Even a Small or Cured Agreement Default Triggers Assumption Obligations

Faegre Drinker co-chair Andrew Kassner and counsel Joseph Argentina coauthored an article for The Legal Intelligencer, titled “Even a Small or Cured Agreement Default Triggers Assumption Obligations,” that reports on a case involving disputes under Section 365 of the Bankruptcy Code, which governs the disposition of executory contracts in bankruptcy.

The authors discuss the opinion issued in In re Hawkeye Entertainment, where the U.S. Court of Appeals for the Ninth Circuit held all the requirements for assumption were triggered even though the defaults had been cured or were not material but the debtor could assume the lease because the defaults in bankruptcy were not material enough to require any further undertakings by the debtor going forward.

Kassner and Argentina conclude that the case is yet another reminder that bankruptcy courts are often confronted with cases that are filed because of continuing a pre-petition dispute between the debtor and third parties, and the bankruptcy courts must determine whether the litigants are trying to use the Bankruptcy Code for a legitimate bankruptcy purpose.