Court Opinion

ID: 205114
Source: CourtListenerOpinion
Date Created: 2011-02-18 15:47:38+00
Date Added: 2024-06-11T17:27:46.806248
License: Public Domain

In the

United States Court of Appeals
               For the Seventh Circuit

No. 10-1524

IN THE M ATTER OF:

    UAL C ORPORATION,
                                                                   Debtor.

R EG EN C APITAL I, INC.,
                                                             Appellant,
                                  v.

UAL C ORPORATION, et al.,
                                                              Appellees.

             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
               No. 09 C 5225—John W. Darrah, Judge.

   A RGUED O CTOBER 22, 2010—D ECIDED F EBRUARY 18, 2011

  Before K ANNE, T INDER, and H AMILTON, Circuit Judges.
  H AMILTON, Circuit Judge. A claims trader buys claims
against bankrupt debtors from creditors at a discount. See
In re Kreisler, 546 F.3d 863, 864 (7th Cir. 2008). This appeal
addresses how purchased claims can be affected by a
debtor’s decision to assume or reject executory contracts
from which those claims arose. We affirm the district
2                                                No. 10-1524

court’s judgment holding that the purchaser of a pre-
petition unsecured claim arising from executory con-
tracts is not entitled to a “cure” that would pay it 100 cents
on the dollar for the claim because the debtor did not
assume the executory contracts at issue.
  AT&T Corporation and appellant ReGen Capital I, a
financial firm that operates as a claims trader, entered
into a contract. AT&T agreed to assign to ReGen pre-
petition unsecured claims that AT&T held against
parties in bankruptcy. One of these claims was a gen-
eral unsecured claim that AT&T maintained against
debtor-appellee United Air Lines, Inc. after United de-
faulted on a series of contracts for telecommunications
services. Believing that United intended to assume the
AT&T executory contracts from which the general unse-
cured claim arose, ReGen filed a “cure claim” in United’s
bankruptcy proceedings to collect the full amount of the
default. Under the Bankruptcy Code, a debtor cannot
assume an executory contract unless the debtor satisfies
several statutory conditions, including both receiving
court approval and either curing any default or pro-
viding adequate assurance that it will promptly cure. See
11 U.S.C. § 365(b). The result of the cure requirement is
that a party to an assumed executory contract with
the debtor typically comes out well ahead of other unse-
cured creditors. United objected to ReGen’s cure claim
and later filed notice of its intent to reject the AT&T
contracts.
  The bankruptcy court denied ReGen’s cure claim on
two grounds. First, the court determined that AT&T had
No. 10-1524                                                  3

not assigned ReGen a right that entitled it to file for
cure under 11 U.S.C. § 365(b)(1)(A). On that theory, only
AT&T as a party to the contracts, and not ReGen,
could seek cure if United sought to assume the con-
tracts. Second, the court concluded that, in any case,
United had rejected the AT&T contracts, foreclosing any
opportunity for either AT&T or ReGen to seek cure. The
district court affirmed on both grounds. Although we
disagree with the bankruptcy and district courts on the
first point, the interpretation of AT&T’s assignment to
ReGen, we agree with both courts on the second. United’s
confirmed reorganization plan permitted it to reject
the AT&T contracts, and it did so effectively. The re-
jection barred ReGen from recovering the cure amount.

I. Factual and Procedural Background
  United and its affiliated debtors filed for Chapter 11
bankruptcy on December 9, 2002. We need not chron-
icle here the long history of United’s bankruptcy pro-
ceedings.1 We focus on AT&T’s assignment of its unse-
cured claim and the treatment of its executory contracts.
  On January 16, 2004, AT&T filed a proof of claim in
the United bankruptcy proceedings, asserting a general

