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automatic stay. See supra Part I.B.
*
In re Pac-West Telecomm., Inc., 377 B.R. 119 (Bankr. D. Del. Oct. 2007) (Shannon, J.)
Section 365(d)(3) did not protect a landlord from its own malfunctioning billing system.
The debtor's leases allowed the landlord to charge the debtor for its monthly electricity usage. After the debtor filed its chapter 11 petition, and in accordance with those lease terms, the landlord filed a motion to compel the debtor to pay rent and electricity usage (and any applicable late fees) for the first 60 days post-petition. See 11 U.S.C. S 365(d)(3). The debtor did not dispute its obligation to pay for those amounts.10 Only after filing its first motion did the landlords discover the ten-month period during which its billing system did not charge the debtor for electricity. The landlord thus sought payment of this deficiency in addition to the amounts owed under section 365(d)(3).
The bankruptcy court denied the landlord's request for payment of the deficiency. Said the court, the debtor's ostensible obligation to pay this deficiency arose, if at all, during the system's malfunction and before the petition date. Although section 365(d)(3) protects landlords during the first 60 days of a case while the debtor decides whether to assume or reject an unexpired lease, that protection was not intended to allow landlords to scour through their files for additional amounts not previously charged to the debtor. Accordingly, the court denied the landlord's request for the deficiency and any late fees attributable to the deficiency.11
* In re Aerobox Composite Structures, LLC, 373 B.R. 135 (Bankr. D.N.M. July 2007) (McFeeley, J.)
The non-debtor licensor could not compel the debtor licensee's rejection of a pre-petition license agreement. Because the debtor-in-possession was essentially the same entity as the prepetition debtor, the bankruptcy court held that section 365(c)(1) did not prevent the debtor from assuming or assigning the license (as an executory contract) because the debtor's continued operations under the pre-petition agreement did not actually force the non-debtor licensor to accept performance of an entity other than the debtor. See 11 U.S.C. S 365(c)(1). Accordingly, the court denied the licensor's motion to compel the debtor to reject the license agreement. The bankruptcy court, however, did not expand on its rationale for applying this "actual test" in light of In re Catapult Entertainment, Inc., 165 F.3d 747 (9th Cir. 1999), which seemed to favor the "hypothetical test" over the "actual test."
10 The debtor did request the court to waive the late fees, but the court rejected that request finding no "cause" for extending the time to make those payments. Said the court, "While the Court is sympathetic to pressures faced by the Debtor's management and professionals in the early stages of a Chapter 11 case, simply being in bankruptcy cannot constitute 'cause' under section 365(d)(3)."11 The court, however, reset the matter to entertain the landlord's request for reasonable attorneys' fees.
