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Delaware District Court Finds Section 506(b) Does Not Limit Allowability of Unsecured Claims for Contractual Postpetition Attorneys’ Fees

Wilmington Trust Co. v. Tribune Media Co. (In re Tribune Media Co.), No. 15-0116 (RGA), 2018 WL 6167504 (D. Del. Nov. 26, 2018)

In a short Memorandum Order, the Delaware District Court reversed the Delaware Bankruptcy Court’s November 19, 2015 ruling issued in the chapter 11 cases of Tribune Media Company and its affiliated debtors disallowing an indenture trustee’s unsecured claim for postpetition attorneys’ fees arising under the express terms of the governing indenture.  As previously analyzed by the Delaware Bankruptcy Insider, the Bankruptcy Court acknowledged that the allowability under section 502(b) of the Bankruptcy Code of contractual postpetition attorneys’ fees claimed by an unsecured creditor is an issue undecided by the Third Circuit Court of Appeals and one that has caused division among lower courts.  In support of its disallowance decision, the Bankruptcy Court relied in part on section 506(b) of the Bankruptcy Code, which permits an oversecured creditor to recover postpetition attorneys’ fees, holding that such provision implicitly eliminates an unsecured creditor’s right to do so.  While on appeal the District Court recognized this canon of statutory construction (i.e. expressio unius est exclusio alterius – the express mention of one thing excludes all others), the Court simply held that it could not conclude section 506(b) expressly disallows the indenture trustee’s unsecured contractual claim for postpetition attorneys’ fees and thus, reversed and remanded the proceedings to the Bankruptcy Court for further consideration.