Bourbon Saloon, Inc. v. Absinthe Bar, L.L.C.

Case: 15-30361 Document: 00513485240 Page: 1 Date Filed: 04/28/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
No. 15-30361 April 28, 2016
Lyle W. Cayce
Clerk
In the Matter of: BOURBON SALOON, INCORPORATED, doing business as
Mango Mango and Old Absinthe House, formerly known as Conti
Management Group, Incorporated, formerly known as Dante’s of Decatur,
Incorporated, formerly known as Newport Corporation of Louisiana,
Debtor
____________________________________________________________________
BOURBON SALOON, INCORPORATED, doing business as Mango Mango
and Old Absinthe House, formerly known as Conti Management Group,
Incorporated, formerly known as Dante’s of Decatur, Incorporated, formerly
known as Newport Corporation of Louisiana,
Appellant
v.
ABSINTHE BAR, L.L.C.,
Appellee
____________________________________________________________________
ABSINTHE BAR, L.L.C.,
Appellant Cross-Appellee
v.
BOURBON SALOON, INCORPORATED, doing business as Mango Mango
and Old Absinthe House, formerly known as Conti Management Group,
Incorporated, formerly known as Dante’s of Decatur, Incorporated, formerly
known as Newport Corporation of Louisiana,
Appellee Cross-Appellant
Case: 15-30361 Document: 00513485240 Page: 2 Date Filed: 04/28/2016
No. 15-30361
ANTHONY J. MACALUSO; YOUSEF SALEM; GOLDKING CAPITAL
MANAGEMENT, L.L.C.; ANTONIO C. ESTEVE; FIRST BANK AND TRUST
COMPANY; ENGLISH TURN PROPERTY OWNERS ASSOCIATION,
INCORPORATED; SYSCO NEW ORLEANS, L.L.C.; HILAL CHOGHARI;
FIRSTBANK ASSETS, L.L.C.; THOMAS BODNAR; KEVIN COCHRAN;
SUSANNE ZEILINGER; VAN JOSEPH; ROBERT JONES; SCOTT BRICK;
REGINALD LANDRY; DEREK ROBINSON; GARRIT SHAFER;
TERRENCE REED; THOMAS LARSON; HAYES THOMPSON; MADELIN
GROENHAGEN,
Appellees
Appeals from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:14-CV-395
USDC No. 2:14-CV-398
Before JONES, WIENER, and HIGGINSON, Circuit Judges.
STEPHEN A. HIGGINSON, Circuit Judge: *
This case concerns a bankruptcy court’s authority to grant a debtor’s
motion to assume a lease during Chapter 11 bankruptcy proceedings. Bourbon
Saloon leased 400 Bourbon Street from Absinthe Bar. When Bourbon Saloon
filed for relief under Chapter 11 of the Bankruptcy Code, it had outstanding
monetary and nonmonetary defaults on the lease. Bourbon Saloon moved to
assume the lease under 11 U.S.C. § 365(b). The two parties entered into an
agreed order regarding assumption of the lease, and the bankruptcy court
approved it. This order set a deadline for when Bourbon Saloon would cure
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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certain defaults. When the deadline passed, Absinthe Bar filed a motion to
reject the lease, which the bankruptcy court denied, holding that the lease was
assumed by the agreed order. The bankruptcy court also determined that
Absinthe Bar was entitled to attorney’s fees for expenses that occurred after
the cure deadline. The district court affirmed. The district court also ordered
the bankruptcy court to consider whether additional attorney’s fees were
warranted. Absinthe Bar timely appealed, and Bourbon Saloon filed a cross-
appeal challenging the grant of attorney’s fees. Concluding that the agreed
order controls and the challenges to the attorney’s fees are premature, we
AFFIRM in part and DISMISS in part.
I.
Absinthe Bar, LLC leased 400 Bourbon Street to Bourbon Saloon, Inc. in
1997. The lease was for twenty-years and featured a twenty-year option to
extend. Bourbon Saloon was solely responsible for maintaining the premises.
