Texas Pellets, Inc.
16-90126
Bankr. E.D. Tex.Dec 19, 2017Background
- Bankruptcy court considers JBI’s Motion for administrative expense under 11 U.S.C. §503(b)(1)(A) for trucking services post-fire at port facility.
- Contract began March 1, 2017; services required 24/7 access to unload pellets after February 27 fire.
- JBI billed $767,007.38; Debtors paid $303,000; $161,287.38 uncontested; $302,720 disputed as stand-by hours.
- Stand-by hours billed for 1,892 hours; Debtors challenge as not benefiting the estate; JBI argues 24/7 availability and delays were caused by Debtors’ extraction.
- Court determines 1,256.25 of the stand-by hours are actual and necessary; Debtors must pay $125,000 immediately with remaining portion paid under plan or distribution.
- Court adopts findings and issues a partial grant/denial of the motion and reserves other findings for a separate order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether stand-by hours are actual and necessary for §503(b) award | JBI: stand-by hours essential due to 24/7 availability | Debtors: stand-by hours largely due to convoying and delays not benefiting estate | Partially granted; 1,256.25 hours allowed |
| Responsibility for delays causing stand-by time | JBI: Debtors’ delays in extraction caused stand-by time | Debtors: delays due to truck convoy or external factors | Debtor partly responsible; Court attributes some delays to Debtors but allows substantial stand-by hours |
| Timing of payment for the allowed administrative claim | Immediate payment requested; should be paid now given estate needs | Court should consider equities and plan distribution | Immediate payment of $125,000 ordered; $237,287.38 to be paid under plan or other distribution mechanism |
Key Cases Cited
- In re TransAmerican Natural Gas Corp., 978 F.2d 1409 (5th Cir. 1992) (benefit to estate governs actual and necessary standard for admin expenses)
- H.L.S. Energy Co., 151 F.3d 434 (5th Cir. 1998) (benefit requirement tests whether the expense is truly necessary to the estate)
- In re Lovay, 205 B.R. 85 (Bankr. E.D. Tex. 1997) (benefit must be concrete, not mere possibility)
- In re Am. Coastal Energy, Inc., 399 B.R. 805 (Bankr. S.D. Tex. 2009) (administrative expenses require actual and necessary benefit to estate)
- In re J.A.V. AG, Inc., 154 B.R. 923 (Bankr. W.D. Tex. 1993) (prima facie case for §503(b)(1) requires post-petition debt incurred and benefiting estate)