Section 365 of the U.S. Bankruptcy
Code<a href="#2" name="2a">2</a> permits a
trustee or debtor-in-possession (DIP)to assume and assign the debtor's
interest in an unexpired lease. This statutory right is one of the
foundational underpinnings of the Code, without which many (if not most)
successful reorganizations would be impossible. Its availability is also
a principal motivation for a troubled debtor to seek bankruptcy
protection. Consistent with this premise, §365(f)(1) invalidates
any provision of an unexpired lease or executory contract that purports
to condition the right to assign such lease or executory contract upon
the consent of the landlord or counterparty.<a href="#3" name="3a">3</a>

This statutory right to assign is not unconditional, however. This is
particularly true in the case of shopping center leases, as Congress has
determined that shopping center landlords and non-debtor tenants are
entitled to special protections. As discussed in Part I of this article,
a recent decision by the Fourth Circuit Court of Appeals, In re Trak
Auto Corp.,<a href="#4" name="4a">4</a>
gave new support to the rights of shopping center landlords under
§365(b) of the Code to enforce restrictive use clauses, which will
enhance the protections given to existing tenant mix and balance in
their centers.<a href="#5" name="5a">5</a>

The Trak Auto decision was grounded in the text of
§365(b)(3) and the legislative history of the Bankruptcy Reform Act
of 1984 (the "1984 Amendments"). While the Fourth Circuit did not base
its decision on §365(b)(3)(D) of the Code, the court's holding, and
the legislative history on which that holding was based, provides new
support for the statutory rights of landlords and their non-debtor
tenants to preserve tenant mix and balance as conditions upon a debtor's
rights to assign its leasehold interests in bankruptcy.

For a debtor to assign its interest in a shopping center lease, both
lease provisions such as restrictive use clauses and tenant mix and
balance within the center must be respected. Congress intended
§§365(b) (3)(C) and 365(b)(3)(D) as separate and distinct
requirements for assignment, designed to protect shopping center
landlords and non-debtor tenants alike.

<h4>What "Tenant Mix" Means</h4>

While the term "tenant mix" is not defined in the Code, courts have
used the term to describe a unique combination of stores in a shopping
center and the extent to which that combination reflects sufficient
balance and diversity to ensure that customers will be drawn by the
opportunity to satisfy all of their shopping needs within the center:

<blockquote>
[T]he modern shopping center with its basic plan of a grouping of
basically non-competitive and diversified, but interrelated, businesses
designed not to serve just one need but as many needs of the consumer as
is feasible within the economic framework of the shopping
center.<a href="#6" name="6a">6</a>
</blockquote>

In creating the ideal "tenant mix," competition between the stores
must be carefully monitored. Allowing direct competition between
businesses within a shopping center is disruptive of tenant mix where
comparison shopping is not a factor.<a href="#7" name="7a">7</a> This is most clearly the case with regard
to commodity products and general merchandise such as office supplies.
Courts have reasoned, for example, that the presence of two stores
selling general merchandise at close-out within a shopping center would
divide business between stores and limit the potential tenants who would
lease space at the center, because there would be fewer categories of
businesses to attract customers.<a href="#8" name="8a">8</a> Similarly, the presence of two stores
selling records and tapes within a single shopping center would upset
tenant mix as well as breach the debtor's lease.9

