In Re: Bourbon Saloon, Incorporated

Filing 24

ORDER that United States Bankruptcy Courts 10/11/2013 order is AFFIRMED IN PART AND REMANDED IN PART. FURTHER ORDERED that the 10/11/2013 order is affirmed regarding its decision that the lease was assumed and that attorneys fees and costs are due. F URTHER ORDERED that this matter is remanded for consideration by the Bankruptcy Court as to whether A-Bar is entitled to attorneys fees or costs for the time period preceding the 5/15/2012 Agreed Order. FURTHER ORDER denying 13 Motion to Dismiss Cross-Appeal Without Prejudice. Signed by Judge Nannette Jolivette Brown on 3/18/2015. (Reference: ALL CASES)(caa)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
In Re:
BOURBON SALOON, INCORPORATED

CIVIL ACTION
CASE NO. 14-395
c/w 14-398
SECTION: “G”(2)

ORDER AND REASONS
Before the Court is The Absinthe Bar, L.L.C.’s (“A-Bar”) appeal from the United States
Bankruptcy Court’s October 11, 2013 order denying A-Bar’s motion for lease rejection of 400
Bourbon Street. Also before the Court is Bourbon Saloon, Inc.’s (“BSI” or “debtor”) cross-appeal
from the Bankruptcy Court’s October 11, 2013 order granting A-Bar fourteen days to file a
statement of attorney’s fees and costs incurred by it after December 31, 2012. Also before the Court
is BSI’s “Motion to Dismiss Cross-Appeal without Prejudice.”1 Considering the briefs filed by the
parties, the statements made at oral argument, the record and the applicable law, for the reasons that
follow, the Court will affirm the Bankruptcy Court’s order and deny BSI’s “Motion to Dismiss
Cross-Appeal without Prejudice.”.
I. Background
A. The Lease of 400 Bourbon Street
On July 24, 1997, BSI entered a lease with A-Bar of 400 Bourbon Street for a term of twenty
years, which is set to expire on October 31, 2017.2 On May 12, 2010, A-Bar filed an eviction

1

Rec. Doc. 13.

2

Bankruptcy Rec. Doc. 592 at 2. The lease includes an option to renew for another twenty years to
October 31, 2037. Id.

1

proceeding against BSI in state court for its defaults under the repair and maintenance provisions
of the lease.3 On August 19, 2010, the state court entered a Consent Judgment obligating BSI to
make all repairs to the building specified by David K. Rester, Esq. and Farr & Huston Architects.4
B. The Chapter 11 Petition and Motion to Assume the Lease
On May 12, 2011, BSI filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code.5 On August 10, 2011, BSI filed a motion to assume the lease of 400 Bourbon
Street pursuant to 11 U.S.C. § 365.6 On August 23, 2011, A-Bar filed an opposition to BSI’s motion
to assume the lease, arguing that there were monetary and nonmonetary defaults on the lease.7
Because the parties did not agree as to the scope, cost or allocation of financial responsibilities for
work to cure the maintenance and repair defaults, the Bankruptcy Court approved the hiring of
Danny Shaw (the “Referee”) to determine the disputed issues of the scope of work, payment
responsibilities and adequacy of the work.8 On March 26, 2012, the Bankruptcy Court confirmed
BSI’s Amended Chapter 11 Plan of Reorganization.9
C. The May 15, 2012 Agreed Order
On May 15, 2012, the Bankruptcy Court entered an Agreed Order on a Motion to Assume

3

Bankruptcy Rec. Doc. 529 at 2.

4

Id. at 3.

5

Bankruptcy Rec. Doc. 1.

6

Bankruptcy Rec. Doc. 107.

7

Bankruptcy Rec. Doc. 115.

8

Bankruptcy Rec. Doc. 295.

9

Bankruptcy Rec. Doc. 411.

2

Lease (the “Agreed Order”).10 The Agreed Order noted that BSI was in default under the lease on
certain of its non-monetary obligations.11The parties did not dispute that defaults existed concerning
the maintenance obligation with respect to conditions cited in:
1)

the pre-petition August 19, 2010 Consent Judgment;

2)

the Vieux Carre Commission (‘VCC’) citations dated June 11, 2011,
September 1, 2011, and February 16, 2012; and

3)

the April 4, 2012 letters from the New Orleans Department of Safety and
Permits (Building Inspection Division) and Department of Safety and Permits
(Zoning Administration Division).12

The Agreed Order stated: “IT IS ORDERED that the Reorganized Debtor’s assumption of the lease
of the premises at 400 Bourbon is approved, subject to the terms of this Order, which provide
Absinthe Bar with adequate assurance of cure as required by Section 365 of the Bankruptcy Code.”13
It further ordered BSI to “immediately commence work on those undisputed maintenance defaults
listed in the Consent Judgment, the VCC and Department of Safety and Permits citations, and any
other citations extant.”14 It provided that when a maintenance item was determined to be the
responsibility of BSI, BSI would pay the resulting contractor obligations as provided in the
construction contract and no liens would be permitted to be filed against the property.15 It set a

10

Bankruptcy Rec. Doc. 449.

11

Id. at 1.

12

Id. at 2.

13

Id. at 3.

14

Id.

15

Id.

3

December 31, 2012 deadline for cure of all maintenance and repair defaults.16 Finally, it ordered that
the Bankruptcy Court maintained jurisdiction to review decisions by the Referee and to enforce the
terms of the Agreed Order.17
D. The Motion to Reject the Lease
After the December 31, 2012 deadline for completing the repairs to the building passed and
BSI had not completed the work agreed to in the Agreed Order, A-Bar filed a motion with the
Bankruptcy Court requesting that it reject the lease.18 On January 24, 2013, the Bankruptcy Court
issued an order setting both the motion for lease rejection and the motion to assume the lease for
hearing.19 The Bankruptcy Judge set a deadline of February 28, 2013, for BSI to complete any and
all maintenance and cure issues remaining due.20 Prior to the hearing, the Referee filed a report
finding that BSI had “substantially performed those items previously found to be its responsibility,
with the exception of the following items: . . . 1) exterior masonry; 2) windows; 3) men’s closet on
first floor; 4) condenser platform in courtyard; and 5) structural engineer certifications of structural
integrity of various building elements and repair efforts.”21
E. The October 11, 2013 Order
The Bankruptcy Court conducted a hearing on March 26-27, 2013, and issued an Order on

16

Id.

17

Id.

18

Bankruptcy Rec. Doc. 497.

19

Bankruptcy Rec. Doc. 512.

20

Id.

21

Bankruptcy Rec. Doc. 592 at 4–5.

4

October 11, 2013.22 First, the Bankruptcy Judge evaluated each of the unfinished repairs identified
by the Referee.23 He concluded that the evidence presented at trial established that the leak in the
men’s bathroom, condenser platform and windows were fixed following the Referee’s last
inspection.24 The Bankruptcy Judge found the masonry work performed was adequate because it was
accepted by the Vieux Carre Commission (“VCC”).25 Finally, he noted that the parties agreed that
any issues regarding the structural engineer certification of structural integrity were resolved.26
Turning to the legal issues presented, the Bankruptcy Judge found that the lease was assumed
by BSI and the assumption was approved by the Agreed Order.27 He noted that the Agreed Order
specifically stated that it approved the assumption of the lease.28 Accordingly, he found the lease was
assumed at the time that court approval of the Agreed Order was obtained.29
The Bankruptcy Judge also found that BSI had adequately cured its non-monetary defaults
on the lease.30 Evaluating this issue, the Bankruptcy Judge stated:
Once the lease assumption is approved the court is then concerned with whether the
nonmonetary defaults existing as of the date of the assumption have been cured or
can be cured within a reasonable time. There is no hard and fast rule and the time
table set by the parties by agreement or in a court order is subject to the court’s

22

Id. at 1.

23

Id. at 6–9.

24

Id. at 7–8.

25

Id. at 8–9.

26

Id. at 9.

27

Id. at 10.

28

Id. at 11.

29

Id. (citing In re Mushroom Transportation Company, Inc., 78 B.R. 754, 761 (Bankr.E.D.Pa. 1987)).

