Administrative Priority for Postpetition, Prerejection Lease Indemnification Obligations

The Bankruptcy Code creates a series of priorities that dictate the order in which claims are paid. Needless to say, obtaining the highest priority status is an important objective for any creditor. Administrative claims (generally consisting of those arising post-petition) are given a senior priority status and are typically among the first paid. (See 11 U.S.C. § 507.)

In fact, administrative claims must be paid in full as part of any plan of reorganization. As a result, precedent recognizing an additional category of administrative claims is always notable. In a recent case of first impression, the U.S. Bankruptcy Court for the District of Delaware held that a claim arising from an indemnification obligation contained within a rejected nonresidential commercial lease was entitled to administrative status pursuant to 11 U.S.C. § 365(d)(3). (See WM Inland Adjacent v. Mervyn’s (In re Mervyn’s Holdings), No. 08-11586 (KG), Adv. Pro. No. 09-50920 (KG), 2013 Bankr. LEXIS 67 (Bankr. D. Del. Jan. 8, 2013).)