1
   We have considered several appeals arising from the United
bankruptcy. See, e.g., United Air Lines, Inc. v. HSBC Bank USA
(In re United Air Lines, Inc.), 453 F.3d 463 (7th Cir. 2006);
United Airlines, Inc. v. HSBC Bank USA, N.A., 416 F.3d 609
(7th Cir. 2005); In re UAL Corp., 411 F.3d 818 (7th Cir. 2005);
In re United Airlines, Inc., 368 F.3d 720 (7th Cir. 2004).
4                                               No. 10-1524

unsecured claim in the amount of $5.4 million, later
reduced by the court to $4.9 million. The next month,
ReGen filed a “Notice of Transfer of Claim” and a
“Notice of Assignment of Claim” that recorded ReGen’s
purchase of AT&T’s claim under their 2002 assignment
agreement.
   In accord with the provisions of Chapter 11, United
filed a proposed reorganization plan in late 2005 to pro-
vide a means to satisfy the claims of its creditors and
other parties in interest and to make arrangements for
future operations. Pursuant to 11 U.S.C. § 1123(b)(2),
United’s proposed plan provided for the assumption
and rejection of executory contracts—contracts where
“significant unperformed obligations remain on both
sides.” Dick v. Conseco, Inc., 458 F.3d 573, 577 (7th Cir.
2006) (emphasis in original), quoting Mitchell v. Streets
(In re Streets & Beard Farm Partnership), 882 F.2d 233, 235
(7th Cir. 1989). United’s proposed plan also addressed
means for curing any default on those contracts pursu-
ant to 11 U.S.C. § 1123(a)(5)(G). As it relates to defaults,
“to cure” means to remedy or rectify the default and to
“restore matters to the status quo ante,” often by making
full payment for services or goods provided before
the filing of the bankruptcy petition. See In re Clark,
738 F.2d 869, 872 (7th Cir. 1984) (collecting cases). A
Chapter 11 debtor may assume an executory contract
subject to court approval and only if, at the time of as-
sumption, the debtor-in-possession or trustee “cures, or
provides adequate assurance that [it] will promptly
cure,” any default on the contract. 11 U.S.C. § 365(b)(1)(A).
(While there are some exceptions to this requirement,
No. 10-1524                                               5

they are not applicable here. See 11 U.S.C. § 365(b)(1)(A),
(b)(2).)
  Under the terms of United’s plan, its confirmation
“constitute[d] the Bankruptcy Court’s approval of the
proposed treatment of executory contracts” and “deter-
mination that the Debtors have exercised reasonable
business judgment in determining whether to assume
or reject each of their executory contracts.” The plan set
out a “Cure Bar Date,” after which no further cure
claims would be accepted from any creditor claiming a
default on an assumed executory contract. In an exhibit
to the plan entitled “Assumed Executory Contracts and
Unexpired Leases,” United listed ten AT&T executory
contracts. The exhibit did not, however, list any ap-
proved or agreed cure amounts.
  Most important for the present appeal, United’s plan
also included a reservation of rights that allowed it to
reject any executory contract up to fifteen days after the
later of (1) the date on which the contracting parties’
agreed to the amount of the cure, or (2) the issuance of a
final order from the bankruptcy court establishing the cure.
Creditor Sabre, Inc., which also had executory service
contracts with United, objected to this provision. Sabre
argued that the reservation violated section 365(d)(2) of
the Bankruptcy Code, which provides that a trustee
may assume or reject an executory contract “at any time
before the confirmation of a plan,” by authorizing United
to postpone final decisions whether to assume or reject
executory contracts until long after confirmation and
implementation of the plan. After raising these objec-
6                                               No. 10-1524

tions, Sabre negotiated an exemption from the reserved
right to reject its executory contracts. ReGen, on the
other hand, raised no objection and voted in favor of the
plan.
  The bankruptcy court confirmed United’s plan effective
February 1, 2006. United paid ReGen $626,000 in new
common stock as its pro rata share of United’s distribu-
tion to holders of general unsecured claims.
  ReGen then submitted a cure claim for the full amount
of AT&T’s contractual default. ReGen asserted that, by
including the AT&T contracts (the contracts that
formed the basis of the claim it purchased) in a list
labeled “Assumed” contracts, United had elected to
assume them. In ReGen’s view, that assumption meant
that it was entitled to a complete cure, which would
confer on its claim priority status like that of an adminis-
trative expense claim—it would be reimbursed 100 cents
on every dollar of unsecured pre-petition debt. ReGen
calculated a cure claim amount of $4.3 million, the total
amount owed to AT&T under the contracts, less the
value of the new common stock that ReGen received in
the earlier distribution.
  United objected, asserting that the claim was “not
supported by the Reorganized Debtors’ Books and Rec-
ords.” On June 4, 2008, United filed notice of its
intent to reject the AT&T contracts. United also asserted
that the terms of AT&T’s assignment to ReGen allowed
ReGen to file only a general unsecured claim and not a
cure claim. At a hearing on June 18, 2008, the bank-
ruptcy judge ruled that ReGen’s general unsecured pre-
No. 10-1524                                                7

