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"interest" that the property could be sold free and clear of pursuant to § 363(f). The district court reversed and found that § 363(f) sales could not be used to eviscerate the congressional protection of the lessee under § 365(h). The Seventh Circuit reversed and found that the right to possession was an "interest" that could be terminated under § 363(f), although the lessee was entitled to adequate protection pursuant to § 363(e). Thus, the debtor could accomplish by a sale free and clear what it could not accomplish by rejection of the lease under § 365(a).
Judge Haines entered the fray of determining whether an operating agreement of a limited liability company is an executory contract with respect to a member that files a bankruptcy petition. He held that the operating agreement was not an executory contract, and that the member's interests in the operating agreement became property of the estate under § 541(a) and (c)(1), without being subject to the limitations of §§ 365(c) and (e). Nothing in the operating agreement imposed affirmative obligations upon the members. The only burden upon the members was the option to accept a diminished payment in the event the member withdrew from the partnership. Accordingly, the operating agreement was not an executory contract, since there were no obligations imposed upon the members which, if breached, would entitle the limited liability company to withhold performance. The interests of the trustee were governed by § 541, and restrictions in the operating agreement and applicable law restricting assignment were unenforceable under § 541(c)(1).
The Third Circuit addressed the intersection of bankruptcy and partnership law in Woskob. The debtor and her ex-husband were general partners under Pennsylvania law owning an investment property. Their partnership experienced partnership fights as well as the ex-husband's bankruptcy
