635 F.3d 312
7th Cir.2011Background
- UAL Corporation and affiliates filed Chapter 11; ReGen Capital I, as an assignee, purchased AT&T's pre-petition unsecured claim against UAL arising from AT&T contracts.
- ReGen filed a cure claim seeking full payment of AT&T's contract defaults under 11 U.S.C. § 365(b) on the theory that United planned to assume the AT&T contracts.
- UAL's plan proposed to assume or reject executory contracts, with a Cure Bar Date and a reservation of rights to reject contracts after a cure amount was agreed or a final order establishing cure.
- The plan listed AT&T contracts in an Assumed Executory Contracts exhibit but did not specify cure amounts; United reserved post-confirmation rejection rights.
- Bankruptcy court and district court held ReGen could not claim a cure because (i) assignment did not grant cure rights and (ii) United had not yet assumed the AT&T contracts; United ultimately rejected the AT&T contracts as permitted by the plan.
- ReGen appealed, arguing the assignment broad enough to include cure rights and that United’s plan did not constitute an actual assumption of the AT&T contracts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does AT&T-ReGen assignment include cure rights? | ReGen has cure rights under assignment. | Assignment only covered general unsecured claims, not cure. | Assignment includes cure rights; ReGen can seek cure. |
| Did United's plan confirmation amount to an assumption of the AT&T contracts? | Contracts were assumed by listing them as 'Assumed' and by plan terms. | Confirmation did not constitute actual assumption; cure obligations not satisfied. | No assumption occurred; plan did not cure defaults. |
| Was United's post-confirmation right to reject contracts valid under § 365(d)? | Reservation to reject after cure determination could not nullify prior assumption. | Reservation allowed post-confirmation rejection, extinguishing cure rights. | Reservation valid; rejection extinguished cure rights. |
| Is ReGen entitled to a cure as a transferee of AT&T's claim? | As transferee, ReGen stands in AT&T's shoes for cure. | No; cure rights depend on actual assumption; plan allowed rejection. | ReGen has no cure payment because no assumption occurred. |
Key Cases Cited
- In re Kreisler, 546 F.3d 863 (7th Cir. 2008) (claims trading context; relevance to pre-petition claims and acquisitions)
- ReGen Capital I, Inc. v. Halperin (In re U.S. Wireless Data), 547 F.3d 484 (2d Cir. 2008) (assignment of claims includes right to cure where contract arises pre-petition)
- In re Mushroom Transportation Co., 78 B.R. 754 (Bankr.E.D. Pa. 1987) (cure payment and assumption timing considerations)
- In re Genuity Inc., 323 B.R. 79 (Bankr.S.D.N.Y. 2005) (first-cure requirement; adequate assurance concepts)
- In re Superior Toy & Manufacturing Co., 78 F.3d 1169 (7th Cir. 1996) (requirement to cure pre-assumption obligations)
- Adventure Resources, Inc. v. Holland, 137 F.3d 786 (4th Cir. 1997) (labor contracts; treatment under bankruptcy)
- In re Chicago, Milwaukee, St. Paul & Pacific Railroad Co., 961 F.2d 1260 (7th Cir. 1992) (interpretation of plan language and binding effect of confirmation)