In a 5 page opinion released January 21, 2016 in the Trump Entertainment Resorts case (Bank. D. Del. 14-12103), Judge Kevin Gross of the Delaware Bankruptcy Court denied the motion of Unite Here Health (“UHH”), the health care provider to employees who were members of union, Unite Here Local 54 (the “Union”). Judge Gross’s opinion is available here (the “Opinion”). Judge Gross has issued a number of opinions in this bankruptcy, and we have published several posts about the issues which have been decided. Please review our prior posts for the background of the dispute between the Union and the Debtors:
Trump Entertainment Resorts Files for Chapter 11 Bankruptcy Protection in Delaware
Trump Entertainment – A Debtor’s Rejection of a Bargaining Agreement
Third Circuit Affirms Bankruptcy Opinion – Trump Entertainment
UHH claimed that because it was not served the Debtors’ motion to reject the CBA, it should be entitled to an administrative claim for health care benefits it provided through October 31, 2014. The Debtors objected, arguing that because the Court granted its prior motion to reject the CBA nunc pro tunc to September 26, 2014, UHH is not entitled to an administrative claim for benefits it provided.
The Debtors conceded that it did not serve the motion to reject the CBA on UHH, but that UHH had actual notice of the Debtors’ motion to reject the CBA. Opinion at *3. The Court agreed that UHH had actual notice and thus was subject to the relief granted in the Court’s order allowing the rejection of the CBA. The Court then cited Calpine Corp. v. O’Brien Envtl. Energy, Inc. (In re O’Brien Envtl. Energy, Inc.), for the proposition that “The burden of establishing an entitlement to an administrative claim is on the claimant to prove that the expense (1) arises from a post-petition transaction and (2) is beneficial to the debtor in operating its business.” Opinion at *4 (citing 181 F.3d 527, 532-33 (3d Cir. 1999)).
Judge Gross held that UHH failed to meet the “heavy burden of demonstrating that the costs and fees for which it seeks payment provided an actual benefit to the estate and that such costs and expenses were necessary to preserve the value of the estate assets.” Opinion at *4-5. Judge Gross thus held that UHH was subject to the order allowing rejection of the CBA and was not entitled to an admin claim for the purported value of any health benefits it provided.
My primary takeaway from this Opinion is that actual notice “trumps” arguments of inadequate service.