Executory Contracts Retention Without Assumption in Chapter 11Ride-through Revisited

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Mar 2000

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A recent Ninth Circuit decision has generated much concern in the affected bankruptcy community
regarding continuation of executory contracts in a chapter 11 reorganization. The decision rendered in
<a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… v. Catapult Entertainment Inc. (In re Catapult Entertainment Inc.), 165 F.3d 747 (9th Cir. 1999)</a>,
restricts the ability of a debtor, after having filed chapter 11, to assume certain executory contracts that may
be critical to the operation of the debtor's business. In Catapult, the court joined three other circuits in
adopting the "hypothetical test" as the proper approach to making determinations under §365(c) of the
Bankruptcy Code. The test essentially provides that where applicable non-bankruptcy law renders an
executory contract non-assignable because the identity of the non-debtor party is material, a debtor cannot
assume the contract without the consent of the non-debtor party. The type of contracts potentially affected
generally fall under categories of personal contracts such as certain franchise agreements, employment
contracts or partnership agreements; certain intellectual property licenses such as non-exclusive patent and
copyright licenses; and government contracts (collectively referred to here as "personal contracts").<a href="#1" name="1a">1</a>

The anxious reaction to Catapult can be attributed at least in part to the common presumption among
many bankruptcy practitioners that the only way a reorganized debtor can retain an executory contract
through a chapter 11 proceeding is to formally assume it under §365. This of course leads to the
perception in some cases, upon the filing of a chapter 11, that the successful reorganization of the
business is completely dependent on the debtor's ability to obtain the consent of all non-debtor parties
to those essential personal contracts—a prospect often far from certain. Therefore, debtors seeking to
simply retain valuable personal contracts to ensure a successful reorganization have been reluctant to file
chapter 11. In fact, the concern has risen to such a level that new legislation has been passed by the
House of Representatives to negate the effects of the Catapult decision. The House version of the
Bankruptcy Reform Act of 1999 (H.R. 833) addresses §365(c) with respect

to the right of a trustee or debtor-in-possession to assume the debtor's contracts within a chapter 11.<a href="#2" name="2a">2</a>
Of course, there is no certainty that the legislation will be enacted in its current form, as the Senate
companion bill (S. 625) does not deal with the issue.

In any event, legislation may not be needed to address the perceived Catapult dilemma, especially in
the form proposed by the House. There is another option that should be considered. This article will
revisit the idea of neither assuming nor rejecting an executory contract but permitting it to "ride through"
the bankruptcy, essentially retaining the contract without assumption.<a href="#3" name="3a">3</a>

<h3>The "Hypothetical Test" and Its Ramifications</h3>

In its modern form, the "hypothetical test" was delimited more than 10 years ago by the Third
Circuit in <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… re West Electronics Inc., 852 F.2d 79 (3rd Cir. 1988)</a>. The opinion drew significant
criticism.<a href="#4" name="4a">4</a> Despite these criticisms, three other circuits have adopted the "hypothetical test" and
followed the literal interpretation of the words of §365(c),<a href="#5" name="5a">5</a> although one circuit has definitively
adopted a different approach deemed the "actual test."<a href="#6" name="6a">6</a>

In Perlman v. Catapult Entertainment Inc., the Ninth Circuit court reviewed the cases and
development of the "hypothetical test" application of §365.<a href="#7" name="7a">7</a> The court also addressed old and new
objections to a literal interpretation, ultimately dismissing them all.<a href="#8" name="8a">8</a> The court held, "...where applicable
non-bankruptcy law makes an executory contract non assignable because the identity of the non-debtor
party is material, a debtor-in-possession may not assume the contract absent consent of the non-debtor
party."<a href="#9" name="9a">9</a> Thus, the debtor in Catapult could not assume non-exclusive patent licenses over the objection
of the licensor because non-bankruptcy law makes non-exclusive patent licenses personal and not
assignable.