Throughout the initial lease, Bourbon Saloon caused several maintenance and
financial defaults. Following several notices alerting Bourbon Saloon to these
defaults, Absinthe Bar initiated eviction proceedings. During the proceedings,
Bourbon Saloon filed for relief under Chapter 11 of the Bankruptcy Code.
Bourbon Saloon filed a motion in the bankruptcy court to assume the
lease. Absinthe Bar opposed the motion, citing the lease defaults. Under
§ 365(b) of the Bankruptcy Code, a debtor can assume a lease that is in default,
subject to the court’s approval, if the debtor (1) cures or provides adequate
assurance that it will cure the default, (2) compensates or provides adequate
assurance that it will compensate the lessor for any losses related to the
default, and (3) provides adequate assurance of future performance. 11 U.S.C.
§ 365(b)(1). The court confirmed Bourbon Saloon’s Chapter 11 Plan of
Reorganization on March 26, 2012, but Absinthe Bar and Bourbon Saloon
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agreed to continue Bourbon Saloon’s motion to assume following the
confirmation.
The parties then entered into an agreed order on the motion to assume,
which the bankruptcy court confirmed on May 15, 2012. According to this
agreed order, Bourbon Saloon had cured all of its monetary defaults, but the
court approved the hiring of a referee to determine the scope and allocation of
responsibility for the remaining nonmonetary defaults. The court ordered that
these defaults be cured on or before December 31, 2012. Importantly, the
agreed order read: “Based on these findings, IT IS ORDERED that the
Reorganized Debtor’s assumption of the Lease of the premises at 400 Bourbon
is approved, subject to the terms of this Order, which provide Absinthe Bar
with adequate assurance of cure as required by Section 365 of the Bankruptcy
Code.” The order was silent as to whether it provided adequate assurance of
future performance and compensation. The bankruptcy court maintained
jurisdiction over enforcement of the order.
As of December 31, 2012, Bourbon Saloon had not cured the
nonmonetary defaults. Absinthe Bar then filed a motion to reject the lease.
The bankruptcy court responded by setting a hearing and extending Bourbon
Saloon’s deadline to cure the defaults. After the bankruptcy court heard both
parties’ arguments and received the referee’s report, the bankruptcy court
denied Absinthe Bar’s motion for rejection. The bankruptcy court held that
the lease was assumed by the agreed order and that Bourbon Saloon had
adequately cured its defaults by substantially performing the requirements of
the agreed order, but that Absinthe Bar was entitled to attorney’s fees for the
litigation related to the defaults that still remained after December 31, 2012.
Absinthe Bar appealed to the district court.
On appeal to that court, Absinthe Bar argued that the lease was not
assumed by the agreed order because the agreed order only addressed one of
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the three requirements of § 365—it did not address the issues of compensation
for pecuniary losses or adequate assurance of future performance. Instead,
Absinthe Bar argued that the order was simply “the parties’ contractual
definition of how [Bourbon Saloon] could accomplish § 365(b)(1)(A) cure.”
Alternatively, Absinthe Bar argued that the deadlines contained in the agreed
order were suspensive conditions, which were not met, and that the
bankruptcy court erred by extending the deadline. Absinthe Bar also
contended that the attorney’s fees should not have been limited to the period
following December 31, 2012. Bourbon Saloon cross-appealed, arguing that
the bankruptcy court should not have granted attorney’s fees at all. But
Bourbon Saloon later filed a motion to voluntarily dismiss its cross-appeal on
the ground that it was not timely.
The district court affirmed each of the bankruptcy court’s rulings and
denied Bourbon Saloon’s motion to dismiss its cross-appeal. The district court
also remanded for the bankruptcy court to consider whether Absinthe Bar was
entitled to fees for the period before the lease was assumed. Absinthe Bar
timely appealed and makes the same arguments to this court. Bourbon Saloon
again filed a cross-appeal—this time arguing that the district court erred in
affirming the bankruptcy court’s grant of attorney’s fees for the period
following December 31, 2012 and in ordering the bankruptcy court to address
the fees for the time preceding the May 15, 2012 agreed order. A previous
panel of this court granted in part Absinthe Bar’s motion to dismiss the cross-
appeal, holding that the portion challenging the district court’s remand was
untimely.
