A very large casino is operating under Chapter 11.
I'd like initiate a business contract with this casino by providing it services,
in a pay per transaction manner, paid monthly
1. Could they simply choose to not pay me, while they are in bankruptcy?
2. When they come out of Chapter 11, will my contract be terminated or unenforceable?
The casino can certainly decide not to pay you while the bankruptcy is pending. However (and I believe this is at the heart of your first question), there would be consequences to that decision, and those consequences would benefit you and be an incentive for the casino to pay you in full. That incentive is based on your probable right as an "administrative expense" claimant. If a contractor enters into a business relationship with the casino post-petition (after the commencement of the case) and in the ordinary course of business, then the contractor is afforded a special, higher status - that of an administrative expense holder. That means that the contractor must be paid in full before a plan can be confirmed and (to give a further perspective on the contractor's status) the contractor has the same status, in terms of distribution priority, as the attorneys representing the casino. (The casino bankruptcy you're referring to is, probably, Caesar's. That case is being adjudicated by a bankruptcy court in Chicago and the attorneys for the casino are also in Chicago. And, for the record, although I am a Las Vegas chapter 11 reorganization lawyer, I do not yet represent any parties in Caesar's.) And, though my intent is not to strike a cynical tone, chapter 11 attorneys are not in the business of not getting paid - and the administrative claim of a post-petition contractor would, essentially, be on the same distribution level as those attorneys representing the casino.
When the casino, comes out of or "emerges" from bankruptcy (i.e., when the plan is confirmed and the case is closed), any contracts entered into during the reorganization will, absent any extraordinary efforts by the casino to terminate the contract based on state law rights, remain in full force and effect.
In the unlikely event that the case is converted to a chapter 7 case, your claim would still have an administrative expense priority over all pre-petition debts, but your claim would be subordinated to the administrative expenses of a chapter 7 trustee. In a large corporate reorganization that has been converted to chapter 7, there is often sufficient assets to pay all administrative expenses - the task and goal of the chapter 7 trustee is to gather assets and pay as many claims as possible (I opine that it is unlikely because, once again, I'm assuming that the reorganization is that of Caesar's and find it improbable that a court and the entities involved would choose chapter 7 over dismissal in the event a plan isn't confirmed - converting to a 7 usually results in a cessation of business operations and that is very unlikely for Caesar's).
A chapter 11 is different from chapter 7, chapter 13 and chapter 12 for farmers & fishermen in that there is no trustee appointed except in very rare circumstances. The chapter 11 debtor in possession has the rights and duties of a trustee.
The chapter 11 debtor has the right to conduct its business and it can incur debt, contract with individuals or companies, and lease property, etc. provided the action taken is in the ordinary course of business. In your case, contracting with subcontractors to provide normal services would probably be considered in the ordinary course of business. If it is not in the ordinary course of business, the debtor in possession can still contract with you, but must obtain court approval.
Similar to a chapter 13 and 12, any post petition obligation incurred by the debtor cannot be included in the plan of reorganization. Another difference is that when the chapter 11 plan is confirmed for a partnership, corporation or LLC, the debtor in possession receives its discharge of any debt that not is being paid according to the confirmed plan and the reorganized debtor emerges from bankruptcy with a new set of obligations as set out in the plan. However, the obligation to you will continue unaltered since the obligation is a post petition debt.
One problem does exist. If the debtor is unable to successfully reorganize and the case is converted to a chapter 7, all debt incurred post petition is included in the debt of the debtor in the chapter 7 case. The obligation to you would become an unsecured debt and in most chapter 7 cases, unsecured debtors receive a very small percentage of their debt, if any thing at all.
Answers and comments provided are for general discussion only. My comments are not to be considered legal advice and they do not create an attorney-client relationship.
Both of the other attorneys are assuming that you contract would be entered into in the ordinary course of business, such as supplies, maintnance, advertising etc: things the casino normally does. On the unlikely event your contract is NOT ordinary course, or you are a licenses professional such as a broker or accountant you would be best served to get court approval of your contract. If you're not sure discuss the contract with your own bankruptcy attorney.
This response is not intended as legal advice. You may need to consult your own attorney to obtain a more specific answer.
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