The impact of this view of executory contract assumption is significant. Many businesses rely heavily
on ongoing personal contracts, especially in the booming entertainment and technology industries.<a href="#10" name="10a">10</a>
Therefore, in chapter 11 the retention of these contracts would be vital to a successful reorganization. But
if it is suspected that the requisite consent to assumption cannot be acquired or can only be acquired by the
payment of a large premium or the forced undertaking of some other distasteful obligation, the filing of a
chapter 11 could appear an unattractive option, if an option at all.<a href="#11" name="11a">11</a> Accordingly, bankruptcy practitioners
have advised clients to postpone, if not completely abandon, plans to reorganize their businesses under
chapter 11 for fear of losing certain contracts vital to their business.<a href="#12" name="12a">12</a>

<h3>The "Ride-through" Option</h3>

The authors here assert that there is an alternative to the formal assumption of certain executory
contracts by which the contract and its benefits can be retained. This is simply to permit the executory
contract to pass or "ride through" the reorganization and continue on unaffected by the reorganization.
Thus, the debtor retains the contract without formally assuming it under the Code.

Courts generally attribute the beginnings of this doctrine to the early case of <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Gas, Electric
Light and Power Co. of Baltimore v. United Railways and Electric Co. of Baltimore, 85 F.2d 799 (4th Cir.
1936)</a>.<a href="#13" name="13a">13</a> The court held that an executory contract, if not rejected, "passes through with other property of
the debtor to the reorganized corporation."<a href="#14" name="14a">14</a> This precept continues to this day since legal theories
developed under the Act apply to cases decided under the Code, and when Congress doesn't change
pre-Code law, courts should interpret the Code as continuing Bankruptcy Act principles.<a href="#15" name="15a">15</a> Accordingly,
there are numerous contemporary case and commentator formulations of the rule.<a href="#16" name="16a">16</a> Several circuit courts
have adopted ride-through or continuing-contract principles.<a href="#17" name="17a">17</a> It has been referred to as a "carry through"
when a chapter 11 plan does not deal either way with an executory contract.<a href="#18" name="18a">18</a> The Collier treatise also
recognizes the theory: "The plan may provide for the assumption or assignment of an executory contract.
On the other hand, the contract may 'ride through' the plan without being affected."<a href="#19" name="19a">19</a> In addition,
commentators have also been supportive of the existence and use of ride through.<a href="#20" name="20a">20</a>

Recently, the National Bankruptcy Conference published recommendations for reforming the
Bankruptcy Code and specifically addressed the subject of executory contracts.<a href="#21" name="21a">21</a> On the subject of "ride
through," the conference acknowledged that in many reorganizations there are contracts that would ride
through without needing to be scheduled and without notice to the other party as the parties expect to
perform the contracts without formality. In this light, and in the absence of a clear consensus of the
conference, no action was recommended on this issue.<a href="#22" name="22a">22</a> In essence, after full consideration of the matter,
the conference left ride through intact.

The conference's report was also the basis of comments by David G. Epstein and Steven H. Nickles
in a recent analysis of proposed Code changes. These authors acknowledge the ride-through case law
under the Bankruptcy Act, and although not supportive, they "...do support the practice of ride through,
at least in chapter 11, and would urge Congress to follow the review commission's non-review of this
concept."<a href="#23" name="23a">23</a>

At this point, it is important to emphasize what the ride-through option is not. It is not some form of
automatic assumption of an executory contract based on inaction.<a href="#24" name="24a">24</a> Richard F. Broude succinctly stated,
"The doctrine of implied assumption is probably dead."<a href="#25" name="25a">25</a> A court order is needed for an assumption or
rejection—it does not happen automatically.<a href="#26" name="26a">26</a> Therefore, the thought that taking no action could result in
an assumption or a rejection conflicts with the statutory requirement of court approval of either an
assumption or rejection.<a href="#27" name="27a">27</a>

