Opinion
01 Civ. 8946 (RWS)
April 8, 2002
Thomas F. Berner, Esq., Thomas J. Leanse, Esq., Donna L. Dutcher, Esq., Katten Muchin Zavis, New York, NY, for Appellant.
Bonnie Steingart, Esq., Fried, Frank, Harris, Shriver Jacobson, New York, NY, for Appellees.
OPINION
Urban Retail Properties Co. ("Urban") has appealed an order (the "Order") of the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") made in the course of administration of the Chapter 11 estate of debtors Loews Cineplex Entertainment ("Loews"), Skokie Cinemas, Inc. ("Skokie" or "Debtor"), and various affiliates (collectively "Debtors"). For the reasons set forth below, the Order is reversed, and the action is remanded for further proceedings consistent with this opinion.
Background and Prior Proceedings
On November 17, 1999, Skokie entered into a lease (the "Lease") with American National Bank and Trust Company of Chicago, as trustee under a Trust Agreement dated June 11, 1993 and known as Trust No. 116914-09, as landlord ("Landlord") for theater space to be built at Old Orchard Shopping Center in Skokie, Illinois. The Lease is guaranteed by Loews pursuant to a Guaranty entered into on November 17, 1999. By agreement between the Landlord and Skokie, as tenant, Urban agreed to construct a new six-screen motion picture theater complex at the shopping center at Urban's expense, subject to certain reimbursement provisions in the Lease, which was to be in addition to a theater complex operated by Plitt Theatres, Inc., one of the Debtors in these proceedings. Urban began construction in the spring of 2000, and the work was completed on April 16, 2001.
On February 15, 2001 (the "Petition Date"), Skokie and the other Debtors filed with the Bankruptcy Court voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. By order of the Bankruptcy Court dated as of the Petition Date, the Debtors' Chapter 11 cases are being jointly administered. Skokie has continued to operate its businesses and manage its properties pursuant to 11 U.S.C. § 1107 (a) and 1108.
In association with the construction of the new theater complex, Section 2.17(b) of the Lease requires the Debtor to pay the Landlord for a portion of its costs upon the completion of "Landlord's Work," as defined in the Lease. Section 2.17(b) provides, in relevant part: "On or before the Rental Commencement Date, Tenant Shall reimburse Landlord for $1,000,000 of the cost of Landlord's Work." The Rental Commencement Date is defined in Article III, Section 3.01(e) as follows:
The "Rental Commencement Date" means the earlier of:
(i) six (6) months after the later of(x)the date the demised premises are deemed ready for the performance of Tenant's Work or (y) the date Tenant's Permits are issued. . . .; and
(ii) when Tenant opens the Theatre Complex to the public for the regular conduct of Tenant's business (the "Opening Date").
Under this definition, the Rental Commencement date was May 25, 2001, the date the new complex was opened for business.
On June 14, 2001, Urban sent a demand letter to the Debtors requesting payment by June 21, 2001 for outstanding postpetition obligations for the construction of the theater complex under the Lease. The Debtors refused to make the reimbursement payment, and the sum demanded remains outstanding. On October 12, 2001, the Bankruptcy Court entered an order extending the time in which the Debtors must assume or reject leases through and including February 12, 2002. A search of the record reveals that the time period within which the Debtors must elect to assume or reject the Lease has been further extended through confirmation of their Chapter 11 plan, and the Debtors have not assumed or rejected the Lease at issue in the instant appeal.
Urban sought immediate payment of the sums due, plus applicable attorneys' fees and interest, by filing a motion to compel payment of postpetition obligations with the Bankruptcy Court. The matter was briefed and a hearing was held on August 9, 2001 before the Honorable Allan L. Gropper. After hearing arguments from Urban and the Debtors, Judge Gropper denied Urban's motion without prejudice in the Order entered August 27, 2001.
On October 5, 2001, Loews filed the instant Notice of Appeal. The parties submitted papers and oral argument was heard on December 12, 2001.
Discussion
This bankruptcy appeal presents three issues: (1) whether the Order denying the relief requested by Urban was a final order that is appealable under 28 U.S.C. § 158 (a)(1); (2) whether the Bankruptcy Court erred in denying Urban's motion based on its determination that 11 U.S.C. § 365 (d)(3) did not require the Debtors to immediately pay the entire $1,000,000 owed under the Lease obligation upon postpetition completion of the construction project, but rather that the amount owed should be prorated to cover only the period after the Petition Date; and (3) if payment of the entire amount is required, whether Urban is entitled to recover interest and attorneys' fees.
