Lease Termination Damages and Letters of Credit: The Fifth Circuit Pops the Cap
Daniel I. Morenoff
Hughes & Luce, LLP; Dallas
The U.S. Court of Appeals for the Fifth Circuit recently addressed the intersection of letters of credit with Bankruptcy Code §502(b)(6)’s statutory cap on the allowance of damages for bankruptcy claims arising from the termination of leases of nonresidential real property. EOP-Colonnade of Dallas Ltd. P’ship. v. Faulkner (In re Stonebridge Tech., Inc.), 430 F.3d 260 (5th Cir. 2005). The Fifth Circuit allowed a lessor to retain amounts drawn against its letter of credit in excess of the statutory cap – a result contradicting a common reading of the decisions of two other courts of appeals.
New Publication: Bankruptcy Issues for Commercial Landlords, Tenants and Mortgagers
Written by David R. Kuney of Sidley Austin, LLP (Washington, D.C.), this manual on real estate bankruptcy is a comprehensive yet highly readable book on the rights and obligations of tenants, landlords and third parties, covering lease assumption, rejection, curing of defaults, damage calculations and pre-petition strategies, among other matters. The book covers the important new rules in this area created by BAPCPA. Softbound, 100 pages. Members: $15 (includes shipping). Order today!
Annual Spring Meeting Agenda
The committee will present a panel discussion entitled, "Managing and Marketing Weird Real Estate," which will deal with property having special conditions, such as title defects, environmental contaminaiton or squatters, that present marketing issues and legal challenges. Guest speakers will include Alex Moglia of Alex Moglia and Associates in Chicago and Steve Karbelk of Tranzon Fox in Burke, Va.
Minutes from the Winter Leadership Conference
The Real Estate Committee presented a discussion on the changes made to the practice of real estate issues in bankruptcy by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. In addition to the co-chairs, our featured speakers were Maita Prout, a partner and head of the bankruptcy practice in the Los Angeles office of Holland & Knight LLP, and William Lenhart, a partner based in New York and national director of the financial recovery practice at BDO Seidman LLP. Although the discussion focused principally on changes to the practice concerning retail leases, the panel also discussed provisions concerning single-asset real estate cases, serial filings and real property taxes. It was a lively, informative and entertaining discussion.
View Materials: The Real Property Lessor, Three Easy Pieces.