Neither the Bankruptcy Code nor caselaw, however, provides consistent guidance on whether a ROFR is an executory contract subject to rejection under section a of the Bankruptcy Code and, if so, whether the non-debtor party may nevertheless specifically enforce its rights under the ROFR. CB Holding Corporation operated three chains of restaurants in debtor s right to option mid-Atlantic region. After the bankruptcy court approved the rejection of the leases, CB Holding sought to sell the liquor licenses associated with each of the leased premises.
The court went on to conclude that the ROFR was not applicable because it was only triggered by the termination or expiration of the term of the lease — neither of which had occurred. Interestingly, many of these cases either relied upon or were similar in reasoning to In re Coordinated Financial Planning Corp.
The court rebuffed this argument, however, by simply stating that it had already found Ground Round which MBK relied upon to be unpersuasive. In Delaware, at least, the issue seems fairly settled. Moreover, some courts, including Judge Gerber of the Bankruptcy Court for the Southern District of New York, have found that a ROFR is an unenforceable restriction on an assignment of a contract under section f 1 of the Bankruptcy Code and have refused to enforce a ROFR when a debtor seeks to assume and assign a contract containing such a provision.
In re CB Holding Corporation is important precedent, but this is an area of the law that remains quite unsettled. More from the Bankruptcy Blog.