Determining first that the testimony of creditor's expert was inadmissable, and second, that the "creditor expectation" test was not satisfied, the bankruptcy court concluded that creditor's postpetition debt was not incurred in the ordinary course of business and, accordingly, creditor's claim could not be allowed as an administrative expense. The district court affirmed, basing its decision on the reasons set forth in the bankruptcy court's opinion and with these additional comments: (1) that the creditor expectation test is well supported and in furtherance of the purpose of chapter 11; (2) that the bankruptcy court's rulings were within its discretion and supported by the reasons articulated in its decision; and (3) that the proffered expert testimony concerning "ordinary course of business" was inadmissable because the opinion was based on the meaning of the law and the witness was not a legal expert and, in any event, testimony by a legal expert is neither common, nor proper in these proceedings.

Proceeding was brought to determine spouse's interest in real property that chapter 7 trustee sought to sell. The bankruptcy court held that: (1) even if debtor's spouse was entitled to an equitable lien in real property that trustee sought to sell, based on fact that property was acquired with funds in which spouse had a one-half interest, as to which debtor allegedly instructed real estate agent to prepare deed naming both himself and spouse as grantees, that equitable lien would merely give spouse the right to recoup her contribution from sale proceeds. It would not give her a joint interest in the property within the meaning of 11 U.S.C. § 363, which restricts trustee's right to sell jointly owned property; and (2) in any event, spouse's equitable lien claim was barred by laches.

Order Allowing Reduced Fees and Expenses. The fourth fee application of The Blackstone Group, financial advisor to the debtor, came before the Court. Even though the advisor's appointment provided for a fixed fee, the Court adjusted downward the award of fees because the number of hours spent by the advisor went downward in subsequent fee periods. The advisor was entitled to recover, as part of its allowable expenses, a reasonable fee for legal services of law firm that it hired to defend its fee application, although law firm had never been appointed to serve as a professional in the case.

Unsecured creditor entered into a postpetition construction agreement with debtor, a land developer, for the purpose of correcting defective work and completing improvements on debtor's sixty-one acre residential subdivision. Upon creditor's application for allowance of administrative expense, the trustee and secured creditors objected, arguing that the postpetition debt was not incurred in the ordinary course of the debtor's business pursuant to 11 U.S.C. § 364(a). The court concluded that the postpetition debt was not incurred in the ordinary course of business and, accordingly, creditor's claim could not be allowed as an administrative expense. The court first determined that the opinion testimony of creditor's expert witness was inadmissable because his methodology could not be proved under the test set forth in Kuhmo Tire Company, Ltd. vs. Carmichael , 526 U.S. 137 (1999). The court then applied the well-established "creditor expectation" test to determine that, given its scope and nature, this was not the type of transaction a reasonable creditor would expect the debtor to enter into in the ordinary course of its business. Specifically, when the debtor and creditor entered into the construction agreement, neither had a clear understanding of the amount of corrective work that would be necessary, nor was there any certainty as to the source of funds to repay the debt incurred. As such, this transaction was outside the ordinary course of the debtor's business, and creditors should have been given notice and an opportunity to be heard.