<blockquote>
One court referred to legislative history to illustrate the rights and
business expectations that are at play when a shopping center landlord
and non-debtor tenants are about to be "saddled with an unattractive
tenant" by the bankruptcy process: 
In a real sense, a shopping center is akin to a small town...you put
down business roots in a town if you believe you will fit in, you
believe the town will provide security and other necessary services, you
believe the town will flourish—and your business with it. If the
major businesses or other institutions that draw people to town shut
their doors, the town will die. If the town's financial base shrinks,
the security and other communal services will shrink, and with it the
desirability of the town as a place to visit. If the neighbors with whom
you are comfortable leave town, you will soon begin to look
elsewhere. 
Tenants locate in shopping centers based on the complementary ability of
the various stores in the shopping center to draw customers.... When
Saks Fifth Avenue moves out as an anchor store and John's Bargain moves
in, the small independent fashion boutiques die. When the future of the
center is in doubt, a businessman-tenant does not know how to order for
the next season. 
The matter becomes far more crucial when the chapter 11 debtor is an
"anchor store".... Those anchor stores have been looked to as primary
draws of clientele to the entire shopping center. The smaller tenants in
the shopping center had generally determined to locate in that center
based upon the nature of the anchor store.... A shoe store or fashion
boutique depends upon the advertising and continued operation of the
Saks or Marshall Fields department store (or some prompt substitute) for
its continued viability. 
Consider a shopping center, such as the Water Tower Shopping Center in
Chicago, that has [a] Marshall Fields Department Store and a Lord &
Taylor Department Store as anchors. The "high-end" character of that
shopping center is established by those stores, attractive to smaller
boutiques, relatively expensive men's clothing stores, fashion shoe
stores and similar uses. Depending on the character of the anchor
stores, the other tenants have entered into long-term leases. Consider
what happens if one or both of those anchor stores filed chapter 11
proceedings and the leases are assigned to John's Bargain Basement and
J.C. Penney or Sears. This is not to suggest that the latter are not
fine department store tenants. It is to make clear that they are
department stores with a dramatically different appeal than Lord &
Taylor or Marshall Fields [that could be potentially very damaging [to]
the shopping center]."<a href="#10" name="10a">10</a>
</blockquote>

Simply put, the Code does not allow for the disruption of the
existing tenant mix and balance in a shopping center or the violation of
tenant exclusives that would follow a proposed lease assignment.

<h4>The Plain Language of §365(b)(3)(D) of the Code Should Be
Given Effect</h4>

It has been argued that if a proposed assignment neither violates
applicable provisions of the lease to be assigned, nor the provisions of
other agreements related to the shopping center, the landlord and
non-debtor tenants have no ability to prevent assignment of the lease
under §365(b) (3)(D).<a href="#11" name="11a">11</a> Proponents of this view contend that if
non-debtor tenants whose leases do not contain exclusive right or use
provisions were allowed to object to a prospective assignment on the
basis of its possible effects on tenant mix and balance, such tenants
would effectively have more rights in bankruptcy than they had prior to
the commencement of the case, under applicable non-bankruptcy law.

On review, such an argument is evidently flawed. Requiring that a
non-debtor tenant offer evidence of a lease containing exclusive right
or use provisions, thereby invoking §365(b)(3)(C), in order to
avail itself of the protections afforded to tenant mix or balance under
§365(b)(3)(D), improperly collapses the two subsections. Such an
interpretation is contrary to the settled rule that a statute must, if
possible, be construed in such fashion that no part of the statute is
superfluous and every word has some operative effect.<a href="#12" name="12a">12</a> As a matter of statutory
construction, it makes no sense to apply §365(b)(3)(D), which
requires that assumption or assignment of a lease will not disrupt any
tenant mix or balance in the shopping center only when a landlord
or non-debtor tenant can point to exclusive rights or use provisions
contained in a lease, when §365(b)(3)(C) separately requires
adequate assurance of future performance of use and exclusivity
provisions contained in the debtor's lease and "in any other lease."
Such a reading would render §365(b)(3)(D) wholly superfluous.

Depriving §365(b)(3)(D) of any independent operative effect is
also inconsistent with certain prior case law imbuing the concept of
"tenant mix" with meaning distinct from any exclusive rights or use
restrictions formalized in a lease. Thus, in In re Rickel Home
Centers Inc., discussed in Part I of this article for a different
proposition, the court effectively conducted a two-step analysis of a
landlord's objection to a proposed lease assignment.<a href="#13" name="13a">13</a> There, one of the affected
landlords had argued that a proposed assignment violated tenant mix
because it would cause the affected premises to remain dark for
approximately six months. After first finding that the debtor's lease
contained no "going dark" provisions, the court then considered—as
a distinct step in the analysis—whether that six-month period would
otherwise adversely affect tenant mix or balance in the shopping center.
As an evidentiary matter, based on the proposed assignee's proffer, the
court concluded that it would not.<a href="#14" name="14a">14</a>

