A finding is "clearly erroneous" when "although there is evidence to

s u p p o rt it, the reviewing court on the entire evidence is left with the definite and firm c o n vic tio n that a mistake has been committed." In re Smith, 582 F.3d 767, 777 (7th C ir. 2009) (internal citations omitted). Bertram's principal issue on appeal is that the bankruptcy court erred by d is a llo w in g Bertram's request for an administrative claim for post-petition services re n d e re d . Section 503 of the Bankruptcy Code provides priority status for the p a y m e n t of "actual, necessary costs and expenses of preserving the [bankruptcy] e s ta te ," including "wages, salaries, or commissions for services rendered after the c o m m e n c e m e n t of the case." 11 U.S.C. § 503(b)(1)(A). The logic of the Bankruptcy C o d e in giving priority to parties who supply goods or services to a debtor-in-

-6-

p o s s e s s io n is to encourage such parties to do business with the bankruptcy estate. In re Jartran, Inc., 732 F.2d 584, 586 (7th Cir. 1984). However, "administrative p r io r ity claims are to be strictly construed because the presumption in bankruptcy c a s e s is that the debtor has limited resources that will be equally distributed to c re d itors ." In re Nat'l Steel Corp., 316 B.R. 287, 299 (Bankr. N.D. Ill 2004). The S e ve n th Circuit has adopted a strict two-part test for determining whether a p a rtic u la r debt will be afforded administrative priority: (1) the debt must arise from a transaction with the debtor-in-possession; and (2) the debt must be beneficial to th e debtor-in-possession in the operation of the business. Jartran, 732 F.2d at 5 8 6 -8 7 (citing In re Mammoth Mart, 536 F.2d 950, 954 (1st Cir. 1976)). To satisfy th e first prong of the Jartran test, the creditor must enter into a transaction with the p o s t-p e titio n debtor or the debtor must have induced the creditor's performance. J a rtra n , 732 F.2d at 588. The debt may not merely arise out of commitments made b e fo re the debtor-in-possession came into existence. Id. "[W ] he n third parties are in d u c e d to supply goods or services to the debtor-in-possession pursuant to a c o n tra c t that has not been rejected, the purposes of [administrative claims] plainly re q u ire that their claims be afforded priority." Mammoth Mart, 536 F.2d at 954 (n o tin g that the debtor-in-possession is "free to . . . reject burdensome executory c o n tra c ts ."). The second prong of the Jartran test requires an actual and necessary b e n e fit to the bankruptcy estate. Id. at 587. The moving party bears the burden of s h o w in g its claim is entitled to administrative expense priority, and the standard of

-7-

p ro o f is preponderance of the evidence. In re FBI Distrib. Corp., 330 F.3d 36, 42 (1 s t Cir. 2003). A p p lyin g this standard of proof, the bankruptcy court found that Bertram could d e m o n s tra te that it met the second prong of the Jartran test, as the appellant had c o n ve ye d a benefit to Netwurx by continuing to provide the debtor with te le c o m m u n ic a tio n service after the appellee filed for bankruptcy on June 5, 2008. (Decision 3) ("Here, Netwurx cannot reasonably dispute that Netwurx received a b e n e fit from Bertram's services."). However, the bankruptcy court also found that B e r tra m could not prove that it was entitled to an administrative claim under the first p ro n g of the Jartran test because "although Netwurx may have received valued b a s e d Bertram's post-petition services," "Bertram's agreement with Netwurx to p ro vid e internet services occurred pre-petition" and was rejected before Netwurx b e c a m e a debtor-in-possession.6 (Decision 3). O n appeal, Bertram makes several arguments that the bankruptcy court's fin d in g s that there were no post-petition inducements was clearly erroneous. (A p p e lla n t's Br. 5) ("However, the Court does not give proper weight to the testimony th a t indicates there were in fact post-petition inducements."). First, the appellant a rg u e s that the bankruptcy court discounted evidence that on May 30, 2008, "Mr. M a h e r talked to the Bertrams about possibly selling the Netwurx customers to B e r tra m ." (Appellant's Br. 5). The appellant contends that Mr. Maher's statement

In concluding as such, the bankruptcy court noted that "before the bankruptcy, Netwurx told Bertram it would not pay for the services anymore."

