## Facts

- Plymouth House Health Care Center (Plymouth) operated a nursing home and filed a Chapter 11 case in the U.S. Bankruptcy Court for the Eastern District of Pennsylvania.
- In August 2001, SouthTrust Bank loaned money to Plymouth and took a security interest in Plymouth’s assets.
- In September 2001, Healthcare Business Credit Corporation (HBCC) also loaned money to Plymouth and took a security interest in substantially the same collateral.
- HBCC and SouthTrust executed a subordination agreement in which SouthTrust agreed HBCC had a “first and priority” interest in the shared collateral and SouthTrust’s interest was subordinate as between the two creditors.
- Plymouth’s Chapter 11 plan was confirmed, and a plan administrator was appointed to administer the estate and make plan distributions.
- After confirmation, HBCC filed a motion seeking allowance and payment of its attorneys’ fees and costs incurred during the pre-confirmation phase, relying on 11 U.S.C. § 506(b) and a provision of the confirmed plan (Plan § 5.3(b)) addressing HBCC’s “fees and costs.”
- The plan administrator objected, arguing HBCC was not oversecured and therefore could not recover fees and costs as part of a secured claim under § 506(b).
- HBCC argued the administrator could not dispute HBCC’s secured status because earlier positions in the case and plan treatment effectively recognized HBCC as a first-priority secured creditor; HBCC invoked judicial estoppel and also argued the plan language independently required payment.

## Issues

1. Whether HBCC proved it was an oversecured creditor entitled to recover postpetition attorneys’ fees, costs, and charges under 11 U.S.C. § 506(b).
2. Whether the plan administrator was barred by judicial estoppel from asserting HBCC was undersecured.
3. Whether the confirmed plan (including Plan § 5.3(b)) independently required payment of HBCC’s pre-confirmation fees and costs even if HBCC was undersecured under § 506(b).

## Decision

- The court held HBCC was not oversecured on the record presented and therefore was not entitled to recover attorneys’ fees and costs under § 506(b).
- The court rejected HBCC’s judicial estoppel argument and permitted the plan administrator to argue that HBCC was undersecured.
- The court ruled the confirmed plan did not create a stand-alone obligation to pay HBCC’s fees and costs contrary to § 506(b)’s oversecured-creditor requirement.
- HBCC’s motion for allowance and payment of fees and costs was denied.

## Legal Principles

- Under 11 U.S.C. § 506(b), only an oversecured creditor may include “reasonable fees, costs, or charges” provided for under the parties’ agreement as part of its allowed secured claim; an undersecured creditor may not recover such postpetition amounts from estate collateral.
- A creditor seeking § 506(b) fees bears the burden to show it is oversecured, which turns on the value of its collateral relative to the amount of its allowed secured claim.
- Judicial estoppel is an equitable doctrine that may prevent a party from taking a position inconsistent with one it previously asserted and that was accepted by a court, but it is applied carefully and generally requires inconsistent positions by the same party (and more than mere ambiguity or changed litigation posture).
- A confirmed Chapter 11 plan is interpreted using contract principles, but plan language will not be read to grant a creditor rights that conflict with Bankruptcy Code limits unless the plan clearly and specifically does so.

## Conclusion

In *In re Plymouth House Health Care Center*, the bankruptcy court denied HBCC’s post-confirmation request to have its pre-confirmation attorneys’ fees and costs paid under § 506(b) and the confirmed plan, concluding HBCC was undersecured and therefore ineligible for § 506(b) fee recovery, rejecting judicial estoppel, and construing the plan’s fee provision as not overriding the statutory oversecured-creditor requirement.


In re Plymouth House Health Care Center, 2005 WL 2589201 (2005)