Richardson v. Michigan Bell Telephone Co. (In Re Lucre, Inc.)

OPINION RE: MICHIGAN BELL’S JULY 21, 2009 MOTION-SUMMARY JUDGMENT

OPINION RE: TRUSTEE’S AUGUST 21, 2009 MOTION — SUMMARY JUDGMENT

This adversary proceeding involves the reconciliation of numerous billing accounts between Lucre, Inc. (“Lucre”) and Michigan Bell Telephone Company, which does business as AT & T Michigan (“AT & T”). Each party has filed a motion for summary judgment in favor of their respective positions. Both motions are denied.

PROCEDURAL BACKGROUND

Lucre is currently operating as a reorganized debtor pursuant to the terms of a confirmed Chapter 11 plan. Thomas C. Richardson (“Richardson”) was appointed as the Chapter 11 trustee during the pen-dency of the Chapter 11 case and he has continued to serve in that capacity even after confirmation. Included among his post-confirmation duties is the administration of claims filed against the estate.

AT & T has filed both a request for administrative expenses and a proof of claim for prepetition debt. Both are most recently expressed in a February 18, 2009 filing in the base case (the “February 18, 2009 Request/Claim”). The amount requested as a Section 503(b)(1) 1 administra *810 tive expense is $1,107,706.46, 2 and the amount claimed as an unsecured prepetition debt is $933,584.75.

Richardson not only objects to the February 18, 2009 RequesVClaim but also asserts that AT & T owes the estate money for postpetition services provided by Lucre and for late charges associated with AT & T’s delay in paying for the same. The recovery he seeks after setoff is $417,372.75. As for AT & T’s prepetition claim, Richardson actually believes that more is owed than AT & T has claimed. 3

AT & T and Richardson have filed competing motions for summary judgment. 4 Each party’s position is supported by both pre- and post-hearing briefs, together with supporting affidavits and documents. Each party also offered oral argument at the scheduled hearing. 5

STANDARD FOR SUMMARY JUDGMENT

Summary judgment is appropriate if there is no genuine issue of fact and the moving party is entitled to judgment as a matter of law. Fed. R. BankR.P. 7056 and Fed.R.Civ.P. 56(c)(2). The court, in considering a motion for summary judgment, is to focus only upon material facts; that is, the court is to consider only those facts that are important vis-a-vis the applicable substantive law. Moreover, in determining whether there is a genuine dispute between the parties, the court is to draw all inferences from the record before it in the light most favorable to the non-moving party. If, though, the pertinent record would not lead a rational trier of fact to find for the non-moving party even under such favorable circumstances, summary judgment should be granted.

FACTUAL BACKGROUND

Lucre provides telecommunication services to its customers. AT & T is Lucre’s competitor. Unfortunately for Lucre, AT & T is also Lucre’s vendor and Lucre’s customer.

The Telecommunications Act of 1996 6 is responsible for this awkward relationship. Telephone service at the local level has traditionally been a monopoly because of the tremendous capital outlay associated with establishing and maintaining a comprehensive and secure network. The Act’s purpose is to reduce the monopolistic grip that existing providers like AT & T have held in these markets by compelling them to make their networks available to competitors like Lucre. However, AT & T has been at best a grudging participant in this arranged marriage. Indeed, virtually every dispute AT & T or Lucre has brought before this court for resolution has included accusations of sabotage, dilatory conduct, or improper motives.

*811 Lucre’s relationship with AT & T, which began in 1997, is memorialized in what is known in the industry as an intercommunication agreement, or “ICA.” 7 In this instance, the ICA, with its attendant schedules, is more than an inch thick. Nonetheless, it is still a contract and, therefore, subject to general contract law. The only twist is that the ICA is also subject to regulatory authority, which, in this case, is the Michigan Public Service Commission (“MPSC”).

The controversy now before the court focuses primarily upon AT & T’s postpetition handling of calls routed through its facilities. The parties anticipated that AT & T’s existing system could handle normal volumes of Lucre’s traffic. However, the parties also recognized that an excessive volume of calls might overload AT & T’s routing device, known as a tandem switch.