petition claim did not carry with it a right to receive a
cure payment in connection with the assumption of
the contract that gave rise to the claim. ReGen then filed
an amended cure claim, and United raised the same
objections. On July 29, 2009, the bankruptcy court disal-
lowed the amended cure claim for the same reason it
had disallowed the original and because it found that
United had properly rejected the AT&T contracts. The
district court affirmed on both grounds, and ReGen
appealed to this court.

II. Discussion
   We take up each of the bankruptcy court’s two justifica-
tions for denying ReGen’s cure claim in turn, beginning
with the court’s conclusion that the agreement between
AT&T and ReGen did not assign to ReGen a right to
file a cure claim.

  A. The Scope of the Assignment
   The bankruptcy court’s interpretation of the assign-
ment 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
8                                                 No. 10-1524

    thereon from and after the Effective Date, and
    any actions, claims, lawsuits or rights of any nature what-
    soever, 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 as-
signment agreement assigned only general pre-peti-
tion 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 agree-
ment was that ReGen purchased “general prepetition
unsecured claims and the right to recover any distribu-
tion made on account of those general prepetition unse-
cured claims,” and not the right to recover the full
amount of the default.
  While we do not dispute the bankruptcy court’s state-
ment 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.
No. 10-1524                                                   9

  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 agree-
ment’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 transac-
tion 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 con-
tracts.2

2
  Subsection (e) of Federal Rule of Bankruptcy Procedure 3001,
which governs proof of claims that have been transferred,
provides that in the absence of a timely objection by the trans-
feror, the transferee is substituted for the transferor in
                                                  (continued...)
10                                             No. 10-1524

  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 unse-
cured 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 *1-2 (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 *1. 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

2
  (...continued)
the bankruptcy proceedings. The 1991 Notes of the Ad-
visory Committee to the Federal Rules acknowledge that
Rule 3001(e) is intended “to limit the [bankruptcy] court’s
role [in claims transfers] to the adjudication of disputes”
between transferor and transferee.
No. 10-1524                                               11

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 incen-
tives to try to force the debtor to make a prompt deci-
sion 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 (1907). In that case, the Court con-
sidered whether an assignee of a claim for wages earned
by an employee of a debtor-employer before the com-
mencement 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.

3
  The parties debate whether we may properly consider a
letter, attached as an exhibit to ReGen’s amended cure claim,
as an indication of AT&T’s intent in the original assignment
agreement. In the letter, AT&T “authorizes the payment of
[any] cure amount to ReGen.” We need not consider the letter
because we believe the broad language of the assignment
agreement is sufficiently clear.
12                                             No. 10-1524

  We came to the same conclusion in Dorr Pump & Manu-
facturing 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 stock-
holders 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 pur-
chaser’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
No. 10-1524                                               13

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.

  B. No Assumption Occurred
   A claim holder’s right to a cure claim is realized only
if the debtor chooses to assume the executory contract
under which the debt arose. Although the terms of this
assignment agreement would have allowed ReGen to
file a cure claim, we hold that United effectively re-
jected the AT&T executory contracts, as the bankruptcy
court held in interpreting its order confirming the plan.
  Before confirming a Chapter 11 reorganization plan, a
bankruptcy court must review the terms of the proposed
plan to ensure that it complies with the applicable pro-
visions of the Code. See 11 U.S.C. § 1129(a)(1). When
the court later interprets the plan, it interprets words on
which it has already passed judgment. See In re Chicago,
Milwaukee, St. Paul & Pacific Railroad Co., 961 F.2d 1260,
1264 (7th Cir. 1992). We afford that interpretation full
deference on review. See In re Weber, 25 F.3d 413, 416
(7th Cir. 1994). We overturn the bankruptcy court’s in-
terpretation “only if the record shows an abuse of discre-
tion in the interpretation.” Airadigm Communications, Inc. v.
FCC (In re Airadigm Communications, Inc.), 547 F.3d 763,
768 (7th Cir. 2008), citing Weber, 25 F.3d at 416. A bank-
ruptcy court abuses its discretion when its decision is
“premised on an incorrect legal principle or a clearly
erroneous factual finding, or when the record contains
14                                               No. 10-1524

