- No. 11-35368 / D.C. No. 2:10-cv-00054-SEH (not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3)
- The Ninth Circuit affirmed the Montana District Court’s order affirming the Bankruptcy Court’s grant of summary judgment in favor of the liquidating trustee determining and fixing the amount of damages arising from the rejection of an executory contract.
- Procedural context:
- The Bankruptcy Court confirmed the Debtor's chapter 11 plan, which provided for a rejection of the Appellant's club membership agreement with the Debtor. Subsequently, the Bankruptcy Court fixed the rejection damages for the amount of Appellant's membership deposit of $250,000. Appellant appealed the order fixing the amount of the rejection damages. The District Court affirmed. Appellant filed an appeal to the Ninth Circuit.
- The Debtor, Yellowstone Mountain Club, is a private ski and golf community. Appellant, Robert Sumpter, served as the Debtor's director of development. As part of his compensation package, Appellant was provided a Company Membership (non-dues paying membership). Subsequently, Appellant exchanged the Company Membership for a non-dues paying Residential Membership by paying $250,000 deposit. Thereafter, the Debtor filed a chapter 11 petition. The Bankruptcy Court confirmed the debtor's chapter 11 plan, which included a provision to reject all executory contracts except those contracts specifically identified in the plan. Among the contracts rejected included Appellant's Residential Membership. In determining the amount of rejection damages, the Bankruptcy Court granted the liquidating trustee's motion for summary judgment and fixing the rejection damage claim for the Appellant's deposit of $250,000. The Bankruptcy Court's ruling was based on the "clear and unambiguous" terms of the Membership Agreement, which provided that the Club could "recall" a membership for any or no reason and return the deposit to the member. The Bankruptcy Court equated the rejection of the Appellant's Residential Membership Agreement to a recall, thus only entitling Appellant to the return of his deposit. The District Court affirmed the Bankruptcy Court's ruling. On appeal to the Ninth Circuit, Appellant contended that (i) a rejection results in a breach of the Membership Agreement (and not a recall), thus precluding the Club from exercising its right to recall the membership agreement, and (ii) rejection damages are not limited to the return of his deposit, but also include appreciation in the value of the membership, dues that would have been paid under a standard membership agreement, and the value of any membership upgrade. In affirming the lower courts, the Ninth Circuit held that when a "contract is terminated under §365(a)," the contract provisions that govern compensation upon a unilateral termination remain applicable, and in this case, determine the amount of rejection damages.
- SCHROEDER, ALARCÓN AND GOULD, Circuit Judges
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Summarizing by Bradley Pearce
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Summarizing by Amir Shachmurove
3495 in the system
8 Being Processed