Traffic from Lucre’s Verizon customers did in fact threaten such an overload. 8 Consequently, Lucre and AT & T began discussions in 2001 or 2002 as to how to remedy the problem. Lucre initially took the position that it was AT & T’s responsibility under the ICA to augment its system. However, AT & T did not agree and, as a consequence, Lucre decided instead to enter into a separate contract with AT & T to address the Verizon traffic. As Lucre put it: “Lucre was very new to the business at that time and ordered services under the tariff rather than taking AT & T before the MPSC, as it should have.” 9

“Tariff’ is one of many specialized terms used in the telecommunications industry. It is a contractual arrangement whereby a telecommunications service is provided at a rate set by the regulatory authority. In this instance, the tariff service that Lucre ordered from AT & T was the routing of all Verizon customer calls through a separate, dedicated circuit as opposed to through AT & T’s tandem switch. This dedicated circuit has been referred to by the parties as the “Tariff Circuit” and as a “DEOT.” 10 The court will use “Verizon DEOT.”

Lucre commenced its case in October 2005. AT & T had been charging Lucre $3,185.78 per month for the Verizon DEOT service prepetition and it immediately began billing the same amount to the newly created Chapter 11 estate. However, AT & T’s invoices did not include this monthly charge after May 2006. Lucre contends that the billing stopped because Lucre had *812 legitimately terminated the service at that time. AT & T, though, points out that Lucre continued to use the Verizon DEOT for years thereafter and, as a consequence, AT & T contends that it is entitled to continued monthly reimbursement. Indeed, AT & T insists that at some point in time the regulated rate it could charge increased to $17,947.80 per month. 11

This much higher rate reflects what AT & T contends is the regular tariff for the DEOT service had Lucre ordered it on a month-to-month basis from the outset of the relationship. However, AT & T asserts that Lucre selected an alternate arrangement whereby it was able to pay AT & T a deeply discounted rate of $3,185.78 per month in exchange for Lucre’s commitment to use the Verizon DEOT for five years. But, according to AT & T, that five year term expired sometime in 2006 or 2007 without renewal. Therefore, AT & T argues that Lucre’s only alternative is to pay it the much higher month-to-month rate for the service it without question continued to enjoy. 12

If these were the only facts, then this court’s task would be simply to decide whether an administrative claimant who had originally contracted with the prepetition debtor should be reimbursed at the contract rate or whether some lesser amount should be awarded. However, other factors complicate the matter at hand.

For example, AT & T sought relief from the automatic stay immediately upon the commencement of Lucre’s case so that it could terminate all services being provided by it to Lucre, including the Verizon DEOT service. This court granted that relief in March 2006. 13 Lucre’s response was to file a motion to assume the ICA together with a request that AT & T be enjoined from terminating services under that agreement pending the motion’s adjudication. A preliminary injunction was then granted, which in turn prompted the parties to work out a settlement whereby the ICA would be assumed. Unfortunately, it took over two years for the parties to negotiate that result.

Whether the Verizon DEOT service would continue had been a major roadblock in the negotiations. Lucre wanted to terminate it all along. However, AT & T maintained that Lucre’s assumption of the Verizon DEOT was inextricably connected to the ICA, which Lucre did want to assume. AT & T’s argument was that *813 (a) Lucre’s Verizon traffic would inevitably overload the system unless it was routed through a separate DEOT; and (b) Lucre would be in violation of the ICA if such an overload were to occur. Therefore, AT & T maintained that Lucre could not provide it with the necessary assurances of future performance required by Section 365(b)(1) with respect to the ICA’s assumption without Lucre also assuming the Verizon DEOT. 14

Lucre 15 did not agree. It countered with its own argument that it was AT & T’s responsibility, not Lucre’s, under the ICA to address the overload problems that the Verizon traffic posed. It also contended that AT & T’s recent installation of a second tandem switch had added more than enough capacity to alleviate AT & T’s concerns. But what actually broke the impasse was Lucre’s discovery that it could forgo using AT & T’s system altogether with respect to Verizon calls by establishing a much cheaper DEOT (or equivalent) through a third party carrier. Therefore, the problem simply disappeared.

Unfortunately, Lucre’s solution created yet two more issues. One is estoppel. Lucre contends that its concession to find a third-party carrier to handle the Verizon traffic was premised upon AT & T’s own representations at that time concerning the amount of its administrative claim against the estate and that the figure AT & T provided it did not include what AT & T now claims it is owed for Lucre’s postpe-tition utilization of the Verizon DEOT. Therefore, Lucre argues that AT & T has either waived or is estopped from adding on at this time anything for the months that AT & T claims are to be billed at the $17,947.80 rate.