II.
A.
“Bankruptcy court rulings and decisions are reviewed by a court of
appeals under the same standards employed by the district court hearing the
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appeal from bankruptcy court; conclusions of law are reviewed de novo,
findings of fact are reviewed for clear error, and mixed questions of fact and
law are reviewed de novo.” Century Indem. Co. v. Nat’l Gypsum Co. (In re Nat’l
Gypsum Co.), 208 F.3d 498, 504 (5th Cir. 2000) (italics omitted). A bankruptcy
court’s determination of adequate assurance of future performance and the
ability to cure under § 365 is a fact-specific question. Tex. Health Enters. Inc.
v. Lytle Nursing Home (In re Tex. Health Enters. Inc.), 72 F. App’x. 122, 126
(5th Cir. 2003); see also Richmond Leasing Co. v. Capital Bank, N.A., 762 F.2d
1303, 1310 (5th Cir. 1985). However, matters of contract interpretation are
issues of law, which this court reviews de novo. Bayou Steel Corp. v. Nat’l
Union Fire Ins. Co. of Pittsburgh, 642 F.3d 506, 509 (5th Cir. 2011).
B.
Absinthe Bar argues that the bankruptcy court erred by holding that
Bourbon Saloon assumed the 400 Bourbon lease through the adoption of the
May 15, 2012 agreed order. Absinthe Bar makes two primary arguments:
(1) the lease could not be assumed by the agreed order because it did not
address two of § 365(b)’s three requirements for assumption of a lease in
default; and (2) Bourbon Saloon failed to satisfy a suspensive condition of the
agreed order by not meeting the deadline for cure. “The Bankruptcy Code
provides special rules for the treatment of executory contracts and unexpired
leases during a Chapter 11 reorganization.” Nat’l Gypsum Co., 208 F.3d at 504
(citing 11 U.S.C. § 365). Under § 365(b), a debtor can choose to reject or assume
an unexpired lease. See id. However, if the unexpired lease is in default, then
the debtor can only assume the lease if three conditions are met. Section 365
reads:
(b)(1) If there has been a default in an executory contract or
unexpired lease of the debtor, the trustee may not assume such
contract or lease unless, at the time of assumption of such contract
or lease, the trustee—
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(A) cures, or provides adequate assurance that the trustee
will promptly cure, such default other than a default that is
a breach of a provision relating to the satisfaction of any
provision (other than a penalty rate or penalty provision)
relating to a default arising from any failure to perform
nonmonetary obligations under an unexpired lease of real
property, if it is impossible for the trustee to cure such
default by performing nonmonetary acts at and after the
time of assumption, except that if such default arises from a
failure to operate in accordance with a nonresidential real
property lease, then such default shall be cured by
performance at and after the time of assumption in
accordance with such lease, and pecuniary losses resulting
from such default shall be compensated in accordance with
the provisions of this paragraph;
(B) compensates, or provides adequate assurance that the
trustee will promptly compensate, a party other than the
debtor to such contract or lease, for any actual pecuniary loss
to such party resulting from such default; and
(C) provides adequate assurance of future performance
under such contract or lease.
11 U.S.C. § 365(b). This subsection “affords the non-debtor a measure of
protection, since it is possible that the contract is not beneficial to the non-
debtor, and the non-debtor lacks any decision-making authority in the
assumption process.” Nat’l Gypsum Co., 208 F.3d at 506.
Absinthe Bar argues that because the agreed order did not address
§ 365(b)(1)(B) and (C), Bourbon Saloon could not have assumed the lease
through the order. Absinthe Bar is correct that all three requirements listed
in § 365(b)(1) are conditions of assumption. See Adventure Res., Inc. v.
