In re: Scarborough-St.James Corporation

Filing 16

MEMORANDUM OPINION regarding Bankruptcy Appeal (D.I. 1 ). Signed by Judge Richard G. Andrews on 7/12/2016. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
INRE:

Chapter 11

SCARBOROUGH-ST. JAMES CORPORATION,

Bankr. Case No. 15-10625-LSS

Debtor.
SCARBOROUGH-ST. JAMES CORPORATION,
Civ. No. 15-809-RGA
Appellant,
v.
67500 SOUTH MAIN STREET, RICHMOND, LLC,
Appellee.

MEMORANDUM

Ian Connor Bifferato, Esq., Thomas F. Driscoll III, Esq., Bifferato LLC, Wilmington, DE; and
Michael T. Conway, Esq., LeClairRyan, New York, NY, attorneys for Appellant ScarboroughSt. James Corporation..
William D. Sullivan, Esq., William A. Hazeltine, Esq., Sullivan Hazeltine Allinson LLC,
Wilmington, DE; and Jeffrey Miller, Esq., Thomas A. Draghi, Esq., Eric G. Waxman III, Esq.,
Westerman Ball Ederer Miller Zucker & Sharfstein, LLP, Uniondale, NY, attorneys for Appellee
67500 South Main Street, Richmond, LLC.

July

I~, 2016

·~'~~
sf

ANDREWS, UNITED

ATES DISTRICT JUDGE:

Presently before the Court is an appeal by Debtor Scarborough-St. J runes Corporation
from a final order (B.D.I. 63) 1 (the "Surrender Order") of the United States Bankruptcy Court for
the District of Delaware granting the motion (B.D.I. 54) (the "Surrender Motion") of appellee,
67500 South Main Street, Richmond, LLC ("Landlord"), for an order deeming a nonresidential
property lease terminated pursuant to§ 365(d)(4) of the Bankruptcy Code and directing Debtor
to immediately surrender possession of the property to Landlord. The appeal is fully briefed.
The briefs fully and adequately set forth the parties' arguments, and the Court does not believe
that oral argument would be helpful. See Fed. R. Bankr. Proc. 8019.

I.

BACKGROUND
The relevant facts are not disputed. 2 Since 2008, Debtor and Landlord have been

litigating various provisions in a 2006 lease between Richmond Realty Limited Partnership, as
landlord, and MCANY of Richmond Fund II Limited Partnership, as tenant, relating to a
shopping center located in Richmond, Michigan. (D.I. 10 at A3-23). Neither Debtor nor
Landlord were original parties to the lease. Landlord becaine the landlord under the lease (and
owner of the shopping center) by foreclosing upon its secured position in the lease in October
2008. (B.D.I. 27 at if 17). In March 2015, Debtor purchased all of MCANY's rights and
interests under the lease. (Id. at if 8). Prior to the purchase ofMCANY's rights, Debtor managed
the property and collected rent from subtenants pursuant to a servicing agreement between
MCANY and Debtor. (Id. at if 12). Landlord has received no rent since acquiring the shopping

1

The docket of the chapter 11 case, In re Scarborough-St. James Corp., Case No. 15-10625
(LSS) (Bankr. D. Del.), is cited herein as "B.D.I. _."
2

See B.D.I. 56 (providing extensive discussion of prepetition disputes between the parties and
procedural posture ofbankruptcy case).
1

