In re Lazy Days' RV Center Inc.

Citation:
-- F3d. --, No. 12-4047 (3d Cir. July 30, 2013)
Tag(s):
Ruling:
The United States Court of Appeals for the Third Circuit reversed the judgment of the United States District Court for the District of Delaware, finding that the United States Bankruptcy Court for the District of Delaware did not issue an advisory opinion when it adjudicated a motion to reopen the bankruptcy case filed by the Reorganized Debtors.
Procedural context:
Appeal from judgment of the United States District Court for the District of Delaware vacating order of the United States Bankruptcy Court for the District of Delaware on basis that Bankruptcy Court order was an advisory opinion.
Facts:
Appellee I-4 Land Holding Limited Co. (I-4") owns a parcel of land in Florida. In July 1999, I-4 leased that land to the Lazy Days' R.V. Center Inc. ("Lazy Days") under a written lease (the "Lease") that gave Lazy Days an option to purchase the property. The Lease also included an anti-assignment provision. Beginning in 2008, the Debtor failed to pay rent as it came due and informed I-4 of its plan to file a chapter 11 case and assign the Lease to LDRV Holding Corp ("LDRV"). Pre-petition, Lazy Days negotiated with I-4 and reached a settlement agreement in October 2009 (the "Settlement Agreement"), pursuant to which I-4 consented to Lazy Days’ assignment of the Lease to LDRV. As part of the Settlement Agreement, Lazy Days agreed not to “argue against the Bankruptcy Court abstaining from consideration of Lease interpretation issues . . . except to the extent necessary in connection with the assumption and assignment of the Lease as contemplated herein.” The Settlement Agreement did not explicitly state whether the purchase option would survive. In November 2009, Lazy Days filed a chapter 11 petition. In December 2009, the Bankruptcy Court confirmed a plan of reorganization incorporating the Settlement Agreement. The case was closed in March 2010. Thereafter, the Lease was assigned to LDRV. On May 12, 2011, LDRV attempted to exercise the purchase option, but I-4 refused to honor it. The parties each filed lawsuits in Florida state court seeking a determination of their respective rights under the Lease. At the same time, the Reorganized Debtors filed an emergency motion to reopen the cases in the Bankruptcy Court, seeking a ruling that the Lease’s anti-assignment provision was unenforceable pursuant to Bankruptcy Code section 365(f)(3). The Bankruptcy Court held that the anti-assignment provision was unenforceable and that I-4’s refusal to honor the purchase option violated the Settlement Agreement. The Bankruptcy Court ordered I-4 to honor the option. I-4 appealed to the District Court, which vacated the Bankruptcy Court’s order, holding that the Bankruptcy Court’s judgment was an advisory opinion directed to the Florida courts presiding over the state court litigation. This appeal followed.
Judge(s):
Scirica, Hardiman, and Aldisert, Circuit Judges

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