The other issue the settlement raises relates to the mechanics of actually rerouting the Verizon traffic. According to Lucre, AT & T was to assist in accomplishing this task. Lucre, though, claims that AT & T dragged its feet on a project that should have taken only a year to complete but instead took two. Consequently, Lucre refuses to pay AT & T for the last year of Verizon DEOT charges it claims it is due as an administrative expense.

If this were not enough, the administrative claim AT & T asserts also has a bearing on the late charge that Lucre wishes to collect from AT & T. As already indicated, Lucre provided reciprocal services to AT & T and Lucre contends that it is entitled under the ICA to charge late fees for AT & T’s failure to timely pay postpetition amounts it owed on account of these services. Lucre’s argument for late fees, though, depends upon it establishing that AT & T was not justified in withholding the postpetition amounts owed. According to AT & T, it had the right to withhold payment from Lucre because of a mediated settlement it had reached with Lucre prepetition. AT & T also contends that the ICA limits Lucre’s ability to assess late charges to only amounts billed after 2006.

DISCUSSION

Licenses, Leases, and Executory Contracts.

This court begins by examining the contractual relationship that gives rise to *814 AT & T’s administrative claim. Lucre, in a sense, is like the medieval German merchant who had to transport his goods down the Rhine in order to get them to market. AT & T, in turn, is the baron whose castle stood in between. The merchant would have presumably solved his predicament by paying a toll each time he required safe passage and indeed Lucre has solved its own predicament in a similar fashion, albeit the arrangement here was for unlimited usage over some period of time. But either way, the accommodations reached by the merchant and Lucre both resulted in a license being granted, for a license is nothing more than:

[t]he permission by competent authority to do an act which, without such permission, would be illegal, a trespass, a tort, or otherwise not allowable.

Black’s Law Dictionary 920 (6th ed. 1990).

The court further observes that a license is conceptually the same as a lease. Lucre wanted to connect calls from Verizon but Lucre, at least in 2001, did not believe that it could do so without routing those calls through AT & T’s “property”— that is, through its system. Therefore, Lucre needed AT & T’s permission to use its system and, in fact, AT & T not only gave that permission but actually added to that system by providing the dedicated line needed to route the Verizon calls directly to Lucre. Granted, AT & T and Lucre do not agree as to the fee Lucre was to pay for AT & T’s permission or the duration of the permission given. 16 However, there is no disagreement that AT & T could again deny Lucre access to its system if Lucre materially breached its agreement to pay just as a landlord would be entitled to repossess the demised premises if the tenant failed to pay the rent he had agreed upon as it came due. Indeed, it would seem that the only thing that distinguishes a lease from a license, at least when land is involved, is possession. That is, a lease involves the landlord’s actual relinquishment of the property’s possession to the tenant whereas the li-censor is able to retain possession, albeit the possession retained is then limited by whatever rights the licensee is also entitled to enjoy under the terms of the license. 52 C.J.S. Landlord & Tenant § 337 (2010); 49 Am. Jur. 2d. Landlord & Tenant § 20 (2010).

The court makes this comparison between a license and a lease because of its decision in In re Sturgis Iron & Metal Co. 17 That case involved the commercial lease of a large piece of equipment to the debtor and the subsequent rejection of that lease by the Chapter 11 estate. The question in Sturgis was whether the lessor was entitled to the actual rent due on the lease during the two postpetition months that preceded rejection or whether the lessor was entitled to only some reasonable amount for that interval based upon the benefit realized by the estate, which, at least according to the debtor, was almost none at all.

This court concluded that the lessor in Sturgis was entitled to the actual rent. It employed the following logic:

• The commencement of a bankruptcy case creates an estate comprised of all of the debtor’s interests in property, including whatever the debtor might *815 hold as a tenant under a lease. 18

• However, none of the interests acquired by the estate can be any greater than what the debtor had previously held unless the Bankruptcy Code itself creates a greater right. 19

• Therefore, the estate must pay the actual rent due for its continued possession of the leased property since the Bankruptcy Code includes no provision that permits the estate to alter what is in effect the sine qua non of the estate’s continued right to possession under a lease — the payment of an agreed upon rent. 20

But if, as this court has now concluded, a license functions much like a lease, the reasoning in Sturgis should apply equally in the instant case. That is, the Chapter 11 estate created when Lucre filed its bankruptcy petition unquestionably acquired Lucre’s prepetition rights under the Verizon DEOT contract to have continued access to the dedicated line that routed Verizon customers to Lucre. However, the estate’s enjoyment of that access also depended unequivocally upon Lucre continuing to pay the same fee that Lucre had agreed upon prepetition to gain that access and that fee, according to AT & T, was $3,185.75 per month for the original five years and $17,974.80 per month thereafter until the license was either terminated or rejected.

