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Judge Kevin Gross Denies Administrative Claim for Benefits Paid After Nunc Pro Tunc Date for Rejection of Collective Bargaining Agreement

By Charlene D. Davis

On January 20, 2016, Judge Kevin Gross of the Unites States Bankruptcy Court for the District of Delaware (the “Court”) issued a Memorandum Opinion and Order denying a motion for payment of an administrative claim (the “Motion”) filed by UNITED HERE HEALTH (“UHH”) in Trump Entertainment Resorts, Inc. case no. 14-12103 (KG).  By the Motion, UHH had sought payment, as an administrative claim, of an amount in excess of $806, 365.24 (the “Payments”) for health and welfare benefits paid to members of Unite Here Local 54 (the “Union”) in connection with a Collective Bargaining Agreement (the “CBA”)  between the Debtors and the Union.  The Payments were made between September 26, 2014 and October 31, 2014.  During that period, on October 14, 2014, the Court entered an order granting the Debtors’ motion to reject the CBA nunc pro tunc to September 26, 2014 (the “CBA Motion”).

UHH brought the Motion pursuant to Section 503(b)(1)(A) of the Bankruptcy Code, arguing that the Payments were made post-petition and were beneficial to the estate.  UHH also argued that it had not received notice of the request for retroactive relief sought by the CBA Motion; did not have an opportunity to object to it; and should not be bound by the order approving the CBA Motion (the “CBA Order”).  Based on the factual record before the Court, Judge Gross easily found that, notwithstanding the Debtors’ failure to serve the CBA Motion on it, UHH had actual notice of the request for nunc pro tunc relief to September 26, 2014.  In addition, assuming for purposes of the Motion only that UHH was a creditor of the Debtors, the Court easily concluded that the Payments were not an administrative expense.  The Court noted that, even if they were post-petition obligations, the Payments did not benefit the estate or preserve operations.  In fact, the Court noted that the underpinning of the order approving the CBA Motion was the Debtors’ proposal to provide alternative healthcare to Union members.  Thus UHH did not carry its “heavy burden” of establishing entitlement to an administrative claim under Section 506(b)(1)(A) of the Bankruptcy Code.

A copy of the Court’s opinion is available here.

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