6

-8 -

in d u c e d the Bertrams to "continue service in order to preserve the customers p e n d in g a sale, as without these services the customers would be lost." (Appellant's Br. 5). The court is unpersuaded by the appellant's first argument. There is a dearth o f evidence in the record indicating that there was a formal arrangement to have B e r tra m purchase Netwurx's customers in exchange for continuing internet service p o s t-p e titio n . The closest the testimony of any party comes to discussing any sort o f arrangement is the testimony of Ms. Bertram, who stated that the two parties were e xp lo rin g the "option" of having the appellant purchase the appellee's clients. (Tr. 2 9 :5 -1 5 ). The bankruptcy court did not error by finding that Ms. Bertram's testimony fa ile d to show that Mr. Maher induced the appellants into continuing services postp e titio n . The bankruptcy court found Mr. Maher's testimony that he emphatically s ta te d that he would "no longer pay [Bertram] ever again" (Tr. 55:25 - 56:1), credible a n d concluded that Bertram could not be induced by discussions regarding the p o s s ib le purchase of the appellee's customers when there was zero possibility that c o n tin u in g the services would result in payment. W h ile Mr. Bertram and Ms. Bertram te s tifie d that they did not recall Mr. Maher making such a statement, this court is u n a b le to conclude that the bankruptcy court was clearly erroneous in accepting the te s tim o n y of Mr. Maher and rejecting the testimony of the Bertrams. See Anderson v . Bessemer City, 470 U.S. 564 (1985) ("W h e re there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous.").

-9-

P e rh a p s more importantly, even if the court does find that there was some sort o f statement about selling customers to Bertram by Mr. Maher that compelled the a p p e lla n t to continue to provide Netwurx telecommunication services, such a s ta te m e n t does not constitute post-petition inducement, as the conversation in q u e s t io n occurred before Netwurx filed for bankruptcy. Bertram argues that the "p o s s ib ility of a sale remained past the petition filing date, and so the pre-petition in d u c e m e n t continued on as a post-petition inducement." (Appellant's Br. 5).

H o w e v e r, "inducement of the creditor's performance by the debtor-in-possession is c ru c ia l to a claim for administrative priority." Jartran, 732 F.2d at 587 (emphasis in o rig in a l). The appellant cites to no authority indicating that pre-petition inducement c a n "continue on" as post-petition inducement,7 and, as such, the court is obliged to re je c t Bertram's first argument for reversal. Second, Bertram argues that the bankruptcy court erred by failing to find that "M r. Maher . . . induced the Bertrams post-petition when he stated to Mr. and Mrs. B e rtra m that because he was in Chapter 11, they could not shut off service." (A p p e lla n t's Br. 5). W h e n applying the first prong of the Jartran test that "the debt m u s t arise from a transaction with the debtor-in-possession," 732 F.2d at 588, it

In fact, if any statement made before a petition for bankruptcy is filed can "continue on" to influence a creditor such that they provide services post-petition, the distinction between pre- and post-petition inducement is obliterated. The goal of providing priority to administrative claims is to encourage parties to contract with the debtor-in-possession. If the court reads the first prong of the Jartran test to encompass pre-petition statements, the value of the intended priority envisioned by Congress would be "diluted." Jartran, 732 F.2d at 586. Moreover, the court notes that the appellants do not argue that Netwurx "had a duty to take affirmative steps to prevent [Bertram] from engaging in post-petition performance," and, as such, any silence by Netwurx is meaningless. Id. at 587.