<h3>There Is No Requirement to Choose Assumption or Rejection</h3>

The existence of the ride-through option is largely based on the lack of a requirement in the Code that
a chapter 11 debtor formally assume or reject an executory personal contract within any court proceeding.
Section 365(a) specifically states that subject to the court's approval, a trustee "may assume or reject any
executory contract or unexpired lease of the debtor." (emphasis added) Likewise, §356(d)(2) provides: "In
a case under chapter 9, 11, 12 or 13 of this title, the trustee may assume or reject an executory contract..."
(emphasis added) Also, under §1123(b), "a plan may...(2) subject to §365 of this title, provide for the
assumption, rejection or assignment of any executory contract..." Cases also support the optional nature of
this election.<a href="#28" name="28a">28</a>

<h3>Advantages of Formally Assuming Executory Contracts and Potential Limitations of Ride Through</h3>

Although the ride-through option should be considered when addressing issues involving the debtor's
executory contracts, it should not be seen as the primary option. There are several advantages of formally
assuming an executory contract in lieu of allowing a contract to ride through the bankruptcy. For instance,
an executory contract must be assumed in a chapter 11 before it can be assigned to a third party.<a href="#29" name="29a">29</a> Also,
it may be advantageous for a debtor to treat any defaults under an executory contract within a §365
bankruptcy proceeding where the concerns of all interested parties are considered when deciding the
manner by which the defaults might be cured.<a href="#30" name="30a">30</a> In addition, formal assumption by motion provides a level
of certainty for all parties regarding the status of the contract. Specifically, the parties can be assured that
all the defaults have been addressed and the means by which the debtor will continue its performance have
been provided.<a href="#31" name="31a">31</a>

There also may be some inherent difficulties with electing ride through, such as when the
reorganized debtor is the product of a merger. In such a case, the attempt to allow a contract to ride
through to the surviving entity may be a de facto transfer in violation of the initial contract or
applicable law.<a href="#32" name="32a">32</a> A debtor should also be required, either by way of the court's own motion or a
motion to compel assumption or rejection filed by another party to the contract, to give adequate
assurance of future performance of any contract that is to be ridden through.<a href="#33" name="33a">33</a> Accordingly, the
ride-through election would not be appropriate in conjunction with a liquidating plan.<a href="#34" name="34a">34</a>

Also, Epstein and Nickles raise the issue of the very broad, current definition of "claim" under the
Bankruptcy Code.<a href="#35" name="35a">35</a> They assert that an executory contract would meet the definition of "claim," and if
not dealt with in the plan, it would be extinguished or otherwise discharged under §1141.<a href="#36" name="36a">36</a> Whether or
not this is the case, this matter may be addressed by placing a provision in the plan that excludes from
discharge all executory contracts not assumed or rejected.

Finally, if there is an ipso facto clause terminating or modifying the contract upon a bankruptcy filing
or the event of insolvency, ride through could be lost as an option should the court choose to follow certain
precedents. Typically, such clauses are unenforceable pursuant to §365(e)(1). However, an exception to this
provision is set forth in §365(e)(2). The circumstances under which the exception applies are subject to
interpretation. However, the authors believe that if §365(e) is interpreted properly, the ipso facto clauses
will be deemed unenforceable unless the entity attempting to retain the personal contract would not be
allowed to retain it under non-bankruptcy law.<a href="#37" name="37a">37</a> The proposed amendments to §365, referenced earlier,
also propose changes to §365(e) regarding ipso facto clauses.<a href="#38" name="38a">38</a> If these proposed amendments are passed,

ipso facto clauses will be enforceable in all cases where the debtor-in-possession cannot assume under the
new subdivision (c). This would have the effect of rendering the ride-through option almost valueless,
especially in non-chapter 11 cases.

<h3>Conclusion</h3>

Ride-through remains a viable alternative when dealing with certain executory contracts on behalf of
reorganizing debtors. It is a means to retain a personal contract without formal assumption, which could
prove valuable in circuits that have adopted the hypothetical test. The proper implementation of retention
without assumption could greatly increase the chances of a successful reorganization or out-of-court
workout because it provides the financially troubled debtor with much-needed bargaining leverage when
negotiating with its creditors.