no evidence on which the court rationally could have
relied.” In re Wiese, 552 F.3d 584, 588 (7th Cir. 2009),
quoting Corporate Assets, Inc. v. Paloian, 368 F.3d 761, 767
(7th Cir. 2004).
   The bankruptcy court held that ReGen was not
entitled to a cure claim here because United rejected the
AT&T executory contracts as permitted by the con-
firmed reorganization plan. We agree. Article VII of the
plan provided:
     The Debtors and Reorganized Debtors reserve the
     right to reject any executory contract or unexpired
     lease no later than fifteen (15) days after the later of
     (i) the Debtors or Reorganized Debtors and the
     counterparty to such executory contract or unexpired
     lease agree in writing to the amount of the Cure, or
     (ii) the entry of a Final Order establishing the Cure.
This explicit reservation of United’s right to reject gave
it the right to reject the AT&T executory contracts when
it did. Neither of the two actions activating the fifteen-
day expiration had occurred. United’s valid rejection
under this provision of the confirmed plan extinguished
any right that ReGen would have had to the cure amount.
  ReGen argues that the reservation cannot be read to
permit the nullification of any “prior assumption of
executory contracts previously approved by virtue of
entry of the Confirmation Order,” and that United there-
fore may not reject the AT&T contracts that ReGen con-
tends were assumed upon confirmation. We are not
persuaded there was any prior assumption.
No. 10-1524                                              15

  A trustee or debtor-in-possession may assume any
executory contract “subject to the court’s approval.” See
11 U.S.C. § 365(a). In adding this language to the
Code, Congress intended that courts “insure that the
trustee’s [assumption of the contract] gives the other
contracting party the full benefit of his bargain.” In re
Superior Toy & Manufacturing Co., 78 F.3d 1169, 1174
(7th Cir. 1996), quoting S. Rep. No. 95-989, at 59 (1978);
H.R. Rep. No. 95-595, at 348 (1978). The bankruptcy court
reviews the debtor’s business judgment with respect to
the proposed assumption to determine if it would be
beneficial or burdensome to assume the executory con-
tract by evaluating whether assumption would serve
the reorganization or whether it would take away funds
available to other creditors. See Orion Pictures Corp. v.
Showtime Networks, Inc. (In re Orion Pictures Corp.),
4 F.3d 1095, 1099 (2d Cir. 1993); Collier on Bankruptcy
¶ 365.03.
  Where a debtor has defaulted on a contract, as here,
section 365 also requires that a trustee or debtor-in-pos-
session at the time of assumption (1) cure or provide
adequate assurance of prompt cure of that default;
(2) compensate or provide adequate assurance of prompt
compensation; and, (3) provide adequate assurance
of future performance under the contract. See 11 U.S.C.
§ 365(b)(1). In the Chapter 11 context, the debtor’s reorga-
nization plan must provide means for curing or waiving
any outstanding defaults. See 11 U.S.C. § 1123(a)(5)(G).
At the plan confirmation stage, the court approves those
means. At confirmation, the court also approves provi-
sions in the plan, if any, for the assumption, rejection,
16                                             No. 10-1524

or assignment of executory contracts. See 11 U.S.C.
§ 1123(b)(2). Under the terms of United’s plan, confirma-
tion constituted just that: approval of the assumption
of executory contracts and a process for curing de-
faults. The plan stated that its confirmation signified
“approval of the proposed treatment” of executory con-
tracts, “determination that the Debtors have exercised
reasonable business judgment in determining whether
to assume or reject each of their executory contracts,”
and “approval of the assumption . . . of the executory
contracts . . . to be assumed under the Plan.” By con-
firming the plan, the court approved United’s choice to
assume the contracts it listed in the “Assumed Executory
Contracts” exhibit. For the AT&T executory contracts,
where there remained an outstanding default, confirma-
tion of the plan did not, and could not, constitute the act
of assumption itself.
  The detailed terms of United’s plan make plain that, at
the time of confirmation, United had not yet cured the
outstanding defaults on the AT&T executory contracts
as required by section 365 for assumption. The plan
defined “Cure” in relevant part as the “distribution in
the ordinary course of business following the Effective
Date of Cash, or other such property . . . in an
amount equal to all unpaid monetary obligations,
without interest, or such lesser amount as may be agreed
upon by the parties, under an executory contract . . .
assumed pursuant to Section 365.” United did not pay
either AT&T or ReGen for the amount equal to “all
unpaid monetary obligations.” Because section 365(b)(1)
requires cure or adequate assurance of prompt cure “at
No. 10-1524                                               17