<h4>Legislative History Demonstrates Congressional Intent that
Non-debtor Tenants Have Standing Under §365(b)(3)</h4>

Remarkably little attention has been paid to date to the legislative
history of §365(b)(3) as it relates to non-debtor tenants. While
courts and parties often cite to a line or two from the House and Senate
reports, there exists a rich and largely unmined store of material in
the legislative history, including frequently cited testimony by
shopping industry experts. This testimony was quoted extensively in the
resulting committee reports in support of congressional findings that
action must be taken to protect the interests of solvent non-debtor
tenants as well as landlords. These concerns, which were nascent at the
time of enactment of the Bankruptcy Reform Act of 1978, culminated in
passage of the 1984 Amendments, which gave us §365(b)(3) in its
current form. Not only does the plain language of §365(b)(3) in no
way restrict its application to landlords, to the exclusion of
non-debtor tenants, but the relevant legislative history strongly
suggests that Congress intended that non-debtor tenants have standing
pursuant to §365(b)(3).

As a threshold matter, the legislative history clearly reflects
Congress' solicitous attitude towards shopping center interests
generally. Thus:

<blockquote>
A shopping center is often a carefully planned enterprise, and though it
consists of numerous individual tenants, the center is planned as a
single unit, often subject to a master lease or financing agreement.
Under these agreements, the tenant mix in a shopping center may be as
important to the lessor as the actual promised rental payments, because
certain mixes will attract higher patronage of the stores in the center
and, thus, a higher rental for the landlord from those stores that are
subject to a percentage of gross receipts rental
agreement.<a href="#15" name="15a">15</a>

</blockquote>

The need to protect solvent shopping center tenants from the possibly
devastating ripple effects of a debtor's bankruptcy manifested itself in
early discussions leading to the enactment of the 1978 Act:

<blockquote>
[Adequate assurance] ought to be in terms of a reasonable assurance...
that the assignment or assumption of a lease will not breach other
clauses in other tenants' leases or in the lender's agreements, and a
reasonable assurance that an assumption or an assignment of a lease
will not disturb the tenant mix generally.<a href="#16" name="16a">16</a>
</blockquote>

After courts began to interpret the provisions of the 1978 Act, it
became evident that the protection of non-debtor tenants must be made
more explicit in light of the fact that "[t]he interdependence among the
tenants of a shopping center means that the bankruptcy of one tenant
will seriously affect the other tenants...."<a href="#17" name="17a">17</a> The following testimony illustrated the
need to protect non-debtor tenants:

Tenants locate in shopping centers based on the complementary ability of
the various stores in the shopping center to draw customers.... These
multifarious symbiotic relationships in the shopping center are
in peril whenever any tenant suffers financial hardship or fails.... The
continued vitality of those relationships and the businesses in the
center depends on the system our bankruptcy policies create to swiftly
fill vacancies and fairly acknowledge the interest of remaining
solvent tenants.<a href="#18" name="18a">18</a>
</blockquote>

Wallace R. Woodbury, whose testimony was favorably cited in the
report of the Senate Judiciary Committee, testified on another occasion
as to the "symbiotic, interdependent nature of a shopping center" as "a
delicate balance of merchants." Woodbury noted that "the success of a
shopping center, and thus all of its tenants, is based in large part on
its 'tenant mix.'" He used the example of "the assignment of a lease to
a tenant in the same business as other existing tenants" as the type of
thing that would constitute "the use of any tenant space for purposes
other than those contemplated by the shopping center and its other
tenants and provided for in a master lease or other agreement" and could
thus cause a shopping center's operations to be "seriously
impaired."<a href="#19" name="19a">19</a>

Thus, the legislative history leading to the enactment of the 1984
Amendments reveals the inadequacies of prior law and explains Congress's
intent when removing the word "substantially" from the text of each of
§§365(b)(3)(C) and (D). The Judiciary Committee report
reflects that:

