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Losing Bidder Has Standing to Seek Reimbursement of Fees and Expenses

By Michael L. Cook

A New York bankruptcy court recently held that a losing acquiror in a competing Chapter 11 plan fight had “standing” to seek reimbursement of its legal fees and expenses as a “substantial contribution” to the reorganization case. In re
S & Y Enterprises, LLC, et al., 2012 Bankr. LEXIS 4622, at * 4-*5 (Bankr. E.D.N.Y., Sept. 28, 2012). Nevertheless, the losing acquiror failed to recover because, in the court's view, it failed to satisfy the statutory requirements for reimbursement with the requisite “preponderance of the evidence.” Id. According to the court, Bankruptcy Code (Code) ' 503(b)(3)(D) permits an entity in a reorganization case “to seek ' to recover its 'actual, necessary expenses' in making a substantial contribution” only if it proves that its “contributions are of such consequence to the bankruptcy process and the parties as a whole that the debtor's estate, rather than the entity should bear the reasonable cause of those contributions . '” Id. at *2. The losing acquiror failed this test, reasoned the court, in a close call, at best.

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