center. (B.D.I. 16 at if 3).
A. The Arbitration and New York Litigation
The disagreements between Debtor and Landlord regarding the lease led to significant
prepetition litigation in both the New York and Michigan state courts. Arbitration proceedings
in 2013 and 2014 led to the issuance of a final award on January 27, 2014, in which the arbitrator
ruled that the lease remained valid, and Debtor owed Landlord rent of $652,911.96 for the period
from November 2008 through December 2012, and that rent should be paid within 60 days of the
final award. (B.D.I. 16, Ex. A, ex. 2 at 2-3). The arbitrator further held that calculation of rent
for the year 2013 and subsequent years should be calculated by the same method used in the final
award. (Id.) Debtor did not pay as directed.
Landlord subsequently filed a motion to confirm the final award in the Supreme Court of
the State of New York. Debtor opposed the motion and filed a cross-motion to vacate or modify
the final award. On August 4, 2014, the Supreme Court issued a decision and order confirming
the final award and denying the Debtor's motion to vacate or modify it. On December 1, 2014,
the Supreme Court re-issued its August ruling and directed the Clerk to enter judgment on the
final award in favor of Landlord. (B.D.I. 27 at if 7). Thereafter, on March 16, 2015, the
Supreme Court issued judgment in favor of Landlord in the amount of $720,204.80. (B.D.I. 16
at if 5). On April 14, 2015, Debtor appealed but did not seek a stay of the judgment pending
appeal. (B.D.I. 27, if 10). On January 28, 2016, the decision and order was affirmed on appeal
in all respects. (See D.I. 15).
B. The Termination Notice and the Michigan Litigation
In the time after the final award, but prior to the judgment, Landlord sent.a demand letter

to Debtor and MCANY notifying them of an "Event of Default" under the lease and demanding

2

payment of the 2013 rent in the amount of $290,612.15 within 60 days of the letter. (Id. at Ex.
A, ex. 4). Receiving no response, on May 20, 2014, Landlord sent a lease termination notice.
(Id. at Ex. A, ex. 5). On August 20, 2014, Landlord sent MCANY and Debtor a demand for

immediate possession and turnover of all books and records with the subtenants and all keys to
the property. (Id. at Ex. A, ex. 6). Debtor did not comply with this demand. On September 20,
2014, Landlord filed a complaint in Michigan state court seeking a judgment of immediate
possession of the shopping center and an eviction order. (B.D.I. 43, Ex. D).

C. The Bankruptcy Proceedings
While the Michigan litigation was pending, on March 19, 2015 (the "Petition Date"),
Debtor filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. Debtor
listed the lease on Schedule G of its Schedules of Assets and Liabilities - Executory Contracts
and Unexpired Leases. (See B.D.I. 32). On April 7, 2015, Landlord filed a motion for relief
from the automatic stay provision of§ 362(d) in order to proceed with the Michigan litigation.
(B.D.I. 16). The Bankruptcy Court granted relief from the automatic stay, which permitted
Landlord to proceed with the Michigan litigation. (B.D.I. 56, 57).
Debtor did not file a motion to assume or reject the lease within the.120-day period
prescribed by§ 365(d)(4) of the Bankruptcy Code, nor did it move for any extension of the
deadline to assume or reject the lease. 3 On July 17, 2015, the 120-dayperiod expired. On July
29, 2015, Landlord filed the Surrender Motion. Landlord asserted that, based on Debtor's failure
to assume or reject the lease and failure to move for an extension of the deadline, the lease was
deemed rejected as a matter oflaw pursuant to a straightforward application of§ 365(d)(4), and

3

The court may, for cause, extend the 120-day period to assume or reject for an additional 90
days upon a motion by a trustee, debtor, or lessor. Any subsequent extensions may be granted
only upon written consent of the lessor. 11 U.S.C. § 365(d)(4)(B).
3

the Debtor was therefore required to immediately surrender the shopping center to the Landlord.
(See B.D.I. 54 at 2). 4

In response, Debtor filed (i) a motion to dismiss its chapter 11 case on August 19, 2015
(B.D.I. 58), and (ii) an opposition to the Surrender Motion on August 20, 2015 (B.D.I. 60).
Debtor argued in its opposition that, in light of the pending motion to dismiss the chapter 11
case, the issue of whether the lease could be assumed was no longer relevant, and the Surrender
Motion was therefore moot. (B.D.I. 60 at 1). Debtor argued that even ifthe Surrender Motion
was not moot, it should be "denied in that it ignores the realities ofthis case." (Id.). Debtor
argued that the "real issue" in assuming the lease was the issue of any default and cure under the
lease - issues which, Debtor contended, were still being litigated in the New York litigation due
to its pending appeal of the judgment. (Id. at 2). Debtor further argued that, instead of deeming
the lease rejected, the Bankruptcy Court should allow the Debtor another opportunity to file a
motion to assume the lease because in similar factual situations, courts have held that a motion to
assume a lease can be filed after the 120-day period has expired "so long as the Debtor makes it
clear that it intends to assume the lease during that pr[ e]scribed period." (See id. at 2-3). In
support of its position, Debtor cited a case from the Bankruptcy Court for the District of
Massachusetts, which expressed agreement "with those courts that see no command in
subsection (d)(4) that a motion is to be filed within the prescribed period, and require only timely
and unequivocal statements to the lessor of intention to assume." In re The Casual Male Corp.,

