Reading Co. v. Brown

Summary

Justice Harlan's opinion held that damages caused by a receiver's negligence within the scope of his authority qualify as actual and necessary costs of a Chapter XI arrangement, entitled to administrative-expense priority. Fairness requires that those injured by continued business operations recover ahead of the preexisting creditors for whose benefit those operations continued. The Court also rejected treating these postpetition tort claims as general claims under § 63a. It reversed and remanded without deciding whether negligence actually occurred. Chief Justice Warren, joined by Justice Douglas, dissented, arguing that administrative priority should cover only costs necessary to preserve and administer the estate, not ordinary negligence claims, and would have affirmed. Justice Marshall did not participate.