30

Id.

5

discretion as to whether the cure efforts of the debtor – particularly as to
non-monetary defaults – are substantial enough to deny A-Bar its sought after relief,
cancellation of the long term lease.31
The Bankruptcy Judge opined that much of A-Bar’s evidence showed that the substantial cure of the
defaults was not completed by either the December 31, 2012 deadline or the February 28, 2013
deadline, but BSI continued to make repairs.32 He noted that BSI had set aside $30,000 to $40,000
for future repairs, which he opined demonstrated “that whatever failures or delays the debtor may
be responsible for in the past, it is now making a good faith effort to comply with the lease
obligations concerning the maintenance and repair of the building.”33 He noted that the December
31, 2012 deadline was only six and a half months after the parties agreed upon and the Bankruptcy
Court approved the assumption of the lease.34 He opined that “the process for getting permits to
perform the required work on a building in the French Quarter is very lengthy.”35 “In light of the fact
that [BSI had] spent over $300,000 to make repairs and ha[d] set aside another $30 - $40,000,” the
Bankruptcy Judge found it was “not unreasonable to allow the debtor to complete any remaining
repairs after that December 31, 2012 date and thereby allow the debtor to complete the plan of
reorganization.”36
The Bankruptcy Judge found that A-Bar, as the owner of the building, was “setting high
standards for the repairs it expects the debtor to make under the terms of the lease and adhering to

31

Id.

32

Id. at 12.

33

Id.

34

Id.

35

Id.

36

Id. at 12–13.

6

its stringent position that failure to meet that standard gives it the right to dissolve the lease.”37 He
noted that A-Bar would stand to gain substantially if allowed to evict BSI, but “the effect on the
reorganized debtor and the creditors would be a devastating failure of the plan.”38 He found that “the
terms of the lease called only for good repair and condition, not the perfection that A-Bar insists
upon.”39 He noted that the standard for repair called for by the VCC was high, and found it
significant that the demands of the VCC had been satisfied.40
The Bankruptcy Judge cited Louisiana Civil Code Article 2014, which states: “A contract
may not be dissolved when the obligor has rendered a substantial part of the performance and the
part not rendered does not substantially impair the interest of the obligee.”41 He also cited Louisiana
Fourth Circuit Court of Appeals caselaw stating, “The trial court has discretion to decline dissolution
where it finds that the breach of the lease is not major or where the breach was not the fault of the
lessor or where the lessor was in good faith.”42 The Bankruptcy Judge found that BSI had rendered
a substantial part of the performance required by the Agreed Order as it had spent over $300,000
making repairs to the building, performed the work to the satisfaction of the VCC, cleared all
outstanding VCC complaints against the building and satisfied the City of New Orleans Safety and
Permits violation letter.43 He also found that A-Bar’s primary interest was dissolving the lease, and
37

Id. at 13.

38

Id.

39

Id.

40

Id.

41

Id. at 14.

42

Id. (citing Karno v. Fein, 846 So.2d 105, 110 (La.App. 4 Cir. 2003); Karno v. Bourbon Burlesque Club
Inc., 931 So.2d 1111 (La.App. 4 Cir. 2006)).
43

Id.

7

“[a]ny other interests of A-Bar are not substantially impaired if the debtor continues to pay the rent
and make all repairs called for by the lease.”44 Finally, he noted that under the lease, A-Bar could
make the repairs and invoice BSI for the costs.45
The Bankruptcy Judge noted that Section 365(b)(1)(B) of the Bankruptcy Code requires that
the debtor compensate the nondebtor “for any actual pecuniary loss resulting from default.”46 He
found that A-Bar incurred damages of attorney’s fees and costs for litigation related to the defaults
that remained as of the December 31, 2012 cure deadline set forth in the Agreed Order.47 He noted
that Section 365(b)(1)(B) does not create an independent right to an attorney fees award, but it
“recognizes a landlord’s right to compensation for actual pecuniary losses resulting from debtor’s
default under an unexpired lease assumption.”48 He found that attorney fees qualify as “actual
pecuniary losses” when state law would recognize them as such.49 He noted that the lease provided
for attorney fees incurred by the lessor to enforce or defend any of the lessor’s rights or remedies.50
The Bankruptcy Judge noted that attorney fees would be first priority administrative
expenses under 11 U.S.C. § 503, “if the actual and necessary damages: 1) occur post-petition; and
2) arose as a result of actions taken by the trustee (the debtor in possession in this case) that

44

Id.

45

Id. at 15.

46

Id.

47

Id.

48

Id.

49

Id. (citing In re Westview 74th Street Drug Corp., 59 B.R. 747 (Bankr. S.D.N.Y. 1986)).

50

Id.

8

benefitted the estate.”51 He found that the first element was satisfied because “A-Bar incurred
attorney’s fees and costs as a result of the post-petition litigation brought after the December 31,
2012 deadline to force the debtor to finish remedying the nonmonetary defaults under the lease that
was assumed by the Agreed Order.”52 The Bankruptcy Judge found that the second element was met
because the lease assumption was an action taken by BSI to benefit the estate.53 Accordingly, he
found that attorney fees would be first priority administrative expenses and requested that A-Bar file,
within fourteen days, a statement of attorney’s fees and costs incurred by it after December 31,
2012.54
On October 22, 2013, A-Bar filed a timely Notice of Appeal.55 On November 4, 2013, BSI
timely filed a cross-appeal.56 A-Bar filed an appellate brief on March 21, 2014,57 and BSI filed an
appellate brief on April 4, 2014.58 A-Bar and BSI both filed reply briefs on May 2, 2014.59 On June
19, 2014, BSI filed a “Motion to Dismiss Cross-Appeal without Prejudice.”60 A-Bar filed an

51

Id. at 15–16 (citing In re Jack/Wade Drilling, Inc., 258 F.3d 385, 387 (5th Cir. 2001)).

52

Id. at 16.

53

Id.

54

Id.

55

Bankruptcy Rec. Doc. 597.

56

Bankruptcy Rec. Doc. 597.

57

Rec. Doc. 5.

58

Rec. Doc. 6.

59

Rec. Docs. 7 and 8.

60

Rec. Doc. 13.

9

objection to the motion on July 3, 2014.61 The Court conducted oral argument on July 23, 2014.62
II. Issues Raised on Appeal
A. A-Bar’s Appellate Brief
1. Assumption of the Lease
A-Bar argues that the lease of 400 Bourbon could not have been assumed by the parties’
Agreed Order because the Agreed Order only addressed cure, one of three requirements for lease
assumption of defaulted leases under 11 U.S.C. § 365(b)(1).63 It asserts that the “starting point” for
assumptions of defaulted leases is “clearly prohibitory” because Section 365(b) provides that a
defaulted lease “may not [be] assume[d]” unless all of the requirements are met.64 A-Bar quotes Fifth
Circuit caselaw stating, “Strict adherence to the Code provisions governing assumption of contracts
might appear overly simplistic, but . . . the requirements . . . provide necessary safeguards to parties
forced to maintain contractual relations with a reorganizing debtor.”65 It argues that the Bankruptcy
Judge “has held that absent the fulfilment of all assumption requirements, it may not approve lease
assumption even in an uncontested matter.”66
A-Bar argues that the Bankruptcy Judge should not have interpreted the Agreed Order as a
lease assumption agreement because it was not an affirmative agreement on all three Section

61

Rec. Doc. 20.

62

Rec. Doc. 22.

63

Rec. Doc. 5 at 36.

64

Id.

65

Id. at 36–37 (quoting In re Nat’l Gypsum Co., 208 F.3d 498, 512 (5th Cir. 2000); Texas Importing Co. v.
Banco Popular de Puerto Rico, 360 F.2d 582 (5th Cir. 1966)).
66

Id. (citing In re O’Neil Theaters, Inc., 257 B.R. 806 (Bankr. E.D. La. 2000)(Brown, J.)).

