United States District Court, D. Delaware
In re ENERGY FUTURE HOLDINGS CORP, et al, Debtors. SHIRLEY FENICLE, INDIVIDUALLY, AND AS SUCCESOR-IN-INTERESTTO THE ESTATE OF GEORGE FENICLE, et al, Appellants,
THE EFH PLAN ADMINISTRATOR BOARD, et al, Appellees. SHIRLEY FENICLE, INDIVIDUALLY, AND AS SUCCESOR-IN-INTEREST TO THE ESTATE OF GEORGE FENICLE, et al, Appellants,
THE EFH PLAN ADMINISTRATOR BOARD, et al, Appellees. BAP Nos. 18-33, 18-34
before the Court is an Appeal from an Order of the United
States Bankruptcy Court for the District of Delaware
("the Bankruptcy Court") denying Appellants'
Substantial Contribution Application. (No. 18-877, D.I.
l-l). The issues have been fully briefed by the
parties. (D.I. 31; D.I. 35; D.I. 38, D.I. 39). The Court
heard oral argument on November 20, 2018. (D.I. 42). For the
following reasons, the Order denying Appellants'
Substantial Contribution Application is affirmed.
Appellants assert that the Bankruptcy
Court erred in denying their application when it held that 1)
Appellants could not receive reimbursement for attorney's
fees because Appellants did not pay those fees themselves and
2) that Appellants had not made a substantial contribution.
(D.I. 31 at 29-42). Appellees EFH Plan Administrator Board
and United States Trustee assert that the Bankruptcy Court
did not err. (D.I. 38 at 17; D.I. 35 at 40).
Court reviews legal determinations of the Bankruptcy Court de
novo, and factual determinations for clear error. U.S.
Bank Nat 7 Ass 'n ex rel. CWCapital Asset Mgmt. LLC v.
Village at Lakeridge, LLC, 138 S.Ct. 960, 966 (2018).
"Whether a creditor has made a substantial contribution
within the meaning of [11 U.S.C.] § 503(b)(3)(D) is a
question of fact, 'and it is the bankruptcy court that is
in the best position to perform the necessary fact finding
task.'" In re Tropicana Entm 't LLC, 498
Fed.Appx. 150, 152 n.3 (3d Cir. 2012) (quoting Lebron v.
Mechem Fin, Inc., 27 F.3d 937, 946 (3d Cir. 1994)).
503(b)(4) of the Bankruptcy Code allows "reasonable
compensation for professional services rendered by an
attorney ... of an entity whose expense is allowable"
under subparagraph (b)(3)(D), and "reimbursement for
actual, necessary expenses incurred by such attorney."
Section 503(b)(3)(D) allows a creditor's expenses where
the creditor has made a "substantial contribution"
in a Chapter 11 case. To show that it has made a
"substantial contribution" under §
503(b)(3)(D), the applicant must show that its efforts
"resulted in an actual and demonstrable benefit to the
debtor's estate and the creditors." Lebron, 27 F.3d
at 944. The Bankruptcy Court determined that Appellants
failed to make this required showing. I agree.
Appellants argue their assumption of "the role that
ordinarily would have been expected of a court-appointed
representative, regardless of the success of their
efforts" constitutes a "substantial
contribution." (D.I. 31 at 40). This argument is
unavailing. The Bankruptcy Court determined that an
independent legal representative for the Unmanifested
Asbestos Claimants was not required. (D.I. 36 at USA238-239,
Tr. at 115:16-116:1). In doing so, the Bankruptcy Court
pointed to the E-Side Committee's "vigorous
representation of asbestos related creditors."
(Id., Tr. 115:24-116:1). Appellants did not appeal
that determination. As the Bankruptcy Court held, Appellants
were therefore not acting in place of a representative, but
in duplication of the court-appointed representative, the
I agree with the Bankruptcy Court that "just being a
committee or being a representative isn't enough. That
committee or representative capacity has to result in some
positive actions that benefit all creditors and the estates
as a whole." (D.I. 34 at ¶ 1803, Tr. 105:20-24).
"[E]xtensive participation in a Chapter 11 case, without
more, is not a sufficient basis for 503(b) status."
In re KiOR, Inc., 567 B.R. 451, 460 (D. Del. 2017);
see also In re Summit Metals, 379 B.R. 40, 53
(Bankr. D. Del. 2007). The cases cited by Appellants also
support this conclusion. See In re Williams, 49
Fed.Appx. 845, 850 (10th Cir. 2002) (affirming substantial
contribution award where applicant's efforts helped
obtain a conversion order, defend that order on appeal, and
obtain a change of venue); In re Bayou Group LLC,
431 B.R. 549, 564- 65 (S.D.N.Y. 2010) (substantial
contribution was made by unofficial creditors' committee
when it successfully moved for the appointment of a
receiver); In re Gen. Electrodynamics Corp., 368
B.R. 543, 555-56 (Bankr. N.D. Tex. 2007) (finding that
applicant's "efforts at least contributed to (1)
Debtors' proposal of a 100% plan; (2) various protections
and a capital infusion that make the Plan feasible; and (3)
Debtor's attendance to its fiduciary duties").
Therefore, to grant a substantial contribution application,
the Court must have evidence that the participation of the
creditor in a representative capacity created "an actual
and demonstrable" benefit.
Appellants have not provided any evidence that their efforts
"resulted in an actual and demonstrable benefit."
Lebron, 27 F.3d at 944. The Bankruptcy Court made
the following factual findings:
• the Appellants have fought against the debtors'
ability to reorganize for years;
• the Appellants' efforts on behalf of the
Unmanifested Asbestos Claimants has not resulted in any
changes to the Plan or to the case benefitting those
• the Appellants' efforts have not created "a
material benefit" to either the estate as a whole or to
the majority of the asbestos creditors.
(D.I. 34 at ¶ 1804-05, Tr. at 106:24-107:1). The record
supports these conclusions. The only evidence Appellants
submitted to the Bankruptcy Court with the Substantial
Contribution Application were fee records. (D.I. 33 at ¶
994-97, A1439-41, A1477-80). Appellants argue that they are
not required to submit corroborating evidence from another
party because the Court may make factual findings from its
own first-hand observance of the proceedings. (D.I. 39 at
12-13 (quoting In re Ocean Blue Leasehold Prop. LLC,
414 B.R. 798, 809 (Bankr. S.D. Fla. 2009))). However, this
argument further buttresses the Bankruptcy Court's
factual determinations in light of Appellants' failure to
carry their evidentiary burden. Appellants submitted no
evidence of substantial contribution. The Bankruptcy Court
drew on its observance of Appellants' activities in the
case to determine that no substantial contribution was made.
Appellants have not demonstrated that the Bankruptcy Court
clearly erred in determining that their efforts did not
result in an actual and demonstrable benefit.
Appellants argue that the Court should either 1) consider the
possibility of Appellants' success in their ongoing
appeal of the Confirmation Order or 2) order the Bankruptcy
Court to postpone determination of the application until that
appeal has concluded. (D.I. 31 at 40-41, 49). The possibility
of success on the ongoing appeal of the confirmation order
should not be considered here. The mere possibility of future
success in an ongoing appeal is not an "actual and
demonstrable benefit" as required by the Bankruptcy
Code. Moreover, "[t]he substantial contribution test is
applied in hindsight." See KiOR, 567 B.R. at
458. Therefore, it is improper to consider future action or
results thereof when considering a substantial contribution
application. Additionally, I do not think the Bankruptcy
Court erred by not deferring determination on the substantial
contribution application until after the appeal of the
foregoing reasons,  the Order denying Appellants'
Substantial Contribution Application ...