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One of the many expenses a debtor faces during Chapter 11 is the obligation to pay a quarterly fee to the Office of the U.S. Trustee. The fee is calculated based upon the amount of disbursements made by the debtor during the applicable quarter. The greater the disbursements, the larger the amount owed. Pursuant to 28 U.S.C. � 1930, the minimum amount payable in any particular quarter is $750. However, that amount can rise to $10,000, for a single debtor in the event that disbursements for the quarter total $5 million or more. As often occurs in complicated bankruptcy proceedings, several companies within the same corporate family may be forced to file, thereby greatly increasing the quarterly fee expense. In a recent decision, the U.S. District Court for the District of Delaware, in the bankruptcy case of In re GC Companies Inc., et al., No. 00-3897, Judge Joseph J. Farnan made two important rulings in favor of the Office of the U.S. Trustee. In the GC Companies case, Donald F. Walton, acting U.S. Trustee for Region Three, appealed a bankruptcy court memorandum opinion and order which confirmed the first amended joint plan of reorganization for the GC Companies Inc. The memorandum opinion held, in part, that disbursements for purposes of calculating the quarterly fee to the Office of the U.S. Trustee only included those payments of a specific debtor’s “legal obligations” to non-debtor third-parties. As a result, the bankruptcy court ordered that for purposes of calculating the amount of the quarterly fee due, the disbursements made by GCX on behalf of its debtor subsidiaries, had to be reallocated to such subsidiaries to the extent such payments satisfied the legal obligation of the subsidiary. In effect, this served to increase somewhat the amount of the subsidiary’s quarterly fee obligations. However, the Office of the U.S. Trustee thought the court should have gone further. In addition, the post-confirmation creditors’ committee appealed the bankruptcy court’s memorandum opinion, which while approving substantive consolidation of the bankruptcy estates, did not make such consolidation retroactively effective to the beginning of the case. Had retroactive application of substantive consolidation been permitted, then only the consolidated debtor would have been obligated to make the quarterly fee payment as opposed to one being due for each of the companies. In his appeal, the Trustee argued that the bankruptcy court erred by too narrowly defining the term “disbursements” such that it only refers to payment of a debtor’s legal obligations. Rather, the Trustee argued, the term “disbursements” should include payment of any expense incurred in connection with the running of the debtor’s business. In connection with its appeal, the committee argued that the bankruptcy court’s definition of “disbursements” was too broad in that the term “disbursement” should only refer to actual cash payments made by a debtor. In this case, substantially all payments were made by the parent, GCX or General Cinema Theatres, and thus, the committee argued, it would be unfair to reapportion those payments to the GCX subsidiaries thus, driving up the amount of quarterly fees otherwise due. The district court in applying a plenary standard of review to the bankruptcy court’s findings, ruled that the bankruptcy court was correct in its determination that “disbursements” are not limited solely to payments made directly by each debtor. Rather, the court, relying on prior decisions made by the Delaware District Court, ruled that the term “disbursements” includes the payments made in relation to any operating expense of the debtor regardless of which debtor actually made the payment. With respect to the issue of whether “disbursements” should be limited solely to the legal obligations of a particular debtor, the court again ruled in favor of the Trustee. In referring to the legislative history behind 28 U.S.C. � 1930, the court could find no justification to limit the definition of “disbursements” to being solely the debtor’s legal obligations. With respect to the committee’s argument that “disbursements” should be limited to actual cash disbursements, the court concluded that “Section 1930(a)(6) requires a determination of whose expense is being paid by the disbursement of cash, regardless of who actually writes the check or when it is posted on the debtors’ accounting records,” citing In re Charter Behavioral Health Systems LLC, (Bankr. D.Del. 2003). Thus, to the extent that an expense is paid on behalf of a debtor that benefits such debtor while not having a legal obligation to pay it, such payment must be included in the calculation of such debtor’s “disbursements.” The district court also did not find persuasive the committee’s argument that because the debtors were operating on a centralized cash management system, parcing out the relative obligations for purposes of determining their respective quarterly fees would be very difficult. With respect to the substantive consolidation issue, the district court recognized that both the 6th and 9th Circuits have held that to the extent substantive consolidation occurs during the course of a bankruptcy proceeding, it will be deemed to have related back to the beginning of the case. The district court found that the bankruptcy court did not err in applying a general balancing test in consideration of the nunc pro tunc relief sought by the committee. In upholding the bankruptcy court’s denial of the committee’s request for nunc pro tunc application of the substantive consolidation order, the court noted that the bankruptcy court did not err in finding that the “trustee would be deprived of substantial quarterly fees, while the estate’s only benefit would be ‘the ability to evade … payment of quarterly fees’ and the estate’s only harm would be the ‘obvious decrease in assets available for distribution as a result of the quarterly fee obligations,’” citing, In re GC Companies Inc. In summary, this opinion has two important findings. The first is that in a complicated multi-tiered corporate Chapter 11, the use of a centralized cash management system is not going to eliminate the need to separately determine which expenses have been paid on behalf of or benefited a particular debtor for purposes of calculating the quarterly fee due. In effect, substantially greater quarterly fees may arise within large Chapter 11 cases. The second important determination by the district court is that substantive consolidation will not automatically be given nunc pro tunc status. This has an obvious impact on the quarterly fee calculation in that rather than calculating the fee for a single debtor, the fee will be applied to multiple debtors, thus potentially significantly increasing the amount due. As a result, in Delaware, and likely some other jurisdictions as well, if parties want substantive consolidation to be applied early in the case, they should move to have such occur as soon as possible rather than waiting for plan confirmation. Francis J. Lawall, a partner is the Philadelphia office of Pepper Hamilton (www.pepperlaw.com), concentrates his practice in national bankruptcy and reorganization matters. He routinely lectures to various creditor groups concerning general bankruptcy issues, including preferences, reclamation, the role of creditors’ committees and related issues. 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