10

365(b)(1) requirements.67 It asserts that BSI “bore the burden of showing that each of the three lease
assumption requirements were satisfied.”68 It argues that the three requirements for assumption of
a defaulted lease “are statutory prerequisites.”69
2. Waiver
A-Bar contends that the Bankruptcy Judge’s ruling “appears to hold that the party opposing
assumption (here, A-Bar) was required every step of the way to force the debtor to make good on
its § 365(b)(1)(A), (B), and (C) obligations.”70 It argues that “[t]he notion that A-Bar even for a
moment waived its right to oppose lease assumption isn’t legally or factually supportable, primarily
because waiver simply doesn’t belong in bankruptcy lease assumption.”71 A-Bar contends that
under Louisiana law, the Bankruptcy Judge could not find that it waived its “right” to attorney’s fees
and an adequate assurance of future performance without proof of “(1) actual intent to relinquish
it, or (2) conduct so inconsistent with the intent to enforce the right that it induces a reasonable belief
that it relinquished the right.”72 A-Bar asserts that its eviction of BSI was interrupted by the
bankruptcy proceeding, and it “consistently maintained a costly opposition to BSI’s lease

67

Id. at 38.

68

Id. at 40 (citing Richmond Leasing Co. v. Capital Bank N.A., 762 F.2d 1303 (5th Cir. 1985); In re
Diamond Mfg. Co., Inc., 164 B.R. 189 (Bankr. S.D. Ga. 1994)).
69

Id. (citing In re PRK Enterprises, Inc., 235 B.R. 597 (Bankr. E.D. Tx. 1999)).

70

Id. at 40.

71

Id. (citing In re Senioris Enterprises, Inc., 70 B.R. 79, 81-82 (Bankr. N.D.Tex. 1987) (principles of
waiver and estoppel have “very little play, if any” in the context of assumption or rejection requirements)).
72

Id. at 40–41 (citing Durham Sch. Servs., L.P. v. Sojourner Truth Acad., 2012 WL 2133672 at *4 (E.D.La.
2012) (Engelhardt, J.), citing Steptore v. Masco Construction Co., 93–2064 (La.8/14/94); 643 So.2d 1213, 1216).

11

assumption.”73 Accordingly, A-Bar argues that the Agreed Order “can’t be interpreted to show that
A-Bar somehow waived its right to demand what the Bankruptcy Code requires where it entered into
a contract so clearly aimed at only one aspect of lease assumption.”74 It contends that such an
interpretation would produce absurd results in violation Louisiana Civil Code article 2046.75
A-Bar contends that the Agreed Order was simply “the parties contractual definition of how
BSI could accomplish § 365(b)(1)(A) cure.”76 It asserts that the Agreed Order required BSI to: “1)
immediately commence on undisputed defaults; 2) participate in referee process to resolve disputes
on still-disputed defaults; and 3) have all repairs accomplished by December 31, 2012.”77 It argues
that “the effectiveness of the Agreed Order was ‘subject to’ these 3 requirements.78
3. Suspensive Condition
A-Bar asserts that “BSI’s entitlement to a cure finding would be subject to a suspensive
condition.”79 It asserts that “a contract where the effect of an agreement depended upon ‘the
achievement [by one party] of mutually acceptable performance criteria’ constituted a contract
subject to a suspensive condition,” and “the suspensive obligation may only be enforced when the

73

Id. at 41.

74

Id.

75

Id.

76

Id.

77

Id. at 42.

78

Id.

79

Id. at 43.

12

uncertain event occurs.”80 A-Bar contends that here the “uncertain event” was wether BSI would
comply with the requirements of the Agreed Order.81 It argues that BSI did not complete the work
by the December 31, 2012 deadline and is, therefore, “not entitled to anything (assumption, cure,
or otherwise under the Agreed Order.”82 At oral argument, A-Bar asserted that the Bankruptcy Judge
made a factual finding that the December 31, 2012 cure deadline was not met, and, therefore, the
Agreed Order must fail because the suspensive condition was not met.83
A-Bar asserts that the Bankruptcy Judge erred in extending the cure deadline from the
Agreed Order because “[a]bsent a significant change in circumstances or law, there is no basis for
altering the considered and bargained for consent decree.”84A-Bar asserts that “[a]lthough the
bankruptcy judge comforted A-Bar that there would be no difference in the outcome at trial, the fact
that he took evidence on work done in January, February, and March means there was – the
December 31, 2012 deadline was entirely disregarded for the purposes of lease assumption.”85
4. Substantial Performance
A-Bar argues that the Bankruptcy Court erred in using the doctrine of “substantial
completion” in determining whether BSI had cured the maintenance defects at 400 Bourbon, instead

80

Id. (quoting In re Crutcher-Tufts Res., Inc., 347 B.R. 189, 194 (Bankr. E.D.La. 2005) aff’d, 504 F.3d 535
(5th Cir. 2007)).
81

Id. at 44.

82

Id. at 45.

83

Rec. Doc. 23 at 17.

84

Rec. Doc. 5 at 45–46 (citing Chisholm v. Greenstein, 876 F.Supp.2d 709 (E.D.La. 2012) (Barbier, J.);
Chisom v. Jindal, – F.Supp.2d –, 2012 WL 3891594 (E.D.La. 2012) (Morgan, J.); Baton Rouge Oil and Chem.
Workers Union v. Exxonmobil Corp., 289 F.3d 373 (5th Cir. 2002)).
85

Id. at 47.

13

of requiring cure of all defaults as required by the Bankruptcy Code and the Agreed Order.86 A-Bar
asserts that BSI left twenty to thirty percent of the contemplated cure work improperly done.87
Further, it argues that the “substantial performance” concept is a contract defense simply unavailable
to BSI in a contested lease assumption governed by § 365 and the Agreed Order.”88 A-Bar asserts
that its motives are irrelevant unless it acted in bad faith, which it contends BSI has not asserted
here.89
5. Attorney’s Fees
Alternatively, if the lease was assumed in the Agreed Order, A-Bar contends Section
365(b)(1)(B) makes compensation of A-Bar’s pecuniary damages caused by BSI breach a
prerequisite to BSI’s lease assumption.90 Accordingly, A-Bar asserts it is “owed attorney’s fees
under § 365(b)(1)(B) of the Bankruptcy Code from the time of the bankruptcy petition until the
‘assumption by consent’ (May 15, 2012), in addition to the attorney’s fees it was awarded for BSI’s
‘post-assumption breach’ of the Agreed Order beginning at December 31, 2012 and lasting through
the time of the ruling under appeal (October 11, 2013).”91

86

Id.

87

Id. at 50.

88

Id.

89

Id.

90

Id. at 51.

91

Id. at 52.

14

B. BSI’s Appellate Brief
1. Assumption of the Lease
BSI argues that the Agreed Order “expressly settled the Motion to Assume,” by stating:
IT IS ORDERED that the Reorganized Debtor’s assumption of the Lease of the
premises at 400 Bourbon is approved, subject to the terms of this Order, which
provide Absinthe Bar with adequate assurance of cure as required by Section 365 of
the Bankruptcy Code.92
It notes that the Agreed Order “allowed for future questions as to ‘the exact scope, costs, and
allocation of financial responsibility for further work to cure maintenance defaults,’ to be submitted
to the referee.”93 BSI asserts that the Agreed Order cites the following sources to define its
obligation to cure maintenance defaults: (1) the Consent Judgment; (2) the VCC Notices of
Violation; and (3) April 4, 2012 letters from the New Orleans Department of Safety and Permits.94
It argues that the maintenance defaults in the Consent Judgment were essentially the same as those
cited in the VCC Notices of Violation.95 BSI contends that the repairs related to Hurricane Katrina
were completed before the date of the Agreed Order.96 Therefore, BSI asserts that it “understood the
scope of work required by the Agreed Order to be the cure of the VCC Notices of Violation.”97 It
contends that A-Bar had a “different, and far broader, view of the cure obligation, but it failed to

92

Rec. Doc. 6 at 18.

93

Id.

94

Id.

95

Id.

96

Id.

97

Id. at 19.

