Pre-Petition fees may qualify as administrative expenses

In re CVEO Corp. (Bankr. DE 2005)

Services rendered pre-petition may be entitled to administrative status so long as the services provided a substantial contribution to reorganization efforts. To qualify for such treatment the claimant must show more than a pre-petition agreement that fees would constitute administrative claims -- the claimant must prove that the pre-petition activity directly benefited post-petition reorganization efforts of the Estate.

Here the Chapter 11 Debtor paid pre-petition fees for financial consulting services. A creditors' committee filed an adversary complaint to recover the payments as preferential and/or fraudulent. The recipient argued that its pre-petition services benefited the Debtor's reorganization efforts and therefore should be allowed as administrative expenses. The Court denied Plaintiff's motion for summary judgment, noting that there was a genuine dispute as to whether or not the Defendant's services rendered any actual benefit to the Debtor. The Court also found a genuine dispute of material fact as to the circumstances alleged to have been preferential or fraudulent (i.e. whether or not the Debtor received reasonably equivalent value in exchange for the money paid).