In Re Fpsda I, LLC
450 B.R. 392
Bankr. E.D.N.Y.2011Background
- Debtors operate multiple quick serve restaurant franchises including Dunkin' Donuts/Baskin-Robbins units in NY and MD; bankruptcy filed July 2010 with jointly administered cases; Debtors hold franchise agreements with Dunkin' Franchising LLC and Baskin-Robbins entities tied to specific store locations; Dunkin' Brands Leases are true nonresidential real property leases tied to the corresponding franchise agreements; cross-default provisions create economic interdependence between each lease and its franchise agreement; debtors seek time to decide whether to assume or reject these integrated agreements and, alternatively, to assume the leases without curing franchise defaults.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are Dunkin' Leases and franchise agreements integrated? | Debtors: integrated; one controlling agreement. | Dunkin' Brands: separate obligations. | Integrated and indivisible controlling agreements. |
| Which Bankruptcy Code provision governs the decision to assume/reject integrated agreements? | § 365(d)(2) applies to executory contracts; extended deadline justified. | § 365(d)(4) governs nonresidential leases; separate deadlines. | § 365(d)(2) applies; § 365(d)(4) inapplicable. |
| Must debtors cure defaults under franchise agreements to assume Dunkin' Leases? | Debtors may assume leases while addressing franchise defaults later. | Defaults under related franchise agreements must be cured. | Cannot assume lease without curing related franchise defaults. |
| Can the Debtors extend time to decide to assume/reject integrated agreements? | Time should be extended in light of integrated nature and plan feasibility. | Extensions should depend on landlord consent; otherwise premature. | Time to decide remains tied to § 365(d)(2) framework; extension granted in context. |
Key Cases Cited
- In re Szenda, 406 B.R. 574 (Bankr. D. Mass. 2009) (integrated contracts treated as one transaction in bankruptcy context)
- In re T & H Diner, Inc., 108 B.R. 448 (D.N.J. 1989) (sale of business and leased premises as one unit; curing defaults concept)
- East Hampton Sand & Gravel Co., Inc., 25 B.R. 193 (Bankr. E.D.N.Y. 1982) (lease as part of one unified transaction; impact on payments)
- In re Harrison, 117 B.R. 570 (Bankr. C.D. Cal. 1990) (integrated petroleum franchise and leases; § 365(d)(4) inapplicable)