4

Landlord ultimately takes the position that the lease was terminated prior to the Petition Date,
Debtor's continued possession of the shopping center was unlawful, and Debtor would have been
evicted from the shopping center but for its chapter 11 filing. Solely for purposes of the
Surrender Motion, however, Landlord assumed that the lease (a) existed as of the Petition Date,
and (b) provided an alternate basis by which the Bankruptcy Court could recognize that the lease
was breached and terminate possession of the shopping center as a matter oflaw. (See B.D.I. 54
at 3, n.7).

4

120 B.R. 256, 260 (Bankr. D. Mass 1990). Debtor argued that it made its intent to assume the
lease clear from the outset of its chapter 11 case, and such intent satisfied the statute. (See id. at
2).
Debtor further argued that under the Third Circuit's ruling in the Channel case, the
Bankruptcy Court had authority to extend the 120-day period retroactively ifthe failure to extend
would be inconsistent with the intent of the Bankruptcy Code and would result in a windfall to
the landlord. (See id. (citing See Legacy, Ltd. v. Channel Home Centers, Inc., 1991WL497171
at *7 (D.N.J. Dec. 12, 1991), af('d, 989 F.2d 682 (3d Cir. 1993)). Debtor argued that its only
asset was the lease, and "[i]f the Debtor were not able to assume this [l]ease there would be no
estate to administer," which would be inconsistent with the Bankruptcy Code's purpose of
allowing a debtor to reorganize. (See id. at 4).
Following briefing and oral argument, on August 27, 2015, the Bankruptcy Court granted
the Surrender Motion. (B.D.l. 63). In so ruling, the Bankruptcy Court found it could not
retroactively extend the 120-day deadline based on Debtor's failure to file a motion for such
relief: "Section 365(d)(4) says I can only extend the time on a motion, and none was brought. So
the only possibility that the debtor relies on is that the debtor has already assumed the lease,
subject to court approval." (See D.I. 10 at A89, 8/27/15 Hr'g. Tr. at 41:17-23). The Bankruptcy
Court rejected Debtor's argument that it had satisfied§ 365(d)(4) under Casual Male by virtue of
its counsel's statements regarding Debtor's intent to assume the lease. The Bankruptcy Court
declined to decide whether it was in agreement with Casual Male but observed the factual and
procedural differences of that case, and noted that the Debtor, in any event, had failed to meet the
standard set in that case. (See id. at 41:24-42:2). The Bankruptcy Court found that any
statements by Debtor's counsel with respect to the lease did not satisfy the standard of a timely

5

and unequivocal statement of intent to assume:
[T]hose statements were a contingent desire to assume the lease, assuming all
issues between the parties are decided in the [Debtor's] favor; specifically, with
respect to the amount of the rent owed. There is no evidence, as there was in
Casual Male, that the debtor itself, as opposed to counsel, ever made statements
to the landlord that it wanted to unequivocally assume the lease. In fact, there
was no evidence at all from the debtor today. On this record I cannot find, as the
Court did in Casual Male, that the debtor's conduct prior to the deadline in
365(d)(4) unquestionably demonstrated to the landlord their intention and
agreement to assume and assign the lease, or here, assume the lease, subject to
court approval.
(Id. at 42:6-21). Having rejected Debtor's argument that it had demonstrated its unequivocal

intent to assume the lease, the Bankruptcy Court entered the Surrender Order, deeming the lease
rejected pursuant to§ 365(d)(4) and directing Debtor to immediately surrender the shopping
center to Landlord. (See B.D.I. 63).
Thereafter, on September 24, 2015, the Bankruptcy Court granted Debtor's motion to
dismiss its chapter 11 case (B.D.I. 91, 92) subject to certain conditions. The dismissal order
provided that the order granting relief from the automatic stay and the Surrender Order would
survive dismissal of the chapter 11 case and further provided that Debtor was prohibited from
filing a petition for relief under any chapter of the Bankruptcy Code on or before January 24,
2016. (See B.D.I. 92).