Perhaps the most intriguing aspect of the ride-through doctrine is how courts of the Third Circuit have
treated executory personal contracts. The Third Circuit has been the longest proponent of the hypothetical
test or literal interpretation of §365(c). As seen above, Third Circuit courts also frequently apply the
ride-through option.

Whether coincidental or not, these opinions lead to the conclusion that perhaps by using the hypothetical
test and ride through in concert, many of the harsh results anticipated by the hypothetical test can be
avoided. Although no case marries the two specifically, with these tools a balance may be struck between
remaining true to the actual words of the Bankruptcy Code and also furthering the bankruptcy objectives
of rehabilitation and reorganization. At the very least, courts have the means to do equity—the heart of
bankruptcy policy and practice.

As a final word, this article is an overview of the subject. The authors' extensive research has
uncovered several areas of difficulty that, if not anticipated and properly handled, could certainly cause
more problems than ride-through could solve. The advice of counsel experienced in these areas should
be sought, and a careful strategic plan must be employed to make the most out of the ride-through option
in the personal contract context.

<hr>
<h3>Footnotes</h3>

<a name="1">1</a> See, e.g., <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… City of Jamestown v. James Cable Partners (In re James Cable Partners), 27 F.3d 534 (11th Cir.
1994)</a> (cable television franchise agreement); <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Country Club Inc. v. Burr (In re Continental Country Club Inc.), 114 B.R. 763 (Bankr. M.D. Fla. 1990)</a> (employment contract); <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… v. Harms (In re Harms), 10
B.R. 817 (Bankr. D. Colo. 1981)</a> (partnership agreements); <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… v. Dayton Country Club Co. (In re Magness),

972 F.2d 689 (6th Cir. 1992)</a> (country club membership agreement); <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… re Access Beyond Technologies Inc., 237
B.R. 32 (Bankr. D. Del. 1999)</a>; <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Systems Inc. v. Cadtrak Corp. (In re CFLC Inc.), 89 F.3d 673
(9th Cir. 1996)</a> and Perlman v. Catapult Entertainment Inc., supra (non-exclusive patent license agreements). <a href="#1a">Return to article</a>

<a name="2">2</a> The proposed amendments to §365(c) generally retain the prohibition of the assumption and assignment of personal contracts but
add that "in a case under chapter 11 of this title, a trustee in a case in which a debtor is a corporation or a
debtor-in-possession may assume an executory contract or unexpired lease of the debtor, whether or not the contract or lease prohibits
or restricts assignment of rights or delegation of duties." H.R. 833, Bankruptcy Reform Act of 1999, §305 (Permitting
Assumption of Contracts). <a href="#2a">Return to article</a>

<a name="3">3</a> "Assuming" a pre-bankruptcy contract has been simplified (or oversimplified) as synonymous with the decision to continue performing the
contract. <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=…, J. Lawrence, "A Functional Analysis of Executory Contracts," 74 Minn. L. Rev. 227, 231 (1989)</a>.
The authors here prefer the more accurate term "retention" of executory contracts through the reorganization. This article will assume that there
are no issues of pre-petition termination or expiration of the executory contract, nor any issues of post-petition status of the contract with
reference to performance of the contract or categorizing the contract as a certain type of claim on the bankruptcy estate. <a href="#3a">Return to article</a>

<a name="4">4</a> <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=…, Brett W., "Assuming and Assigning Executory Contracts: A History of Indeterminate 'Applicable Law'," 70 Am. Bankr. L.J. 95, 115 (Spring 1996)</a>. <a href="#4a">Return to article</a>

<a name="5">5</a> <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Circuit—Breeden v. Catron (In re Catron), 158 B.R. 629 (E.D. Va. 1993), aff'd without op., 25
F.2d 1039 (4th Cir. 1994)</a>; <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… States v. Techdyn Systems Corp. (In re Techdyn Systems), 235 B.R. 857
(Bankr. E.D. Va. 1999)</a>; <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Circuit—Perlman v. Catapult Entertainment Inc. (In re Catapult Entertainment Inc.),

