Leidos Engineering, LLC v. KiOR, Inc. (In re KiOR, Inc.)

567 B.R. 451, 2017 WL 748002, 2017 U.S. Dist. LEXIS 26620
CourtDistrict Court, D. Delaware
DecidedFebruary 27, 2017
DocketBankr. Case No. 14-12514 (CSS); Civ. No. 15-1009 (GMS)
StatusPublished
Cited by12 cases

This text of 567 B.R. 451 (Leidos Engineering, LLC v. KiOR, Inc. (In re KiOR, Inc.)) is published on Counsel Stack Legal Research, covering District Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Leidos Engineering, LLC v. KiOR, Inc. (In re KiOR, Inc.), 567 B.R. 451, 2017 WL 748002, 2017 U.S. Dist. LEXIS 26620 (D. Del. 2017).

Opinion

MEMORANDUM OPINION

GREGORY M. SLEET, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

Presently before the court is the appeal (D.1.1) of Leídos Engineering, LLC (“Leí-dos”) from a Bankruptcy Court order (B.D.I. 793)1 (“Order”) denying its application for allowance and payment of attorneys’ fees and costs as an administrative expense under 11 U.S.C. § 503(b)(3)(D) and (b)(4) (B.D.I. 755) (“Application”) on the basis that Leídos did not carry its burden of proof in establishing a substantial contribution to the Chapter 11 case. For the reasons that follow, the court will . affirm the Order.

II. BACKGROUND

A. The Chapter 11 Case

The court writes solely for the parties and will, therefore, only briefly recite the facts essential to the disposition. On November 9, 2014, KiOR, Inc. (“Debtor”) filed a voluntary petition seeking relief under Chapter 11 of the Bankruptcy Code. Leídos was listed among the Debtor’s twenty largest unsecured creditors with a scheduled claim of $121,893 on account of trade debt. (See B.D.I. 1 at 11.) Despite the efforts of the Office of the United States Trustee (“UST”) to form a statutory committee of unsecured creditors in the Chapter 11 case, only two creditors (including Leídos) applied to serve on the committee. The UST determined that there were insufficient creditors to form an official creditors’ committee, and none was appointed. (See B.D.I. 137.) The Debtor’s proposed timeline contemplated an auction and sale process and emergence from the Chapter 11 case in less than four months. (See B.D.I. 2 at 14.) Consistent with this timeline, the Debtor filed its proposed plan of reorganization on December 15, 2014, which was amended and supplemented several times. (See B.D.I. 149, 219, 470, 564.)

During the Chapter 11 case, Leídos filed two objections. Three parties, including Leídos, filed objections to the Debtor’s disclosure statement. (B.D.I. 244, 246, 316.) Leídos objected on the basis that the disclosure statement did not include adequate information to identify which creditors would qualify for more favorable [455]*455treatment under the plan.2 (See B.D.I. 244.) Although the Debtor’s intent to disclose that information through the filing of a plan supplement was set forth in the Disclosure Statement (see B.D.I. 150 at 24), Leidos objected to the timing of the disclosure. Later in the case, six parties, including Leidos, filed objections to confirmation of the plan. (B.D.I. 576, 580, 582, 583, 587, 593.) Leidos objected on the basis of (i) the plan’s classification of the trade creditor class, (ii) the amount of funding for the liquidating trust, and (iii) the selection of the liquidating trustee. (See B.D.I. 576.) While the Bankruptcy Court overruled Leidos’ objections regarding improper classification and selection of the liquidating trustee, the plan was modified to increase the amount of funding for the liquidating trust from $100,000 to $400,000. The Debtor contends that funding was increased in response to a direct request made by the proposed liquidating trustee — not as a result of Leidos’ plan objection. (See B.D.I. 774 at 5.) On June 9, 2015, the Bankruptcy Court confirmed the plan of reorganization, and the effective date of the plan occurred on June 30, 2015. (B.D.I. 640.)

B. The Application

On August 14, 2015, Leidos filed its Application seeking allowance and payment of an administrative expense claim in the amount of $49,458,60 for professional fees and costs incurred in the Chapter 11 case pursuant to 503(b)(3)(D) and (b)(4). (See B.D.I. 755.) Section 503(b)(3) of the Bankruptcy Code provides that certain administrative expenses shall be allowed after notice and a hearing. 11 U.S.C. § 503(b). Administrative expenses may include expenses incurred by “a creditor ... in making a substantial contribution in a case under chapter ... 11 of this title.” 11 U.S.C. § 503(b)(3)(D). Section 503(b)(4) provides for a related award of attorney’s fees. 11 U.S.C. § 503(b)(4). The phrase “substantial contribution” is not defined in the Bankruptcy Code, but the appropriate inquiry under Third Circuit law is “whether the efforts of the applicant resulted in an actual and demonstrable benefit to the debtor’s estate and the creditors.” See Lebron v. Mechem Fin., Inc., 27 F.3d 937, 944 (3d Cir. 1994).

Leidos submitted no evidence in support of the Application other than its attorneys’ time records.. (B.D.I. 755.) Leidos argued in the Application that, in the absence of a statutory creditors’ committee, it had served as the “de facto creditors’ committee,” as the “most active trade creditor” in the case, and provided “meaningful participation” by monitoring the case and filing its two objections, which “benefitted all trade and unsecured creditors.” (See B.D.I. 755 at 1, 6.) Leidos argued that its objections had resulted in the disclosure of critical information and increased funding for the liquidating trust. (See id. at 7.)

Both the Debtor and the UST (“Appel-lees”) objected to the Application on the basis of Leidos’ limited involvement in the Chapter 11 case and a lack of evidence that Leidos made a substantial contribution. (See B.D.I. 774, 775.) According to Appellees, Leidos was merely an. interested creditor, did not take on any significant role in the ease, filed only two limited objections, and did not meet its burden of establishing by a preponderance of the evidence that its limited actions had resulted in an actual and demonstrable benefit to the Debtor’s estate and creditors. (See B.D.I. 774 at 1-2 (quoting Lebron, 27 F.3d at 944); B.D.I. 775 at 7-8.) While Leidos’ [456]*456filing of the two objections may have provided an incidental benefit to creditors, Appellees argued that Leídos did not present evidence to overcome the presumption that it was acting primarily in its own self-interest. (See id. at 2-3.) Because Leídos’ assertions that it had facilitated the outcome of the Chapter 11 case are were unsupported by any evidence, Appellees argued that the Application must be denied. (See B.D.I. 774 at 1-2.)

In reply, Leídos attached a two-paragraph declaration from its general counsel stating that Leídos “would not have taken actions it took in this case for which it seeks compensation (i) if an official committee of unsecured creditors had been appointed in this case and (ii) absent an expectation of reimbursement from the estate pursuant to [section 503(b)(3)(D)].” (See B.D.I. 790-1 at 1, ¶2.) Leídos also attached the transcript of an unreported Delaware Bankruptcy Court bench ruling, In re Hospitality Liquidating I, LLC, No. 13-12740 (BLS) (Bankr. D. Del. Feb.

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Bluebook (online)
567 B.R. 451, 2017 WL 748002, 2017 U.S. Dist. LEXIS 26620, Counsel Stack Legal Research, https://law.counselstack.com/opinion/leidos-engineering-llc-v-kior-inc-in-re-kior-inc-ded-2017.