II.

CONTENTIONS
On appeal, Debtor asserts that, as an initial matter, the Surrender Motion should have

been "denied as moot," in light of Debtor's motion to dismiss the chapter 11 case, because "the
issue of whether the [l]ease in question should be or can be assumed was no longer relevant."
(D.I. 8 at 2). Debtor further argues, based on the Casual Male case, that "the Bankruptcy Court
improperly held that the [l]ease was deemed rejected, notwithstanding the fact that the Debtor
had unequivocally indicated from the outset of the case that it intended to assume the [l]ease."
6

(See id.) Debtor further argues that the Bankruptcy Court should have rejected strict
construction of§ 365(d)(4), and granted retroactive extension of the deadline, because deeming
the lease rejected "ignored the realities of this case" and resulted in a windfall for the Landlord to
the detriment of the creditors. (Id.) Debtor thus urges the Court to reverse the Surrender Order
"[g]iven the flawed reasoning of the Bankruptcy Court and the status of the case." (Id, at 3).
Landlord disputes Debtor's argument that the motion to dismiss rendered the Surrender
Motion moot. (See D.I. 9 at 20-21). According to Landlord, Debtor's argument that it
demonstrated its intent to assume through statements by counsel is unsupported by the record,
and Debtor's argument that an indication of intent to assume can satisfy the requirements of§
365(d)(4) is unsupported by the plain language of the statute. (See id. at 3; 11-12). Landlord
argues that even if such unequivocal statements were made, the Casual Male holding is
incorrect, as ''unequivocal statements of intent to assume do.not constitute a lease assumption
under the Bankruptcy Code. Rather, a motion and court order are required." (Id.) Finally,
Landlord argues that retroactive extension of the deadline is not permitted under the statute, and
in light of Debtor's failure to file a motion to assume or a motion to extend the deadline, the
Surrender Order must be affirmed. (Id. at 18-19 & n. 27).

III.

JURISDICTION AND STANDARD OF REVIEW
The Court has jurisdiction to hear an appeal from a final judgment of the Banlauptcy

Court pursuant to 28 U.S.C. § 158(a)(l). On appeal from an order issued by the Bankruptcy
Court, a district court "review[s] the Banlauptcy Court's factual findings under a clearly
erroneous standard and exercise[s] plenary review over legal issues." In re Trans World

Airlines, Inc., 145 F.3d 124, 130 (3d Cir. 1998).
IV.

DISCUSSION
The Banlauptcy Code provides that "the trustee, subject to the court's approval, may
7

assume or reject any executory contract or unexpired lease of the debtor." 11 U.S.C. § 365(a).
This provision is modified by § 365(d)(4) of the Bankruptcy Code, which provides:
[A]n unexpired lease of nonresidential real property under which the debtor is the
lessee shall be deemed rejected, and the trustee shall immediately surrender that
nonresidential property to the lessor, if the trustee does not assume or reject the
unexpired lease by the earlier of (i) the date that is 120 days after the date of the order for relief; or
(ii) the date of the entry of an order confirming a plan.
11 U.S.C. § 365(d)(4)(A). Section 365(d)(4)(B) further provides that the Bankruptcy Court
"may extend the period determined under subparagraph (A), prior to the expiration of the 120-

day period, for 90 days on the motion of the trustee or lessor for cause." 11 U.S.C. §
365(d)(4)(B) (emphasis added). However, any subsequent extensions may be granted only upon
prior written consent of the lessor. See id. Here, there is no dispute that no motion to assume
was filed before the expiration of the 120-dayperiod, no motion for an extension of the deadline
was made, and no plan has been confirmed in this case. Under a straightforward application of
the statute, the Bankruptcy Court correctly determined that the lease must be deemed rejected
pursuant to§ 365(d)(4) and that immediate surrender of the shopping center was required.
A. The Bankruptcy Court Properly Declined to Dismiss the Surrender Motion As Moot
Debtor argues that, with respect to the relief requested in the Surrender Motion, "this
issue became moot given the request to dismiss the Bankruptcy Case." (D.I. 8 at 7). Thus,
Debtor argues that "the Bankruptcy Court erred in not simply dismissing the case without
reaching the issue of rejection beforehand ... " (Id. at 8). Landlord asserts this argument is
meritless because Debtor did not have a unilateral right to dismiss its case under the Bankruptcy
Code; rather, the Bankruptcy Court was required to determine whether dismissal was in the best