However, the analogy to leases that Sturgis provides is not perfect, for this court, in deciding Sturgis, made a point of distinguishing between unexpired leases and executory contracts, 21 and licenses, it seems, can also have attributes of an exec-utory contract. Take again, as an example, the German merchant. If all that is involved is the exchange of a toll for passage, then the arrangement resembles a lease. But, if the baron also promised to service the barge and feed the crew as part of an overall package, then the arrangement would more resemble an execu-tory contract. 22 Indeed, in the instant case, the court would not be surprised if the Verizon DEOT contract also included a promise by AT & T to maintain the hardware and software used in order to ensure static free and uninterrupted connections. Therefore, the inevitable question arises as to whether the addition of such executory elements to a license makes a difference in determining what should be awarded the licensor as an administrative expense if the estate ultimately elects to reject the license. Section 508(b)(1).

This court submits that there is no distinction. The issue in each instance is simply whether an administrative claim should be allowed or not and the resolution of that issue is dictated by Section 503(b)(1), not Section 365. 23 As for Section *816 503(b)(1), it focuses only upon whether the cost or expense, however incurred, was (1) actual and (2) necessary for preserving the estate.

In other words, it should be irrelevant whether AT & T had made executory promises to Lucre under the Verizon DEOT contract as well. Granted, these additional executory promises, if made and then breached, would have justified Lucre’s withholding payment of the agreed upon licensing fee and likely would have warranted a setoff for damages incurred. But those additional promises would not alter the underlying fact that (1) AT & T had nonetheless given Lucre a license to use a dedicated line in its system for an agreed upon fee, and (2) utilization of that line (i.e., the Verizon DEOT) was necessary for Lucre to route Verizon customer traffic until the alternate line agreed upon in the settlement could be installed. Therefore, the analysis under Section 503(b)(1) should remain the same — that is, the Chapter 11 estate created when Lucre filed its petition could no more enjoy the continued use of AT & T’s system under the license previously granted than could Lucre have enjoyed the continued possession of demised premises under a lease previously given without, in each case, the estate also paying as an administrative expense the agreed upon fee or rent in return. 24

*817 Lucre certainly argues that it should pay AT & T something much less than what was agreed as its administrative expense because it never benefited from the license granted. As Lucre puts it “[t]he Tariff Circuits [i.e., the Verizon DEOT] have been nothing but trouble for Lucre from the beginning.” 25 That may be. But Lucre’s clear desire throughout the Chapter 11 administrative period was to maintain Verizon as a revenue source. Moreover, there is no question that the Verizon traffic had to be routed through some third party system before Lucre could earn that revenue. Therefore, this court is hard-pressed to understand how AT & T’s license to Lucre to use its system, as troublesome as it might have been, was not a necessary expense of preserving the estate unless and until Lucre was able to find an alternative route for its Verizon customer traffic through another system.

In fact, whether the Verizon DEOT was even used postpetition is of no consequence, for it is enough that the license that Lucre had been given prepetition provided the ensuing bankruptcy estate an interest in AT & T’s system that it would have otherwise not had. Rights arising under a license, though, cannot exist without the licensee also paying the promised fee. Fees associated with the license, then, by their very nature are an expense associated with the license’s preservation. Granted, the estate’s accumulation of fees on account of an unwanted license can prove expensive; however, the same can be said about utilities and other carrying costs that accumulate whenever the estate remains in possession of a marginal building. If such costs are burdensome, the appropriate relief is to reject the license or to abandon the building. However, until that rejection or abandonment occurs, the plain language of Section 503(b)(1)(A) recognizes these accruals as necessary expenses entitled to priority without adjustment of any kind.

Administrative Claims and Postpetition Inducement — Mammoth Mart, Jartran, and White Motor.