15

describe that view adequately.”98 It argues that at the time of the trial in this matter, it had spent over
$300,000 on repairs.99 BSI contends that it proved at trial that each of the deficiencies enumerated
in the Referee’s report “were addressed and remedied promptly following the release of the
Referee’s report.”100 Accordingly, BSI asserts that all of its cure obligations imposed in the Agreed
Order were satisfied.101
BSI argues that the plan of reorganization will fail if the lease is lost, causing harm to all of
the creditors in this bankruptcy case.102 It asserts a finding that its construction efforts failed to cure
the defaults would result in an “unjustified windfall” to A-Bar because:
(1) [A-Bar] receives the benefit of over $300,000 worth of repairs paid for out of the
Debtor’s limited post-confirmation cash reserves, which funds would otherwise be
available to satisfy the other creditors under the Plan, and (2) [A-Bar] may enter into
a new lease for a higher rent with Oceana Grill (the next door neighbor), or some
other third party. The pre-assumption defaults, if any remained as of the hearing date
below, did not justify that result to the Bankruptcy Court.103
BSI argues that the Bankruptcy Court’s October 11, 2013 Order was correct because the only
two issues for it to decide were (1) whether the lease was assumed in the Agreed Order and, if so,
(2) whether BSI cured the pre-assumption defaults, as required by the Agreed Order.104 According
to BSI, because the Bankruptcy Court decided in the affirmative on both of these issues, the Court

98

Id.

99

Id.

100

Id. at 20.

101

Id. at 23.

102

Id. at 29.

103

Id.

104

Id. at 32.

16

correctly granted judgment in favor of BSI.105 BSI points out that the Bankruptcy Court heard two
days of testimony, reviewed numerous documents and found that the necessary repairs were made
to cure maintenance defects, thereby satisfying BSI’s cure obligations under the Agreed Order.106
BSI argues that the Bankruptcy Court’s factual findings in this regard are not clearly erroneous and
its legal conclusion that the substantial performance doctrine applies in this case is correct.107
Regarding A-Bar’s argument that the lease was not assumed because the Agreed Order did
not address all three requirements for lease assumption under Section 365(b)(1), BSI argues that the
Agreed Order on its face unambiguously provides for the assumption of the lease.108 BSI asserts that
a lease is assumed under Section 365 once bankruptcy court approval is obtained.109 It argues that
federal courts interpret consent judgments using general principles of contract interpretation.110 It
contends that Agreed Orders are interpreted under Louisiana law.111 BSI cites Louisiana Civil Code
article 2046, arguing that “[w]hen the words of a contract are clear and explicit and lead to no absurd
consequences, no further interpretation may be made in search of the parties’ intent.”112 It contends
that Section 365(b)(1)(A) allows the debtor a period of time following assumption to cure any

105

Id.

106

Id.

107

Id.

108

Id. at 33.

109

Id. (citing In re Mushroom Transp. Co., 78 B.R. 754, 761 (Bank. E.D. Pa. 1987)).

110

Id. (citing Dean v. City of Shreveport, 438 F.3d 448, 460 (5th Cir. 2006)).

111

Id. (citing In re Robertson, 203 F.3d 855, 860 (5th Cir. 2000)).

112

Id. at 33–34.

17

defaults.113 BSI asserts that “the terms of the Agreed Order are clear, unambiguous and lead to no
absurd results.”114
Moreover, because the Agreed Order is final and non-appealable, BSI asserts that “res
judicata principles preclude A-Bar from re-litigating the issues that were integral to the assumption
of the Lease by [BSI].”115 BSI argues that the Fifth Circuit “has long recognized that a consent
judgment is a judgment on the merits, and normally is ‘given the finality accorded under the rules
of claim preclusion.’”116 BSI argues that when a consent judgment is final, the remaining elements
of the Fifth Circuit’s traditional res judicata analysis apply.117 It contends that those additional
elements are: “(1) the parties are identical in the two actions; (2) the prior judgment was rendered
by a court of competent jurisdiction; and (3) the same claim or cause of action is involved in both
cases.”118 BSI asserts that the remainder of the Fifth Circuit’s res judicata analysis is satisfied here.119
2. Suspensive Condition
Regarding A-Bar’s argument that BSI’s cure obligation created a suspensive condition and
BSI did not meet the December 31, 2012 deadline set forth in the Agreed Order for completion of

113

Id. at 35 (citing In re Mushroom Transp. Co., 78 B.R. 754, 761 (Bank. E.D. Pa. 1987)).

114

Id.

115

Id. at 33, 36.

116

Id. (citing Matter of W. Texas Marketing Corp., 12 F.3d 497, 500 (5th Cir. 1994) (quoting Russell v.
SunAm. Sec., Inc., 962 F.2d 1169, 1173 (5th Cir. 1992) (citing Kaspar Wire Works, Inc. v. Leco Engn’r and Mach.
Inc., 575 F.2d 530, 538 (5th Cir. 1978)).
117

Id. at 37.

118

Id. (citing Oreck Direct, LLC v. Dyson, Inc., 560 F.3d 398, 401 (5th Cir. 2009) (citing In re Ark-La-Tex
Timber Co., 482 F.3d 319, 330 (5th Cir. 2007)).
119

Id. at 37–38.

18

repairs, BSI argues the “cure” requirements set forth in the Agreed Order were to be performed
following the assumption of the Lease, and not before.120 BSI asserts that under Louisiana law
“every provision of a contract must be interpreted in light of the other provisions in order to give
each provision the meaning suggested by the contract as a whole.”121
Further, it contends that a contract provision that is “susceptible of different meanings must
be interpreted with a meaning that renders it effective and not one that renders it ineffective.”122 BSI
argues that A-Bar’s “interpretation of the Agreed Order does violence to these bedrock principles
of contract interpretation,” because the Agreed Order unequivocally states that the “assumption of
the Lease . . . is approved.”123 It asserts that the parties did not state any suspensive conditions to the
assumption of the lease.124 BSI notes that Section 365 of the Bankruptcy Code provides that at the
time of assumption the debtor must cure or provide adequate assurance that the debtor will promptly
cure such defaults.125 It contends that the Agreed Order “expressed a clear intent to connote future
performance, after assumption.”126 Accordingly, BSI argues that A-Bar’s “suspensive condition
construction violates both the terms of § 365(b)(1) and Louisiana principles of contract
interpretation by rendering both the ‘assumption is approved’ and the ‘adequate assurance of cure’

120

Id. at 39.

121

Id. (citing Matter of Liljeberg Enter. Inc., 304 F.3d 410, 443 (5th Cir. 2002)).

122

Id. (quoting La. Civ. Code art. 2049).

123

Id.

124

Id.

125

Id. at 40.

126

Id.

19

language meaningless.”127
3. Substantial Performance
BSI asserts that its post assumption cure obligations are governed by state law.128 It contends
that under Louisiana law a court may refuse to dissolve a lease where the lessee has substantially
performed its obligations.129 It notes that Louisiana law also disfavors dissolution of leases.130 BSI
asserts “that the Bankruptcy Court, as a trial court has discretion to decline dissolution of a lease
when it finds that the breach of the lease is not major or where the lessor is not in good faith.”131 BSI
notes that bankruptcy courts are courts of equity, and “the Bankruptcy Court was well within its
purview to examine [A-Bar’s] motives.”132 However, it contends that A-Bar’s motives were not the
dispositive factor in the Bankruptcy Court’s decision.133
4. Attorney’s Fees
Finally, BSI contends that the attorney’s fee issue is not ripe for appeal because it is not a
final disposition of a discrete dispute because the Bankruptcy Court has not determined the amount

127

Id. at 41.

128

Id. at 42 (citing Wainer v. A.J. Equities, Ltd., 984 F.2d 679, 683 (5th Cir. 1993)).

129

Id. at 41–44 (citing Karno v. Bourbon Burlesque Club, Inc., 2004-0241 (La. App. 4 Cir. 5/10/06), 931
So. 2d 1111, 1115–16; Karno v. Joseph Fein Caterer, Inc., 2002-1269 (La. App. 4 Cir. 4/16/03), 846 So. 2d 105,
writ denied, 2003-1358 (La. 9/19/03), 853 So. 2d 642)).
130

Id. at 45 (citing Quinn Properties Inc. v. Sabine River Realty, Inc., 95-1717 (La. App. 3 Cir. 5/29/96),
676 So. 2d 639); Stoltz v. McConnell, 202 So.2d 451, 457 (La. App. 4 Cir.), writ denied, 203 So.2d 559 (La. 1967);
Arbo v. Jankowski, 39 So.2d 458, 460 (La. App. Orleans 1949)).
131

Id. at 46.