<blockquote>
[T]hese provisions...have not functioned as originally intended by
Congress. Under the Bankruptcy Code, the shopping center and its
solvent tenants may suffer serious economic harm or even business
failure if the bankrupt tenant closes its store for an extended period
of time or assigns its lease to a business which does not conform to the
lease's use clause thus disrupting the shopping center's tenant mix....
By making effective [the provisions that Congress intended to provide
shopping centers and their tenants in the 1978 Act], the bill strikes
the proper balance between the interests of the solvent tenants of a
shopping center and the insolvent tenants.<a href="#20" name="20a">20</a>

</blockquote>

Senate leaders urged the beneficial effect of requiring that any
lease clause be adhered to by deleting the word "substantially" from the
statute. For example, Sen. Hatch (R-Utah) stated that "[i]t is
especially important that...the tenant mix not be disrupted" and offered
that passage of the 1984 Amendments would decrease the likelihood that
the Code would "add to the economic distress of retail merchants in
shopping centers."<a href="#21" name="21a">21</a>

<h4>§365(b)(3)(D) Raises the Inference that a Non-debtor May Be
Afforded Better Treatment in Bankruptcy than It Would Receive Under
Applicable Non-bankruptcy Law</h4>

As outlined in Part I of this article,<a href="#22" name="22a">22</a> prior to the Trak Auto decision,
restrictive-use clauses were routinely struck as anti-assignment
provisions, leaving landlords—and their non-debtor
tenants—without recourse under §365(b)(3)(C). Trak
Auto's ruling that restrictive use clauses must be honored supplies
a much-needed corrective. Based on Trak Auto, it is clear that a
non-debtor may protect its own tenant exclusives by invoking the
protection of §365(b)(3)(C), relying on contractual rights embedded
in its lease.

Outside bankruptcy, however, a non-debtor tenant may not have a right
to object to a proposed use of the lease to be assigned, if and to the
extent that the landlord did not have a right to preclude that change in
use. Accordingly, such a tenant may not be able to invoke
§365(b)(3)(C), which appears to be predicated on the existence of
prior contract rights.

Even assuming, arguendo, that a non-debtor tenant would not
have the right, outside bankruptcy, to prevent the proposed use of a
leasehold to be assigned by a neighboring tenant, the unambiguous
language of §365(b)(3)(D) creates such a right when the neighboring
tenant seeks the protection of the Code.

Such a notion may strike non-bankruptcy practitioners as anomalous,
but it is firmly grounded in the statute and Supreme Court precedent. As
a first principle, the legal, equitable and contractual rights of a
party affected by a debtor's bankruptcy are determined under the
Code.<a href="#23" name="23a">23</a>
Article I, §8, of the U.S. Constitution gives Congress broad
latitude to effect changes in contract and property
rights.<a href="#24" name="24a">24</a> Thus,
the general rule that property interests are determined as a function of
state or other non-bankruptcy law does not apply when a federal
interest—such as those interests embodied, inter alia, in
the statutory language of the Code—requires a different
result.<a href="#25" name="25a">25</a>

Indeed, bankruptcy law is replete with examples of situations where a
party may obtain better treatment in a debtor's bankruptcy case than it
would receive outside of bankruptcy.<a href="#26" name="26a">26</a> From the beginning of a case, a party
obtains access to the debtor's financial information, data that may not
otherwise be made public if the debtor is an individual or non-public
corporation.<a href="#27" name="27a">27</a>
Post-filing, a non-debtor party may examine the debtor at the meeting of
creditors and equity-holders without the need to incur the cost of
commencing a lawsuit and conducting discovery that would be required
under non-bankruptcy law.<a href="#28" name="28a">28</a> Other examples abound. While most other
parties' actions against the debtor or property of the bankruptcy estate
are stayed at the moment of the filing of the bankruptcy
petition,<a href="#29" name="29a">29</a> a
select few are permitted to proceed with their claims or causes of
action notwithstanding the bankruptcy filing.<a href="#30" name="30a">30</a> That may afford such favored parties a
relatively better position vis-à-vis other parties in interest
that it would not have had absent the bankruptcy filing and imposition
of the automatic stay.