8

interest of Debtor's creditors pursuant to§ 1112(b). 5 (See D.I. 9 at 21). Landlord further notes
that Debtor's motion to dismiss was filed on August 19, 2015 - after the§ 365(d)(4) deadline
expired on July 17, 2015 and after the order granting relief from the automatic stay was entered
on August 18, 2105 - and argues that "[e]vents which occur after the expiration of the statutory
deadline cannot moot the obligation to comply with the deadline. If that was the case, then the
statutory requirements could be easily evaded." Id.
When a court's decision on a pending motion will be "hypothetical or academic" or
without any "practical significance," Black's Law Dictionary 1099 (9th ed. 2009), then the
motion is moot. See, e.g., Oparaji v. NE. AutoMarine Terminal, 437 F. App'x. 190, 193 n.1 (3d
Cir. 2001) ("A motion is moot when a court is unable to fashion any form of meaningful relief').
Here, the Debtor did not have a unilateral right to dismiss its case, and its motion to dismiss had
not yet been fully briefed or adjudicated. Landlord's request for relief pursuant to the automatic
termination provision of§ 365(d)(4) was not rendered moot by virtue of the pending motion to
dismiss, as the Bankruptcy Court was able to award meaningful relief to Landlord. The Court
.··thus finds no error in the Bankruptcy Court's consideration of the relief requested in the
Surrender Motion.

B. The Bankruptcy Court Properly Held Debtor's Intent to Assume Did Not Satisfy
§ 365(d)(4)
Debtor argues that its counsel clearly indicated Debtor's intent to assume the lease, and
contest any cure amount, based on the result in the New York litigation, although "the issue of

5

Section 11l2(b)(1) of the Bankruptcy Code provides, in relevant part, that "on request of a
party in interest, and after notice and a hearing, the court shall convert a case under this chapter
to a case under chapter 7 or dismiss a case under this chapter, whichever is in the best interests of
creditors and the estate, for cause ... " 11 U.S.C. § 1l12(b)(l). Section 1112(b)(2) further
provides that the court may not dismiss a case if the court finds that dismissing the case is not in
the best interests of creditors and the estate. See 11 U.S.C. § l 112(b)(2).
9

whether there was a [l]ease to assume and ... whether there is any amount owed to [Landlord] as
a cure payment ... clearly overshadow[ ed] the issue of when the Debtor would formally bring a
motion to assume." (See D.I. 8 at 6). Debtor thus appears to argue that the lack of resolution of
these issues somehow precluded it from moving to assume the lease, and that the Bankruptcy
Court erred in "ignor[ing] the realities ofthis case." (Id. at 2). As the Bankruptcy Court
observed, however, the pending state litigation did not prevent the Debtor from timely moving to
assume the lease. (See D.I. 10 at A67-69, 8/27/15 Hr'g. Tr. at 19:24-20:8 & 21:15-21:24).
Debtor could have moved to assume the lease, at which point the Bankruptcy Court would have
addressed cure issues (id. at A64, 16:4-5). As the Bankruptcy Court observed:
The debtor really suggests ... that it's in an unfortunate situation because of a
confluence of events that have prevented it from making decisions. But I find that
these situations are a circumstance of the rulings that the debtor received in the
arbitration that they insisted upon, the affirmance of that decision by the New
-York Supreme Court, and the timing that the debtor has with respect to when an
appeal could be decided on the issue.
(Id. at A89, 41:8-15). This situation, as the Bankruptcy Court noted, "does not strip other parties

