In the
United States Court of Appeals
For the Seventh Circuit
No. 09-3336
In the Matter of:
A LTHEIMER & G RAY,
Debtor.
Appeal of:
M ARK H. B ERENS,
Movant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 08 C 4999—Charles R. Norgle, Judge.
A RGUED A PRIL 1, 2010—D ECIDED A PRIL 15, 2010
BeforeEASTERBROOK, Chief Judge, and BAUER and
HAMILTON, Circuit Judges.
E ASTERBROOK, Chief Judge. At the height of its pros-
perity, Altheimer & Gray, a law firm founded 1914 in
Chicago, had offices in 11 cities: Bratislava, Bucharest,
Chicago, Istanbul, Kiev, London, Prague, San Francisco,
Shanghai, Springfield, and Warsaw. But in 2003 it entered
involuntary bankruptcy after it failed to pay its landlord
2 No. 09-3336
and other creditors. The firm’s creditors approved a
liquidation under which debts to its partners would be
subordinated to debts owed to other creditors. (This was
technically a plan of reorganization under Chapter 11
of the Bankruptcy Code of 1978; the winding up of a
business is one form of reorganization.) The bankruptcy
court confirmed this plan in 2005; no one appealed.
In 2004 Mark Berens had filed a claim to some of the
estate’s assets. Berens, whose submission described him
as a “non-unit partner,” contended that the law firm
owed him about $311,000 when it went belly up: $73,000
for capital contributions he had made, $154,000 for
unpaid compensation, $75,000 for distributions wrong-
fully withheld, and $9,000 for unreimbursed expenses.
No one objected to his proof of claim. But neither did the
trustee pay it, because the estate never collected enough
from the law firm’s former clients to reimburse its other
creditors fully. In 2008 Berens filed a motion asking
Bankruptcy Judge Doyle to instruct the trustee to pay
his claim. She denied this motion, and the district court
affirmed. 2009 U.S. Dist. L EXIS 75488 (N.D. Ill. Aug. 21,
2009). Both judges concluded that Berens was a “partner”
of Altheimer & Gray, as the plan of reorganization
uses that word, and therefore is not entitled to any distri-
bution from the estate.
One of Berens’s arguments in this court is that, because
no one objected to his claim, it was allowed and must
be paid. That is half right. Because no one objected, the
claim was allowed. 11 U.S.C. §502(a). But an allowed
claim is paid only if it has a high enough priority. Allow-
No. 09-3336 3
ance has nothing to do with priority. And the plan of
reorganization subordinates partners’ claim to those of
other creditors. It is too late to change the plan’s terms.
See 11 U.S.C. §1141(a); United Student Aid Funds, Inc. v.
Espinosa, No. 08-1134 (U.S. Mar. 23, 2010); In re UNR
Industries, Inc., 20 F.3d 766 (7th Cir. 1994). So the only
real question is whether in 2003 Berens was a “partner”
of Altheimer & Gray.
He says not, because in 1999 he signed a contract
under which he was not entitled to any of the firm’s
profits. Until 1999 he had been a partner by the defini-
tion in the Uniform Partnership Act, which Illinois has
enacted: his name was on the firm’s articles of partner-
ship, he voted in its internal deliberations, he invested
capital in the business, and his compensation was
derived from its profits. See 805 ILCS 206/401. He was
personally liable for all of the firm’s debts. 805 ILCS
206/306. But the 1999 contract changed all of that. Berens
gave up his entitlement to any of the profits and a role
in decision-making. He withdrew from the partnership
agreement. The firm promised to repay his capital contri-
bution. Berens and the firm agreed that he would
receive a salary and could continue in his new post if
he billed at least 1,000 hours and collected at least
$1 million a year in fees from clients for which he was
responsible. Berens’s new position would not have
been called “partner” under the Uniform Partnership
Act. And it follows, Berens contends, that he was not a
“partner” for the purpose of the plan of reorganization
either.
4 No. 09-3336
This argument supposes that the plan and the statute
use the word “partner” in the same way. Yet the plan
does not incorporate or refer to the Act’s definition.
Nor does the plan specify other potential rules for distin-
guishing partners from employees. See EEOC v. Sidley
Austin Brown & Wood, 315 F.3d 696 (7th Cir. 2002) (dis-
cussing the possibility that federal employment-discrim-
ination laws draw that line differently from the way
the Uniform Partnership Act does). To the contrary, the
plan employs two phrases that do not appear in the
Uniform Partnership Act: “unit partner” and “non-unit
partner.” These extra-statutory phrases reflect the prac-
tice at Altheimer & Gray, and many other law firms, of
calling certain salaried employees “partners” as an hon-
orific. At Altheimer & Gray any person who stood to
receive a share of the firm’s profits was said to have
“units” in the partnership; senior lawyers who lacked
an interest in the profits were called “non-unit partners”
or “contract partners”. This enabled them to describe
themselves to clients and lawyers outside the firm as
“partners.”
Berens’s 1999 contract with Altheimer & Gray followed
this form. The contract begins: “Mark Berens (Partner)
and Altheimer & Gray (the ‘Firm’) agree that Partner
will be employed as a contract partner of the Firm” for a
term of years. The agreement contemplated that Berens
might receive units as a bonus. Its compensation clause
concludes with the sentence: “Partner may or may not
be given units.” That never happened, so Berens was
following the firm’s usage when his 2004 claim in the
bankruptcy described his status as “non-unit partner.”
No. 09-3336 5
The plan of reorganization defines the firm’s partners
to include both “Unit Partners” and “Non-Unit Partners.”
That definition follows the law firm’s norm, not the
Uniform Partnership Act’s. The bankruptcy judge and
district judge classified Berens as a non-unit partner
under the plan—and, since his own claim applied that
label to himself, he is hardly in a position to com-
plain. His argument that he was not a partner under
the Uniform Partnership Act, and therefore cannot
have been a “non-unit partner” under the plan, is a
non-sequitur.
No rule of bankruptcy law (or any other law) requires
a plan of reorganization to define terms in the same way
as any particular statute. Suppose that the plan had
provided that borogroves stand in line behind all other
creditors, then defined “borogrove” as “anyone called
a ‘unit partner’ or ‘non-unit partner’ in the debtor’s ordi-
nary operations.” Neither Berens nor anyone else could
complain that the word “borogrove” can’t be found in
dictionaries, that it comes from a nonsense poem
(Lewis Carroll’s “Jabberwocky”), that unlike “chortle”
(another of Carroll’s invented words) it never caught on
in English, or that it means something different from
the word “partner” in the Uniform Partnership Act.
Just so with the plan’s actual definition. It uses
words as Altheimer & Gray did, not as the Uniform
Partnership Act does—and this choice makes perfect
sense because it provides clarity and simplicity to
people who were affiliated with that firm or did busi-
ness with it. Why design an elaborate definitional
6 No. 09-3336
clause, or list the subordinated claims one by one, when
Altheimer & Gray already had phrases that could
be plugged into the plan? When Berens called himself
a “non-unit partner,” he signaled that he was not com-
peting with any outside creditor for the estate’s assets.
Small wonder no one objected.
A FFIRMED
4-15-10