## Facts

- A.C.E. Elevator Co., Inc. (ACE) provided elevator construction, modernization, and maintenance services and employed union labor.
- ACE executed a joinder agreement binding it to an industry collective bargaining agreement (CBA) and to three multiemployer benefit plans administered by trustees: a pension plan, a welfare plan, and an educational plan.
- The CBA required ACE to contribute to the plans based on covered employees’ hours worked.
- ACE filed a Chapter 11 petition on December 21, 2004.
- The trustees sought an order compelling payment of unpaid plan contributions, plus related interest, liquidated damages, and attorneys’ fees and costs, as administrative expenses.
- The unpaid contributions at issue were calculated on hours worked from November 2004 through the petition date (prepetition services), totaling $75,826.35 in contributions and interest, with liquidated damages and attorneys’ fees not yet quantified.
- ACE argued the obligation was prepetition and therefore not entitled to administrative priority.
- ACE also alleged the trustees induced a postpetition walkout to force payment, allegedly violating the automatic stay and the CBA, and requested disallowance or subordination of the trustees’ claim; the allegations were disputed and also raised in separate litigation.

## Issues

1. Whether delinquent benefit-plan contributions attributable to prepetition hours worked qualify as administrative expenses under 11 U.S.C. §§ 503(b)(1)(A) and 507(a)(1).
2. Whether 11 U.S.C. § 1113(f) requires payment of prepetition CBA-based benefit contributions as administrative expenses absent rejection of the CBA.
3. Whether 11 U.S.C. § 1114(e) requires administrative-expense treatment for any portion of the delinquent welfare-plan contributions that fund retiree benefits.
4. Whether contested allegations that the trustees induced a postpetition walkout justify disallowance or subordination of the trustees’ claim in the context of the administrative-expense motion.

## Decision

- The court denied administrative-expense priority under §§ 503(b)(1)(A) and 507(a)(1) for delinquent contributions tied to prepetition hours worked.
- The court held § 1113(f) does not override the Bankruptcy Code’s priority scheme to convert prepetition CBA obligations into administrative expenses.
- The court held § 1114(e) could confer administrative-expense status on welfare-plan contributions to the extent they are required to fund retiree benefits, but the record was insufficient to determine what portion, if any, qualified.
- The court declined to disallow or subordinate the trustees’ claim based on the walkout allegations because the facts were disputed and not developed on the motion.

## Legal Principles

- Administrative-expense status under § 503(b)(1)(A) generally requires (1) a postpetition transaction with the debtor-in-possession and (2) a benefit to the estate; obligations tied to prepetition services are ordinarily prepetition claims even if billed or unpaid postpetition.
- Collectively bargained benefit contributions are not entitled to administrative priority solely because they arise under a CBA; the timing of the underlying labor giving rise to the contribution obligation controls.
- Section 1113(f) preserves a debtor’s duty not to unilaterally alter a CBA before complying with § 1113, but it does not create a superpriority or displace §§ 503 and 507.
- Section 1114(e) requires timely payment of retiree benefits as administrative expenses; if plan contributions are necessary to fund retiree benefits, they may receive administrative-expense treatment notwithstanding prepetition accrual, subject to proof of the retiree-benefit component.
- Claims disallowance or equitable subordination based on alleged misconduct requires an adequate evidentiary record and is not determined on a contested, undeveloped administrative-expense motion.

## Conclusion

The court treated delinquent multiemployer plan contributions calculated on prepetition hours as prepetition claims not entitled to administrative priority, rejected use of § 1113(f) to alter statutory priorities, and left open limited administrative-expense treatment under § 1114(e) only to the extent welfare-plan contributions were shown to fund retiree benefits, while declining to resolve contested misconduct allegations in this posture.


In re A.C.E. Elevator Co., Inc., 347 B.R. 473 (Bankr. S.D.N.Y. 2006)