General Electric Credit Corp. v. Levin & Weintraub
United States Court of Appeals for the Second Circuit
739 F.2d 73 (1984)
GECC (plaintiff) financed Flagstaff's Chapter 11 reorganization under a bankruptcy court order granting GECC super-priority status over all creditors and administrative expenses, secured by a first lien on all estate property; despite borrowing an additional $9 million from GECC, Flagstaff's reorganization failed, leaving it owing GECC $4 million while holding less than that in collateral. Attorneys and accountants (defendants) who had provided services during the reorganization sought interim compensation from the estate; the bankruptcy court, finding their work benefited GECC, approved the fees over GECC's objection, and the district court affirmed before GECC appealed.
Whether, where a secured creditor is given priority in payment over all administrative expenses and a first-priority lien on all of the debtor's assets, and that creditor's debt is under-collateralized, the court may disburse interim payments from the estate to post-petition providers of professional services.