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Agway later defaulted on payments to insurers and Fidelity made payments under the terms of the deals it had signed with Agway.
Fidelity then demanded indemnification under the agreements and ultimately incurred 4,506.28 in attorneys’ fees in its post-petition action against Agway to recover amounts due to it.
In conjunction with the other provisions of the Bankruptcy Code that require a disclosure statement and plan to provide “adequate information” for a claim or interest holder to make an informed judgment about the plan, Section 1123(b)(3) effectively provides notice to creditors of retention and prospective enforcement of claims that may enlarge the estate’s assets for distribution.
Absent this provision, a debtor would be required to investigate and prosecute all avoidance and other causes of action prior to confirming a plan, which may take years.
Section 1123(b) (3) of the Bankruptcy Code facilitates the use of a liquidating trust for prompt administration of the estate by providing post-confirmation standing to an appointed representative of the estate to enforce claims and interests.
By establishing a liquidating trust pursuant to section 1123(b)(3) in a confirmed plan of reorganization or liquidation, a debtor can transfer causes of action and other assets to a trust, for future liquidation and distribution to the debtor’s creditors, and avoid delaying plan confirmation.
The creditors become the trust beneficiaries and their claims are paid from trust assets by a waterfall established pursuant to the plan.
of Maryland (Fidelity) entered into several agreements (agreements) with the company that required it to indemnify Fidelity for attorneys’ fees that it might incur to enforce its agreements with Agway.
According to the agreements, Fidelity was to provide surety bonds to Agway’s insurers under which it was to be indemnified.
DENNIS JACOBS, Chief Judge: The federal Bankruptcy Code ("Code"), 11 U. The United States Bankruptcy Court for the Northern District of New York (Gerling, C. Section 502(b) of the Code provides (with inapplicable exceptions) that a "court, after notice and a hearing, shall determine the amount of [a] claim in lawful currency of the United States as of the date of the filing of the petition, and shall allow such claim in such amount." 11 U. However, the dollar amount of Fidelity's contingent right was not a sum certain on the day the bankruptcy petition was filed. Furthermore, the way the issue is framed at the outset, see id.
§§ 101 et seq., does not explicitly state whether an unsecured creditor can collect post-petition attorneys' fees based on a pre-petition indemnity agreement. Clark Ogle ("Ogle"), concedes that Fidelity has a right to the fees under state contract law, but refuses to pay on the ground that the Code bars such recovery. Travelers addresses the first, and United Merchants the second. Manville therefore makes clear that Fidelity possessed a contingent right to post-petition attorneys' fees, and that its right arose pre-petition. True, the facts in Travelers were such that the post-petition costs related solely to litigating issues of bankruptcy law (which Ogle contends is a decisive limiting principle); but the Court's analysis and rationale would seem equally applicable to post-petition costs arising out of pre-petition contracts more generally. Section 502(b)(1) in turn bars any claim that "is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured." 11 U.
Until Agway commenced its Chapter 11 in 2002, it had not defaulted on any payments to its insurers.