Motion for Allowance of Administrative Expense — Quad DBC Holdings, LLC (In re Vyaire Medical, Inc.)

Summary

Quad DBC Holdings, LLC, called the Landlord, files a Motion for Allowance of Administrative Expense in the Vyaire Medical, Inc. Chapter 11 case. It states that Vyaire and the Landlord were parties to an unexpired lease of two buildings in Irvine, California dated October 3, 2017, and that the Debtors' rejection date was set to October 10, 2024. The motion asserts that the Debtors did not pay all post-petition rent and other expenses, relies on section 365(d)(3) and section 503(b)(1) of the Bankruptcy Code, and requests that the Court award an administrative expense in the amount of $2,685,021.30. The signature block carries /s/ Damien Nicholas Tancredi of FLASTER/GREENBERG, P.C.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

11475613 v1
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

In re:

VYAIRE MEDICAL, INC., et al.

Debtors
Chapter 11

Case No. 24-11217(BLS)

(Jointly Administered)

Objection Deadline: January 10, 2025

Hearing Date: TBD

MOTION FOR ALLOWANCE OF ADMINISTRATIVE EXPENSE

Quad DBC Holdings, LLC (“Landlord”), by and through its undersigned counsel, hereby
files this Motion for Allowance and Immediate Payment of Administrative Expense and
respectfully states as follows:
Background
1.
Landlord and debtor, Vyaire Medical Inc., (“Vyaire”) were parties to an
unexpired lease of two buildings of non-residential real property located at 510 Technology
Drive and 520 Technology Drive in Irvine, California (the “Lease”) dated October 3, 2017. On
the Petition Date herein, Tenant was in default under the Lease. The Lease is attached hereto as
Exhibit “A.”
2.
On June 10, 2024, the above captioned Debtors filed the Motion of Debtors for
Entry of an Order (1) Approving Bidding Procedures in Connection with the Sale of
Substantially All of the Debtors’ Assets, (II) Authorizing the Debtors to Enter into a Stalking
Horse Agreement and Provide Bid Protections, (III) Approving the Form and Manner of Notice
Thereof; (IV) Scheduling an Auction and Sale Hearing, (V) Approving Procedures for the
Assumption and Assignment of Contracts, (VI) Approving the Sale of  the Debtors’ Assets Free
and Clear, and (VII) Granting Related Relief [Docket No. 16] (“Sale Motion”). Through the Sale
Case 24-11217-BLS    Doc 894    Filed 12/27/24    Page 1 of 6

2

11475613 v1
Motion, Debtors sought this Court’s Approval of the sale of substantially all of their assets to one
or more to-be-determined purchasers.
3.
On July 11, 2024, this Court entered the Order (I) Approving Bidding Procedures
in Connection with the Sale of Substantially All of the Debtors’ Assets, (II) Authorizing the
Debtors to Enter into a Stalking Horse Agreement and Provide Bid Protections, (III) Approving
the Form and Manner of Notice Thereof; (IV) Scheduling an Auction and Sale Hearing, (V)
Approving Procedures for the Assumption and Assignment of Contracts, (VI) Approving the Sale
of the Debtors’ Assets Free and Clear, and (VII) Granting Related Relief [Docket No. 249]
(“Sale Procedures Order”).
4.
On July 11, 2024, pursuant to the Sale Procedures Order, the Debtors filed the
First Notice to Contract Parties of Potentially Assumed and Assigned Executory Contracts and
Unexpired Leases [Docket No. 256] and identified the Lease as a potentially assumed Lease.
5.
On August 1, 2024, Landlord filed proof of claim numbered 132, asserting an
unsecured claim in the amount of $24,439,923.00.
6.
On August 15, 2024, the Debtors file a notice indicating that Zoll Medical
Corporation (“Zoll”) was the successful bidder for the Debtors’ ventilation business. [Docket No.
388] (the “Zoll Sale”).
7.
The Court approved the Zoll Sale at a hearing on August 30, 2024. On September
4, 2024, the Court entered an order approving Zoll Sale [Docket No. 388].
8.
On September 27, 2024, the Debtors filed the First Notice of Rejection of Certain
Executory Contracts [Docket No. 575]. The only leases identified in the Rejection Notice related
to the Landlord’s Lease.
Case 24-11217-BLS    Doc 894    Filed 12/27/24    Page 2 of 6

3

11475613 v1
9.
 Importantly, the Debtors indicated a rejection effective date of September 30,
2024 (the “Rejection Date”).
10.
On October 11, 2024, the Landlord filed the Limited Objection to First Notice of
Rejection of Certain Executory Contracts [Docket No. 625].
11.
On October 23, 2024, the Court entered an Order confirming the Landlord and
Debtors’ agreement that the date of rejection shall be set to October 10, 2024 (the “Rejection
Date”) [Docket No. 676].
12.
The Landlord and Zoll subsequently entered into a lease whereby Zoll now
occupies a portion of the leasehold, however, the lease with Zoll did not become effective until
the Debtors vacated the Property on the Rejection Date.
13.
From the Petition Date to Rejection Date (the “Administrative Period”), the
Vyaire’s and/or the Debtors’ agents have continually conducted business on the Property. During
the Administrative Period, the Vyaire’s and/or the Debtors’ equipment remained on the Property
undisturbed, and personnel were frequently entering and exiting the Property, meaning the
Vyaire and/or the Debtors did not vacate the Property during the Administrative Period.
14.
The Debtors constructively vacated the Property on the Rejection Date since all
the personal property remaining on the Property is believed to have been transferred to Zoll as of
October 10, 2024.
15.
Neither Vyaire nor the Debtors have not paid all the post-petition rent and other
expenses due to the Landlord. Zoll did not pay any portion of the Administrative Claim defined
below.
16.
Attached hereto as Exhibit “B” is a breakdown of all unpaid charges that are
properly categorized as administrative expenses.
Case 24-11217-BLS    Doc 894    Filed 12/27/24    Page 3 of 6

