The holder of a super-priority unsecured administrative expense claim sought disgorgement of all administrative expenses paid during the Chapter 11 and subsequent Chapter 7 phases of this bankruptcy case in order that the funds could be applied to its claim. The court denied the motion due to the unique facts and circumstances of this case.
First, the court ruled, the Chapter 7 administrative expenses were paid from another creditor's collateral, so disgorgement would simply return those funds to the secured creditor rather than make them available for the super-priority claimant. Moreover, the super-priority claimant had notice of and did not object to the arrangement between the lender and the trustee, and there is no basis now for disturbing that arrangement.
Second, the court ruled, disgorgement of the Chapter 11 administrative expenses would be inequitable because they were paid without objection from the super-priority claimant, even though the debtor was not paying the super-priority claimant at the time. "It simply would be inequitable to allow Hansen's to come in at this late stage to seek disgorgement of duly earned fees from estate professionals. Hansen's had the ability to control this outcome. It could have stopped supplying fuel as soon as debtor defaulted on payment terms. That would have greatly reduced the claim of Hansen's. It also could have objected to payment of administrative claims as soon as it knew that the debtor was not in compliance with payment terms. It did not do those things. Hansen's took a risk that the debtor would successfully reorganize. It gambled and lost."