Throughout the administration of the bankruptcy case, parties are
able to avoid burdensome non-bankruptcy law requirements or
standards.<a href="#31" name="31a">31</a>
Parties in a debtor's bankruptcy case may also gain priority of payment
to which they would not be entitled under applicable non-bankruptcy
law.<a href="#32" name="32a">32</a>

The chapter 11 confirmation process often affords parties better
treatment than they would have had under non-bankruptcy law. For
instance, in certain circumstances, an unsecured deficiency claim may be
converted to a fully secured claim.<a href="#33" name="33a">33</a> A party who obtains a lien superior to
that of another party through a chapter 11 plan may retain its priority
position notwithstanding failure to perfect its interest under
applicable state law.<a href="#34" name="34a">34</a>

Even reclamation creditors, whose claims may be wiped out pursuant to
the Uniform Commercial Code (UCC) by the existence of an inventory
lender's floating lien, have been accorded better treatment under the
Code than under state law.<a href="#35" name="35a">35</a>

In summary, whether or not a solvent tenant's exclusivity provisions
could be enforced outside of bankruptcy is only one part of the inquiry,
and certainly not the end of the analysis. Solvent tenants negotiate
leases in the shadow of the Code, including §365(b)(3)(D), which
specifically mandates that there can be no assignment of a lease in
bankruptcy that disrupts tenant mix or balance in a shopping center.

<h4>Conclusion</h4>

As discussed in Part I of this article, the Trak Auto decision
has made it less likely for landlords and—by a logical
extension—non-debtor tenants to be stuck with an unwanted tenant.
In essence, Trak Auto upheld the contract rights of non-debtors
in connection with a proposed assignment of a shopping center lease in a
debtor's bankruptcy case. Restrictive clauses will no longer be
invalidated unless they are so unreasonably restrictive as to constitute
de facto anti-assignment clauses of the type requiring operating
under a specified trade name (as suggested by legislative history cited
by the Trak Auto court) or requiring assignment only to a
non-existent candidate for a non-existent use (as suggested by

Rickel).

In Part II of this article, we have shown that the statutory text of
§365(b)(3), as well as the legislative history of §365,
express a clear legislative intent to protect the interest of non-debtor
tenants and shopping center landlords from the possibly devastating
ripple effects of a debtor's bankruptcy. Thus, a non-debtor tenant may
protect its reasonable expectations, formed at the time of joining the
shopping center community or even thereafter, by objecting to a proposed
assignment of a debtor-tenant to a lease to which it is not a party,
even absent a basis for such an objection under applicable
non-bankruptcy law. Non-debtor tenants have standing to utilize the
tools specifically made available by Congress to effectuate such
objections. First, §365(b)(3)(C) allows a non-debtor tenant to
challenge a proposed assignment that violates restrictions or
exclusivity provisions in the non-debtor's lease. Second, even if a
proposed assignment does not violate any such provision, the non-debtor
tenant should consider utilizing the protections of §365(b)(3)(D)
specifically crafted by the legislature to ensure that tenant mix and
balance in a shopping center will not be disrupted by the assignment of
a debtor's leasehold interests.

<hr>
<h3>Footnotes</h3>

<a name="1">1</a> Pamela Smith Holleman and
Magdalena Ellis are attorneys with Sullivan & Worcester LLP, a
corporate law firm with offices in Boston, New York and Washington, D.C.
The authors gratefully acknowledge the encouragement and support of
Patrick P. Dinardo, a partner at the firm practicing in this area, as
well as the insights of their colleague, Emily K. Cohen, in the
development of this article. Pamela Smith Holleman is a contributor to
Chapter 11 Theory & Practice: A Guide to Reorganization,
James F. Queenan, Philip J. Hendel, Ingrid M. Hillinger (eds.), LRP
Publications (2003). She is the author of a chapter entitled "Priority
Claims," which analyzes the treatment of administrative expenses and
other priority claims in bankruptcy. <a href="#1a">Return to article</a>