I. The Bankruptcy Court's Order Is Appealable A. The August 27, 2001 Order Was a "Final Order"
Pursuant to 28 U.S.C. § 158 (a), district courts have jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy courts. In relevant part, 28 U.S.C. § 158 (a) provides:
(a) The district court of the United States shall have jurisdiction to hear appeals
(1) from final judgments, orders and decrees; . . . and, with leave of the court, from interlocutory judgements and decrees, of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under section 157 of this title. An appeal under this subsection shall be taken only to the district court for the judicial district in which the bankruptcy judge is serving.
In the bankruptcy context, because bankruptcy proceedings can continue over long periods of time and can involve several and various discrete claims within one proceeding, 28 U.S.C. § 158 (a) has been interpreted to allow "immediate appeal in bankruptcy cases of orders that `finally dispose of discrete disputes within the larger case.'" See In re Fugazy Express, Inc., 982 F.2d 769, 777 (2d Cir. 1992) (quoting In re Sonnax Indus., Inc., 907 F.2d 1280, 1283 (2d Cir. 1992)). "[A] `dispute,' for appealability purposes in the bankruptcy context, means at least an entire claim on which relief may be granted." Fugazy, 982 F.2d at 775-76.
The Debtors argue that the Order issued by the Bankruptcy Court on August 27, 2001 was not a "final order" within the meaning of 28 U.S.C. § 158 and therefore cannot be the subject of appeal to this Court. According to Debtors, the Bankruptcy Court denied Urban's motion to compel immediate payment without prejudice to Urban's right to make any arguments with respect to the $1,000,000 in the event the Debtors reject the Lease. The Debtors quote several passages from the August 9, 2001 hearing on the motion as evidence that the Bankruptcy Court did not finally decide the issue raised by Urban's motion to compel.
However, the Bankruptcy Court did finally resolve the discrete issue central to this appeal: whether Section 365(d)(3) of the Bankruptcy Code requires immediate payment of the Debtors's $1,000,000 postpetition capital expense obligation. The Court denied immediate payment at the August 9, 2001 hearing because it ruled as a matter of law that, even though the Lease calls for a lump sum payment to the Landlord upon the completion of the construction project, Section 365(d)(3) does not require the Debtor to pay the entire amount upon the postpetition completion of the project. The Bankruptcy Court determined that the payment must be allocated between prepetition and postpetition construction periods, irrespective of when the actual obligation to make the payment arose.
This adoption of the so-called "proration" approach was reflected in the August 27, 2001 Order, which states in relevant part that, "consistent with the decision read into the record at the Hearing, the Motion is hereby denied with respect to the Immediate Payment, without prejudice to any argument Urban may be advised to make with respect to payment of part or all of the $1,000,000, plus interest and attorneys fees, in the event of a motion to reject the Lease."
Although the motion was denied without prejudice, the Debtors are incorrect in asserting that Urban retained the right to reargue the issue at a later date (i.e., in the event that the Debtors later reject the Lease). Judge Gropper was unequivocal in denying Urban's motion for immediate payment as a matter of law, leaving open only the issue of how the Debtor's prorated share of its $1,000,000 obligation should be calculated. At the hearing, Judge Gropper stated:
Under the theory of the proration cases, which the Court accepts as the reasonable construction of 365(d)(3), these capital expenses may have become payable at a certain time in the long term contractual relationships of the parties, but they cannot fairly be stated to be wholly applicable to the moment when they became due.
They are, in effect, the tenant's contribution to certain of the landlord's construction costs. If the lease is assumed, obviously, they'll be payed in full or so it would appear, but if the lease is rejected, there would appear to be a windfall to the landlord from a requirement that the Debtor immediately pay these one-time capital costs.
The landlord can argue at the time the Debtor moves to reject the lease, if it does, that these costs are somehow associated with the Loews tenancy and that they must be paid by Loews.
If Loews rejects the lease, the parties can take discovery on that issue and they may, if they wish, take discovery on the construction issue.