Although Section 503(b)(1) as in fact written seems to allow as AT & T’s administrative expense the actual fee associated with the Verizon DEOT license, Lucre relies upon case law interpreting Section 503(b)(1) to assert that AT & T must meet other tests as well. In particular, Lucre cites Employee Transfer Corp. v. Grigsby (In re White Motor Corp.), 831 F.2d 106 (6th Cir.1987). 26 White Motor involved a contract between Employee Transfer Corporation (“ETC”) and the debtor. The contract required ETC to provide relocation services for the debtor’s employees. These services included managing and maintaining homes purchased by ETC from debtor’s relocated employees until ETC resold the homes to third parties. As of debtor’s petition date, ETC owned eleven homes which had not yet been sold. ETC continued to manage these homes postpetition by making mortgage payments, paying taxes and insurance premiums, and generally maintaining the property. At issue in White Motor was whether ETC could recover those amounts as an administrative expense.

The Sixth Circuit denied the request. It said:

The test for whether a claim qualifies for payment as an administrative ex *818 pense is set forth in In re Mammoth Mart, Inc., 536 F.2d 950 (1st Cir.1976). In Mammoth Mart the court stated that a claimant must prove that the debt (1) arose from a transaction with the debt- or-in-possession as opposed to the proceeding entity (or, alternatively, that the claimant gave consideration to the debt- or-in-possession); and (2) directly and substantially benefited the estate. Id. at 954.

White Motor, 831 F.2d at 110.

The court also offered this further explanation concerning the first prong of this test:

A creditor provides consideration to the bankrupt estate only when the debtor-in-possession induces the creditor’s performance and performance is then rendered to the estate. If the inducement came from a pre-petition debtor, then consideration was given to that entity rather than to the debtor-in-possession. In re Jartran, Inc., 732 F.2d 584 (7th Cir.1984). However, if the inducement came from the debtor-in-possession, then the claims of the creditor are given priority. Id. at 586.

Id.

What Lucre contends is that it never induced AT & T to continue providing postpetition access to its system for the Verizon traffic. This is how Lucre itself articulates its position:

AT & T has not established and cannot establish a post-petition contract or inducement. Service under the Tariff Circuits [i.e., the Verizon DEOT] was ordered by the pre-petition debtor back in 2002, long before Lucre filed for bankruptcy protection in 2005. Lucre did not enter into any new contracts with AT & T post-petition and Lucre did not induce AT & T to continue services under the Tariff Circuits post-petition.

AT & T, however, kept the circuits in operation throughout this case. It was free not to, but it left in operation anyway [sic]. Given the legal positions consistently taken by Lucre from at least as early as May of 2006, however, there is no basis whatsoever for the conclusion that Lucre induced AT & T to do this.

Pl.’s Br. Mot. Summ. J. at 18, 20.

“Inducement,” though, is not as important in this instance as Lucre would make it. Granted, White Motor, as well as many other courts, have cited the Bankruptcy Act case of Cramer v. Mammoth Mart, Inc. (In re Mammoth Mart, IncJ 27 as establishing a general test for allowing requests for administrative expenses. See, e.g., In re Jartran, Inc., 732 F.2d 584, 586-87 (7th Cir.1984); Cumberland Farms, Inc. v. Fla. Dept. of Envtl. Prot., 209 B.R. 786, 791-92 (D.Mass.1996). However, Mammoth Mart actually addressed only a very narrow issue — whether employees whose jobs were terminated shortly after the commencement of the debtor’s case could recover as an administrative expense all of the severance pay to which they were contractually entitled even though that pay was attributable to service provided pre-petition.

Because the amount of the severance pay claims depends upon the length of employment, the consideration supporting appellants’ claims was the services performed for Mammoth Mart over the entire period of each appellant’s employment. Since no part of their present claims arise from services performed for the debtor-in-possession, no portion of appellant’s claims may receive s 64(a)(1) priority.

*819 Mammoth Mart, 536 F.2d at 955 (citations omitted).

In re Jartran, Inc., 28 which is the other case relied upon in White Motor, involved the same narrow issue. In that instance, the debtor had an arrangement with some agencies to place Yellow Page advertising on its behalf. Ads had been ordered pre-petition and the opportunity to cancel had by that time already passed with respect to many of those orders. Nonetheless, the agencies maintained that they should be paid as administrative claimants for the fees associated with this advertising because the debtor’s obligation to reimburse them did not in fact arise until after the case had commenced. Jartran, not surprisingly, rejected this argument.

