Bankruptcy — tort claims — administrative claims

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United States Court of Appeals

Civil

Bankruptcy — tort claims — administrative claims

A claim for a tort arising during the interval between appointment of a trustee and liquidation is not an administrative claim entitled to priority.

“RTC had no money that the trustee could have spent on stemming the gas leak. Apart from the meager energy sales that we just mentioned, he did sell some gas engines for an amount not disclosed in the record (all we know is that it could not have exceeded $6 million). But the agreement of sale was made after CDC had terminated RTC’s contract at the landfill, thus evicting RTC, so the trustee could not have used the proceeds of the engine sales to fix the leak. It’s not as if he had embarked on a project to increase the value of RTC’s assets and the workers on the project had committed a tort.”

“We thus are far from Reading, where the Chapter 11 receiver (equivalent to a trustee) was managing a building that was the debtor’s principal asset, when the building burned down and in the process caused damage to adjacent buildings, triggering tort claims against the bankrupt estate. The receiver was either collecting rents or otherwise obtaining or attempting to obtain income for the estate from the building, and by doing so he was unavoidably running a risk of fire. In this case, in contrast, the trustee took over a bankrupt company at the point of collapse, and the collapse was unrelated to his control of the assets. He had neither the mandate nor the resources to do anything with them except liquidate them as quickly as possible, which he proceeded to do. He could and did do nothing with the assets that might (with however low a probability) have enhanced their value for the creditors, in which event they would have had to take the bad with the good—the risk of tort liability along with the prospects for successful management of the assets. The trustee operated a losing venture under legal compulsion. There is no basis for applying the doctrine of Reading to such a case. See In re Hemingway Transport, Inc., 954 F.2d 1, 5-6 and n. 5 (1st Cir. 1992).”

Affirmed.

10-3948 In re Resource Technology Corp.

Appeal from the United States District Court for the Northern District of Illinois, Kennelly, J., Posner, J.