Section 502 Allowance of claims or interests (Judge Mott)
In re Dronebarger(Jan. 31, 2011)
Issue: Whether all or a portion of a final state court judgment against a debtor-guarantor forming the basis for the proofs of claim should be reduced or "capped" under 11 U.S.C. §502(b)(6). Holding: The claims represented by the final state court judgment are not claims for damages "resulting from the termination" of a lease of real property under §502(b)(6) and are therefore not subject to the limitation cap provided by §502(b)(6).
In re WBH Energy, LP, et al (May 20, 2016)
Issue: Debtors were in the oil and gas exploration and production business. During the Chapter 11 case, the oil and gas properties of the Debtors were sold to Purchaser and former lender (Castlelake). Claimant (USED) filed secured proofs of claim, asserting a contractual lien on oil and gas properties sold to the Purchaser based on a Joint Operating Agreement (JOA) between certain Debtors and Claimant. Claimant contended that it was a “prevailing party” in various pre-petition and post-petition legal proceedings against the Debtors, and was therefore entitled to recover its attorneys’ fees as a secured claim under the terms of the JOA. The Purchaser filed objections to secured proofs of claims of Claimant, which were then adjudicated by the Court. The primary issue addressed by the Court was whether Claimant was entitled to recovery of its attorneys’ fees as a “prevailing party” under the contractual standard in the JOA. Holding: In summary, the Court determined that Claimant was not entitled to recover its attorneys’ fees under the contractual standard set forth in the JOA. After applying rules of contract interpretation, the Court determined that the JOA required that Claimant be a “prevailing party” in a legal proceeding to enforce a “financial obligation”, meaning monetary obligation, of the Debtors to be entitled to recovery of its attorneys’ fees. The Court concluded that, although Claimant may have been a “prevailing party” in legal proceedings for injunctive relief that removed a Debtor as operator under the JOA, such proceedings did not enforce a “financial obligation” of the Debtors as required by the contractual standard of the JOA. As a result, the Court found that Claimant was not entitled to recovery of attorneys’ fees under the JOA and granted the objections to the secured claims.