In re Resource Tech. Corp., No. 10-3948 (7th Cir. 2011)
Annotate this CaseClaimant owned a hotel adjoining the CDC landfill. CDC hired debtor to build a system for dealing with gases generated in the landfill. In 1999, debtor was forced into bankruptcy. The landfill's gas control system failed; debtor lacked funds to fix it. The failure released foul odors that, traveling underground, entered the hotel through electrical outlets and cracks, sickening guests and employees. Claimant's hotel declared bankruptcy in 2005. The landfill was permitted to terminate its contract with debtor. Claimant filed a bankruptcy claim for the loss in value in selling the hotel, characterizing it as an administrative claim, superior to others, and brought a tort action in state court, which settled. The bankruptcy judge and district judge rejected characterization as an administrative claim. The Seventh Circuit affirmed. Administrative claims have priority because they are claims for reimbursement of expenses incurred after the declaration of bankruptcy, in order to preserve the value of the bankrupt estate for the benefit of creditors. A tort victim is a creditor, whose actions do not benefit the debtor-tortfeasor. Tort liability is an expense of doing business, like labor or material costs, and should be treated the same way.
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