the time of assumption,” both of which were absent
here, we conclude that no assumption occurred. To the
contrary, United effectively rejected the AT&T contracts.
  Section 365(d) provides that the trustee or debtor-in-
possession may assume or reject an executory contract
at any time before the confirmation of a plan. Some
courts have held that this permissive language leaves
open the possibility that an executory contract may
“ride through” plan confirmation unaffected, neither
assumed nor rejected. See Stumpf v. McGee (In re
O’Connor), 258 F.3d 392, 404-05 (5th Cir. 2001) (describing
the “general agreement” among courts that the “pass-
through” or “ride-through” theory applies in Chapter 11
cases where an assumable executory contract is neither
assumed nor rejected in the terms of the plan);
Consolidated Gas Electric Light & Power Co. of Balti-
more v. United Railways & Electric Co. of Baltimore, 85
F.2d 799, 805 (4th Cir. 1936) (holding under the former
Bankruptcy Act that an executory contract remains in
force “until it is rejected, and unless rejected, it passes
with other property of the debtor to the reorganized
corporation”); Diamond Z Trailer, Inc. v. JZ L.L.C. (In re JZ
L.L.C.), 371 B.R. 412, 424-25 (B.A.P. 9th Cir. 2007) (recog-
nizing “ride-through” option for executory contracts); see
generally Data-Link Systems, Inc. v. Whitcomb & Keller
Mortgage Co. (In re Whitcomb & Keller Mortgage Co.), 715
F.2d 375, 379 (7th Cir. 1983) (holding that bankruptcy
court did not abuse discretion in denying request to
require debtor to assume or reject executory contract
immediately, before confirmation of plan of reorganiza-
tion).
18                                             No. 10-1524

   The United plan’s provision for delayed decisions to
assume or reject executory contracts took advantage of
this approach. We do not address here the broader
issues posed by such “ride-through” arrangements. The
critical facts here are that United’s plan provided for the
“ride-through” possibility and the plan became binding
on all creditors upon confirmation. See 11 U.S.C. § 1141(a)
(“the provisions of a confirmed plan bind the debtor, . . .
and any creditor”). If ReGen wanted to argue that the
“ride-through” possibility violated section 365 or
Chapter 11, the time to do it would have been before
confirmation, as Sabre did, or in an appeal from the
confirmation of the plan. By failing to object to or appeal
the plan’s confirmation, ReGen lost any opportunity to
seek an exemption from or to challenge this provision.
See, e.g., First Union Commercial Corp. v. Nelson, Mullins,
Riley, and Scarborough (In re Varat Enterprises, Inc.), 81
F.3d 1310, 1317 (4th Cir. 1996) (holding that a creditor’s
failure to raise objections during the confirmation
process precluded their consideration after plan con-
firmation).
   Under the terms of this confirmed reorganization plan,
the court approved United’s assumption of the execu-
tory contracts it chose to list, but assumption of any
individual contract would not occur, if at all, unless
and until United cured, or provided adequate assurance
that it would promptly cure, any outstanding default on
it after plan confirmation. United never did so. ReGen
therefore never became entitled to payment of the cure
amount it seeks.
No. 10-1524                                             19