But prima facie on the base question that the landlord has proposed, it would appear that Loews should be responsible only for that part of capital costs that are fairly associated with the postpetition and prerejection period; this would be in accord not only with real emergency cases, as well, the long term obligations should be prorated.
It also gives due consideration to the statutory contract that Congress should be concerned with during the current obligations of the postpetition period in question, in which cases where the obligations arise to a contract that arose prepetition and cannot fairly be allocated to any precise period it is clear that the obligations are not those current obligations, arising from or after the Order for relief, that are covered in whole by 365(d)(3).
Accordingly, the landlord's motion to require immediate payments of such amount is denied.
(Appellant Record on Appeal Ex. 13 ("Hearing Transcript"), at 59-61).
The Lease has not been rejected or assumed by the Debtors. In the event that it is rejected, the Debtors are correct that Urban retains the right to move for payment, but as the quoted passage and other portions of the August 9, 2001 reveal, that motion would relate only to the amount Urban would receive under the proration approach. Urban will not be able to again seek immediate payment of the $1,000,000 under Section 365(d) (3). The Order was therefore final and appealable. See In re Johns-Manvile Corp., 920 F.2d 121, 126 (2d Cir. 1990) ("[O]rders in bankruptcy cases may be immediately appealed if they finally dispose of discrete disputes within the larger case.") (quotations and citations omitted).
For instance, at the hearing, Judge Gropper stated that "[i]f the lease is rejected, the Court will hear any argument the landlord wishes to make at that time, that Loews should be responsible for more than a share of these capital costs that would be derived mathematically, by dividing the cost of the time period that Loews operated under the lease compared to the lease as a whole." (Hearing Transcript, at 61).
B. The Order is Alternatively Appealable Under Bankruptcy Rule 8003
Even if the Bankruptcy Court's Order does not qualify as a "final order," this Court has jurisdiction to hear the appeal as an interlocutory order as permitted by 28 U.S.C. § 154 (a). Under the Bankruptcy Rules, this Court may consider Urban's notice of appeal as a motion for leave to appeal. Bankruptcy Rule 8003 provides:
If a required motion for leave to appeal is not filed, but a notice of appeal is timely filed, the district court . . . may grant leave to appeal or direct that a motion for leave to appeal be filed. The district court . . . may also deny leave to appeal but in so doing shall consider the notice of appeal as a motion for leave to appeal.
Fed.R.Bankr.P. 8003(c). Pursuant to Rule 8003(c), and at the request of Urban, this Court has treated Urban's notice of appeal as a motion for leave to appeal.
Appeals from interlocutory orders and decrees of the bankruptcy court are permitted "with leave of the court." 28 U.S.C. § 158 (a). The standard for determining whether leave to appeal from an interlocutory bankruptcy order should be granted, in turn, is given by 28 U.S.C. § 1292 (b), which governs interlocutory appeals from the district courts to the courts of appeal. See In re Bogdanovich, Nos. 00 Civ. 2264 (JGK), 00 Civ. 2266 (JGK), 2000 WL 1804133, at *8 (S.D.N.Y. Dec. 8, 2000); In re Ionosphere Clubs, Inc., 179 B.R. 24, 28 (S.D.N.Y. 1995); In re Pan Am Corp., 159 B.R. 396, 401 (S.D.N.Y. 1993). Under Section 1292(b), "leave to appeal from an interlocutory order will be granted only if (1) the order involves a controlling question of law (2) as to which there is a substantial ground for difference of opinion and (3) an immediate appeal would materially advance the ultimate termination of the litigation." Bogdanovich, 2000 WL 1804133, at *8. However, "only `exceptional circumstances [will] justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment.'" Klinghoffer v. S.N.C. Achille Lauro, 921 F.2d 21, 25 (2d Cir. 1990) (quoting Coopers Lybrand v. Livesay, 437 U.S. 463, 475, 98 S.Ct. 2454, 2461, 57 L.Ed.2d 351 (1978)).
Here, the Bankruptcy Court's Order involves a controlling issue of law as to which there is a substantial ground for difference of opinion. As the Bankruptcy Court indicated at oral argument, there is a split of authority on the issue of whether Section 365(d)(3) requires the Debtors to pay the entire $1,000,000 owed under the Lease obligation upon postpetition completion of the construction project, or whether the amount owed should be prorated to cover only the period after the Petition Date. The Second Circuit has yet to provide definitive authority on the issue, yet whether Urban is able to collect its $1,000,000 may ultimately depend on which approach is taken.
