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The Delaware Bankruptcy Insider is a premier blog designed to bring its readers a comprehensive analysis of the latest Delaware corporate bankruptcy news and rulings. Brought to you by Ashby & Geddes, P.A.
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- Delaware Court of Chancery
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- Judge Kevin J. Carey
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- Getting Noticed in the Digital Age: Delaware Bankruptcy Court Finds Email Notice Satisfies Due Process but Not Rule 2002
- Third Circuit Reversal Paves the Way For NextEra to Potentially Recover Administrative Expenses Incurred in Connection With Failed Merger
- Delaware District Court Disagrees with Bankruptcy Court’s Ruling and Holds That Committee’s Challenge Rights Survived Entry of the Sale Order and Consummation of Sale
Motion for Reconsideration Denied: Bankruptcy Court Correctly Interpreted Lease
In re Filene’s Basement, et al., No. 11-13511 (KJC) (Bankr. D. Del. Jan. 15, 2014)
In a previous Memorandum issued on February 19, 2013, the Honorable Kevin J. Carey found that, inter alia, an amendment to a credit agreement providing for a $10 million working capital loan secured by a leasehold mortgage constituted a “permanent mortgage” under the terms of the lease. This ruling, contingent on the Court construing the undefined lease term “permanent mortgage,” triggered significant percentage rent under the lease from the debtor, Syms Corp. (“Syms”), to the landlord. Syms moved for reconsideration of such decision on two primary grounds: (i) the Court did not evaluate whether the mortgage constituted a “refinancing” under the lease; and (ii) the Court incorrectly relied on a canon of construction for adhesion contracts and did not consider the common industry usage definition of “permanent mortgage.” According to Syms, if both of these arguments were considered, the mortgage at issue would not constitute a “permanent mortgage” under the lease and thus, no percentage rent would be due to the landlord. In this Memorandum Opinion, the Court denied Syms’s motion for reconsideration.
The Court would not reconsider its previous decision based upon Syms’s first point. Importantly, the “refinancing” issue was not briefed by the parties or raised at oral argument. The Court noted that only one footnote in Syms’s brief related to this issue, but was undeveloped and unsupported. Because it “is the responsibility of the parties to illuminate their arguments and present them–fully–to the Court,” the Court would not consider Syms’s “new, alternative theory” upon reconsideration.
Next, the Court considered whether it erred in deciding that the mortgage at issue fell within the parties’ definition of “permanent mortgage.” The Court, when deciding the issue, did not consider the common industry definition of “permanent mortgage” because it determined that the contract as a whole revealed its meaning. On reconsideration, the Court held that its decision to do so was supported by both state law and the fact that application of the common industry usage would render certain lease terms superfluous. Because every provision of a contract should be given meaning, Syms’s approach was illogical. Thus, the Court denied Syms’s motion for reconsideration on the second ground as well.