7

-10-

a p p e a rs at first blush that Bertram's argument is wholly without merit, as the postp e titio n assertion by Mr. Maher, if believed, did not constitute some sort of a g re e m e n t or transaction between the parties. However, Jartran also noted that the first prong of the test for whether a claim is entitled to the benefit of administrative p rio rity can be also be met by a showing of "inducement of the creditor's p e rfo rm a n c e by the debtor-in-possession." Id. There is a lack of case law

e x p l a in in g what "inducement" in the context of the first prong of the Jartran test e xa c tly entails, 732 F.2d at 591 ("W e leave to another day the problem of what sort o f post-petition conduct by the debtor could lead to a conclusion . . . that the claimant w a s thus entitled to administrative priority"), and neither party cites to any authority tha t is particularly helpful. The cases that have found that a debtor "induced" a c re d ito r's performance have done so in a context where the debtor unequivocally a s s u re d and urged the creditor that an agreement forged pre-petition would c o n tin u e . See, e.g., In re Pre-Press Graphics Co., 287 B.R. 726, 731 (Bankr. N.D. Ill. 2003) ("By assuring Nolte that the Agreements would be "going forward" and c o n tin u in g to accept Nolte's services and the benefits flowing therefrom, the Debtor in d u c e d Nolte's performance"); see also In re Collins & Aikman Corp., 384 B.R. 751, 7 6 0 (Bankr. E.D. Mich. 2008) (holding that a detailed email sent by the debtor, a tool m a n u fa c tu r e r , to a creditor tool supplier constituted inducement under the Sixth C irc u it's equivalent to the Jartran test, as the email both (1) was intended to induce th e creditor's performance and (2) resulted in the continued performance); In re

-11-

C a rp e t Ctr. Leasing Co., 991 F.2d 682, 686-687 (11th Cir. 1993) ("Debtor actively s o u g h t to retain possession of the tractors by agreeing to pay Paccar monthly a d e q u a te protection payments . . . [t]he negotiation for continued possession of the tra c to rs in return for adequate protection is a post-petition transaction providing new va lu e to the bankruptcy estate.") The court is also guided by a 2003 opinion by J u d g e Gerber of the United States Bankruptcy Court for the Southern District of New York: "T h e `inducement' requirement . . . must be construed with common s e n s e ­ to filter out, as in Jartran, claims for administrative expense tre a tm e n t where the post-petition benefit is requested pre-petition a n d /o r unwanted by the post-petition debtor-in possession, but to re q u ire administrative expense treatment where the post-petition b e n e fit is knowingly accepted and desired, post-petition, by the postp e titio n debtor-in-possession." In re Adelphia Bus. Solutions, Inc., 296 B.R. 656, 665 (Bankr. S.D.N.Y. 2003). A p p lyin g these principles to the specific issue at hand, the court concludes th a t Mr. Maher's statement to Mr. Bertram that, "I don't believe you can shut my c u s to m e rs off because its an estate" (Tr. 41:7-8), does not constitute "inducement" u n d e r the first prong of the Jartran test. First, there was nothing unequivocal about M r. Maher's statement that exhibited a knowing acceptance or desire of the benefit B e r tra m was providing to Netwurx. Notably, Mr. Maher had, prior to uttering the

s ta te m e n t in question, told Bertram that Netwurx would no longer pay the appellant "e ve r again" for the services it was rendering under the contract. The court does not fin d error in the bankruptcy court concluding that the rather lukewarm statement "I

-12-

d o n 't believe you can shut my customers off," when viewed in the context of earlier s ta te m e n ts outright rejecting the contract in question, failed to reasonably induce the B e r tra m s into continuing to provide telecommunication services. 8 Moreover, the te s tim o n y of Mr. Bertram and Mr. Maher all indicate that Maher was providing a ra th e r hesitant9 opinion on the state of the law, rather than expressing some sort of d e s ire to continue the business relationship. Additionally, as the bankruptcy court n o te d , there was significant evidence in the record that the true catalyst for Bertram c o n tin u in g to provide telecommunication services to the debtor was the appellant's h o p e to purchase those customers from Netwurx and not Mr. Maher's statements a b o u t the legal perils of shutting off Netwurx's customers. 1 0 Bertram took the

c a lc u la te d risk that by continuing to provide service to Netwurx's customers after the a p p e lle e 's petition was filed that Bertram could avoid upsetting potential future c u s to m e rs even knowing that Netwurx refused to pay for such services. W h ile B e r tr a m 's gamble did not pay off, as the company was unsuccessful in acquiring N e tw u rx's customers, merely providing a benefit post-petition to the debtor does not, in and of itself, transform a debt into an administrative priority claim. Jartran, 732

This is particularly true given that Mr. Maher was not a lawyer and the Bertrams, business people of over thirty years (Tr. 47:9), knew that Mr. Maher's take on the law was lacking any basis.
9

8

Mr. Bertram testified that Mr. Maher used the phrase "I don't believe you can." (Tr.