165 F.3d 747 (9th Cir. 1999)</a>; <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Circuit—The City of Jamestown v. James Cable Partners (In re James Cable
Partners), 27 F.3d 534 (11th Cir. 1994)</a>. <a href="#5a">Return to article</a>

<a name="6">6</a> See <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Pasteur and Pasteur Sanofi Diagnostics v. Cambridge Biotech Corp., 104 F.3d 489 (1st Cir. 1997)</a>. Under the "actual test," §365 would bar assumption by the trustee only when the assumption would result in the non-debtor actually having to accept performance from a third party. <a href="#6a">Return to article</a>

<a name="7">7</a> <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Entertainment Inc., supra at 749-750</a>. <a href="#7a">Return to article</a>

<a name="8">8</a> <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=…; at 751-754</a>. <a href="#8a">Return to article</a>

<a name="9">9</a> <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=…; at 754-755</a>. <a href="#9a">Return to article</a>

<a name="10">10</a> See Walper, Thomas B. and Shinderman, Mark, "Ninth Circuit Weighs In; Conflict Regarding Interpretation and Application of
Sec. 365(c)(1)," The Bankruptcy Strategist (March 1999). <a href="#10a">Return to article</a>

<a name="11">11</a> "The ability of the licensors to prohibit the assumption of non-exclusive patent licenses may, in certain circumstances, render
reorganization impossible for a debtor at the expense of other creditors." Hesse, Gregory G., "Ninth Circuit Slams Shut the 'Back
Door' Access to Patented Technology," ABI Journal at 18 (April 1999); see, also, <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=…, supra note 3, at 113</a>. <a href="#11a">Return to article</a>

<a name="12">12</a> Courts have also recognized the harsh results of this interpretation. For example, the court in <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… States v. Techdyn Systems Corp., supra 235 B.R. at 864</a>, stated the problem quite frankly: "The court is sympathetic with such concerns and recognizes that a blanket
refusal to permit a reorganizing debtor to assume valuable government contracts over the government's objection may well represent poor bankruptcy
policy. Certainly, where a debtor's sole or primary assets consist, as here, of government contracts, application of the 'hypothetical test'
effectively gives the government a veto over any reorganization. Nevertheless, bad policy does not justify a judicial rewrite of the Bankruptcy
Code. <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=…; 165 F.3d at 754</a> ('Policy arguments cannot displace the plain language of the statute...'). The court must presume
that Congress means what it says and says what it means through the passage of statutes. This court's duty is to apply the statute as
written, and if the unfortunate result is to hinder reorganization efforts that ought to succeed, the appropriate forum in which to raise those
concerns is the halls of Congress." See, also, <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=…, supra note 3 at 112, note 79</a> ("As a consequence, the debtor-in-possession
would often be denied valuable assets that were owned by the debtor pre-petition, a result clearly contrary to the rehabilitative goals of
the Bankruptcy Code"). "...[A]ll sorts of contracts that bankruptcy lawyers have long presumed may be assumed by the debtor, even if
not assignable, may not be assumable at all." <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… & Shinderman, supra.</a> Commentators have also recognized serious problems that could occur
in the context of real estate partnerships if the ability to assume or assume and assign a partnership agreement pursuant to §365 was
impeded. Goldberg, Thomas D., "Assumption and Assignment of Partnership Agreements: Recent Developments," 94 ABI Journal (April
1994). In addition, the stigma of the vulnerability of personal executory contracts could affect financial relationships. For example,
the uncertainty of the ability to retain such executory contracts could have a negative effect on the ability of a business to obtain financing.
To the extent a lender evaluates license agreements, such as security or collateral for a loan, as well as the potential of bankruptcy for
the borrowing business, the tenuous nature of the ability to retain these valuable contracts in a reorganization could cause lenders to be less
likely to provide funds to such businesses for startup or expansion. <a href="#12a">Return to article</a>

<a name="13">13</a> See <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Country Club Inc. v. Burr (In re Continental Country Club Inc.), 114 B.R. 763 (Bankr. M.D.
Fla. 1990)</a>. <a href="#13a">Return to article</a>