of their rights." (Id. A89, 41:15-16).
Debtor contends, however, that "in similar factual situations, courts have held that it is
this indication of an intent to assume that is required by[§] 365(d) within 120 days, not the
motion or a decision on the motion to assume." (See D.I. 8 at 6). In support ofthis argument,
Debtor cites the Casual Male decision, in which the court expressed its agreement ''with those
courts that see no command in subsection (d)(4) that a motion is to be filed within the prescribed
period, and require only timely and unequivocal statements to the lessor of intention to assume."
Casual Male, 120 B.R. at 260. However, the Casual Male case does not appear to present a
"similar factual situation."
There, a debtor timely moved to extend its deadline to assume or reject leases, and that
10

request was granted by the bankruptcy court. Casual Male, 120 B.R. at 258. The debtor then
scheduled an auction with respect to a number of its leases. See id. One landlord, Evergreen,
received notice of the auction and attended. Id. At the auction, a purchaser made an offer to
acquire several leases, including Evergreen's lease, and debtor announced the terms of the offer
at the auction. See id. Evergreen's representatives negotiated with the purchaser, stating that
Evergreen would deal with the proposed assignment in the same manner as a lease assignment
outside the bankruptcy context. See id. at 258-59. Evergreen and the purchaser exchanged
information thereafter toward litigating or resolving adequate assurance issues. Id. Several
weeks after the auction, debtor filed a motion to assume and assign the lease, but the motion was
filed outside of the§ 365(d)(4) statutory period (as extended by a prior extension order).
Although debtor had previously filed a motion to assume and assign a number of other leases,
debtor's counsel mistakenly failed to include Evergreen's lease in that motion. See id. at 259.
Evergreen objected to the motion to assume its lease on the basis that debtor had failed to assume
the lease prior to the expiration of the § 365(d)(4) deadline. See id. The motion to assume was
initially denied as untimely. See id. Debtor then sought relief to amend the extension order
pursuant to Rule 60(b) of the Federal Rules of Civil Procedure, made applicable by Federal Rule
of Bankruptcy Procedure 9024. The court granted debtor relief, finding that debtor's actions and
statements were sufficient to support a determination that assumption under the statute was
satisfied. Id. at 262.
The Casual Male case differs from the instant case both factually .and procedurally. In
considering Debtor's argument that§ 365(d)(4) requires only a timely and unequivocal statement
of intention to assume - as opposed to a motion to assume - the Bankruptcy Court noted that this
case was in a different posture than the Casual Male case. The court in Casual Male considered

11

a motion for affirmative relief brought by the debtor, whereas in the instant case, the Bankruptcy
Court was faced with a Landlord's motion to surrender, well after the expiration of the deadline,
and in the absence of any request for relief from the Debtor. The Bankruptcy Court also
expressed hesitation as to whether it agreed with the reasoning in Casual Male. (See D.I. 10 at
A71, 23:12-23:19; A89, 41:24-25). Even ifit would have agreed with Casual Male, the
Bankruptcy Court found that the Debtor had failed to satisfy the timely and unequivocal
statement standard set forth in that case. The Bankruptcy Court observed that Debtor's counsel's
statements with respect to assumption of the lease were "at best ... a contingent desire to assume
the lease, assuming all issues between the parties are decided in the [Debtor's] favor." (See id. at
A90). Thus, Debtor's intent to assume was always contingent on the outcome of the state
litigation - the timing of which was uncertain - notwithstanding the statutory deadline under §
365(d)(4). The Bankruptcy Court further noted that, unlike Casual Male, Debtor had failed to
cite to the record or submit any evidence of a timely and unequivocal statement to the Landlord
by the Debtor itself- as opposed to Debtor's counsel - regarding Debtor's intention to assume
the lease. (Id. at A90, 42:17-21) ("On this record, I cannot find, as the Court did in Casual Male,
that the debtor's conduct prior to the deadline in 365(d)(4) unquestionably demonstrated ...
[Debtor's] intention and agreement to assume and assign the lease, or here, assume the lease,
subject to court approval.").
The Court agrees with the Bankruptcy Court's conclusion. I do not need to decide
whether Casual Male correctly states the law. I agree with the Bankruptcy Court that there was
no evidence in the record of Debtor's timely and unequivocal statement to Landlord of Debtor's
intent to assume the lease. Thus, the Bankruptcy Court correctly concluded that Debtor had not
satisfied the requirements of§ 365(d)( 4).