132

Id. at 47.

133

Id. at 48.

20

of A-Bar’s entitlement to fees.134 Therefore, BSI requests that the Court dismiss its Notice of Appeal,
without prejudice, because it is premature.135
C. A-Bar’s Reply Brief
On May 2, 2014, A-Bar filed a reply brief. A-Bar notes that it could not finalize its 2010 state
court eviction proceeding against BSI because BSI filed a bankruptcy petition in May 2011.136 It
asserts that unless the three requirements of Section 365(b)(1) have been satisfied, there has been
no lease assumption.137 It contends that “[t]he Agreed Order was merely a binding agreement as to
what ‘cure’ would mean in this matter. A-Bar at no point dropped its opposition to lease
assumption.”138 It asserts that the parties could not address the other two components of the lease
assumption before they litigated the cure issue.139 It contends that “[i]t wasn’t until a week before
the hearing that BSI, for the first time, even hinted that it felt the lease had already been assumed
– that the Agreed Order wasn’t just a cure agreement, that it was an agreement that this matter was
over.”140 A-Bar asserts that the pretrial order directed the parties to address whether the Agreed
Order contained a suspensive condition or a resolutory condition, but the Bankruptcy Judge’s ruling
was “completely silent on the issue of the suspensive condition.”141
134

Id. at 48–49.

135

Id. at 49.

136

Rec. Doc. 7 at 5.

137

Id.

138

Id. at 8.

139

Id.

140

Id. at 9.

141

Id. at 9–10.

21

A-Bar states that it will not address BSI’s res judicata argument because it “presupposes that
assumption took place in May 2012 by the Agreed Order.”142 A-Bar agrees with BSI’s position “that
there was nothing for BSI to appeal in terms of attorney’s fees.”143
A-Bar asserts that the Agreed Order “was entered in the context of a §365(b)(1) bankruptcy
lease assumption motion” and does not address the other two requirements imposed by the
Bankruptcy Code.144 It contends that the Court must “do more than look at one discrete section of
the Agreed Order for its answer. Particularly in light of the nature of what § 365 and the Agreed
Order are, those charged with interpreting the contract should take great care to find that the party
seeking assumption has met its burden of proving entitlement, requirement by requirement.”145 It
argues that the plain language of the Bankruptcy Code requires that all three requirements be
addressed before lease assumption can be approved by the Bankruptcy Court.146 It asserts that “[t]he
Agreed Order could not have settled assumption because it didn’t address each of the Bankruptcy
Code’s requirements (§ 365(b)(1)(A)-(C)) for the assumption of a defaulted lease.”147
A-Bar asserts that BSI, as the party moving to assume a defaulted lease, bears the burden of
showing that the requirements have been met.148 It contends that “[n]othing, not even the

142

Id. at 10.

143

Id.

144

Id. at 11.

145

Id.

146

Id.

147

Id. at 12.

148

Id. at 13–14 (citing In re Rachels Indus., Inc., 109 B.R. 797, 802 (Bankr. W.D. Tenn. 1990); Richmond
Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303, 1309–10 (5th Cir. 1985)).

22

“assumption . . . approved” language in the Agreed Order washes away BSI’s affirmative obligations
under the Bankruptcy Code.”149 It cites In re Mushroom Transportation Co., Inc., arguing that there
“the bankruptcy court refused to read an unwritten agreement into a consent decree.”150 It asserts:
[S]ilence on 2 of the 3 assumption requirements shouldn’t be interpreted to mean that
A-Bar and BSI intended to settle the entire lease assumption based on their written
agreement which mentioned cure only. This is particularly the case where:
1) the parties for more than a year after litigated the contested lease
assumption motion, spending significant amounts to take the matter
to trial;
2) the only other lease in this matter was “assumed by consent”: was
resolved by an agreement with addressed each of the 3 lease
assumption requirements expressly required by § 365(b)(1) of the
Bankruptcy Code.151
Alternatively, A-Bar asserts that the conditions expressed in the Agreed Order were not
met.152 It argues that the entire Agreed Order depended upon “the achievement [by one party] of
mutually acceptable performance criteria,” making it a contract subject to a suspensive condition.153
It notes that the Bankruptcy Judge found that BSI did not finish its work by the December 31, 2012
deadline, but “[r]ather than holding that the suspensive condition, at that point, was considered to
have failed . . . the bankruptcy judge didn’t address the fact that the Agreed Order was an agreement

149

Id. at 14.

150

Id. at 15 (citing 78 B.R. 754, 761–62 (Bankr. E.D. Pa. 1987)).

151

Id.

152

Id. at 16.

153

Id. at 17 (citing In re Crutcher-Tufts Res., Inc., 347 B.R. 189, 194 (Bankr. E.D.La. 2005) (Brown, J.)
aff’d, 504 F.3d 535 (5th Cir. 2007)).

23

subject to a condition at all.”154 A-Bar asserts that the Bankruptcy Judge improperly applied
equitable considerations and Louisiana law eviction principles.155 It contends that “[i]n seeking to
do equity, the bankruptcy judge has obliterated the requirements of § 365(b)(1) of the Bankruptcy
Code,” which it asserts violated long-standing Fifth Circuit law dictating strict adherence to the
Bankruptcy Code.156
D. BSI’s Reply Brief
On May 4, 2014, BSI filed a reply brief incorporating the points and authorities set forth in
its original brief.157 BSI argued that because A-Bar “has failed to specify any legal or factual errors
in the Bankruptcy Court’s October 11, 2013, Memorandum Opinion and Order which would justify
overturning the Judgment, [BSI] respectfully requests that this Court deny [A-Bar’s] appeal and
affirm the Bankruptcy Court Judgment.”158
E. BSI’s Motion to Dismiss Cross-Appeal Without Prejudice
BSI asserts that its cross-appeal should be dismissed as premature because the attorney’s
fees, which are the subject of the appeal, are “not ripe for appeal because the amount of those fees
has not been determined yet by the Bankruptcy Court.”159 BSI notes that Federal Rule of Bankruptcy
Procedure 8001(c)(2) provides that “[a]n appeal may also be dismissed on motion of the appellant

154

Id.

155

Id. at 18.

156

Id. at 19–20 (citing In re Nat’l Gypsum Co., 208 F.3d 498, 512 (5th Cir. 2000); Texas Importing Co. v.
Banco Popular de Puerto Rico, 360 F.2d 582 (5th Cir. 1966)).
157

Rec. Doc. 8 at 4.

158

Id.

159

Rec. Doc. 13-1 at 1.

24

on terms and conditions fixed by the district court or bankruptcy appellate panel.”160 It asserts that
a voluntary dismissal may be achieved without prejudice.161
BSI notes that after A-Bar filed its notice of appeal, the Bankruptcy Court delayed the
determination of the amount of attorney’s fees until after the underlying appeal is decided.162 BSI
argues that “[i]f a claim is rendered administrative expense status, the court then must determine the
amount allowable as administrative expense.”163 It contends a bankruptcy court’s order awarding
attorney’s fees is not ripe for appeal until this determination is made.164 Therefore, BSI argues that
the issue of the award of attorney’s fees as an administrative expense will not become ripe unless
and until A-Bar’s appeal is resolved and the Bankruptcy Court has determined the amount owed by
BSI as an administrative expense.165 Accordingly, BSI requests that the Court grant its motion to
dismiss voluntarily its cross-appeal, without prejudice, in order to preserve for a later time its right
to appeal, if necessary.166

160

Id. at 3–4.

161

Id. at 4 (citing In re Woodman, 698 F.3d 1263, 1266 (10th Cir. 2012); Rodriguez-Borges v. Rodriguez,
2012 WL 92557 (D. P.R. Jan. 11, 2012)).
162

Id. at 4–5.