41:7-8). There is also evidence in the record that Mr. Bertram was persuaded to continue providing telecommunication services, not because of Mr. Maher's statement, but because of Mr. Bertram's own research he did on the internet regarding bankruptcy law. (Tr. 41:15-16; 42:22-24, 51:21-24).
10

-13-

F .2 d at 586-87. In fact, Bertram was so unpersuaded by Mr. Maher's assertions a b o u t the law that Mr. Bertram did outside research on bankruptcy law to determine w h e th e r he could shut off Netwurx's customers 1 1 and the company, belatedly, c o n s u lte d an attorney to determine whether the appellant could shut off services.1 2 In short, the court finds the bankruptcy court did not clearly error by finding that in d u c e m e n t did not occur in this case. The only way inducement could exist in this c a s e is if the first element of the Jartran test was given a very expansive meaning to encompass off-handed comments by the agents of a debtor-in-possession that h a d the remote and patently unreasonable 1 3 possibility of causing the creditor to c o n tin u e to provide services to the debtor. Given that administrative priority claims a re to be strictly construed, In re Federated Dep't Stores, Inc., 270 F.3d 994, 1000 (6 th Cir.2001), the court finds it improper to expand the "inducement" requirement

Mr. Bertram conceded in his testimony that his own research was a reason why he continued to provide services to Netwurx. (Tr. 41:15-16; 42:22-24, 51:21-24). The court surmises that Bertram did this only after they concluded that they no longer had the opportunity to acquire Netwurx's customers. The court finds that it borders on the absurd that Bertram could reasonably rely or be induced by the assertion of a non-lawyer regarding the law.
13 12

11

-14-

a s such.1 4 See also In re Larsen, 80 B.R. 784, 788 (Bankr. E.D. Va. 1987) ("It is not e n o u g h that the debtor-in-possession take some action that gives rise to a claim: a tra n s a c tio n between the creditor and debtor-in-possession must occur") (emphasis in original). Third, Bertram attempts to distinguish Jartran, arguing that, unlike in Jartran, h e re , the debtor "continued to take and sell the service offered" by the creditor and "co n tin u e d to make money from this service post-petition." (Appellant's Br. 6). H o w e ve r, in Jartran, like in this case, the debtor did indeed benefit from the c o n tin u e d services of the creditor. 732 F.3d at 587 ("There is no question that the a p p e a ra n c e of ads in Yellow Page directories throughout the country is beneficial to J a rtra n , as a debtor-in-possession, in the operation of its business . . . [a]fter filing th e petition in bankruptcy, Jartran continued to place new ads in directories th ro u g h o u t the nation, thus evidencing the importance of Yellow Pages advertising to the success of the Jartran business.") The issue in Jartran is identical to the issue in this instant case: whether there was any post-petition transaction or inducement

The appellant, later in its brief, argues, without citation, that the "Debtor's arguments with regards to the administrative claim in effect state that a debtor can demand that a creditor continue to provide a service because the debtor is in bankruptcy, can make a profit from the service when the creditor complies with these demands, and the debtor never has to pay the creditor anything for it . . . [t]his is an absurd result." (Appellant's Br. 7). The appellant is being disingenuous. First, there is nothing in the record that indicates that the debtor "demanded" that the creditor continue to provide their service; the debtor, at best, made an off-hand comment about the legal ability for the creditor to cut-off services. As discussed above, the unequivocal statements by Mr. Maher that he would no longer pay for services removes any chance that the statements in question were any sort of "demand." Moreover, just because a creditor's claim is not given administrative status does not mean that the debtor "never has to pay the creditor anything for it;" the claim is merely given lower priority. 11 U.S.C. § 507.

