In re Inc.
| Decision Date | 28 May 2010 |
| Docket Number | No. 09-20523REF,09-20523REF |
| Citation | 440 B.R. 390 |
| Parties | In re HYMAN COMPANIES, INC., Debtor-in-Possession. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Angela Lynn Baglanzis, Edmond M. George, Michael D. Vagnoni, Obermayer Rebmann Maxwell & Hippel, LLP, Philadelphia, PA, Joseph Vogel, Kravet & Vogel, LLP, New York, NY, for Debtor-in-Possession.
Dave P. Adams, USDOJ, Philadelphia, PA, for U.S. Trustee.
Barry D. Kleban, Christin E. Deacon, Gary David Bressler, McElroy Deutsch Mulvaney & Carpenter, Philadelphia, PA, for Creditor Committee.
Debtor's business is selling high-end costume jewelry and other merchandise from shopping center, mall, and hotel stores and kiosks throughout much of the United States. The matter currently before me arose from Debtor's attempt to assume numerous leases for locations from which it sells its goods. One of the leases at issue is with a Marriott hotel and is titled Concession Agreement (both as initially drafted and as later revised and executed, the "Lease").1 The Lease providesfor the location of a retail sales kiosk in the lobby of the hotel located at Copley Square in Boston, Massachusetts. Three issues underlie the dispute involving Debtor's attempt to assume the Lease.
The first issue is the effectiveness of the attempted termination of the Lease in September 2008, about six months before Debtor filed the present Chapter 11 proceeding. The parties had specifically negotiated terms that would control the relationship between them upon the hotel's renovation or reconstruction of its lobby. The renovation/reconstruction of the lobby came to pass and I must therefore interpret that language of the Lease and the actions taken by the parties to the Lease, particularly the actions of the hotel. The second issue is whether Debtor had assigned the Lease to a related, non-debtor entity before it filed this bankruptcy proceeding. No written assignment of the Lease exists. But the hotel presented circumstantial evidence of an assignment. The third issue, which I will answer first, is the order in which I must address the preceding two substantive questions.
First, I conclude that I will consider termination of the Lease as the first substantive issue. Second, I find and conclude that the termination of the Lease in September 2008 was not effected pursuant to the terms of the Lease. Third, I find and conclude that Debtor did not assign the Lease to any other party (related or otherwise). The Lease remains with Debtor as part of its Chapter 11 estate in the status that existed when Debtor filed its bankruptcy petition. In the matter now before me, therefore, I reject the hotel's opposition to Debtor's assumption of the Lease and I will grant Debtor's motion to assume the Lease.
Debtor, The Hyman Companies, Inc.,2 initiated this Chapter 11 reorganization when it filed its petition on March 3, 2009. On September 16, 2009, in the course of the administration of its estate, Debtor filed the Combined Motion of Debtor for (i) Expedited Consideration, Shortened Time and Limited Notice, and (ii) an Order Pursuant to 11 U.S.C. § 365 Authorizing the Assumption of Unexpired Leases of Nonresidential Real Property (the "Assumption Motion"). The Assumption Motion sought approval of Debtor's request and intention to assume numerous leases of space for its stores and kiosks throughout the country. Chief Judge Stephen Raslavich granted that portion of the Assumption Motion that sought expedited consideration and set a date for me to hear the Assumption Motion on September 24, 2009.3
Many of the leases between Debtor and its various lessors were quickly assumed pursuant to the parties' agreements and consent orders filed on and following the September 24, 2009 hearing date. On October 9, 2009, I entered a consent order scheduling a hearing on November 5, 2009,for me to consider the dispute between Debtor and Marriott Copley,4 which had filed its objection to the Assumption Motion on October 30, 2009. The issue raised by the original objection was the effect of Marriott Copley's pre-petition attempt to terminate the Lease of lobby space to Debtor for its retail sales kiosk (the "Kiosk"). On November 5, 2009, the hearing on Debtor's dispute with Marriott Copley was continued to December 18, 2009, the date on which I heard the first part of this contested matter in an all-day evidentiary hearing.
At the conclusion of the December 18, 2009 hearing, the parties agreed to file their briefs on the termination issue on January 5, 2010. I suggested that their briefs address certain issues in particular, although I gave them leave to address any other issues that they thought were germane. I followed my oral suggestion of the issues to be briefed with my written Order on December 21, 2009, in which I described certain specific issues, among any others, that the parties should address.
