Argonaut Insurance v. Falcon V, 44 F.4th 348

Falcon V, LLC and affiliates operated an oil-and-gas business and entered a Surety Bond Program with Argonaut, under which Argonaut issued four irrevocable performance bonds (largest $10,000,000 to Hilcorp) and Falcon V agreed to pay premiums and indemnify Argonaut.
Falcon V filed Chapter 11 in May 2019; the confirmed Second Amended Plan provided that each reorganized Falcon V entity "shall be deemed to have assumed each executory contract . . . to which it is a party."
Argonaut filed a proof of claim for the full bond amounts and later demanded an additional $7.3 million of collateral under the Indemnity Agreement; Falcon V refused, citing the Plan discharge.
Argonaut moved to have the bankruptcy court interpret the Plan, arguing the Surety Bond Program was an executory contract and thus assumed (or alternatively that it "passed through" the bankruptcy).
The bankruptcy court held the Program was not an executory contract (and alternatively characterized it as an unassumable financial accommodation) and disallowed Argonaut’s unsecured claim; the district court affirmed.
The Fifth Circuit affirmed, holding the Surety Bond Program is not executory under the Countryman test and therefore was not assumed and does not ride through the bankruptcy.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Surety Bond Program is an executory contract and thus assumed under the confirmed Plan	Argonaut: the arrangement is executory because both surety and principal still owe obligations to obligees and Falcon V has unperformed indemnity duties	Falcon V: Argonaut already posted irrevocable bonds and owes no continuing performance to the debtor, so performance is one-sided	The Program is not executory. Applying the Countryman test (flexibly to account for multiparty obligations), the bonds are irrevocable so debtor nonperformance would not excuse Argonaut; the second prong fails, so no executory contract and no assumption under the Plan
Whether the bonds "pass through" the bankruptcy (ride-through) if not assumed	Argonaut: even if not assumed, the ride-through doctrine leaves bond obligations intact	Falcon V: ride-through applies only to executory contracts that are neither assumed nor rejected	Ride-through applies only to executory contracts; because the Program is non-executory, the doctrine does not apply

In re Provider Meds, L.L.C., 907 F.3d 845 (5th Cir. 2018) (defines executory contract using Countryman test)
In re Weinstein Co. Holdings LLC, 997 F.3d 497 (3d Cir. 2021) (explains Countryman test rationale and application)
ASARCO, L.L.C. v. Mont. Res., Inc., 858 F.3d 949 (5th Cir. 2017) (discusses ride-through doctrine for executory contracts)
In re O'Connor, 258 F.3d 392 (5th Cir. 2001) (ride-through precedent)
Balboa Ins. Co. v. United States, 775 F.2d 1158 (Fed. Cir. 1985) (describes three-party suretyship structure)
Ins. Co. of the West v. United States, 243 F.3d 1367 (Fed. Cir. 2001) (same: surety bond creates three-party relationship)