In Re: Ibi Security Service, Inc., Debtor. Bii, Inc. v. Chapter 7 Trustee for Ibi Security Service, Inc.

FEINBERG, Circuit Judge:

Plaintiff BII, Inc. (BII), a secured creditor in the Chapter 7 bankruptcy of IBI Security Service, Inc. (IBI), appeals from an order of the United States District Court for the Eastern District of New York, Arthur D. Spatt, J. That order affirmed orders of the Bankruptcy Court, Melanie J. Cyganowski, J., holding that a settlement agreement between BII and the Trustee did not prevent the Trustee from using 11 U.S.C. § 506(c) to surcharge the proceeds of a litigation belonging to the estate. 1 For reasons set forth below, we reverse the judgment of the district court.

A.…