Opinion ID: 37876
Heading Depth: 2
Heading Rank: 1

Heading: The Majority View

Text: 10 As the bankruptcy court notes, and as described in note 2 supra, the issue of when interest on administrative fees and expenses arises has been considered by only two courts of appeals — the Ninth and the Eleventh Circuits. Both courts conclude that the better rule is to allow such fees and expenses to accumulate interest from the date the bankruptcy court awards the trustee his fees and expenses. The Ninth Circuit, in In re Riverside-Linden Investment Co., 945 F.2d 320 (9th Cir.1991), states: 11 The provision which defines [trustee]'s fees as a compensable administrative expense, Section 503(b), refers to compensation and reimbursement awarded under section 330.  ... It is not until the fees have been awarded by the bankruptcy court pursuant to Section 330, therefore, that they become an administrative expense entitling them to treatment as a claim under Section 726(a)(5). 12 Id. at 324. 13 The Eleventh Circuit followed another line of reasoning in bolstering the majority view, noting that to award interest to the trustee at the time the debtor initially files the petition is contrary to the purpose of 11 U.S.C. § 326, which sets limits on the amount of trustee compensation. In re Glados, 83 F.3d 1360, 1365 (11th Cir.1996). Specifically, the court determined that because the trustee is paid based on the distribution to creditors, and because the trustee earns fees on the interest paid on creditors' claims pursuant to § 326(a), a trustee could delay final distribution, allow the interest earned on assets converted to cash to accumulate in escrow, and earn a fee on the distribution of those assets (which now include earned interest) in satisfaction of claims and as part of his compensation petition for interest on his fee under § 726(a)(5). See id. The Eleventh Circuit concluded, therefore, that to allow the trustee to delay the conclusion of settling the estate, while simultaneously collecting additional monies for doing so, would frustrate Chapter 7's purpose of efficiently administering the liquidation of the estate for the benefit of creditors. Id. 14 Recognizing that the majority rule diverges from the plain language approach to statutory construction, the Eleventh Circuit nevertheless reasoned that such a divergence is permissible in the rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intent of its drafters. Id. at 1366 (alteration in original) (citation and internal quotation marks omitted). Allowing interest to accrue prior to actual awards is contrary to the remainder of the statutory scheme, as well as to the case law interpreting it. Id. 4