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administrative priority.
Similarly, where an employee asserted rights to significant cash compensation under a pre-petition employment agreement that had not been assumed or rejected, the court looked to the reasonable value of the post-petition services rather than the contract teens for allowance of an expense of administration. The court rejected the employee's argument that his performance post-petition met contractual benchmarks and thus triggered the contract terms. The court applied a quantum meruit measure of damages.
An Arkansas court took the opposite view where the debtor gave its president a 90-day notice of termination after bankruptcy. The contract then expired by the term of the notice. The court held that the former president was entitled to the benefits due under the contract during the 90-day termination period, although those were offset by huge unauthorized expense reimbursement and other claims against the former officer.
Where an insider argued that the debtor's notice, which he authored, terminating his employment contract, created a claim for severance benefits, the court pointed out that rejection, like assumption, requires court approval. Since the court had not approved rejection, and the debtor's action was outside the ordinary course of business, the contract was not terminated. The insider had an unsecured claim when the employment contract was rejected upon plan confirmation. Since the debtor continued to pay the insider for services as a consultant until he obtained new employment, all on terms at or above the compensation required under the employment agreement, the insider suffered no rejection damages.