<a name="2">2</a> 1 U.S.C. §101, et
seq. <a href="#2a">Return to article</a>

<a name="3">3</a> §365(f)(1) provides,
in pertinent part, that—

<blockquote>
Except as provided in subsection (c) of this section, notwithstanding a
provision in an executory contract or unexpired lease of the debtor, or
in applicable law, that prohibits, restricts or conditions the
assignment of such contract or lease, the trustee may assign such
contract or lease under paragraph (2) of this subsection.... <a href="#3a">Return to article</a>
</blockquote>

<a name="4">4</a> 367 F.3d 237 (4th Cir.
2004). <a href="#4a">Return to article</a>

<a name="5">5</a> §365(b)(3) provides
in part:

<blockquote>
For the purposes of paragraph (1) of this subsection and paragraph 2(B)
of subsection (f), adequate assurance of future performance of a lease
of real property in a shopping center includes adequate assurance...

<blockquote>
(C) that assumption or assignment of such lease is subject to all the
provisions thereof, including (but not limited to) provisions such as a
radius, location, use or exclusivity provision, and will not breach any
such provision contained in any other lease, financing agreement or
master agreement relating to such shopping center; and 
(D) that assumption or assignment of such lease will not disrupt any
tenant mix or balance in such shopping center. <a href="#5a">Return to
article</a>

</blockquote>
</blockquote>

<a name="6">6</a> Almacs Inc. v.
Drogin, 771 F. Supp. 506, 507 (D. R.I. 1991) (internal quotation
omitted); see, also, Goldberg, Richard, "Developments in Leasing
and Tenant Mix from the Lawyer's Perspective," C410 ALI-ABA 509, 514
(1989) ("The purpose of tenant mix is to provide a complete diversity of
goods and services so that shoppers may come to the shopping center and
accomplish all of their consumer needs."). <a href="#6a">Return to
article</a>

<a name="7">7</a> See In re TSW Stores
of Nanuet Inc., 34 B.R. 299, 303 (Bankr. S.D.N.Y. 1983);

Brookings Mall Inc. v. Captain Ahab's Ltd., 300 N.W.2d 259, 263
(S.D. 1980). <a href="#7a">Return to article</a>

<a name="8">8</a> See TSW Stores, 34
B.R. at 303. <a href="#8a">Return to article</a>

<a name="9">9</a> Brookings Mall,

300 N.W.2d at 263. See, also, Warmack v. Merchants Nat'l. Bank of
Fort Smith, 612 S.W.2d 733 (Ark. 1981) (substitution of a savings
and loan that already had a facility in the shopping center in question,
for a drive-in bank, would harm tenant mix in the center); cf. In re
Sun TV and Appliances Inc., 234 B.R. 356 (Bankr. D. Del. 1999) (the
presence of competing stores within a mall created an appropriate tenant
mix, since there were no competing malls nearby in which customers could
compare prices, and the expense of the items sold made it likely that
customers would not buy without comparing prices at more than one store
first). In the leading case on tenant-mix issues, the court noted that
in essence the statutory term "mix" focuses on the inclusion or
exclusion of a store in the array or mix of mall stores. In re
Federated Dep't. Stores Inc., 135 B.R. at 943. <a href="#9a">Return
to article</a>

<a name="10">10</a> Federated Dep't.
Stores, 135 B.R. at 943-46, quoting Bankruptcy Reform: Hearing
Before the Subcommittee on Courts of the Senate Committee on the
Judiciary on Shopping Center Tenancy Amendments, 98th Cong., 1st
Sess. 381-91 (1983) (Statement of Nathan B. Feinstein). <a href="#10a">Return to article</a>

<a name="11">11</a> Parties to a proposed
transaction raised this argument in a recent case in which the authors
represented a non-debtor tenant seeking to challenge the assignment of a
debtor's lease to a competitor made pursuant to a designation rights
order. The bankruptcy court rejected the non-debtor's view, and the
district court affirmed with little analysis of the issue under
§365 (b)(3)(D). Staples Inc. v. Montgomery Ward LLC (In
re Montgomery Ward LLC), 307 B.R. 782 (D. Del. 2004). <a href="#11a">Return to article</a>

