ReGen Capital I, Inc. v. UAL Corp. (In re UAL Corp.)

Summarized by Paul Lucey , Leverson Lucey & Metz, S.C.
15 years 1 week ago

Citation:

___ F.3d ___ (7th Cir. 2011)

Tag(s):

7th Circuit

Ruling:

Although the purchaser of a prepetition claim arising under an executory contract would have been entitled under the language of its assignment agreement to a cure payment had the contract been assumed (reversing holdings of the bankruptcy and district courts), the purchaser was not entitled to a cure payment where the reorganized debtor exercised its right under a confirmed chapter 11 plan to reject the executory contract post-confirmation, even though the contract was listed as an "assumed executory contract" in an exhibit to the plan. Because purchaser never objected to the assumption/rejection mechanism in the plan, and because the contract was never actually assumed (since debtor neither cured nor provided adequate assurance of prompt cure), the debtor properly exercised its right to reject the contract post-confirmation. On this ground, the bankruptcy court's decision disallowing the cure claim is affirmed.

Procedural context:

Purchaser of claim arising under executory contract appeals the bankruptcy court's decision, affirmed by the district court, disallowing a "cure" claim filed by the purchaser on the grounds that (i) the purchaser did not acquire the right to seek a cure payment when it purchased the claim, and (ii) the debtor never assumed the contract.

Facts:

ReGen, a claims trader, purchased from AT&T, at a discount, a substantial prepetition claim under an executory contract for telecommunitcaiton services. The claim assignment expressly transferred to ReGen rights of any nature "arising out of or in connection with the claim." The confirmed plan listed the AT&T contract as an "assumed executory contract" but gave the reorganized debtor the option, which the debtor exercised in this instance, to reject post-confirmation a contract listed as "assumed" in connection with the process of determining the cure amount. Purchaser did not object to this "ride through" provision of the plan or appeal the confirmation order. AT&T, having sold its claims, had no incentive to negotiate for assumption of its contract, as opposed to entering into a new contract with the reorganized debtor.

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