assumption and assignment

Many preference defendants are not aware of the fact that if their pre-petition contract with the debtor is assumed or assigned in the course of the bankruptcy, then such assumption/assignment will generally serve as a bar to recovery for receipt of alleged preferential transfers.

Under established Third Circuit law, the assumption or assignment of a

In a 21 page opinion (the “Opinion”) released February 20, 2015, in the Trump Entertainment Resorts, Inc bankruptcy (Case No. 14-12103), Judge Gross, granted the motion of Trump AC Casino Marks, LLC (“Trump AC”) to modify the automatic stay to allow litigation to proceed, which could result in termination of their license with the Debtors. 

Assumption of the lease is permissible even if the terms of the lease expressly prohibit assumption.  Section 365 of the Bankruptcy Code requires a debtor-tenant to meet certain criteria in order to “assume” a lease.  First, and most importantly, the tenant must cure any and all existing defaults, both monetary and non-monetary.  Second, the debtor-tenant

Introduction

In a recent decision in the Distributed Energy Systems bankruptcy ("DES" or "Debtors"),  the Honorable Kevin Gross of the United States Bankruptcy Court for the District of Delaware provided a concise discussion of what is required for a debtor to assume and assign an executory contract.  DES filed a motion seeking to assume and assign contracts with ePower and Vestas Wind Systems to CB Wind Acquisition Corp ("CB Wind").  CB Wind previously purchased all of Debtors’ assets. Due to what Debtors’ termed a "scrivener’s error,"  the ePower and Vestas contracts were not included in the schedules to the original asset purchase agreement.

ePower objected to the assumption of its contract on several grounds.  First, ePower argued that DES failed to prove CB Wind could provide adequate assurance of future performance.  Next,  ePower claimed that its contract was not an executory contract and therefore not subject to assumption and assignment under section 365 of the Bankruptcy Code.  Finally,  ePower argued that Debtors’ failure to include its contract in the sale motion evidenced its original intent to reject the agreement. 


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Introduction

When a company files for bankruptcy, often it will reject some or all of its commercial leases. Alternatively, some debtors in bankruptcy choose to assume and assign their leases to third parties. By assigning its lease, the debtor is in essence selling its lease to the highest bidder. Large retailers who file for bankruptcy