On January 4, 2010, counsel for Marriott Copley filed a letter in which he identified a second, completely new and different, issue that Marriott Copley believed must be determined as part of this dispute. Counsel claimed that they had only very recently discovered 5 that the Lease might have been assigned to a non-debtor affiliate of Debtor, which might therefore render the issue of termination of the Lease beyond my power and ability to decide. The assignment issue had not been mentioned at all in the pleadings leading to or during the December 18, 2009 hearing. Debtor immediately denied and continues to deny that any such assignment exists.6 In a telephone conference among myself and all counsel on January 4, 2010, the parties agreed to conduct discovery on the assignment issue and to participate in a hearing, if one were necessary, on January 15, 2010. On January 8, 2010, counsel informed me that they had difficulty in completing discovery; I agreed with their request to continue the assignment hearing to January 29, 2010. Once again,counsel jointly requested that the hearing be continued to February 19, 2010; I agreed. I heard additional testimony and received additional exhibits on the assignment issue at the second hearing date.
On February 18, 2010, the day before the hearing, the parties raised an issue that they believed was jurisdictional. The new issue, discussed in more detail below, related to the order in which I must decide the two substantive issues before me—termination of the Lease and assignment of the Lease. I established a new briefing schedule for the two substantive issues and the single jurisdictional issue at the conclusion of the February 19, 2010 hearing. Through my written Order on February 24, 2010, I again described a specific legal issue, among any other issues, for the parties to research and brief. I later twice extended the briefing schedule upon the unexpected and serious illness of a family member of one of the counsel before me. The parties timely filed their briefs on or before the due dates.
On May 11, 2010, Debtor filed a motion to strike certain exhibits and arguments presented by Marriott Copley. Following a telephone conference with counsel in which I listened to their positions and stated mine, I issued a written Order dated May 12, 2010, granting Debtor's motion in part and denying it in part.
In summary, I have decided that I will first determine the Lease termination issue. I will then address the Lease assignment issue.7 I have concluded that Marriott Copley had attempted to terminate the Lease, but that the termination was not done in accordance with any provision in the Lease. Marriott Copley may therefore be subject to Debtor's claim for damages resulting from the attempted termination or for some other relief.8 I have also determined that the Lease has not been assigned and remains property of the Debtor's estate in this case, subject to the attempted termination by Marriott Copley. My analysis and discussion for arriving at these conclusions follows.9
This contested matter is a core proceeding, relating to a fundamental issue in the administration of Debtor's reorganization efforts,10 and is now ripe for my determination. This Opinion contains my findings and analysis of facts, my conclusions of law, and my discussion of the application of the law to the facts.
I find no material deviation in the parties' evidence showing how the Lease, particularly Section 11, was negotiated and revised from its initial iteration to the final version executed by the parties.
Some time in or before 2003, Debtor initiated discussions with Marriott Copley about placing a kiosk in its lobby for the sale of Debtor's high-end costume jewelry and other merchandise. Debtor prepared the first draft of the Lease, because Debtor's principal, Mr. Nat L. Hyman ("Mr. Hyman"), had previously negotiated a similar lease with another Marriott hotel. Debtor sent the first draft of the Lease to Marriott Copley with its November 24, 2003 letter. The initial version of the Lease included the following Section 11:
11. Hotel Alterations. If renovation, construction, or other Hotel needs necessitates a relocation or closing of the present Premises, Operator agrees that Marriott shall have the right to temporarily relocate the Operator's business to a comparable premises (with rentals proportionately abated).
Exhibit D-1.
On December 3, 2003, following further discussions between the parties, Debtor sent the Lease to Marriott Copley with the following revised Section 11:
11. Hotel Alterations. If a major renovation or reconstruction of the Hotel lobby necessitates a relocation or closing of the present Premises, Marriott shall use its best efforts to relocate the Operator's business to a comparable premises (with rentals proportionately abated). If a relocation is not possible, then, in such event,...
To continue reading
Request your trial
-
Is This Really the Best We Can Do? American Courts’ Irrational Efforts Clause Jurisprudence and How We Can Start to Fix It
...163 n.1, 166 n.2 (3d Cir. 2001) (implying that there is a distinction between “best efforts” and “reasonable efforts”); In re Hyman Cos., 440 B.R. 390, 409 (Bankr. E.D. Pa. 2010) (“[I]t is particularly important that the parties had amended the language of Section 11, changing the duty of M......