   ReGen argues that United assumed the AT&T executory
contracts for four reasons that we find unpersuasive.
First, ReGen contends that United actually assumed
the AT&T executory contracts because it listed the con-
tracts on the plan’s list of “Assumed Contracts” and,
according to the plan, that list could not be amended
more than thirty days after the plan’s confirmation.
ReGen contends this prohibition required United to
assume all the contracts on the list after thirty days
had passed. We disagree with ReGen’s reasoning,
which would have us ignore other terms in the plan,
including the reserved right to make a delayed decision
about assumption. As noted above, the plan indicated
that its confirmation constituted only approval of
United’s choice not to reject the contracts listed in its
“Assumed Contracts” exhibit. The plan expressly stated
that those contracts not included in this exhibit, or else-
where in the plan, were rejected upon confirmation. But
it did not state that those listed in its “Assumed Con-
tracts” exhibit were actually assumed upon confirma-
tion. To the contrary, the plan expressly gave United the
opportunity to see a cure amount before making a final
decision regarding assumption or rejection of those
listed contracts with outstanding defaults.
  Second, because the plan sometimes referred to “condi-
tional” assumption of named contracts, ReGen argues
that other contracts (like the AT&T contracts) that were
not labeled “conditional” were assumed automatically
upon the confirmation of the plan. Like the bankruptcy
and district courts, we read these provisions differently.
The plan mentioned “conditional assumption” only in
20                                               No. 10-1524

the context of the exceptions or exemptions negotiated
by specific creditors. The conditions at stake were delin-
eated within the plan, often within the same sentence
or paragraph where the term was used. It does not
follow that all other contracts were assumed upon con-
firmation, without any further conditions. Again,
ReGen’s argument invites us to ignore the provision
allowing United to let executory contracts “ride-through”
plan confirmation and to make final decisions to assume
or reject at later times. The same requirements of section
365 still applied. Following the court’s approval of the
plan, creditors claiming a default on their executory
contracts could submit cure claims, and the debtor had
to respond to those claims in order to assume those
contracts according to the terms of the plan.
   Third, ReGen suggests that section 365 does not require
actual payment of a cure claim before assumption of an
executory contract. For this assertion, it relies on two
cases, both of which we find to be inapposite. ReGen
first directs us to In re Mushroom Transportation Co., 78 B.R.
754, 761 (Bankr. E.D. Pa. 1987), in which the bankruptcy
court held that “a lease is assumed once court approval
is obtained.” There, unlike here, the court had issued
an order including a cure amount and a payment sched-
ule. Approval of a specific cure amount cannot be com-
pared to approval of a reorganization plan like
United’s, which makes no mention of specific cure
amounts or a cure payment schedule. While ReGen cor-
rectly states that the cure payment is not required at the
time of assumption, the statute requires at least that the
debtor provide adequate assurance of a prompt cure,
No. 10-1524                                                21

an issue we discuss further below. We agree with the
bankruptcy court that the terms of United’s plan, which
lacked the specificity of the order in In re Mushroom
Transportation, did not meet the statutory requirement.
  ReGen also relies on In re Genuity Inc., 323 B.R. 79 (Bankr.
S.D.N.Y. 2005), in which the bankruptcy court resolved a
dispute about the amount of a creditor’s cure claim.
The court held that section 365 “clearly and plainly states
that in order to assume a contract, a debtor is required
to first cure all defaults, or provide adequate assurance
that it will cure such defaults.” 323 B.R. at 84 (emphasis
in original). We agree with this reading of the statute.
As we held in In re Superior Toy:
      The language and intent behind § 365 is decisive.
    The language of § 365(b)(1) is unequivocal. . . . In
    drafting § 365(b)(1), Congress went further than
    requiring that the trustee guarantee payment for
    future performance under the contract. It required
    that the trustee guarantee payment of all amounts
    owed prior to assumption.
78 F.3d at 1174; see also H.R. Rep. No. 95-595, at 347
(“Subsection (b) requires the trustee to cure any default
in the contract or lease . . . if there has been a default,
before he may assume.”); Collier on Bankruptcy ¶ 365.01
(same).
  ReGen contends that the Genuity court’s determina-
tion that post-petition assumption “transformed the pre-
petition claims of the Carriers once not cured, into new
claims arising post-petition,” 323 B.R. at 84, citing Adven-
22                                                  No. 10-1524