12

C. The Bankruptcy Court Properly Denied Debtor's Request to Retroactively Extend the
Statutory Deadline
The Bankruptcy Court correctly concluded that it cannot retroactively extend the deadline
to assume or reject a lease under the statute. Because the Casual Male court found that the
debtor acted timely to assume the lease at issue, it did not reach the issue of whether to extend
the deadline retroactively. See Casual Male, 120 B.R. at 263. The only other case cited by
Debtor is the Channel case. See Channel Home Centers, Inc., 1991WL497171 at *7 (D.N.J.
Dec. 12, 1991). In that case, the issue was whether the bankruptcy court could grant a second
timely extension of the debtor's time to assume or reject a lease under a prior version of the
. statute. There, both of the extensions "were requested and granted before the relevant period
expired." Channel, 989 F.2d at 688 n.11. Here, it is undisputed that the 120-dayperiod expired
without the Debtor requesting, and without the Bankruptcy Court granting, an extension of time
to assume or reject the lease. Thus, the Channel case does not require a different result than the
Bankruptcy Court reached here.
Notwithstanding these different facts, Debtor argues that Channel stands for the Third
Circuit's rejection of a literal construction of§ 365(d)(4) where a literal construction would be
contrary to justice and result in a windfall to one creditor to the detriment of other creditors. (See
B.D.L 60 at 4-5). However, the concerns raised in Channel are simply not implicated in this
case. Debtor's schedules reflected few creditors. 6 No committee of unsecured creditors was
appointed, nor did any creditor other than Landlord participate in the case. (See id. at n.4). As
the Bankruptcy Court observed, this chapter 11 case was essentially "a two-party dispute

·

6

Debtor's schedules listed no secured creditors. (See B.D.L 4, Sch. D). Debtor listed one
creditor as having an unsecured priority claim in the amount of $47,218.29. (Id. at Sch. E). This
creditor also held 50.75% of Debtor's equity. (See B.D.L 3). Debtor listed twelve unsecured
creditors with total liquidated debt of$740,323.18, of which $720,204.80 was Landlord's claim.
(B.D.L 4, Sch. F). Six of the remaining creditors were owed less than $200. (Id.)

13

between Debtor and Landlord regarding which of the parties is entitled to the rents from the
shopping center, which are Debtor's only asset of any real value." (See B.D.I. 91 at 2).
Moreover, the Channel case considered a prior version of the statute. Section 365(d)(4)
was amended in 2005 for the purpose of limiting courts' discretion in applying the 120-day time
period for assuming or rejecting a lease. See, e.g., In re Eastman Kodak Co., 495 B.R. 618, 623
(Banla. S.D.N.Y. 2013) ("'[The amendment of§ 365(d)(4)] is designed to remove the
banlauptcy judge's discretion to grant extensions of the time for the retail debtor to decide
whether to assume or reject a lease after a maximum possible period of 210 days from the time
of entry of the order ofrelief."') (quoting H.R. Rep. No. 109-31, 1091h Cong., pt Sess. 153
(2005)). Numerous courts have held that the period to assume or reject a lease cannot be
extended after the expiration of the statutory period. See, e.g., In re Southampton Yen Rest. Grp.
LLC, 2009 WL 3925563, at *3 (Bankr. S.D.N.Y. Nov. 16, 2009) (reviewing case law and

holding "the Debtor failed to timely file a motion to extend the time to assume the lease and the
120-day period contemplated by§ 365(d)(4) has expired. Because this Court cannot
retroactively extend the deadline under the statute, the lease is deemed rejected as a matter of law
and the Debtor must immediately surrender the property"). Thus, the Court finds no error in the
Banlauptcy Court's conclusion, which is consistent with the language of the statute, the
legislative intent underlying the statute, and post-amendment case law.

V.

CONCLUSION
For the foregoing reasons, the Surrender Order is affirmed. Landlord's Motion for Leave

to File a Sur-reply Brief (D.I. 12) is dismissed as moot. An appropriate order shall issue.

14