14

-15-

b y the debtor-in-possession resulting in the creditor conveying a benefit on the d e b to r. The Seventh Circuit concluded in Jartran that there was no transaction or in d u c e m e n t by the debtor-in-possession; faced with nearly identical material facts in this case, this court is obliged to conclude similarly. Bertram cites the case of In re Home Interiors & Gifts, Inc., No. 0 8 - 3 1 9 6 1 - 1 1 - B J H , 2008 Bankr. LEXIS 2476 (Bankr. N.D. Tex. Oct. 9, 2008) in s u p p o rt of its attempt to distinguish Jartran. The court is puzzled by the appellant's c itatio n , as even a cursory reading of the case indicates to the reader that the court in that case limited its holding to the specific context of the continued use of a c re d ito r 's trademark.1 5 Id. at *14; 21 ("However, HIG's focus on post-petition

`in d u c e m e n t' is misplaced in a trademark use context . . . In these instances, the g e n e ra l administrative expense claim requirement as stated in In re Amarex, 853 F .2 d at 1530, of a post-petition transaction and inducement by the debtor is not the re le va n t inquiry . . . [r]ather, in the trademark and pre-1984 real property cases, c o u rts addressing this issue have looked primarily to the debtor's continued p o s t-p e titio n `use' of that property, and whether such use benefitted the bankruptcy e s ta te .") (emphasis added). In the context of the post-petition use of a trademark, w h e r e the law states that the "underlying right to the trademark accrues from the use o f a particular name or symbol," the In re Home Interiors & Gifts court found that the d e b to r-in -p o s s e s s io n engaged in a transaction with the creditor by knowingly and

15

Remarkably, the appellee does not mention this distinction either.

-1 6 -

w illin g ly using the marks in question.1 6 Id. at *16. Here, the facts of this case are c o m p le te ly divorced from those of the In re Home Interiors & Gifts court, as no tra d e m a r k use is at issue here, and the court finds Jartran much more on point. "A b e n e fit to the debtor-in-possession alone, without it having induced the performance, is not sufficient to warrant entitlement to an administrative claim priority, as it would c o n tra d ic t [the] policy reason for allowing priority." In re Old Carco LLC, 424 B.R. 6 5 0 , 656 (Bankr. S.D.N.Y. 2010) (citing to Jartran, 732 F.2d at 590). In an attempt to try to further distinguish Jartran, the appellant, in its reply b rie f, argues that in Jartran, unlike in this case, the benefit conferred by the creditor w a s "unquantifiable and unascertainable." (Appellant's Reply Br. 4). The appellant d o e s not cite to any case law for the proposition that the "certainty" of the amount of d e b t in question is dispositive when determining whether a claim should be afforded a d m in is tra tive status. Rather, this court will rely on the test in Jartran, which states th a t a debt can be an administrative claim if it arose from a transaction with the d e b to r- in - p o s s e s s io n and was beneficial to the debtor-in-possession in the operation o f the business. 732 F.2d at 586-87. Here, the appellant has failed to meet its

b u rd e n of demonstrating that the bankruptcy court erred by finding that no postp e titio n transaction occurred. Accordingly, this court will affirm the decision of the b a n k ru p tc y court in not granting the appellant an administrative claim in the amount o f $18,844.75.

The court does not voice agreement with the distinction made by the In re Home Interiors & Gifts court, but merely restates its holding.

