Opinion ID: 789697
Heading Depth: 2
Heading Rank: 2

Heading: Post-Confirmation Fees8

Text: 20 The U.S. Trustee's Manual provides that [s]ubstantively consolidated cases become one case and are subject to only one [§ 1930(a)(6)] fee from the time the substantive consolidation order is docketed. U.S. Trustee Manual, Vol. III at § 3-8.3.3 (Oct.1998). Debtors argue that their deemed consolidation for Reorganization Plan purposes bears all [the] indicia... of a substantive consolidation, making their post-confirmation trustee fee obligations that of but one entity. 9 Even assuming substantive consolidation permits payment of a single fee, here the reorganized Debtors were not substantively consolidated. 21 Substantive consolidation treats separate legal entities as if they were merged into a single survivor left with all the cumulative assets and liabilities (save for inter-entity liabilities, which are erased). The result is that claims of creditors against separate debtors morph to claims against the consolidated survivor. Because its effect radically rearranges legal boundaries, assets and liabilities, substantive consolidation is typically a sparingly used remedy for debtors' conduct that blurs separateness so significantly that either the debtors' assets are so scrambled that unscrambling them is cost, time and energy prohibitive or creditors already perceive the debtors as simply a single unit and deal with them so. Yet again form follows substance. 22 Contrast these cases. Debtors' prepetition actions leave no impression of blurring entity separateness. Moreover, § 5.1 of the Plan explicitly does not affect ... the legal and organizational structure of the Reorganized Debtors and no one sought substantive consolidation-creditor or debtor. (Indeed, for the most part Debtors are obligated for licensing purposes to maintain separate corporate identities.) But for possibly the merger contemplated by the Plan (the corporate parents of Genesis and Multicare), separate cases filed by the Debtors on the petition date remained the same separate cases after Plan confirmation. 23 All we have is a [d]eemed [c]onsolidation ... for Plan [p]urposes. For a temporary period, claims against separate Debtors were deemed filed against the deemed consolidated ... Debtors and the handling of inter-Debtor claims and cross-Debtor guaranties was simplified. Put colloquially, per the Plan voting and distribution were streamlined. But for funding distributions under the Plan, deemed consolidation left no effect on the Debtors (including their legal and organizational structures) and the rights of claimholders (including the holders of intercompany claims). 24 The Debtors made clear before the Bankruptcy and District Courts, and reiterate here, that § 5.1 of the Plan does not result in substantive consolidation. 10 They claim instead that because the Bankruptcy Court examined and found justifications for substantive consolidation at the time of Plan confirmation, 11 the resulting deemed consolidation must be a [t]ype of substantive consolidation. But factors favoring substantive consolidation, if indeed they existed, are at best inchoate ingredients for a result never made formal. Instead, the Debtors proposed a Reorganization Plan several zip (if not area) codes away from anything resembling substantive consolidation. That Plan, a contract Debtors proposed, now binds them. They got the benefit of the voting and distribution streamlining the Plan's deemed consolidation allowed. But without the collapsing of all the Chapter 11 cases into a single case, the plain language of § 1930(a)(6) requires that each Debtor extant post-confirmation pay quarterly fees until its case status ceases. 12 25 In sum, substantive consolidation was not sought by the Debtors (or anyone else) and in any event was not ordered by the Bankruptcy Court. Nor did the deemed consolidation provisions of the Reorganization Plan result in a de facto substantive consolidation. All pre-confirmation cases (save perhaps the merged parent entities) continued as separate cases post-confirmation. Thus no basis exists for the Debtors to claim that there nonetheless was an effective substantive consolidation for purposes of quarterly fee calculations under § 1930(a)(6). We hold that quarterly fees should be assessed for each Debtor in each case still extant post-confirmation, as the deemed consolidation provision of the Reorganization Plan does not affect that assessment. 26