Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

The Bankruptcy StrategistLJN NewslettersNewsSections

Post-Petition Enforcement

By ALM Staff | Law Journal Newsletters |
May 30, 2006

Generally speaking, after a bankruptcy filing, executory contracts are not enforceable against a debtor that has not yet assumed the contract. N.L.R.B. v. Bildisco and Bildisco, 465 U.S. 513, 531 (1984). However, the reverse is not true. During the pre-assumption period, the non-debtor party to the contract is presumed to be obligated to perform in accordance with a contract. Howard C. Buschman III, Benefits and Burdens: Post-Petition Performance of Unassumed Executory Contracts, 5 Bankr. Dev. J., 341, 346, 359 (1988); Univ. Med. Ctr. v. Sullivan (In re Univ. Med. Ctr.), 973 F.2d 1065, 1075 (3d Cir. 1992); McLean Indus., Inc. v. Med. Lab. Automation, Inc. (In re McLean Indus., Inc.), 96 B.R. 440, 449 (Bankr. S.D.N.Y. 1989). Of course, a debtor who elects to receive the benefits of a contract while deciding whether to assume or reject the contract is expected to pay for the value of the goods and services received in accordance with the contract. As the Supreme Court noted in Bildisco, 465 U.S. at 531, 'If the debtor-in-possession elects to continue to receive benefits from the other party to an executory contract pending a decision to reject or assume the contract, the debtor-in-possession is obligated to pay for the reasonable value of those services ' '  See also Schokbeton Indus., Inc. v. Schokbeton Prods. Corp. (In re Schokbeton Indus., Inc.), 466 F.2d 171, 175 (5th Cir. 1972).

There are some limitations, however, on the ability of the debtor in possession to obtain the benefit of a contract after bankruptcy but prior to assumption. Section 365(b)(4) of the Bankruptcy Code, for example, excuses a landlord from providing services and supplies incidental to the lease when there has been a nonmonetary default under the lease, unless the landlord is compensated for the services or supplies. 11 U.S.C. ' 365(b)(4). With respect to nonresidential realty leases, the debtor in possession must pay the full rent as it accrues post-petition, prior to assumption, even if the premises are not used or occupied. 11 U.S.C. ' 365(d)(3); Cukierman v. Uecker (In re Cukierman), 265 F.3d 846, 850 (9th Cir. 2001) ('We have held that claims arising under ' 365(d)(3) are entitled to administrative priority even when they may exceed the reasonable value of the debtor's actual use of the property'); In re Curry Printers, Inc., 135 B.R. 564 (Bankr. N.D. Ind. 1991) (requiring lease payments regardless of actual usage).

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
The DOJ's Corporate Enforcement Policy: One Year Later Image

The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.

Use of Deferred Prosecution Agreements In White Collar Investigations Image

This article discusses the practical and policy reasons for the use of DPAs and NPAs in white-collar criminal investigations, and considers the NDAA's new reporting provision and its relationship with other efforts to enhance transparency in DOJ decision-making.

The DOJ's New Parameters for Evaluating Corporate Compliance Programs Image

The parameters set forth in the DOJ's memorandum have implications not only for the government's evaluation of compliance programs in the context of criminal charging decisions, but also for how defense counsel structure their conference-room advocacy seeking declinations or lesser sanctions in both criminal and civil investigations.

CLE Shouldn't Be the Only Mandatory Training for Attorneys Image

Each stage of an attorney's career offers opportunities for a curriculum that addresses both the individual's and the firm's need to drive success.

Discovery of Claim Construction and Infringement Analysis May be Compelled Prior to a Markman Hearing Image

A defendant in a patent infringement suit may, during discovery and prior to a <i>Markman</i> hearing, compel the plaintiff to produce claim charts, claim constructions, and element-by-element infringement analyses.