James Angell v. Stubbs & Perdue, P.A., 811 F.3d 166

Debtor filed Chapter 11 in Feb 2010; Stubbs & Perdue represented him and was allowed ~ $213,408 in fees (about $185,430 unpaid). The IRS filed a secured tax claim for roughly $987,083.
The case converted to Chapter 7 in Nov 2011; the Chapter 7 Trustee collected ~$702,630, insufficient to pay both the IRS secured claim (~$1M) and Stubbs’s Chapter 11 administrative claim (~$200k).
Section 724(b)(2) can, in Chapter 7, permit certain unsecured administrative claimants to subordinate secured tax claims and be paid from collateral proceeds first; whether Stubbs could subordinate the IRS claim determined whether Stubbs would be paid.
BAPCPA (2005) attempted to limit § 724(b)(2) to exclude Chapter 11 administrative expenses, but a drafting error and a simultaneous renumbering of § 507 created ambiguity.
Congress enacted the Bankruptcy Technical Corrections Act (BTCA) in Dec 2010 to correct the drafting error; the corrected § 724(b)(2) excluded Chapter 11 administrative expenses. The case converted to Chapter 7 in Nov 2011, after the BTCA.
Bankruptcy and district courts applied the BTCA version, holding Stubbs could not subordinate the IRS secured tax claim; Stubbs appealed, arguing retroactivity concerns as to fees incurred/approved before the BTCA.

Issue	Plaintiff's Argument (Stubbs)	Defendant's Argument (Trustee/United States)	Held
Which version of § 724(b)(2) governs distribution on conversion to Chapter 7?	The pre‑BTCA (BAPCPA) text should control for fees incurred/approved before BTCA.	The law in effect when the court decides (the BTCA correction) governs because conversion occurred after BTCA.	BTCA version governs; § 724(b)(2) corrected text applies.
Does applying the BTCA version to pre‑BTCA fees have an impermissible retroactive effect?	Applying BTCA denies a preexisting right to subordinate for fees incurred/approved pre‑BTCA, so it is impermissibly retroactive.	No retroactivity problem: § 724(b)(2) never applied while case was in Chapter 11; the right to subordinate only arises on conversion (after BTCA).	No impermissible retroactivity; applying BTCA is permitted.

Landgraf v. USI Film Prods., 511 U.S. 244 (retroactivity framework for statutes)
Bradley v. School Bd. of Richmond, 416 U.S. 696 (apply law in effect at time of decision)
In re K.C. Mach. & Tool Co., 816 F.2d 238 (discussion of incentives created by § 724(b)(2))
In re Midway Airlines, Inc., 383 F.3d 663 (priority of secured claims)
Gordon v. Pete's Auto Serv. of Denbigh, Inc., 637 F.3d 454 (applying Landgraf retroactivity analysis)
Jacksonville Airport, Inc. v. Michkeldel, Inc., 434 F.3d 729 (standard of review for district review of bankruptcy court)