In re Headlee Management Corp.
This memorandum decision addresses a Chapter 7 trustee's motion to disgorge interim Chapter 11 professional fees. The trustee sought disgorgement due to the administrative insolvency of the Chapter 7 estate, which would prevent pro rata distribution to Chapter 11 administrative claimants if interim payments were retained. Chief United States Bankruptcy Judge Cecelia G. Morris denied the motion. The court concluded that the Bankruptcy Code, specifically §§ 726(b) and 330(a)(5), does not provide statutory authority to compel disgorgement of interim fees solely based on administrative insolvency upon conversion. It further determined that § 105(a) cannot be used to create such a remedy when the Code already provides specific provisions for fee recovery.