163

Id. at 5 (citing In re Williams, 246 B.R. 591, 594, n.4 (8th Cir. 1999); In re TransAmerican Natural Gas
Corp., 978 F.2d 1409, 1420 (5th Cir. 1992) (“[T]he amount to be allowed as an administrative expense must be
measured in dollars and cents.”)).
164

Id. (citing In re Emergency Beacon Corp., 52 B.R. 979, 984-85 (S.D.N.Y. 1985); In re Commodore
Corp., 70 B.R. 543 (Bankr. N.D. Ind. 1987)).

165
166

Id.
Id.

25

F. A-Bar’s Opposition to BSI’s Motion to Dismiss Cross-Appeal Without Prejudice
A-Bar contends BSI noticed its appeal on two issues – “whether the attorney’s fee award was
error (‘propriety’) and whether the administrative expense status given to the award was error
(‘classification’).”167 It argues BSI based its motion to dismiss for lack of ripeness, based solely on
an issue it contends BSI has not appealed, the amount of attorney’s fees (“quantum”).168 A-Bar
contends the Bankruptcy Court’s ruling on attorney’s fees and their administrative expense status
is final.169 It argues the bankruptcy judge’s award of attorney’s fees under § 365 and his
classification of them as administrative expenses under § 503 are final under the Fifth Circuit’s
approach toward “bankruptcy finality.”170 A-Bar contends the Fifth Circuit’s recent ruling in Colbert
v. Brennan would prohibit BSI from refiling its appeal if it is voluntarily dismissed.171
III. Jurisdiction
The Court has jurisdiction to hear this appeal pursuant to 28 U.S.C. § 158(a)(1), which
authorizes appellate review of final orders, judgments and decrees of a United States Bankruptcy
Court entered consistent with 28 U.S.C. § 157.172 In appeals from bankruptcy courts, district courts
sit as an appellate court.173

167

Rec. Doc. 20 at 1.

168

Id. at 2.

169

Id. at 6 (citing In re ASARCO, L.L.C., 650 F.3d 593, 599–600 (5th Cir. 2011)).

170

Id.

171

Id. at 5. (citing Colbert v. Brennan, 2014 WL 1876519, *4 (5th Cir. 2014)).

172

28 U.S.C. § 158(a)(1).

173

28 U.S.C. § 1334(b).

26

IV. Standard of Review
A district court reviews a bankruptcy court’s conclusions of law de novo, findings of fact for
clear error, and mixed questions of law and fact de novo.174 A district court may affirm, reverse or
modify a bankruptcy court’s ruling, or remand the case for further proceedings.175
V. Discussion
A. Assumption of the Lease
1. Applicable Law
“The Bankruptcy Code provides special rules for the treatment of executory contracts and
unexpired leases during a Chapter 11 reorganization.”176 Section 365 of the Bankruptcy Code allows
“the trustee, subject to the [bankruptcy] court’s approval, [to] assume or reject any executory
contract or unexpired lease of the debtor.”177 “An assumed lease or contract will remain in effect
through and then after the completion of the reorganization.”178 “[T]he act of assumption must be
grounded, at least in part, in the conclusion that maintenance of the contract is more beneficial to
the estate than doing without the other party’s services.”179
Section 365(b)(1) addresses assumption of contracts and unexpired leases where there has
been a default. It provides:

174

In re Nat’l Gypsum Co., 208 F.3d 498, 504 (5th Cir. 2000).

175

Fed. R. Bankr. P. 8013.

176

In re National Gypsum Co., 208 F.3d 498, 504 (5th Cir. 2000) (citing 11 U.S.C. § 365).

177

11 U.S.C. § 365

178

In re National Gypsum Co., 208 F.3d at 505.

179

Id.

27

(b)(1) If there has been a default in an executory contract or unexpired lease of the
debtor, the trustee may not assume such contract or lease unless, at the time of
assumption of such contract or lease, the trustee–
(A) cures, or provides adequate assurance that the trustee will
promptly cure, such default other than a default that is a breach of a
provision relating to the satisfaction of any provision (other than a
penalty rate or penalty provision) relating to a default arising from
any failure to perform nonmonetary obligations under an unexpired
lease of real property, if it is impossible for the trustee to cure such
default by performing nonmonetary acts at and after the time of
assumption, except that if such default arises from a failure to operate
in accordance with a nonresidential real property lease, then such
default shall be cured by performance at and after the time of
assumption in accordance with such lease, and pecuniary losses
resulting from such default shall be compensated in accordance with
the provisions of this paragraph;
(B) compensates, or provides adequate assurance that the trustee will
promptly compensate, a party other than the debtor to such contract
or lease, for any actual pecuniary loss to such party resulting from
such default; and
(C) provides adequate assurance of future performance under such
contract or lease.180
The Fifth Circuit has explained that Section 365 “provides a means whereby a debtor can
force others to continue to do business with it when the bankruptcy filing might otherwise make
them reluctant to do so.”181 Accordingly, the Fifth Circuit has stated that the section “serves the
purpose of making the debtor’s rehabilitation more likely.”182

2. The Requirements for Lease Assumption

180

11 U.S.C. § 365(b)(1).

181

Richmond Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303, 1310 (1985).

182

Id.

28

BSI asserts that the lease was assumed by the Agreed Order. A-Bar argues that the lease
could not have been assumed by the Agreed Order because the Agreed Order only addressed one
of the three requirements for lease assumption of a defaulted lease. A-Bar argues that the text of
Section 365(b) is prohibitory because it provides that the trustee may not assume a defaulted lease
unless the requirements of Section 365(b)(1) are met. A-Bar cites In re National Gypsum Co. to
support its position that the strict prohibitory nature of Section 365 underscores the purpose of the
statute. There, the Fifth Circuit stated that “[s]trict adherence to the Code provisions governing
assumption of contracts might appear overly simplistic, but . . . the requirements of court approval
and a hearing after notice to interested parties provide necessary safeguards to parties forced to
maintain contractual relations with a reorganized debtor.”183 A-Bar correctly asserts that assumption
of a lease under Section 365 requires court approval and notice to interested parties. However, the
Court finds the holding of In re National Gypsum Co. inapplicable here because the requirements
of court approval and notice to interested parties were met in this case.
A-Bar cites no authority to support its position that the Agreed Order must address all three
Section 365(b)(1) requirements.184 Contrary to A-Bar’s position, bankruptcy courts have found that
a defaulted lease is assumed following court approval of the parties agreement, where the agreement
did not address all three requirements of Section 365(b)(1). The bankruptcy court in In re Leon’s
Casual Co., Inc. entered a consent order that did not address the debtor’s cure obligations.185
183

In re National Gypsum Co., 208 F.3d at 512.

184

A-Bar cites In re O’Neil Theatres, Inc., arguing that the Bankruptcy Judge Previously held that absent
the fulfilment of all assumption requirements, it may not approve lease assumption. 257 B.R. 806 (Bankr. E.D. La.
2000). However, this case only addresses lease rejection and does not address the requirements for assumption of a
defaulted lease as A-Bar contends. See id.
185

See In re Leon’s Casuals Co., Inc., 122 B.R. 768, 756–57 (Bank. S.D. Ala. 1990).

29

Nonetheless, the bankruptcy court found that the debtor was responsible for cure obligations because
the lessor did not waive its right to cure.186 Accordingly, because A-Bar has cited no authority to
support its position, and because the Court has been unable to locate any, the Court will not extend
the law to require that an agreed order address all three requirements of Section 365(b)(1).
3. Contract Interpretation
A-Bar argues that the Agreed Order did not assume the lease, while BSI asserts that the lease
was assumed by the Agreed Order. “When interpreting a consent decree, general principles of
contract interpretation govern.”187 Both parties agree that Louisiana contract law governs the
interpretation of the Agreed Order.188 Under Louisiana law, “[i]nterpretation of a contract is the
determination of the common intent of the parties.”189 “When the words of a contract are clear and
explicit and lead to no absurd consequences, no further interpretation may be made in search of the
parties’ intent.”190 “Each provision in a contract must be interpreted in light of the other provisions
so that each is given the meaning suggested by the contract as a whole.”191 The United States Fifth
Circuit Court of Appeals has noted that under Louisiana law “[a] contract provision is not
ambiguous where only one of two competing interpretations is reasonable or merely because one

186

Id.

