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Citing In re Amarex, 853 F.2d 1526 (10th Cir. 1988), the BAP noted that an expense will be granted administrative priority if it arises out of a transaction between the creditor and the bankrupt's trustee or debtor-in-possession and also benefits the debtor-in-possession in the operation of the business. Here, the court noted, all of the debtor's conduct demonstrated an intent to retain the benefit of the vendor's contracts.

Technical Support Vendor's Claim Entitled to Priority

The Bankruptcy Appellate Panel of the Tenth Circuit has ruled that a technical support vendor that was ready to perform under its contracts with a Chapter 11 debtor is entitled to administrative expense priority for contract payments owed by the debtor for the post-petition period. Peters v. Enterasys Networks Inc. (In re Native American Systems Inc.), No. CO-06-036 (Sept 29).

The issue on appeal was whether to allow a Chapter 11 administrative claim for services requested by the debtor of a creditor, where the creditor stood ready to provide the same but the debtor did not actually use the service. Affirming the bankruptcy court's allowance of claim as a Chapter 11 administrative expense under sections 503(b) and 507(a)(2), the BAP stated that '[e]ither the providing of services under its contracts with the Debtor, or its standing ready, willing and able to provide those services, constitutes a transaction between [the support vendor] and the debtor-in-possession that benefited the Debtor in the operation of its business.'

Citing In re Amarex, 853 F.2d 1526 (10th Cir. 1988), the BAP noted that an expense will be granted administrative priority if it arises out of a transaction between the creditor and the bankrupt's trustee or debtor-in-possession and also benefits the debtor-in-possession in the operation of the business. Here, the court noted, all of the debtor's conduct demonstrated an intent to retain the benefit of the vendor's contracts.