ture Resources, Inc. v. Holland, 137 F.3d 786, 798 (4th Cir.
1997), demonstrates that a cure claim need not be
paid before a debtor may assume an executory contract.
On this point, which is at odds with the same court’s
prior statement that a debtor must “first cure all de-
faults,” we disagree with the Genuity court’s choice of
words, which we believe are confined to its facts.4 For
this statement, the Genuity court adopted language
from the Fourth Circuit’s decision in Adventure Resources,
a case that addressed an outstanding default on a
labor contract. Because the Code treats labor contracts
uniquely, see, e.g., 11 U.S.C. § 1113 (providing special
treatment for rejection of collective bargaining agree-
ments), we do not find this reasoning applicable here.
  Fourth, ReGen claims that the substantial financing
available to United was sufficient to provide “ade-
quate assurance” of a prompt cure pursuant to section
365(b)(1)(A) of the Bankruptcy Code. There is no general
definition of “adequate assurance” in the Code, nor have
we adopted one in this context in our prior cases. We
develop its meaning based on the facts and circum-
stances of each case. See Collier on Bankruptcy ¶ 365.06
(collecting cases in which courts have applied the term
pragmatically). In this case, we do not regard United’s

4
  The debtors in that case contended that portions of their
cure payments should be offset due to prior deposits they
had made with their creditors. The court ruled that the
debtors were not entitled to use their pre-petition deposits
to offset their post-petition cure obligation. See 323 B.R. at 84.
No. 10-1524                                              23

substantial financing for its reorganization as adequate
assurance of cure for any particular creditor. To do
so would undermine the concept of assumption, the
statutorily prescribed menu of options granted to the
trustee in bankruptcy to decline assumption where it
would cause sufficient hardship to the reorganized
debtor, and the specific terms of United’s plan, which
gave United the option to decline to cure after plan con-
firmation. In the context of a debtor’s executory con-
tracts when the debtor seeks to reorganize and continue
its business, Chapter 11 presents a tradeoff. The debtor
has the right (with court approval) to force a reluctant
contracting party left stranded by bankruptcy to
continue to do business with it. But if the debtor
exercises that right, the debtor must then fulfill its ob-
ligations under section 365(b) to cure its earlier defaults.
See Frito-Lay, Inc. v. LTV Steel Co., Inc. (In re Chateaugay
Corp.), 10 F.3d 944, 955 (2d Cir. 1993) (section 365
enables a debtor to compel contracting parties to
“continue to do business with it when the bankruptcy
filing might otherwise make them reluctant to do so”),
quoting Richmond Leasing Co. v. Capital Bank, N.A., 762
F.2d 1303, 1310 (5th Cir. 1985) (per curiam). The Code
also enables the contracting party to ask the bankruptcy
court to expedite the debtor’s final decision regarding
assumption or rejection. See 11 U.S.C. § 365(d)(2).
  When a party to an executory contract assigns its pre-
petition claim (and the related potential claim for
a cure), however, the parties’ incentives can change
dramatically. If the party to the executory contract
(here, AT&T) wants to continue to do business with the
24                                               No. 10-1524

debtor, it is free to do so without insisting on either the
cure (which would not benefit it at all) or even a
prompt and final decision on assumption or rejection
(which also would not benefit it at all). As assignee,
ReGen could only benefit from an assumption, but it
could offer the debtor no incentive to assume, especially
as long as AT&T was willing to continue providing
service to the debtor post-petition rather than allow the
debtor’s post-petition business to move to a competitor.
  We do not have occasion to decide here whether a
timely challenge to United’s reservation of the right to
postpone the assumption decision would have been
successful under section 365. Nevertheless, we can ap-
preciate that such a reservation can make sound busi-
ness sense in the context of the Code’s balancing of the
rights of debtors and creditors. The reservation gave
the debtor protection from the risk that a creditor’s de-
mand for a cure could be more expensive than expected,
and it gave the debtor the opportunity to continue to
do business with AT&T without making a final deci-
sion to assume or reject that would affect ReGen
rather than AT&T.

III. Conclusion
  Claims trading remains a gray area in bankruptcy law
that the courts and Congress have left to the parties
to negotiate. In this case, a confirmed reorganization
plan delineated in clear terms what the debtor was able to
do to protect its interests, as well as those of its creditors
and customers. Because ReGen held only an assigned
No. 10-1524                                             25

claim, it had nothing to offer United in return for assump-
tion. AT&T had no incentive to insist on an early and
final assumption decision or full cure that would pro-
vide it with no benefit at all. The confirmed plan clearly
authorized United to reject the AT&T contracts after
plan confirmation. The bankruptcy court’s holding that
United did so was well within the court’s discretion.
                                                A FFIRMED.

                          2-18-11