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I. FIRST DAY ORDERS
A debtor with an operating business, particularly a service-oriented or retail business, will likely need to obtain a variety of orders from the bankruptcy court almost immediately upon filing its chapter 11 petition ("first-day orders") to allow it to continue its operations uninterrupted. For example, a debtor may seek authority to allow it: (1) to pay prepetition wages, salaries or commissions to or reimburse business expenses incurred by its employees; (2) pay the prepetition claims of certain essential suppliers who may otherwise refuse to continue supplying the debtor postpetition; (3) to honor refund or other agreements with customers or entities such as credit card issuers; and (4) to continue to maintain and utilize its prepetition bank accounts so as to avoid an interruption in cash flow. The debtor's operation under these first-day orders may result in some prepetition creditors receiving what are essentially preferential payments over other prepetition creditors.
Courts have recognized that in some circumstances, unequal treatment of prepetition debts may be permitted when necessary for the survival and rehabilitation of the debtor. However, at least one Court of Appeals has restricted the applicability of the "necessity doctrine" to cases concerning railroads and has refused to apply it to other types debtors, another circuit held that § 105 does not authorize a substantive alteration of Code provisions, and another Court of Appeals and one bankruptcy court have rejected broad authority to pay prepetition claims and adopted rather strict tests.
There is little case law on first day orders per se, but there are starting to be reported