4

11475613 v1
17.
The total charges attributable to 510 Technology Drive during the Administrative
Period are $936,905.65.
18.
The total charges attributable to 510 Technology Drive during the Administrative
Period are $1,92,355.64.
19.
The total legal expenses incurred by the Landlord during the Administrative
Period are $66,760.01
20.
The total administrative expense requested is $2,685,021.30 (the “Administrative
Claim”).
Relief Requested
21.
The amounts in the Administrative Claim are properly categorized as
administrative expenses and should be classified and treated as such.
22.
Section 365(d)(3) provides that a debtor is required to “timely perform all the
obligations of the debtor . . . arising from and after the order for relief under any unexpired lease
of nonresidential real property, until such lease is assumed or rejected[.]” 11 U.S.C. § 365(d)(3).
See also, In re Montgomery Ward Holding Corp., 268 F.3d 205, 209 (3d Cir. 2001) (holding that
section 365 requires a debtor in possession to perform all obligations when due under a lease of
nonresidential real property until such lease is rejected).
23.
The purpose of section 365(d)(3) is to ensure immediate payment of lease
obligations so that a landlord is not forced to provide services to the debtor without being
compensated. See, Morris v. New-man (In re McCrory Corp.), 210 B.R. 934, 936 (S.D.N.Y.
1997). Such a section prevents landlords from becoming involuntary creditors of a post-petition
estate, which is precisely what has occurred in these bankruptcies.
Case 24-11217-BLS    Doc 894    Filed 12/27/24    Page 4 of 6

5

11475613 v1
24.
Costs and expenses incurred for post-petition, pre-assumption or rejection
performance under an unexpired commercial lease must be allowed as an administrative expense
without regard to Section 503(b)(1)(A). A debtor’s obligation under Section 365(d)(3) is
independent of, and not subject to, the requirements for allowance of administrative expenses
pursuant to Section 503(b)(1). See In re Valley Media, Inc., 290 B.R. 73, 77 (Bankr. D. Del.
2003).
25.
In addition, Section 503(b)(1) provides for an administrative expense claim for
“the actual, necessary costs and expenses of preserving the estate.” See 11 U.S.C. § 503(b)(1). A
landlord’s administrative claim under Section 503(b)(1) is equal to the lease contract rate. In re
ZB Co., Inc. 302 B.R. 316, 319 (Bankr. D. Del. 2003). Section 507(a) of the Bankruptcy Code
provides that administrative expense claims that are allowed under 503(b) of the Bankruptcy
Code enjoy first-priority status. 11 U.S.C. § 507(a)(2). The Debtors here clearly benefitted from
the post-petition use of the Property because they were able to occupy such Property while
deciding whether to assume or reject the lease and then also to make the space and equipment
inside the space available to potential purchasers.
26.
The charges sought through this Motion are all defined as “rent” within the scope
of the applicable lease and therefore constitute a proper entitlement to an administrative expense.
Section 14.1(a) of the Lease states that upon the Vyaire’s default, all payments due from Vyaire
to Landlord set forth in the lease shall constitute “rent” due to the Landlord.1 These rental
amounts include the Vyaire’s obligation to indemnify the Landlord for all losses, including the
payment of attorneys’ fees.  Here, all rent due, costs, and expenses identified on Exhibit B
constitute an administrative expense.

1 A copy of the applicable lease is attached hereto as Exhibit B.
Case 24-11217-BLS    Doc 894    Filed 12/27/24    Page 5 of 6

6

11475613 v1
27.
Further, all other related post-petition fees and costs, including attorneys’ fees as
provided for in Section 10.3 of the Lease are entitled to the same status as an administrative
expense.
28.
In addition, the Landlord asserts an administrative expense for the attorneys’ fees
and costs incurred between the Petition date and the Rejection Date. In re Crowne Brooks
Corporation, 269 B.R. 12, 15 (Bankr. D. Del. 2001) (“attorneys’ fees are recoverable as part of a
cure claim only if the contract or lease specifically requires their payment.”).
29.
Landlord reserves and preserves all rights to amend or supplement this request as
needed.
WHEREFORE, Landlord requests that this Court award an administrative expense in the
amount of $2,685,021.30 and all other relief that it determines to be just and appropriate.
Date: December 27, 2024

FLASTER/GREENBERG, P.C.

/s/ Damien Nicholas Tancredi

By:
_______________________________

Damien Nicholas Tancredi (DE 5395)

221 W. 10th Street, 4th Floor

Wilmington, DE 19801

(215) 587-5675

damien.tancredi@flastergreenberg.com

Case 24-11217-BLS    Doc 894    Filed 12/27/24    Page 6 of 6

File and source

File

gov.uscourts.deb.193283.894.0.pdf

Size

516,329 bytes

SHA-256

e3335ad2c1f7a4e027291a9aec6e30702b61dc573ef336d11bf648fa3d02c651

Our copy

gov.uscourts.deb.193283.894.0.pdf

Original

PACER (login required)