187

Dean v. City of Shreveport, 438 F.3d 448, 460 (5th Cir. 2006) (citing United States v. Chromalloy Am.
Corp., 158 F.3d 345, 349 (5th Cir. 1998)).
188

Rec. Doc. 5 at 41; Rec. Doc. 6 at 33–34.

189

LA. CIV. CODE art. 2045.

190

LA. CIV. CODE art. 2046.

191

LA. CIV. CODE art. 2050.

30

party can create a dispute in hindsight.”192
A-Bar’s argument ignores the clear language of the Agreed Order, which states, “IT IS
ORDERED that the Reorganized Debtor’s assumption of the Lease of the premises at 400 Bourbon
is approved, subject to the terms of this Order.”193 Here, the words of the Agreed Order are clear and
explicit, providing that the “assumption of the Lease of the premises at 400 Bourbon is approved.”
Further, this interpretation does not lead to absurd consequences.
“Unless the court approves of a different arrangement, a lease is assumed once court
approval is obtained.”194 A defaulted lease may be assumed prior to resolving all cure obligations
so long as there is adequate assurance of prompt cure.195 The Fifth Circuit has held that “‘the
question whether a lease should be rejected . . . is one of business judgment.’”196 “As long as
assumption of a lease appears to enhance a debtor’s estate, court approval of a
debtor-in-possession’s decision to assume the lease should only be withheld if the debtor’s judgment
is clearly erroneous, too speculative, or contrary to the provisions of the Bankruptcy Code. . .”197
Here, the parties expressly agreed to the assumption of the lease, and the Bankruptcy Court approved
the assumption of the lease by entering the Agreed Order. Accordingly, on de novo review, the
192

Amoco Production Co. v. Texas Meridian Resources Exploration, Inc., 180 F.3d 664, 668–669 (5th
Cir.1999) (quoting Texas E. Transmission Corp. v. Amerada Hess Corp., 145 F.3d 737, 741 (5th Cir.1998)).
193

Bankruptcy Rec. Doc. 449 at 3.

194

In re Mushroom Transportation Company, Inc., 78 B.R. 754, 761 (Bankr. E.D.Pa. 1987).

195

Id. (citing Collier on Bankruptcy, ¶ 365.04, at 365–37 (15th ed. 1987) (“Providing ‘adequate assurance’
of a prompt cure ‘is a substitute for the taking of the action.’”
196

Richmond Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303, 1309 (5th Cir. 1985) (citing Group of
Institutional Investors v. Chicago, Milwaukee, St. Paul & Pacific Railroad Co., 318 U.S. 523, 550, 63 S.Ct. 727,
742, 87 L.Ed. 959 (1943)).
197

Id.

31

Court finds that the Agreed Order assumed the lease.
4. Suspensive Condition
A-Bar also argues that the Agreed Order was subject to a suspensive condition. BSI contends
this argument is without merit because it ignores the plain language of the Agreed Order. The
Louisiana Civil Code defines a conditional obligation as “one dependent on an uncertain event.”198
“If the obligation may not be enforced until the uncertain event occurs, the condition is
suspensive.”199 “Conditions may be either expressed in a stipulation or implied by the law, the nature
of the contract, or the intent of the parties.”200
A-Bar contends that here the “uncertain event” was whether BSI would comply with the
requirements of the Agreed Order. It argues that BSI did not complete the work by the December
31, 2012 deadline and is, therefore, “not entitled to anything (assumption, cure, or otherwise under
the Agreed Order.”201 At oral argument, A-Bar asserted that the Bankruptcy Judge made a factual
finding that the December 31, 2012 cure deadline was not met, and, therefore, the Agreed Order
must fail because the suspensive condition was not met.202
The Agreed Order states: “IT IS ORDERED that the Reorganized Debtor’s assumption of
the lease of the premises at 400 Bourbon is approved, subject to the terms of this Order, which
provide Absinthe Bar with adequate assurance of cure as required by Section 365 of the Bankruptcy

198

LA. CIV. CODE art. 1767.

199

Id.

200

LA. CIV. CODE art. 1768.

201

Rec. Doc. 5 at 45.

202

Rec. Doc. 23 at 17.

32

Code.”203 Under Louisiana law “every provision of a contract must be interpreted in light of the
other provisions in order to give each provision the meaning suggested by the contract as a
whole.”204 A contract provision that is “susceptible of different meanings must be interpreted with
a meaning that renders it effective and not one that renders it ineffective.”205 Here, interpreting the
cure obligation as a suspensive condition would render the “assumption . . . is approved” and
“adequate assurance of cure” language meaningless. Section 365(b)(1)(A) provides that a defaulted
lease may be assumed if the trustee cures, or provides adequate assurance that the trustee will
promptly cure such defaults.206 Accordingly, Section 365(b)(1)(A) allows the debtor a period of time
following assumption to cure any defaults, where the debtor has provided adequate assurance of
cure.207 The express language of the contract evidences the parties’ intent to assume the lease and
for BSI to fulfill its cure obligations following assumption. A-Bar has presented no evidence
showing that the parties intended the contract to be subject to a suspensive condition.
Further, the Court notes that Section 365 “serves the purpose of making the debtor’s
rehabilitation more likely.”208 If the Agreed Order did not assume the lease, BSI would have been
obligated to complete the work without any assurance that the lease was assumed. Such a finding
would be contrary to the purpose of Section 365 as it would make BSI’s rehabilitation less likely.

203

Id. at 3.

204

In re Liljeberg Enter. Inc., 304 F.3d 410, 443 (5th Cir. 2002).

205

LA. CIV. CODE art. 2049.

206

11 U.S.C. § 365(b)(1)(A).

207

Concerto Software, Inc. v. Citaquest Intern., Inc., 290 B.R. 448, 453 (D. Maine 2003) (citing In re
Mushroom Transp. Co., 78 B.R. 754, 761 (Bank. E.D. Pa. 1987)).
208

Richmond Leasing Co., 762 F.2d at 1310.

33

Accordingly, the Court finds that the Agreed Order was not subject to a suspensive condition.
C. Cure of Defaults and Substantial Performance
A-Bar argues that the Bankruptcy Court erred in using the doctrine of substantial
performance in determining whether BSI had cured the maintenance defects at 400 Bourbon, instead
of requiring cure of all defaults as required by the Bankruptcy Code and the Agreed Order. A-Bar
also asserts that the Bankruptcy Judge erred in extending the cure deadline. BSI argues that the
Bankruptcy Court correctly applied the doctrine of substantial performance. The Agreed Order set
December 31, 2012 as the cure deadline. After that deadline passed, A-Bar filed a motion with the
Bankruptcy Court requesting that it reject the lease.209 On January 24, 2013, the Bankruptcy Court
issued an order setting a deadline of February 28, 2013, for BSI to complete any and all maintenance
and cure issues remaining due.210
For the reasons discussed above, the Court affirms the Bankruptcy Judge’s holding that the
Agreed Order assumed the lease. “Once a lease has been assumed, the rights of the parties are
governed by state law unless there are contrary provisions in the Bankruptcy Code.”211 Here, the
Bankruptcy Judge applied Louisiana law in determining whether BSI had fulfilled its cure
obligations as required by the Agreed Order. Louisiana Civil Code Article 2014 provides that “[a]
contract may not be dissolved when the obligor has rendered a substantial part of the performance
and the part not rendered does not substantially impair the interest of the obligee.” “The trial court
has discretion to decline dissolution where it finds that the breach of the lease is not major or where

209

Bankruptcy Rec. Doc. 497.

210

Bankruptcy Rec. Doc. 512.

