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2007 NORTON BANKRUPTCY LAW SEMINAR MATERIALS

EXECUTORY CONTRACTS

By Rob Charles, Warren Agin and Robert Feinstein

proceeds for the estate than honoring a specific provision of the Bankruptcy Code is not a basis to ignore the statute.

The shopping center provisions of § 365(b)(3) in a Tennessee case did not save an anti-assignment restriction as the shopping center protections concern such matters as average sales clauses, radius and use restrictions. The landlord also objected to the new tenant and argued that the new tenant did not provide adequate assurance of future performance. The district court analyzed the test on a commercially reasonable standard based upon available information. The bankruptcy and district courts also refused to enforce "going dark" clause in the lease which triggered the landlord's right to purchase the resold improvements as in effect a prohibited anti-assignment provision.

Anti-assignment clauses come in many forms. The debtor operated an auto parts store in a shopping center pursuant to a lease that restricted use to the debtor and for use limited to retail sale of automobile parts and accessories. The Virginia bankruptcy court avoided the restriction as a de facto anti-assignment clause under § 365(f). Although the bankruptcy court had not made a specific finding, the district court assumed that the premises were located within a "shopping center" under § 365(b)(3). The district court determined that the protection in § 365(b)(3) for provisions in a shopping center lease such as radius, location, use or exclusivity provisions, is subject to the anti-assignment provisions of § 365(f). Where such clauses are actual or de facto anti-assignment clauses they may be excised from the lease from the lease for the purpose of the transfer from the debtor to its assignee, but not thereafter. The bankruptcy court had found that the location surrounding the shopping center had so many auto parts retailers that the auto parts restriction was not a feasible use for the debtor's premises, and accordingly was a de facto anti

 

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