486 B.R. 773
Bankr. W.D. Tex.2013Background
- Consolidated bankruptcy proceeding involving Patriot Place Ltd. (PPL) and Three Legged Monkey L.P. (3LM) over Hawkins Plaza.
- PPL owns Hawkins Plaza and holds a ground lease with the City of El Paso; City Bank is a secured creditor.
- 3LM is a major tenant at Hawkins Plaza; the City sought to terminate the ground lease if 3LM remained, prompting PPL to seek protection via bankruptcy plans.
- Settlement negotiations between PPL and the City contemplated the City purchasing Hawkins Plaza and terminating 3LM’s shopping center lease.
- Two parallel bankruptcy cases (PPL Case and 3LM Case) produced competing plans: PPL Plan and 3LM Competing Plan, with contested motions about lease assumption and value.
- The court conducted a consolidated hearing addressing (1) 3LM’s Motion to Assume the Shopping Center Lease, (2) plan confirmations, (3) related value and ballot motions, and (4) designation of classes as unimpaired.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether PPL’s Notice of Termination of the Ground Lease was outside the ordinary course. | PPL | 3LM/Patriot contends termination was improper and outside, requiring court approval. | Notice ineffective; termination deemed outside ordinary course and not approved. |
| Whether 3LM may assume the Shopping Center Lease under § 365(b). | PPL | 3LM can cure defaults and provide adequate assurance of performance. | Yes; 3LM may assume the lease after cure of monetary defaults and adequate assurance. |
| Whether 3LM provided adequate assurance of future performance under § 365(b)(1)(C). | PPL/Trustees | 3LM has steady rent history, CAM, and potential profitability. | 3LM shown adequate assurance of future performance. |
| Whether the 3LM Competing Plan is feasible under § 1129(a)(11). | PPL/City/Monaco | 3LM contends feasibility; plan relies on uncertain 3LM emergence. | Not feasible at this time; plan confirmed to be denied. |
| Whether the PPL Plan can be confirmed given § 363(f) free-and-clear sale and non-debtor releases. | PPL | Plan seeks free-and-clear sale and non-debtor releases; contested. | Denied; no §363(f) basis found and non-debtor releases/exculpations violate Fifth Circuit precedent. |
Key Cases Cited
- In re Wingspread Corp., 116 B.R. 915 (S.D.N.Y. 1990) (cure/adequate assurance analysis under 365(b))
- In re Tex. Health Enterpr. Inc., 72 Fed.Appx. 122 (5th Cir. 2003) (extremely fact-specific adequate assurance factors)
- In re Lavigne, 183 B.R. 65 (Bankr.S.D.N.Y. 1995) (nonmonetary defaults cured by performance; 365(b)(1) emphasis)
- In re Natco Indus., Inc., 54 B.R. 436 (S.D.N.Y. 1985) (adequate assurance and rent history considerations)
- Pacific Lumber Co. v. Coho Res., Inc., 584 F.3d 229 (5th Cir. 2009) (non-debtor releases and exculpations limitations under Fifth Circuit)
- Qualitech Steel Corp. v. Qualitech Steel SBQ, LLC, 327 F.3d 537 (7th Cir. 2003) (sale free and clear under § 363(f); caveats about applicability to leaseholds)
- In re Valley View Shopping Ctr., L.P., 260 B.R. 10 (Bankr. D. Kan. 2001) (procedural propriety of attempting deemed assumption in competing plan)
- In re Taylor, 198 B.R. 142 (Bankr.D.S.C. 1996) (bona fide dispute and 363(f) standards)
- In reMMH Auto. Group, LLC, 385 B.R. 347 (Bankr.S.D. Fla. 2008) (monetary buyout vs. no buyout provisions for leasehold)