16

-17-

B e r tra m argues, in the alternative, that their "post-petition claim should be g ive n unsecured status." (Appellant's Br. 8). Before the bankruptcy court, the a p p e lla n t advanced two state-law based theories for why its post-petition claim s h o u ld be allowed: (1) unjust enrichment; and (2) quantum meruit. The bankruptcy c o u rt rejected both of the theories presented by the creditor, and Bertram argues on a p p e a l that the bankruptcy court was in error. The court proceeds to evaluate the u n ju s t enrichment claim. In W is c o n s in ,1 7 an action for unjust enrichment is "based upon proof of three e le m e n ts : (1) a benefit conferred on the defendant by the plaintiff, (2) appreciation o r knowledge by the defendant of the benefit, and (3) acceptance or retention of the b e n e fit by the defendant under circumstances making it inequitable for the defendant to retain the benefit." Watts v. Watts, 137 W is . 2d 506, 531 (1987). The bankruptcy c o u rt, in its February 27, 2009 order, found that "the first and second requirements [o f an unjust enrichment claim] appear to be met . . . because Bertram provided se rv ic e s to Netwurx's customers, and Netwurx received payment from the customers f o r those services." (Decision 5). However, the bankruptcy court concluded that B e rtra m could not recover under an unjust enrichment theory because: (1) Netwurx "u n e q u ivo c a lly declined the benefit" for which Bertram now seeks compensation; and

The parties do not dispute that Wisconsin law applies to the claim at issue. In federal court, the choice of law is determined by the choice of law rules of the forum state. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941). When the parties do not dispute what law should be applied, the court should apply forum law, Futuresource L.L.C. v. Reuters Ltd., 312 F.3d 281 (7th Cir. 2002), and, accordingly, the court will apply Wisconsin law.

17

-1 8 -

(2 ) "[i]f a person declines in advance a benefit to be conferred by another, then the p e rs o n conferring the benefit may not recover for unjust enrichment." (Decision 5) (c itin g to Lawlis v. Thompson, 137 W is. 2d 490, 499 (1987)). W ith respect to the unjust enrichment claim, the court does not find error with th e bankruptcy court. Bertram does not quibble with the bankruptcy court's

c o n c lu s io n s regarding the law, but rather disputes the court's findings regarding the fa c ts of the case, arguing that the "debtor never `unequivocally declined the benefit' a n d in fact urged that the benefit continue." (Appellant's Br. 8). Specifically, in a rg u in g that Netwurx did not "decline in advance the benefit conferred" by Bertram, th e appellant repeats its earlier concerns that: (1) "the parties were discussing a s a le [of Netwurx's customers to Bertram]"; and (2) "Mr. Maher told the Bertrams that th e y could not shut off service due to the bankruptcy." (Appellant's Br. 8). For the re a s o n s discussed above, the court cannot find clear error with the bankruptcy c o u rt's factual findings. The bankruptcy court relied upon the testimony of Mr. Maher a n d Mr. Roller to conclude that the appellee's chief executive officer told Bertram t h a t Netwurx no longer desired the appellant's services. The mere fact the

b a n k ru p tc y court found the testimony of Mr. Maher and Mr. Roller to be more c re d ib le than the testimony of the Bertrams does not mean that the bankruptcy c o u rt's findings were clearly erroneous. In re Pearson Bros. Co., 787 F.2d 1157, 1 1 6 2 (7th Cir. 1986) ("[T]he bankruptcy judge's determination . . . was based upon th e conflicting testimony of two witnesses and must be upheld if the testimony

-19-

a c c e p te d by the trier of fact was coherent, facially plausible and uncontradicted by d o c u m e n ta ry or objective evidence."). Here, the appellant only complains that the b a n k ru p tc y court did not accept the Bertrams' version of the facts, an insufficient g r o u n d to reverse a bankruptcy court's factual findings. 1 8 Id. Moreover, even if the c o u rt fully accepts the testimony that: (1) there were discussions about Bertram p u rc h a s in g Netwurx's customers; and (2) Mr. Maher stated "I don't believe you can s h u t my customers off because its an estate," such evidence does not call into d is p u te whether Netwurx declined the benefit conferred by Bertram: Netwurx was c le a r that they were no longer going to pay Bertram. Testimony with respect to ta n g e n tia l questions about obtaining the appellee's clients and Mr. Maher's lu k e w a rm assertions about bankruptcy law does not warrant reversal of the b a n k ru p tc y court's ultimate conclusion. B e rtra m also asserts that the bankruptcy court erred with respect to its claim b a s e d on quantum meruit. Recovery in quantum meruit is "allowed for services p e r fo r m e d for another on the basis of a contract implied in law or an implied promise to pay the performer for what the services were reasonably worth." In re Estate of V o s s , 20 Wis. 2d 238, 241 (1963). Quantum meruit is applicable where: (1) the d e fe n d a n t requested the plaintiff to perform services; (2) the plaintiff complied with

