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not become an issue until the bankruptcy court determines that Rule 7023 applies by granting a Rule 9014 motion. The issue on such a motion centers more directly on whether the benefits of applying Rule 7023 (and Civil Rule 23) are superior to the benefits of the standard bankruptcy claims procedures. While some Civil Rule 23 factors could be relevant to resolving a Rule 9014 motion, extensive discovery related to class certification is not necessary." Here, in deciding the 9014, the bankruptcy court had assumed that a class action could be certified, thus rendering discovery on that issue irrelevant. The Court then found that, on the facts presented in this case, the bankruptcy court had not abused its discretion in concluding that the bankruptcy claims resolution process was a superior means for addressing the claimants' claims, and that the class action process would be more cumbersome and expensive. The Court thus affirmed this portion of the bankruptcy court's decision. Finally, the Court affirmed the holding of the bankruptcy court that notice to the unnamed claimants had been proper. The Court rejected the named claimants' argument that the bankruptcy court should have required "Rule 23 opt-out notice," stating: "[b]ecause the bankruptcy court denied the Rule 9014 motion to apply Rule 7023, there was no requirement that unnamed class members be notified in accordance with the procedures under Civil Rule 23. The bankruptcy court would have to grant the Rule 9014 motion before the requirements of Civil Rule 23 could apply. Thus, the only notice required was that given by Circuit City for giving notice of bankruptcy procedures and the bar date." The Court further found that the named claimants did not have standing to raise the argument that the notice procedures violated the due process rights of the unnamed claimants.
iv. In re Denali Family Services, 506 B.R. 73 (Bankr. D. Alaska 2014).
Issue: Chapter 11 debtor, which had operated its day care center in leased commercial space prepetition and subsequently rejected the lease, objected to lessor's proof of claim of more than $1.5 million, asserting that it exceeded statutory cap.
Holdings: (1) Lessor's claims against debtor for unpaid rent, utilities, tenant improvements, and real estate commission for locating future tenant were subject to statutory cap;
(2) Lessor's claim for anticipated costs to remove tenant improvements and repair the damages caused by such removal was not subject to statutory cap;
(3) Under lease's "end of term" provision, debtor was liable for costs of removing tenant improvements and repairing the damages caused by such removal, but not for restoring the property to a condition suitable as a retail warehouse;
(4) Debtor's payments for tenant improvements were recoverable by lessor as "rent reserved";
and
(5) Debtor's utility payments did not qualify as "rent reserved."
©2014 William L. Norton III
