In re IML Freight, Inc.
| Decision Date | 25 June 1985 |
| Docket Number | 83C-01951 and 83C-01952.,Bankruptcy No. 83C-01950 |
| Parties | In re IML FREIGHT, INC., a Utah Corporation, Debtor. In re IML PROPERTIES, INC., a Utah Corporation, Debtor. In re INTERSTATE RENTAL OF UTAH, INC., a Utah Corporation, Debtor. |
| Court | United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Utah |
Robert D. Merrill and Danny C. Kelly, Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, Utah, and Russell C. Fericks, Richards, Brandt, Miller & Nelson, Salt Lake City, Utah, for trustee.
Douglas L. Furth, Fabian & Clendenin, Salt Lake City, Utah, for Tradex, Inc.
Frederick Perillo, Goldberg, Previant, Uelman, Gratz, Miller & Brueggeman, Milwaukee, Wis., for the Teamsters Nat. Freight Industry Negotiating Committee.
David E. Leta, Hansen, Jones, Maycock & Leta, Salt Lake City, Utah, for the Joint Bd. of Trustees of the Western Conference of Teamsters Pension Trust Fund.
James C. Swindler, Rooker, Larsen, Kimball & Parr, Salt Lake City, Utah, for the Central States, Southeast and Southwest Areas Health and Welfare and Pension Funds.
David M. Connors, LeBoeuf, Lamb, Leiby & MacRae, Salt Lake City, Utah, for the unsecured creditors' committee.
This matter came before the Court on January 4, 1985, on the trustee's Motion for an Order Permitting Payment of Allowed Professional Fees. The Court is called upon to decide whether and to what extent professional persons employed in a superseded Chapter 11 case should be paid their allowed administrative expense claims where there are insufficient assets in the debtor's estate to pay all Chapter 11 administrative claims in full. For the reasons hereinafter set forth, the Court shall not authorize the trustee to disburse funds to Chapter 11 administrative claimants at this time.
On July 15, 1983, IML Freight, Inc., IML Properties, Inc. and Interstate Rental of Utah, Inc. (hereinafter collectively referred to as "IML" or "the debtor")1 filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. On that date the Court entered an order for joint administration of their estates. Subsequently, the debtors were substantively consolidated. IML was a major transcontinental trucking company, and one of the larger common carries of general commodities by motor vehicle in the United States. The debtor in possession was represented by Watkiss & Campbell, a Salt Lake City, Utah, law firm and Stutman, Treister & Glatt, a Los Angeles, California, law firm.2
On October 15, 1983, a hearing was held on the motion of the creditors' committee for appointment of a trustee. The Court determined that appointment of a trustee was in the best interest of creditors and entered an order on October 18 appointing Allan D. Musgrove trustee. On October 21 the trustee accepted his appointment and was subsequently qualified upon entry of the order approving his bond. Musgrove served as trustee until June 3, 1984, at which time he resigned. On May 17, 1984, the Court entered an order providing for appointment of a co-trustee to serve in the case jointly with Musgrove until June 3, at which time the co-trustee would become successor trustee. Main Hurdman, an accounting firm which has served as trustee in other large Chapter 11 cases before this Court, was appointed as co-trustee. During the course of this case, numerous professional persons with administrative expense claims have been employed by the debtor in possession, the trustee, and the unsecured creditors' committee.3
On December 20, 1983, a hearing was held to consider the following applications for allowance of interim compensation under Section 331 of the Bankruptcy Code:
Objections to the applications were filed by the Western Conference of Teamsters Pension Trust Fund and the Western Conference of Teamsters Health and Welfare Trust Fund (hereinafter collectively referred to as the "Western Conference Funds"), and the Central States, Southeast and Southwest Areas Pension Fund and the Central States, Southeast and Southwest Areas Health and Welfare Fund (hereinafter collectively referred to as the "Central States Funds").4 The basis for these objections was that other first priority administrative claimants, such as the pension funds, should participate on a pro rata basis in any authorized payment of administrative expenses.5 The Court allowed all fees and expenses in the amounts requested, except for fees for services rendered by Richards, Brandt, Miller & Nelson prior to the appointment of the trustee. The Court took under advisement the issue of whether or not the allowed professional fees should be paid ahead of other administrative claims.
On February 2, 1984, the trustee filed a motion for approval of his rejection of a collective bargaining agreement entered into post-petition. In a memorandum opinion dated March 7, 1984, this Court denied the trustee's motion.6
On March 12, 1984, following a strike against the debtor by the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, resulting from alleged unfair labor practices and failure to pay health and welfare contributions, the trustee discontinued operation of the debtor's business. Since that date the trustee has been engaged in the liquidation of the debtor's assets.
In May, 1984, numerous fee applications were filed by professional persons employed in the case. On May 22, a hearing was held to consider the following applications for allowance of interim compensation:
Again, the applications were objected to by the Western Conference Funds and the Central States Funds. They renewed their earlier objection to payment to professional persons without concurrently making a pro rata payment to other administrative claimants. First National Bank of Boston, the principal secured creditor of the debtor, objected to payment out of its cash collateral because of uncertainties surrounding the estate's ability to satisfy its claim in full from the sale of assets.7
At the hearing on the fee applications on May 22, 1984, the Court heard vigorous argument by co-counsel for the trustee and counsel for the Western Conference Funds and the Central States Funds. The attorneys for the trustee pointed out that unlike the attorneys for the displaced debtor in possession, they had not received a retainer, but, in effect, were being asked to finance the case based on the expectation of interim payments.8 The failure to receive these interim payments, counsel stated, was causing substantial financial hardship to their law firms.9 Counsel for the trustee further argued that Section 331 of the Bankruptcy Code, as interpreted by this Court in In re Callister,10 contemplates interim payments to professional persons during the progress of the case before payment to other administrative claimants.11 Counsel for the Western Conference Funds informed the Court that prior to the hearing he had filed a proof of claim for an administrative expense in the amount of $7,115,562.05 based on the debtor's withdrawal liability for withdrawal from the multiemployer pension plan administered by the fund.12 Counsel...
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