<a name="14">14</a> <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Gas, supra 85 F.2d at 805</a>. <a href="#14a">Return to article</a>

<a name="15">15</a> See <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Inc. v. Union Tank Car Co. (In re Polysat), 152 B.R. 886, 890 (Bankr. E.D. Penn. 1993)</a>;
<a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Travelers Insurance Co. v. Cambridge Meridian Group Inc. (In re Erin Food Services Inc.), 980 F.2d 792 (1st
Cir. 1992)</a>: "When confronted with an alleged ambiguity in the Bankruptcy Code, courts may consult pre-Code law for appropriate
guidance, based on the presumption that Congress did not intend to effect substantive changes in the prior bankruptcy law unless its
intent is clearly expressed in the Code." <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=…; at 800</a>. <a href="#15a">Return to article</a>

<a name="16">16</a> See <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… re Taylor, 198 B.R. 142 (Bankr. S.C. 1996)</a>, where the court recognized the continued utility of the
ride-through option. See, also, <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… re Day, 208 B.R. 358, 368 (Bankr. E.D. Penn. 1997)</a>; <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… re Bacon,

212 B.R. 66, 73 fn. 13 (Bankr. E.D. Penn. 1997)</a>. <a href="#16a">Return to article</a>

<a name="17">17</a> <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Service Co. of New Hampshire v. New Hampshire Electric Cooperative Inc. (In re Public Service Co. of New
Hampshire), 884 F.2d 11 (1st Cir. 1989)</a> (debtor neither assumed nor rejected a contract with utility, thus it continued
in effect and the utility had no provable claim against the bankrupt estate); <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Mutual Life Ins. Co. v. Grey Stone III
Joint Venture (In re Matter of Grey Stone III Joint Venture), 948 F.2d 134 (5th Cir. 1991)</a>; <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Road Limited
Partnership v. FDIC (In re Boston Road Limited Partnership), 21 F.3d 477 (2nd Cir. 1994)</a> (passed through
contract's effect on determination of claims status). <a href="#17a">Return to article</a>

<a name="18">18</a> Broude, Richard F., "Executory Contracts and Unexpired Leases in Bankruptcy," ALI-ABA Course of Study Materials, Course
SE33, Real Estate Defaults, Workouts and Reorganizations (August 1999). <a href="#18a">Return to article</a>

<a name="19">19</a> 7 Collier on Bankruptcy, §1123.02[2] (15th Ed. Rev. 1999); see, also, 3 Collier on Bankruptcy,

§365.04[2][d] (15th Ed. Rev. 1999). <a href="#19a">Return to article</a>

<a name="20">20</a> Countryman, <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Contracts in Bankruptcy," 58 Minn. L. Rev. 479, 561-62 (1974)</a>; see, also, Bordewieck,
<a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=… Post-petition, Pre-rejection, Pre-assumption Status of an Executory Contract," 59 Am. Bankr. L. J. 197, 200,
211-213 (1985)</a> (recognizing the continuing duty of a lessee to pay rent to a debtor-in-possession when a lease has been
neither assumed nor rejected and the consequences in the form of an injunction for failure to perform). <a href="#20a">Return to article</a>

<a name="21">21</a> Reforming the Bankruptcy Code: National Bankruptcy Conference Code Review Project (Rev. ed. 1997). <a href="#21a">Return to article</a>

<a name="22">22</a> <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=…; The conference members' concerns appear aimed at "accidental" or unknowing obligations undertaken via a contract when not
addressed in the bankruptcy. These are legitimate concerns. However, the authors propose managed ride through, done knowingly to avoid
the potential bar to assumption of the "hypothetical test." <a href="#22a">Return to article</a>

<a name="23">23</a> Epstein, David G. and Nickles, Steve H., <a href="http://www.westlaw.com/find/default.asp?rs=CLWP2.1&vr=1.0&cite=…;

</a>

Journal Authors

Mark R. Campbell

Robert C. Hastie

Journal Date

Wednesday, March 1, 2000 - 12:00