<a name="12">12</a> United States v.
Nordic Village Inc., 503 U.S. 30 (1992); accord, Dole Food Co. v.
Patrickson, 123 S. Ct. 1655, 1661 (2003); Mertens v. Hewitt
Assocs., 508 U.S. 248, 258 (1993). <a href="#12a">Return to
article</a>

<a name="13">13</a> See 240 B.R. 826
(D. Del. 1998), appeal dismissed, 209 F.3d 291 (3d Cir.),
cert. denied sub nom., L.R.S.C. v. Rickel Home Ctrs. Inc., 531
U.S. 873 (2000). <a href="#13a">Return to article</a>

<a name="14">14</a> Id. at 834-35;

see, also, Federated Dep't. Stores, 135 B.R. at 945 (protecting
tenant mix by statute where debtor's own lease contains no effective
exclusives or other use restrictions). In a footnote, the court noted
that if the assignee's efforts to sublet excess space that was not to be
used by the assignee were unduly protracted, leaving that portion of the
store to remain dark for an unreasonable period of time, "the landlord
can seek the appropriate redress at that time." Rickel Home
Ctrs., 240 B.R. at 835 n. 6. <a href="#14a">Return to article</a>

<a name="15">15</a> H.R. Rep. No. 595, 95th
Cong., 1st Sess. 348-49 (1977). <a href="#15a">Return to article</a>

<a name="16">16</a> Bankruptcy Reform
Act of 1978: Hearings before the Subcommittee on improvements in
Judicial Machinery of the Judiciary, Committee on the Judiciary, S.
2266, 95th Cong., 1st Sess., at 732 (1977) (Testimony of Sylvan Cohen)
(emphasis added). <a href="#16a">Return to article</a>

<a name="17">17</a> Omnibus Bankruptcy
Improvements Act of 1983, Report from the Committee on the
Judiciary, S. Rep. No. 98-65, at 33-35 (1983). <a href="#17a">Return
to article</a>

<a name="18">18</a> Id., quoting
hearings on S. 2297 before the Subcommittee on Courts of the Senate
Judiciary Committee, 97th Cong. 2d Sess. (1982) (Testimony by Nathan B.
Feinstein) (emphasis added). <a href="#18a">Return to article</a>

<a name="19">19</a> Bankruptcy: the
Shopping Center Protection Improvement Act of 1982: Hearing before the
Subcommittee on Courts of the Committee on the Judiciary of the U.S.
Senate, S. 2297, at 27-28 (1982) (Statement of Wallace R. Woodbury).

<a href="#19a">Return to article</a>

<a name="20">20</a> Omnibus Bankruptcy
Improvements Act of 1983, Report from the Committee of the
Judiciary, S. Rep. No. 98-65, at 33-35 (1983) (emphasis added). <a href="#20a">Return to article</a>

<a name="21">21</a> 130 Cong. Record D684,
S6088, S6091, 98th Cong., 2d Sess. (May 21, 1984) (Remarks by Hon. Orrin
Hatch); accord, 130 Cong. Record S8895-96, Cong. 2d Sess. (June
29, 2984) (Remarks by Hon. Robert Dole). <a href="#21a">Return to
article</a>

<a name="22">22</a> See "Reexamining
the Protections Afforded to Solvent Shopping Center Tenants Under
§365 of the Bankruptcy Code in Light of In re Trak Auto
Corp., Part I," which appeared in last month's ABIJournal.
<a href="#22a">Return to article</a>

<a name="23">23</a> Solow v. PPI Enters.
(U.S.) Inc. (In re PPI Enters. (U.S.) Inc.), 324 F.3d 197, 205 (3d
Cir. 2003) (claim capped by §502(b)(6) is not impaired for voting
purposes because creditors' rights are determined under the Code);

