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§ 365(e)(1) did not invalidate the creditor's claim to a double dividend and the plan provision paying that claim.
An option agreement provided for an increase in the option price if the option was exercised for any reason after the deadline. The debtor filed a bankruptcy petition the day before the deadline to exercise the option and sought to assume the option within the additional 60 days granted by § 108(b). The non-debtor party sought to collect the additional consideration on account of delay and the debtor argued that the additional consideration was invalid under § 365(e)(1). Since the additional consideration was payable due to delay, and not specifically on account of insolvency, bankruptcy or appointment of a trustee, the anti ipso facto provision of § 365(e)(1) did not excuse the obligation to make the additional payment. A careful drafter of option or other contract provisions will try to create delay damages rather than ipso facto defaults and remedies.
The bankruptcy court did not err in finding that a provision allowing a non-defaulting partner to buy out a defaulting partner based upon its adjusted capital account was an unenforceable ipso facto clause under § 365(e)(1). However, the debtor's interest in a limited liability company was subject to a right of first refusal. The bankruptcy court did not err in finding that the right of first refusal was not a de facto anti-assignment clause unenforceable under § 365(f). Accordingly, the non-debtor members had a right of first refusal if the debtors sought to sell the economic interests in the limited liability company. Rights of first refusal are also addressed under the rubric of antiassignment clauses discussed below.
In re Mirant Corp., The Bonneville Power Administration ("BPA"), appealed a district court's
