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pursuant to ipso facto clause providing for default and a termination payment in the event of a bankruptcy filing. A party must obtain relief from the stay in order to terminate a contract containing an ipso facto clause. The federal agency, thus, violated the stay when it terminated the contract without seeking relief from the stay. Additionally, the bankruptcy court did not abuse its discretion when it denied the agency's subsequent request for stay relief. Although the federal Anti-Assignment Act prohibited the assignment of the contract, the agency did not show cause for relief because it did not demonstrate that its contract with the debtor was actually going to be assigned. Section 365(e)(2)(A) permits the termination of a contract containing an ipso facto clause only upon a showing of more than the hypothetical possibility that a contract will be assigned. The nondebtor party to the contract must show that the contract will actually be assigned.)
In re Adelphia Business Solutions, Inc., 482 F.3d 602 (2d Cir. Apr. 13, 2007) (Bankruptcy court did not abuse its discretion when it gave retroactive effect, 33 months after initially hearing the matter, to its order authorizing rejection of an executory lease. When the court heard the rejection motion, the bankruptcy judge stated that he would take the motion under advisement and that, if he approved the rejection, it would be retroactive to the date of the hearing so as to limit the estate's administrative expense liability. Debtor then abandoned the premises. Years passed as both the court and the parties allowed the matter to languish. When the lessor finally brought the matter back to the court's attention, the court authorized the rejection of the lease and held that the rejection was effective as of the date of the initial hearing. The lessor waived the argument that the bankruptcy court does not have equitable authority to make its order retroactive, so the appellate court assumed the power existed without deciding that question. Assuming the power exists, the bankruptcy court did not abuse its discretion because, at the time of the initial hearing, the court had put the lessor on notice that the decision would be retroactive and the lessor then acquiesced in the court's delay by not raising the issue for years. Also factoring into the court's decision were the debtor's decision to immediately vacate the premises and the lessor's ability to move for stay relief and lease the premises to another tenant.)
Thompkins v. Lil' Joe Records, Inc., 476 F.3d 1294 (11th Cir. Feb. 5 2007) (Record label's § 365 rejection of contract with recording artist did not rescind contract and revert intellectual property rights to artist. Upon rescission, artist's remedy was to file a claim for rejection damages, and his failure to do so precluded his later claims based on contract law, Lanham Act, and other theories.)
Agarwal v. Pomona Valley Med. Group, Inc. (In re Pomona Valley Med. Group, Inc.), 476 F.3d 665 (9th Cir. Jan. 17, 2007) (Debtor's § 365(a) rejection of contract with physician did not violate business judgment rule. Physician claimed rejection was motivated by bad faith because debtor's motion was filed shortly after physician filed adversary proceeding alleging that debtor had