Holland, 137 F.3d 786, 798 (4th Cir. 1998). In addition, “strict adherence to
the Code provisions governing assumption of contracts ‘might appear overly
simplistic, [but] it is important in that it allows a debtor in possession the
flexibility intended by the Bankruptcy Code in deciding whether or not to
assume or reject contracts or leases.’” Nat’l Gypsum Co., 208 F.3d at 512
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(alteration in original) (quoting Walat Farms, Inc. v. United States (In re Walat
Farms, Inc.), 69 B.R. 529, 534 (Bankr. E.D. Mich. 1987)). However, assumption
through court-approved agreed orders is common. See, e.g., In re Allen, 362
B.R. 866, 871 (Bankr. N.D. Ohio 2007) (“These objections are usually resolved
by an agreed order clarifying and specifying treatment of the lease as either
assumed or rejected.”); In re Pro Page Partners, LLC, 270 B.R. 221, 226 n.1
(Bankr. E.D. Tenn. 2001) (“[The non-debtor] filed a motion to compel the debtor
to assume or reject the [executory contract] although it was not necessary for
the court to rule on the motion due to the parties’ submission of the Agreed
Order.”).
The Bankruptcy Code does not provide any guidance for when
assumption through an agreed order can occur. In addition, we are aware of
no case requiring an agreed order to specifically address each of the
requirements of § 365(b)(1). In fact, the only case cited by the district court
and provided by Absinthe Bar on this issue suggests that assumption can occur
even if the agreed order does not specifically address each § 365(b)(1)
requirement. See In re Leon’s Casuals Co., 122 B.R. 768, 770 (Bankr. S.D. Ala.
1990) (enforcing assumption by agreed order even though the order
“contain[ed] no reference to the Debtor’s duty to cure prepetition defaults
under the lease”). Moreover, Absinthe Bar had the opportunity to ensure that
each of the three conditions of § 365(b) was satisfied before it entered into the
agreed order, and it did not do so. In these circumstances, we decline to hold
that an agreed order establishing assumption must explicitly address each of
the obligations of § 365(b).
C.
Absinthe Bar next argues that assumption did not occur through the
adoption of the agreed order because the plain language of the order
establishes that assumption would not occur until and unless Bourbon Saloon
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met the conditions of the order by curing all defaults by December 31, 2012.
Because the bankruptcy court found that the deadline was not met, Absinthe
Bar argues that assumption could not have occurred. “When interpreting a
consent decree, general principles of contract interpretation govern.” Dean v.
City of Shreveport, 438 F.3d 448, 460 (5th Cir. 2006). The parties have briefed
the interpretation of the agreed order in terms of Louisiana law, and the
bankruptcy and district courts followed suit. As an agreed order resolving a
motion to assume or reject a lease, however, it seems at least equally likely
that the courts should simply have applied a common sense reading of the
order it approved. See Houston v. Holder (In re Omni Video, Inc.), 60 F.3d 230,
232 (5th Cir. 1995). Applying either Louisiana law or general principles of
contract interpretation, however, the outcome is the same, as both instruct this
court to first look to the express language of the contract. See United States v.
Chromalloy Am. Corp., 158 F.3d 345, 350 (5th Cir. 1998); Angus Chem. Co. v.
Glendora Plantation, Inc., 782 F.3d 175, 180 (5th Cir. 2015). In addition, under
both approaches, we consider the surrounding circumstances when
determining the plain meaning of the contract’s terms. See Dean, 438 F.3d at
460–61; La. Civ. Code art. 2053.
The plain language of the agreed order establishes that assumption
occurred at the time it was entered: “Based on these findings, IT IS ORDERED
that the Reorganized Debtor’s assumption of the Lease of the premises at 400
Bourbon is approved, subject to the terms of this Order, which provide
Absinthe Bar with adequate assurance of cure as required by Section 365 of
the Bankruptcy Code.” However, Absinthe Bar argues that a provision which
follows—“all maintenance and repair defaults must be cured and work
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completed on or before Dec 31, 2012”—is a condition that had to be met before
assumption could occur. 1
The express language of the agreed order does not compel such a
conclusion. In bankruptcy court, when assumption occurs, the debtor becomes
legally obligated to meet the conditions necessary to cure the defaults of the
lease or executory contract. See, e.g., Tag Invs. Ltd. v. Monaco (In re Monaco),
514 B.R. 477, 486 (Bankr. W.D. Tex. 2014) (“By assuming the subcontracts,
[the debtor] undertook both legal and practical obligations to pay the
subcontractors.”). “[A]ny claims arising from the debtor’s failure to cure are
entitled to first priority as administrative expenses of the bankruptcy estate.”