Bertram contends that Netwurx was attempting to mislead and lure the appellant into continuing its services. The question of the intent of the parties is largely one related to the credibility of the conflicting witnesses. The court will defer to the trier of fact on such questions. Pearson Bros. Co., 787 F.2d at 1162 ("The question of credibility of witnesses is peculiarly for the trier of fact and an appellate court will not redetermine the credibility of witnesses where the trial court had the opportunity to observe their demeanor and form a conclusion.").

18

-20-

th e request; and (3) the services were valuable to the defendant.1 9 W.H. Fuller Co. v . Seater, 226 W is . 2d 381, 386 n.2., 595 N.W .2 d 96 (Ct. App. 1999). The

b a n k ru p tc y court concluded that "Bertram's quantum meruit argument fails because N e tw u rx made no promise to pay, and therefore Bertram could not expect re a s o n a b le compensation." (Decision 5). Again, Bertram on appeal does not dispute the bankruptcy court's in te rp re ta tio n of the law, but instead argues that contrary evidence existed that c o n flic te d with the evidence relied on by the court. (Appellant's Br. 9) ("Again the B a n k ru p tc y Court relies on Peter Maher's testimony . . . [h]owever, this is entirely c o n tra d ic t o r y of Mr. Maher's statements a few days later stating that the Bertrams h a d to keep providing him service."). For the reasons stated above, the bankruptcy c o u rt was not clearly erroneous by finding the testimony of Mr. Maher and Mr. Roller to be more persuasive than that of the Bertrams. Moreover, Mr. Maher's statement t h a t he "didn't believe" Bertram was allowed to shut off Netwurx's customers is a w a y s removed from a "request" for Bertram to continue services, especially when

Indicative of the quality of the brief, the appellant's attorney opted to not cite any authority for what the elements of a quantum merit claim are. (Appellant's Br. 9) ("To satisfy the elements of quantum merit, there must be three elements. The defendant must request a service; the service must be performed; and the plaintiff must expect reasonable compensation. Again, the Bankruptcy Court relies . . .").

19

-21-

vie w e d in light of Netwurx's earlier statements about its unwillingness to pay the a p p e lla n t.20 In the final analysis, the bulk of Bertram's argument rests on a very thin reed ­ the suggestion that an assertion made by Mr. Maher, a layperson and non-lawyer, c o n c e rn in g the implications of bankruptcy law compelled the appellant to continue to provide telecommunications services to the debtor. To be sure, the suggestion th a t anyone seasoned with many years of experience in operating a business would b e persuaded by the legal musings of a non-lawyer to continue providing thousands o f dollars in services strains all credulity. Thus, the court is obliged to affirm the d e c is io n of the bankruptcy court and dismiss this appeal in its entirety. A c c o rd in g ly, IT IS ORDERED that this appeal be and the same is hereby DISMISSED. D a te d at Milwaukee, W is c o n s in , this 29th day of July, 2010. BY THE COURT:

J .P . Stadtmueller U .S . District Judge

The appellant states that "[t]here is no reason not to believe that one would be compensated for a service compelled in such a way." (Appellant's Br. 10). The court has difficulty with even understanding the appellant's argument, as it contains a double negative. See GE R A L D IN E WOODS, ENGLISH GRAMMAR FOR DUMMIES 306 (2d ed. 2010) ("If you think this is one in a long list of useless grammar rules, think again. A double-negative mistake can completely wreck your sentence.") Beyond the grammatical error, the court finds it preposterous that Bertram "believed" that it would be compensated when Mr. Maher stated that he "didn't believe" that the appellant could shut off service; nothing in Mr. Maher's comments indicate that Netwurx would pay Bertram for services rendered.

20

-22-