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District Court Finds a Series of Agreements to be One – Reverses and Remands to Bankruptcy Court

Huron Consulting Servs., LLC v. Physiotherapy Holdings, Inc. (In re Physiotherapy Holdings, Inc.), No. 14-693 (LPS), 2015 WL 4205146 (D. Del. July 13, 2015)

In the spring of 2014, the Delaware Bankruptcy Court was presented with a contested assumption dispute involving six agreements between Physiotherapy Holdings Inc. and its various affiliates (together, the “Debtors”) and Huron Consulting Services, LLC (“Huron”).  While the Debtors sought to assume just one – a Licensing Agreement necessary to ongoing operations – Huron argued that all six agreements were integrated and must be assumed together or not at all.  For reasons discussed in our previous post, Judge Gross sided with the Debtors, allowing them to assume only the Licensing Agreement.  This appeal followed.

Narrowing the issues on appeal, Huron focused its integration argument on only three of the six agreements at issue.  As noted by the District Court, the determination of whether multiple agreements are independent or unitary focuses on the intent of the contracting parties, and if the agreements are written, the “final expression” of the parties’ intention can be discerned from the writings themselves.  Disagreeing with the Bankruptcy Court, the District Court also noted that execution of multiple agreements need not be simultaneous for those intended to be unitary to indeed be considered as one.

Turning to the agreements at issue, the District Court focused on their integration clauses.  While the Bankruptcy Court determined that the clauses simply eliminated parol evidence, the District Court disagreed, holding that language such as “This Agreement, [and other Agreements], including the License Agreement, … represent the entire, final and complete agreement between Client and Huron with regard to the services Huron will perform” established “robust intent” that the multiple documents were one.  Additionally, language was included in each agreement governing how the parties were to construe conflicting and inconsistent provisions amongst the documents.  The Bankruptcy Court relied on such language to disprove integration but the District Court further disagreed.  In its view, while provisions of separate agreements may conflict, the agreements can still form a single contract.  Conflicting provisions may pertain to different scenarios, but if they overlap, then language within the agreements can provide for a rule of interpretation.  That language existed in the agreements before the Court.

Ultimately, because the agreements were found to indicate the parties’ intent for unity, the District Court held that the Bankruptcy Court erred by granting the Debtors’ request to assume just the License Agreement and its benefits while rejecting the remainder of the agreements and their burdens.  On remand, the Debtors must now make their choice either to reject the agreements or assume them cum onere.