In the case before us, no inducement by the debtor-in-possession was required because the liability for the costs of the ads was irrevocably incurred before the petition was filed.

It is clear, ... that appellants’ claim here arises out of commitments made before the debtor-in-possession came into existence.

Id. at 588.

And, in fact, White Motor also follows suit, for the focus in that instance was only upon the eleven properties that ETC had already purchased and had been maintaining under ad hoc contracts entered into between ETC and the debtor prepetition. 29 The Sixth Circuit certainly recognized that ETC had continued postpetition to incur expenses associated with these properties’ maintenance and that the estate had benefited from the services ETC had rendered. Nonetheless, the Sixth Circuit concluded that the ongoing expenses were associated with commitments that ETC had already made beforehand with the debtor concerning these eleven properties and, as such, administrative priority was not warranted.

Although we feel that the services provided post-petition were beneficial to WMC as debtor-in-possession, we find that ETC’s claims arise from commitments made before the debtor-in-possession came into existence.

White Motor, 831 F.2d at 110 (emphasis added).

However, it is just as interesting that there was no dispute in White Motor concerning the additional properties that ETC had purchased postpetition. As for the costs associated with maintaining these acquisitions, the parties agreed without question that all of those charges were entitled to administrative priority. 30 And in Jar-tran the parties also agreed that whatever Yellow Page advertising the debtor, as the estate’s debtor-in-possession, had purchased postpetition was allowable as an administrative expense. Indeed, in that instance, they reached that agreement even though the postpetition purchases had been made under the very same contract as had the prepetition purchases been made and even though the debtor-in-possession eventually rejected that contract. Jartran, 732 F.2d at 586, n. 2.

The concern, then, in Mammoth Mart, Jartran, and White Motor was a limited one that arose only because the claim in question seemed to straddle the petition date. As such, the issue in each instance *820 was whether the particular claim should be treated as having arisen pre- or postpetition. In turn, each court’s response was based upon its recognition that the whole purpose of permitting administrative priority to a claimant was to induce otherwise reluctant entities to continue providing whatever the bankruptcy estate needed for its preservation, maintenance, and rehabilitation.

The application of s 64(a)(1) [now Section 503(b)(1)(A) ] to Chapter XI arrangements is primarily a means of implementing the statutory objective of facilitating the rehabilitation of insolvent businesses. Congress recognized that, if a business is to be reorganized, third parties must be willing to provide the necessary goods and services. Since they clearly will not do so unless their claims for payment will be paid ahead of the pre-petition debts and liabilities of the debtor, s 64(a)(1) provides a priority for expenses incurred by the debtor-in-possession in order to maintain, preserve, or rehabilitate the bankrupt estate.

Mammoth Mart, 536 F.2d at 954 (citations omitted); see also Jartran, 732 F.2d at 586; White Motor, 831 F.2d at 110.

Mammoth Mart then went on to explain how a court was to address claims arising from a contract that had been entered prepetition.

For a claim in its entirety to be entitled to first priority under s 64(a)(1), the debt must arise from a transaction with the debtor-in-possession. When the claim is based upon a contract between the debtor and the claimant, the case law teaches that a creditor’s right to payment will be afforded first priority only to the extent that the consideration supporting the claimant’s right to payment was both supplied to and beneficial to the debtor-in-possession in the operation of the business.

Id.

Finally, Mammoth Mart offered examples of when such “straddling” contract claims are to be treated as postpetition administrative expenses and when they are to be left to fend with the rest of the creditors holding prepetition claims.

When third parties are induced to supply goods or services to the debtor-in-possession pursuant to a contract that has not been rejected, the purposes of s 64(a)(1) plainly require that their claims be afforded priority. It is equally clear that a claimant who fully performs under a contract prior to the filing of the petition will not be entitled to first priority even though his services may have resulted in a direct benefit to the bankrupt estate after the filing.

Id. (citation and footnote omitted). 31

However, what cannot be lost in Mammoth Mart and its effort to address such straddling claims is that court’s unequivocal affirmation of the Supreme Court’s much more general ruling in Reading Co. v. Brown 32 concerning the allowance of administrative expenses. This is what Mammoth Mart said:

*821 Since the debtor-in-possession is a separate legal entity that is carrying on the business principally for the benefit of the pre-filing creditors, the Court has reasoned that fairness requires that any claims incident to the debtor-in-possession’s operation of the business be paid before those of creditors for whose benefit the continued operation of the business was allowed. See Reading Co. v. Brown, supra at 478, 88 S.Ct. 1759.

