Opinion ID: 40556
Heading Depth: 3
Heading Rank: 3

Heading: The Denial of Modification to Stay

Text: 53 We next address BPA's contention that the lower courts erred in failing to lift or modify the stay under § 362(d)(1). Based upon our conclusion that the Anti-Assignment Act has no application on this record, we cannot say the bankruptcy court abused its discretion in denying BPA's Motion to Modify Stay. The bankruptcy court denied BPA's motion because the court concluded that BPA failed to show cause for relief from stay under § 362(d)(1), although a portion of the court's conclusion also necessarily rested upon the legal determination that the Anti-Assignment Act is not an applicable law under § 365(c)(1) or (e)(2)(A). 54 The Bankruptcy Code does not precisely define cause under § 362(d)(1), and in the past we have noted that this lack of definition affords flexibility to the bankruptcy courts. Little Creek Dev. Co. v. Commonwealth Mortgage Corp. ( In re Little Creek Dev. Co. ), 779 F.2d 1068, 1072 (5th Cir.1986) (explaining that lack of good faith is sufficient for cause and discussing the inherent balancing required for the court's determination of whether a stay should be lifted under § 362(d)). Mirant argues that a contractual right to terminate does not constitute sufficient cause to grant relief from the automatic stay. See Elder-Beerman Stores Corp. v. Thomasville Furniture Indus. Inc. (In re Elder-Beerman Stores Corp. ), 195 B.R. 1019, 1023 (Bankr.S.D.Ohio 1996). The exception provided by § 365(e)(2)(A) discredits such a broad understanding of the limits on a potential relief from stay, and a bankruptcy court's discretion is not so broad as Mirant argues. Although the district court did not abuse its discretion here to deny the stay's modification, on a record differing in fact, procedure, or both, a bankruptcy court's discretion is limited by the text of § 365(e)(2)(A), that is, in the case in which a law proffered as applicable under § 365(e)(2)(A) is determined to apply to the case, then the stay must be lifted or modified in such a way that permits the entitled nondebtor party to exercise its termination option accordingly. 55 Here, BPA has not demonstrated cause because the Anti-Assignment Act is not an applicable law on this record because here there has been no transfer. In order for the Act to apply to this case, it must be said that the Agreement was transferred within the meaning of the Act. See 41 U.S.C. § 15. The caselaw, however, does not support BPA's reading of transfer under the Act. On this record, the Anti-Assignment Act cannot apply because no assignment, which would be prohibited by the Act, occurred between prepetition debtor and debtor in possession for three salient reasons. First, Mirant never affirmatively assumed or rejected the Agreement. See 11 U.S.C. § 365(a). 19 According to § 365(f)(2)(A), assumption must precede assignment. See § 365(f)(2)(A); see also Cinicola v. Scharffenberger, 248 F.3d 110, 120 (3d Cir.2001). Here, Mirant did not assume the Agreement. Second, BPA might have moved under § 365(d)(2) 20 for the court to order Mirant to determine, within time constraints, whether it would assume or reject the Agreement. But BPA never so moved the court, nor did it make any effort apparent on the record (other than the letter, sent to Mirant, unilaterally terminating the Agreement) to either the bankruptcy court or with opposing counsel to resolve the question of assumption or rejection. Finally, BPA conceded to the bankruptcy court that there was no assignee in fact. On such a record, no transfer — prohibited by the Anti-Assignment Act — has occurred or even been attempted, and therefore the Act is not an applicable law. 56 The parties dispute whether, as a matter of law, a transfer or assignment occurs as a result of the change in status from prepetition debtor to debtor in possession. If the change in the status produces a transfer of the executory contract, then according to BPA, the Anti-Assignment Act applies. If the change in status is nominal only and there is no transfer or assignment as a matter of law, then, as Mirant argues, the Anti-Assignment Act may have no applicability in the absence of a transfer. See 41 U.S.C. § 15 (providing that any such transfer shall cause the annulment of the contract or order transferred, so far as the United States is concerned). We need not, on this record, resolve this res nova question. 21 We hold only what this record permits, that is, no transfer occurs under the Anti-Assignment Act where the debtor neither assumes nor attempts to assume the executory contract, the nondebtor concedes there is no assignment in fact, and the nondebtor, seeking to invoke the combined effect of the Anti-Assignment Act and § 365(e)(2)(A), fails to move for assumption or rejection under § 365(d)(2). In such a circumstance, where no party has moved to assume the executory contract before the bankruptcy court, no assignment occurs between prepetition debtor and debtor in possession with respect to the Anti-Assignment Act and § 365(e)(2)(A).