Opinion ID: 214647
Heading Depth: 2
Heading Rank: 1

Heading: The Scope of the Assignment

Text: The bankruptcy court's interpretation of the assignment agreement is a question of law, and we review its interpretation de novo. See International Production Specialists, Inc. v. Schwing America, Inc., 580 F.3d 587, 594 (7th Cir.2009). The AT & T-ReGen assignment agreement defined a claim, with some emphasis added, as: any general pre-petition unsecured claim of AT & T against a debtor together with interest, if any, payable thereon from and after the Effective Date, and any actions, claims, lawsuits or rights of any nature whatsoever, whether against a debtor or any other party, arising out of or in connection with the Claim, including, Assignor's right to receive, from and after the Effective Date, any cash, securities, instruments, and/or other property as distributions on the Claim. The bankruptcy court rejected ReGen's argument that it was entitled to cure, commenting that the right to cure does not arise out of a claim. It arises out of a contract. The bankruptcy court went on to conclude that the assignment agreement assigned only general pre-petition unsecured claims. According to the court, the general pre-petition unsecured claim referenced in the agreement definition did not and could not become a cure claim. The district court agreed that the only reasonable interpretation of the assignment agreement was that ReGen purchased general pre-petition unsecured claims and the right to recover any distribution made on account of those general pre-petition unsecured claims, and not the right to recover the full amount of the default. While we do not dispute the bankruptcy court's statement that a right to cure arises out of a contract, we disagree with both courts' conclusion that the language of the AT & T assignment agreement restricted ReGen's treatment to that of a general unsecured claim holder. We hold that the agreement's definition of claim is broad enough to include the right to collect a cure amount arising from AT & T's original contracts. Under the assignment agreement, ReGen received not only the general unsecured claim but also any actions, claims, lawsuits or rights arising out of or in connection with that claim. ReGen's cure claim fits within this broad definition. It is connected to the general unsecured claim through the original provision of services from which the default arose. Further, the assignment agreement's definition of Claim itself uses the word claim, which the Bankruptcy Code defines broadly, in relevant part, as a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured. 11 U.S.C. § 101(5)(a). We are not persuaded by United's contention that, because a separate filing is required to seek a cure claim, the cure claim is disconnected from the general unsecured claim. The claims stem from the same transaction giving rise to a single right to payment. The priority granted to the right to payment changes (dramatically) based on the debtor's court-approved treatment of the executory contract, but the right is the same. Thus, we interpret the agreement to give ReGen the ability to seek a cure arising out of United's default on the AT & T contracts. [2] Our conclusion on this point agrees with the Second Circuit's interpretation of exactly the same contract between AT & T and ReGen in ReGen Capital I, Inc. v. Halperin (In re U.S. Wireless Data), 547 F.3d 484 (2d Cir.2008). The bankruptcy court determined there that ReGen, as assignee of AT & T's pre-petition general unsecured claim, had a valid cure claim but had missed the deadline to file for cure. The district court affirmed. In re U.S. Wireless Data, No. 06 Civ. 829, 2006 U.S. Dist. LEXIS 42577, at -2 (S.D.N.Y. June 21, 2006). The district court characterized ReGen's purchase as rights that arose under the AT & T contracts. Id. at . The court held that ReGen, as transferee, was among the parties required to file for cure in order to recover on its claim. (Exactly the same transfer notice form was used in this case.) The Second Circuit affirmed. It found no difference between the claim ReGen purchased and the claim that AT & T could have pursued. 547 F.3d at 493-94. The Second Circuit clarified that, although ReGen's claim was a general unsecured claim in the literal sense, it plainly falls into the narrower, more specific category of a cure claim because it is a claim against the Debtor under [an] executory contract that arose prior to the commencement of the Chapter 11 case. 547 F.3d at 495 (quotation marks omitted; alteration in original). There, as here, AT & T's assignment to ReGen allowed ReGen to seek the full pre-petition amount owed to AT & T, but the assignment separated the issue of cure from the ongoing business relationship between the debtor and AT & T. As a result, AT & T did not have the same incentives to try to force the debtor to make a prompt decision to assume or reject its executory contracts. [3] Our analysis is also consistent more generally with the Supreme Court's decision in Shropshire, Woodliff & Co. v. Bush, 204 U.S. 186, 27 S.Ct. 178, 51 L.Ed. 436 (1907). In that case, the Court considered whether an assignee of a claim for wages earned by an employee of a debtor-employer before the commencement of bankruptcy proceedings was entitled to priority of payment. The bankruptcy statute then in effect granted priority to claims arising from wages earned within three months of the commencement of the bankruptcy proceedings. Act of July 1, 1898, ch. 541, § 64(b), 30 Stat. 544, 563. The Court made clear that the priority associated with a claim is attached to the debt and not to the person of the creditor; to the claim and not to the claimant. 204 U.S. at 189, 27 S.Ct. 178. We came to the same conclusion in Dorr Pump & Manufacturing Co. v. Heath (In re Dorr Pump & Manufacturing Co.), 125 F.2d 610 (7th Cir.1942). In that case, a group of stockholders of a bankrupt corporation purchased wage earners' claims for the amounts they claimed against the corporation. At the same time, the stockholders and the wage earners agreed in writing that the wage earners had sold and assigned their claims. Their agreement assigned all right, title, and interest which [the original claim holders] have in and to a certain claim. 125 F.2d at 610. We held that this assignment placed the claim purchaser in the same position as the original claim holders. Notwithstanding changes made to bankruptcy law since the Supreme Court's decision in Shropshire and ours in Dorr, their shared principle remains good law. Accord, Frederick Tung, Confirmation and Claims Trading, 90 Northwestern U.L.Rev. 1684, 1699 (1996) (The basic premise that drives investment in bankruptcy claims is that the purchaser of a claim . . . generally succeeds to all the rights of its seller. Perhaps the most important of these rights from the purchaser's perspective is the right to demand payment in full on the claim.) (footnote omitted); Chaim J. Fortang & Thomas Moers Mayer, Developments in Trading Claims: Participations and Disputed Claims, 15 Cardozo L.Rev. 733, 759 (1993) (For over eight decades, federal courts from the Supreme Court on down have unanimously held that a claim in the hands of a buyer is no different than a claim in the hands of a seller.). Like the Second Circuit, we find no ambiguity in the terms of the AT & T-ReGen assignment agreement and conclude that the agreement enabled ReGen, by way of its purchase of AT & T's claim in the United bankruptcy proceedings, to file for cure just as AT & T could have in the absence of the assignment.