Wright v. Union Central Life Ins. Co., 304 U.S. 502, 517,
reh'g. denied, 305 U.S. 668 (1938) (enumerating instances where
bankruptcy modifies and affects property rights, including, e.g.,
directing the marshalling of liens, impliedly reasoning that Congress
has authority under the Constitution to place junior lienors in a
relatively better position in bankruptcy than they would occupy at state
law). <a href="#23a">Return to article</a>

<a name="24">24</a> See Wright v. Union
Central Life Ins. Co., 304 U.S. at 517. <a href="#24a">Return to
article</a>

<a name="25">25</a> Cf. Butner v. United
States, 440 U.S. 48, 55 (1979). <a href="#25a">Return to article</a>

<a name="26">26</a> But, cf. Cinicola v.
Scharffenberger, 248 F.3d 110, 120 n.10 (3rd Cir. 2001) (citing
pre-Code legislative history outside the shopping-center context). <a href="#26a">Return to article</a>

<a name="27">27</a> 11 U.S.C. §107(a).
<a href="#27a">Return to article</a>

<a name="28">28</a> 11 U.S.C. §343(a)
("debtor shall appear and submit to examination under oath at the
meeting of creditors under §341(a)") (emphasis added). <a href="#28a">Return to article</a>

<a name="29">29</a> 11 U.S.C. §362(a).

<a href="#29a">Return to article</a>

<a name="30">30</a> 11 U.S.C. §362(b).
<a href="#30a">Return to article</a>

<a name="31">31</a> See, e.g., 11
U.S.C. §363(g) (sale free and clear of rights of dower or curtesy);
In re Trans World Airline Inc., 322 F.3d 283 (3rd Cir. 2003)
(sale of assets free and clear of airline employees' successor liability
claims); Woskob v. Woskob (In re Woskob), 305 F.3d 177 (3rd Cir.
2002), cert. denied, 123 S. Ct. 1762 (2003) (state law providing
for the automatic dissolution of a partnership preempted upon the filing
of a bankruptcy petition by general partner); In re Fed. Fountain
Inc., 165 F.3d 600 (8th Cir. 1999), (en banc) (validity of
nationwide service of process in bankruptcy). <a href="#31a">Return to
article</a>

<a name="32">32</a> See, e.g., In re
Westmoreland Coal Co., 213 B.R. 1 (Bankr. D. Colo. 1997) (court
applies bankruptcy law to determine a claim's priority and treatment in
the bankruptcy process); 3 Collier on Bankruptcy ¶364 ("[i]f
a lien authorized under [11 U.S.C. §]364(c) is one which, absent
bankruptcy, must be perfected by filing or recording to be valid against
or gain priority over liens or interests, such action should not be
necessary as long as the bankruptcy case is extant"). <a href="#32a">Return to article</a>

<a name="33">33</a> 11 U.S.C.
§1111(b)(2). <a href="#33a">Return to article</a>

<a name="34">34</a> See Gen. Elec.
Capital Corp. v. Dial Bus. Forms Inc. (In re Dial Bus. Forms Inc.),
283 B.R. 537 (BAP 8th Cir. 2002) (confirmed plan governs priority of
liens notwithstanding state law requirements). <a href="#34a">Return to
article</a>

<a name="35">35</a> 11 U.S.C. §546(c);
see, e.g., In re Diversified Food Serv. Distrib. Inc., 130 B.R.
427, 430 (Bankr. S.D.N.Y. 1991) (reclaiming creditor prevented from
enforcing its interest due to another creditor's superior status is
entitled to administrative expense claim); In re Roberts Hardware
Co., 103 B.R. 396, 399 (Bankr. N.D.N.Y. 1988) (same); but, see In
re Primary Health Sys. Inc., 258 B.R. 111, 117 (Bankr. D. Del. 2001)
(contra). <a href="#35a">Return to article</a>

Journal Authors

Magdalena Ellis

Pamela Smith Holleman

Journal Date

Tuesday, February 1, 2005 - 12:00

Bankruptcy Rule

2005

none