Adventure Res. Inc., 137 F.3d at 793. Given this structure, the plain language
of the agreed order (“the Reorganized Debtor’s assumption of the Lease of the
premises at 400 Bourbon is approved”), and Absinthe Bar’s failure to present
any evidence, upon inquiry by the bankruptcy court, showing an intent to treat
the conditions of the agreed order as suspensive conditions, Absinthe Bar’s
argument fails. We hold that assumption occurred at the time the parties
entered into the agreed order and that the remaining provisions of the order
were conditions which Bourbon Saloon became legally obligated to meet under
the supervision of the bankruptcy court.
III.
Both Bourbon Saloon and Absinthe Bar challenge the bankruptcy court’s
grant of attorney’s fees. The bankruptcy court awarded attorney’s fees of an
undisclosed amount for any litigation expense incurred “as a result of the post-
petition litigation brought after the December 31, 2012 deadline to force the
1 The Louisiana Civil Code defines such a condition as a suspensive condition. La.
Civ. Code art. 1767. Louisiana courts disfavor finding suspensive conditions and will not
infer a suspensive condition unless there is strong proof; “they do so only when the express
language of the contract ‘compels’ such a construction.” Mumblow v. Monroe Broad., Inc.,
401 F.3d 616, 622 (5th Cir. 2005).
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debtor to finish remedying the nonmonetary defaults under the lease that was
assumed by the Agreed Order.” 2 The bankruptcy court classified the
attorney’s fees as administrative expenses of the estate. Bourbon Saloon
argues that the attorney’s fees were not proper because Absinthe Bar did not
timely claim attorney’s fees before the lease was assumed and did not show
that it was entitled to the fees under the lease. Bourbon Saloon also argues
that the fees should not be treated as an administrative expense because the
bankruptcy court did not determine why the fees were necessary or why they
benefited the estate. Conversely, Absinthe Bar argues that because
assumption did not occur at the time of the agreed order and “attorney’s fees
should run from bankruptcy petition through assumption,” the district court
should not have limited the consideration of attorney’s fees to before the order.
These arguments are not properly before this court.
“While the district court may, under 28 U.S.C. § 158(a), review
interlocutory orders of the bankruptcy court,” our case law holds that “a district
court’s decision on appeal from a bankruptcy court’s interlocutory order is not
a final order for purposes of further appellate review unless the district court
order in some sense ‘cures’ the nonfinality of the bankruptcy court order.” In
re Wood & Locker, Inc., 868 F.2d 139, 142 (5th Cir. 1989). Although the
bankruptcy court entered a judgment awarding attorney’s fees for Absinthe
Bar, it issued the award for an undetermined amount without specific
instructions for determining that amount; therefore, that order was not final.
Zink v. United States, 929 F.2d 1015, 1020 (5th Cir. 1991) (“[A] final judgment
2 The bankruptcy court limited the fees awarded to those following December 31, 2012
for unexplained reasons. On appeal, the district court ordered the bankruptcy court to
address whether Absinthe Bar was entitled to expenses associated with the default that
occurred before May 15, 2012—when the parties entered into the agreed order. This order is
not at issue in this case because a previous panel dismissed Bourbon Saloon’s cross-appeal
as to the district court’s remand.
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for money must, at least, determine, or specify the means for determining, the
amount of the judgment.” (quoting United States v. F. & M. Schaefer Brewing
Co., 356 U.S. 227, 233–34 (1958))). Because we only have authority to review
final orders under 28 U.S.C. § 1291, we dismiss Bourbon Saloon’s cross-appeal
and Absinthe Bar’s challenge to the lower courts’ limitation on the grant of
attorney’s fees. 3
IV.
Concluding that the agreed order controls and that the challenges to the
attorney’s fees are premature, we AFFIRM the district court’s holdings as to
lease assumption, and DISMISS without prejudice the appeal and cross-appeal
challenging the award of attorney’s fees.
3 We also DENY Absinthe Bar’s outstanding motions to strike portions of Bourbon
Saloon’s appendix and brief.
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