586 F.2d at 954 (emphasis added).

And in Jartran, the court observed:

It is well settled that expenses incurred by the debtor-in-possession in attempting to rehabilitate during reorganization are within the ambit of § 503.

732 F.2d at 586 (citing Reading Co. v. Brown).

Indeed, lest there be any doubt as to how expansive Reading’s notion of an administrative expense is to be, the administrative claim that was actually allowed in Reading was on account of a tort attributable to the trustee. 33

In sum, then, the inducement language used in White Motor and Jartran must be read in the broader context of Section 503(b)(1) and its effort to include within its scope all “actual and necessary costs ... ordinarily incident to operation of a business....” Reading, 391 U.S. at 483, 88 S.Ct. 1759. Inducement, as White Motor, Jartran, and Mammoth Mart all illustrate, is important only when a court is called upon to determine whether a claim arising from a prepetition contract with the debtor is (1) in fact deserving of administrative priority because its incursion was actually incidental to the estate’s continued operation; or (2) simply residue of a prepetition transaction that is no more deserving of priority than any other pre-petition claim.

The Sixth Circuit has said in Su-narhauserman: “Reading does not eliminate the requirement that a debt arise post-petition in order to be accorded administrative expense priority.” 34 But the converse is equally true — that if it is clear that a debt did arise postpetition, then Reading requires that it be treated as an administrative expense so long as the expense is “ordinarily incident” to the operation of the postpetition business. Indeed, Jartran well illustrates this point. Again, the agencies in Jartran were denied administrative priority for the advertising that had been irrevocably placed by them on the debtor’s behalf prepetition. It made no difference that the debtor’s contract with them did not permit billing for that advertising until after the case had begun. What has been overlooked, though, is that these same agencies, under the same prepetition contract, had also placed advertising on behalf of the debtor before the bankruptcy’s commencement that the debtor, now as debtor-in-possession, could still revoke postpetition. As for costs associated with this advertising, both the court and the debtor agreed that these *822 bills should be paid as administrative expenses even though the estate was no more involved in the inducement of this advertising than it was involved in the inducement of the advertising for which no priority had been awarded. The distinguishing factor, according to the court, was simply whether the debtor-in-possession could later change its mind. Id. at 732 F.2d at 586. In other words, so long as the estate had had that option but had not exercised it, the court in Jartran was not going to deny the agencies’ administrative priority for something that otherwise fell clearly within the parameters that Reading had previously set. 35

AT & T is not an eleemosynary society nor is the estate created when Lucre filed for Chapter 11 relief a charity case. Rather, what is before this court is a matter of commerce and the question posed by these two businesses is simply this: Should the estate, as opposed to the prepetition debtor, be treated as AT & T’s customer for what all agree was Lucre’s unimpaired ability to continue having the desirable Verizon telephone traffic routed through AT & T’s system for some three and one-half years after Lucre had become the estate’s debtor-in-possession? For Lucre, then, to insist that its utilization of AT & T’s system for this extended period falls outside of what Reading would regard as “ordinarily incident” to the estate’s success is disingenuous. The Verizon DEOT that AT & T provided may have been both expensive and bothersome. However, until Lucre actually replaced it with some alternative system, AT & T was how Lucre, as debtor-in-possession, accomplished the estate’s business objectives. As such, AT & T has a basis for asserting the administrative claim that it makes.

But, as already discussed, AT & T cannot simply expect to be paid for whatever benefit Lucre enjoyed from its continued willingness to route the Verizon traffic through its system because its claim ultimately must be rooted in either contract or some other legal theory. Again, if Lucre is to be believed, AT & T’s right to receive an administrative claim was lost altogether when Lucre allegedly terminated the relationship in 2006 or, at the very least, AT & T’s right to receive what it claims has been diminished because of either waiver or its own dilatory ways. 36 *823 However, these are contract issues that arise separate and apart from whether the services provided by AT & T otherwise should fall within the scope of what the Supreme Court in Reading determined should be allowed as an administrative expense under former Act Secti