SVENHARD'S SWEDISH BAKERY V. BAKER
- Summarized by Michael Myers , Ballard Spahr LLP
- 5 months 1 week ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- No. 23-60045 (9th Circuit, Sep 12,2025) Published
- Tag(s):
-
- Ruling:
- The Ninth Circuit Court of Appeals upheld the decisions of the Bankruptcy Appellate Panel and the bankruptcy court that the debtor could not assume a settlement agreement with a pension fund providing for payment of less than all of the amounts allegedly owed to the pension fund. However, the Ninth Circuit affirmed on the ground that the agreement was a "financial accommodation" that could not be assumed under Section 365(c)(2) whereas the BAP had ruled that the agreement could not be assumed because it was not executory.
- Procedural context:
- The bankruptcy court had denied the assumption of the settlement agreement on both grounds. The BAP affirmed only on the ground that the agreement was not executory. The Ninth Circuit affirmed only on the ground that the agreement was a "financial accommodation" under Section 365(c)(2).
- Facts:
- Debtor Svenhard was a bakery with facilities in Oakland and Exeter, California. Svenhard had participated in a Bakery and Confectionary Union and Industry International Pension Fund (the "Pension Fund"). Svenhard closed the Oakland facility and terminated its workforce at that location, triggering alleged liability of $50 million for withdrawal liability and $500,000 for severance and vacation payouts under the Pension Plan. The Pension Fund settled with Svenhard for monthly payments of $12,500 for 240 months ($3 million in total) to settle the withdrawal liability and $8,580.80 monthly installments to settle the delinquent contribution liability claims. The Pension Fund accepted the settlement because enforcement would have caused secured creditors to assert their rights to Svenhard's assets leaving the Pension Fund with little to nothing. A few months after the settlement agreement, Svenhard ceased operating, defaulted on the settlement agreement, and filed chapter 11 bankruptcy.
In the bankruptcy, Svenhard entered into a settlement agreement with the United States Bakery (USB) which had previously purchased the Exeter facility from Svenhard. Under the settlement, Svenhard was to assume the settlement agreement with the Pension Fund and assign the agreement to USB. The Pension Fund opposed the assignment, and the bankruptcy court denied the motion.
- Judge(s):
- Marsha S. Berzon, Michelle T. Friedland, and Salvador Mendoza, Jr.
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