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The Bankruptcy StrategistFeaturesBankruptcyContractsLitigation

Bankruptcy Court Rules Contract to Produce Documentary Was Not a Personal Services Contract

By Andrew C. Kassner and Joseph N. Argentina Jr.
October 01, 2023

Bankruptcy courts continue to adjudicate disputes regarding Section 365 of the Bankruptcy Code, which addresses the disposition of executory contracts between the debtor and third parties. And we continue to report on developments in this area. Often the issue involves whether the contract is an executory contract that is subject to being assumed and assigned.

Other times the dispute involves whether an exception exists to the general rule that executory contracts can be assumed. Section 365(c)(1) of the code provides an exception where applicable law excuses a party from accepting or rendering performance to an entity other than the debtor.

What does this mean in the context of a franchise, recording artist, management, defense munitions manufacturing, physician or personal services agreement? What is a personal services agreement? The issue was recently considered by the U.S. Bankruptcy Court for the Southern District of New York in the case of In re Vice Group Holdings, (Case No. 23-23-10738 (JPM)). The court found that a contract to produce a documentary television series by a media company was not a personal services contract under applicable nonbankruptcy law and approved assignment of the contract to the company's secured lenders in connection with the lenders' purchase of the debtors' business.

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