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could not be cured. The First Circuit was required to interpret the language of the exception in subparagraph (D). Opinions like the Ninth Circuit's Claremont decision interpret the exception as applying to any penalty rate or any penalty provision triggered by a non-monetary default. Another reading consistent with the unclear language treats the exception as applying either to penalty rates or other provisions triggered by non-monetary defaults, not merely penalties. The First Circuit adopted this interpretation and found the broader interpretation consistent with legislative history, for Congress sought to free debtors from lease provisions triggered by incurable non-monetary defaults. The non-debtor parties would be free to assert damages caused by the historic defaults as part of the cure.
The Ninth Circuit has held that the exception to obligations that must be cured in order for a lease or contract to be assumed relates only to a penalty imposed on account of a non-monetary default. The Ninth Circuit read section 365(b)(2)(D) as follows:
A proper reading of subsection (D) requires that the adjective "penalty" modify both the words "rate" and "provision," not just the word "rate." Furthermore, like the word "penalty," the word "satisfaction" must also define both "rate" and "provision." Stated differently, subsection (D) provides an exception from cure for satisfaction of "penalty rates" and "penalty provisions.
Under this interpretation, subsection (D) only applies to penalties (not "any provision" relating to a default arising from any failure by the debtor to perform nonmonetary obligations). A "penalty" is defined as "the suffering or the sum to be forfeited to which a person agrees to be subjected in case of nonfulfillment of stipulations." Even prior to the First Circuit's BankVest opinion, the Ninth Circuit's interpretation was by no means unanimously accepted.