211

Wainer v. A.J. Equities, Ltd., 984 F.2d 679, 683 (5th Cir. 1993)

34

the breach was not the fault of the lessor or where the lessor was in good faith.”212
The Bankruptcy Judge found that BSI had rendered a substantial part of the performance
required by the Agreed Order as it had spent over $300,000 making repairs to the building,
performed the work to the satisfaction of the VCC, cleared all outstanding VCC complaints against
the building and satisfied the City of New Orleans Safety and Permits violation letter. He also found
that A-Bar’s primary interest was dissolving the lease, and any other interests of A-Bar are not
substantially impaired if the debtor continues to pay the rent and make all repairs called for by the
lease. Finally, he noted that under the lease, A-Bar could make the repairs and invoice BSI for the
costs. A-Bar has presented no evidence to show that these factual findings are clearly erroneous.
Because Louisiana law allows courts to decline to dissolve a lease where the breach is not major and
where the lessor was in good faith, the Court finds that the Bankruptcy Court did not err in applying
the doctrine of substantial performance.
Even if the Bankruptcy Judge erred in applying the doctrine of substantial performance, ABar would not be entitled to rejection of the lease. Courts have held that a delay in fulfilling a cure
obligation following assumption of a lease does not “open any escape hatch by which [the lessor]
could have ‘dis-assumed’ the . . . lease.”213 Rather, “the principal consequence attending [the
debtor’s] tardy cure payment was the creation of a potential administrative claim against the estate
for monetary damages.”214 Accordingly, BSI’s failure to fulfill its cure obligations prior to the

212

Karno v. Fein, 846 So.2d 105, 110 (La.App. 4 Cir. 2003); Karno v. Bourbon Burlesque Club Inc., 931
So.2d 1111 (La.App. 4 Cir. 2006).
213

In re F& M Distributors, Inc., 202 F.3d 268 *8 (6th Cir. 2000) (citing In re Mushroom Transportation
Company, Inc., 78 B.R. 754, 761 (Bankr. E.D.Pa. 1987)).
214

Id.

35

deadline established in the Agreed Order does not entitle A-Bar to a finding that the lease should
be rejected or “dis-assumed.” Instead, A-Bar is entitled to an administrative claim against the estate
for monetary damages resulting from BSI’s failure to meet the cure deadline. Accordingly, on de
novo review, the Court finds that the Bankruptcy Judge properly held that A-Bar was entitled to
attorney’s fees and costs resulting from BSI’s failure to meet the December 31, 2012 cure deadline.
It is of no moment that the Bankruptcy Court considered the work performed by BSI after the
deadline because, when the Bankruptcy Court evaluates A-Bar’s entitlement to attorney’s fees and
costs, it will be entitled to costs resulting from BSI’s failure to meet the cure deadline.
D. Attorney’s Fees
1. Fees Following the December 31, 2012 Cure Deadline
BSI filed a cross-appeal challenging the award of attorney’s fees in this case. BSI then filed
a “Motion to Dismiss Cross-Appeal Without Prejudice” arguing that its cross-appeal was premature
because the amount of attorney’s fees had not been determined yet by the Bankruptcy Court. A-Bar
contends that the Bankruptcy Court’s ruling on attorney’s fees and their administrative expense
status is final. The Bankruptcy Court has not yet determined the extent of A-Bar’s entitlement to
fees, but he did determine that the fees would be first priority administrative expenses under 11
U.S.C. § 503. Accordingly, the Court finds that these discrete disputes — (1) A-Bar’s entitlement
to attorney’s fees; and (2) the classification of the attorney’s fees as an administrative expense —
are final.215
For the reasons discussed above, the Court finds that A-Bar is entitled to attorney’s fees and
215

See In re ASARCO, L.L.C., 650 F.3d 599, 600 (5th Cir. 2011) (In the Fifth Circuit “[a]n appealed
bankruptcy order will be considered final if it constitutes either a final determination of the rights of the parties to
secure the relief they seek, or a final disposition of a discrete dispute within the larger bankruptcy case.”).

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costs resulting from BSI’s failure to meet the cure deadline. Attorney fees are considered first
priority administrative expenses under 11 U.S.C. § 503, if the actual and necessary damages: 1)
occur post-petition; and 2) arose as a result of actions taken by the trustee or the debtor in possession
that benefitted the estate.”216 The Bankruptcy Judge found the first element was satisfied because
“A-Bar incurred attorney’s fees and costs as a result of the post-petition litigation brought after the
December 31, 2012 cure deadline.”217 He found that the second element was met because the lease
assumption was an action taken by BSI to benefit the estate.218 Accordingly, he found that attorney
fees would be first priority administrative expenses. BSI presents no argument as to any error in
these findings. Accordingly, on de novo review, the Court finds that A-Bar is entitled to attorney’s
fees and costs, and those items are first priority administrative expenses.
2. Waiver of Fees Preceding the May 15, 2012 Agreed Order
A-Bar asserts it is owed attorney’s fees from the time of the bankruptcy petition until May
15, 2012. BSI does not specifically address this argument. A-Bar argues that the Bankruptcy Judge
improperly held that it had waived its right to attorney’s fees and adequate assurance of future
performance, although this Court cannot find in the Bankruptcy Court’s Order or in the transcript
below where he made such a finding. A-Bar correctly asserts, however, that under Louisiana law
“[w]aiver occurs when there is an existing right, a knowledge of its existence and an actual intention
to relinquish it or conduct so inconsistent with the intent to enforce the right as to induce a

216

In re Jack/Wade Drilling, Inc., 258 F.3d 385, 387 (5th Cir. 2001).

217

Bankruptcy Rec. Doc. 592 at 16.

218

Id.

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reasonable belief that it has been relinquished.”219 A-Bar argues that there is no proof of: (1) its
intent to waive its right to attorney’s fees and an adequate assurance of future performance; or (2)
conduct so inconsistent with the intent to enforce the right.
The Bankruptcy Judge’s Order does not appear to address whether A-Bar waived its right
to attorney’s fees and adequate assurance of future performance for the time period preceding the
Agreed Order. At lease one other bankruptcy court has held that a party does not waive its rights
under Section 365(b)(1) where the agreement contained no express waiver.220 Here, there is no
evidence before this Court of A-Bar’s intent to waive its right to attorney’s fees and an adequate
assurance of future performance or conduct inconsistent with the intent to enforce these rights.
Therefore, the Court finds that the Bankruptcy Court erred in failing to address A-Bar’s entitlement
to attorney’s fees and costs preceding the May 15, 2012 Agreed Order. Accordingly, it is ordered
that when awarding attorney’s fees and costs, the Bankruptcy Court is also to address the issue of
whether A-Bar is entitled to attorney’s fees or costs for the time period preceding the May 15, 2012
Agreed Order.221

219

Steptore v. Masco Const. Co., Inc., 93-2064 (La. 8/18/94); 643 So. 2d 1213, 1216.

220

See In re Leon’s Casuals Co., Inc., 122 B.R. 768, 771 (Bank. S.D. Ala. 1990) (stating that under
Alabama law “[t]he parties’ agreement contains no express waiver of the right to cure on its face. The contract
‘expressly conditioned’ the lessor’s acceptance on the Debtor’s payment of September rent and keeping current on
future rent, but it does not expressly waive the Movant’s right to cure under § 365.”).
221

The issue of attorney’s fees was raised by both the parties and the Bankruptcy Judge during the March
26-27, 2013 hearing. See Bankruptcy Rec. Doc. 572 at 174–76, 182, 186. However, the October 11, 2013 Order only
addresses attorney’s fees incurred after the December 31, 2012 cure deadline. It does not address whether the Agreed
Order waived A-Bar’s right to seek attorney’s fees for the time period preceding the Agreed Order.

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VI. Conclusion
Based on the foregoing,
IT IS HEREBY ORDERED that United States Bankruptcy Court’s October 11, 2013 order
is AFFIRMED IN PART AND REMANDED IN PART.
IT IS FURTHER ORDERED that the October 11, 2013 order is affirmed regarding its
decision that the lease was assumed and that attorney’s fees and costs are due.
IT IS FURTHER ORDERED that this matter is remanded for consideration by the
Bankruptcy Court as to whether A-Bar is entitled to attorney’s fees or costs for the time period
preceding the May 15, 2012 Agreed Order.
IT IS FURTHER ORDERED that BSI’s “Motion to Dismiss Cross-Appeal Without
Prejudice” is DENIED.
NEW ORLEANS, LOUISIANA, this ______ day of March, 2015.
18th

________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE

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