Finally, since the time to accept or reject the Lease has been adjourned, there is no foreseeable resolution of Urban's claim, and presumably there are no payments for the theater complex which has been operating since the spring of 2001. Granting an immediate appeal will materially advance the bankruptcy litigation by resolving any uncertainties as to the Debtor's immediate obligations and potentially obviating the need for later discovery. The exceptional circumstances of this case warrant an interlocutory appeal.
II. The Bankruptcy Court Erred in Denying Urban's Motion to Compel Debtor to Perform its Lease Obligation
Section 365(d)(3) of the Bankruptcy Code governs the postpetition obligations of a debtor to its landlord during the period from the order for relief until the applicable lease is either assumed or rejected. It provides, in relevant part:
The Trustee shall timely perform all of the obligations of the debtor . . . arising from and after the order for relief under any unexpired lease of nonresidential real property, until the lease is assumed or rejected, notwithstanding section 503(b)(1) of this title.11 U.S.C. § 365 (d)(3). Given that, in the bankruptcy context, a commercial landlord is generally required to provide ongoing services to the debtor (e.g., the use of its property, utilities, security, and other services) until the lease is assumed or rejected by the debtor, Section 365(d)(3) essentially ensures that each party will get the benefit of its bargain under the lease.
Urban argues that Section 365(d)(3) of the Bankruptcy Code requires immediate payment of all lease obligations arising postpetition, regardless of whether such obligations relate to prepetition periods. According to Urban, the Lease requires the Debtor to reimburse the Landlord for its work by paying $1,000,000 "on or before the Rental Commencement Date," which each party agrees was May 25, 2001. As this obligation arose over two months after the Petition Date of February 15, 2001, it falls squarely within the language of Section 365(d)(3) and therefore requires immediate payment.
The Debtors contend, however, that the payment sought by Urban is a prepetition obligation that falls outside the realm of Section 365(d)(3) since the vast majority of the costs to be reimbursed were incurred prior to the Petition Date. They argue that this Court should follow the approach taken by Judge Gropper, who, adopting a proration approach to determine the Debtor's postpetition obligations, found that Section 365(d)(3) requires only performance of obligations that are "fairly associated" with the postpetition and prerejection period.
As the Bankruptcy Court indicated at the August 9, 2001 hearing, and as each party acknowledges, the Court of Appeals has not definitively addressed the issue of whether Section 365(d)(3) requires payment of postpetition obligations in their entirety or whether the obligations should be prorated between prepetition and postpetition periods. Other courts, including those in this District, have been divided on the issue. Some have held that Section 365(d)(3) calls for the prorated payment of a debtor's obligations under a lease, regardless of the billing date. See e.g., In re Handy Andy, 144 F.3d 1125, 1127 (7th Cir. 1998); In re McCrory Corp., 210 B.R. 934, 940 (S.D.N.Y. 1997); In re All for A Dollar Inc., 174 B.R. 358, 361-62 (Bankr. D.Mass. 1994); In re Child World, Inc., 161 B.R. 571, 576-77 (S.D.N.Y. 1993). Others, including the majority of circuit courts, have recently held that obligations under expired leases become obligations according to the terms of the lease at issue, regardless of when those charges accrued. See, e.g., In re Montgomery Ward Holding Corp., 268 F.3d 205, 209 (3d Cir. 2001); In re Koenig Sporting Goods, Inc., 203 F.3d 986, 989 (6th Cir. 2000); In re R.H. Macy Co., Inc., No. 93 Civ. 4414, 1994 WL 482948 (S.D.N.Y. Feb. 23 1994), aff'g 152 B.R. 869, 873 (Bankr. S.D.N.Y. 1993); Cf. In re Cukierman, 265 F.3d 846, 850-51 (9th Cir. 2001) (holding that an obligation to repay promissory notes denominated in a lease as "further rent" falls within Section 365(d)(3) on the basis that the statute should be interpreted as a "bright-line rule, encompassing all obligations contained in a bargained-for agreement"). Many courts in the latter group have reasoned that the terms "obligations" and "arise" in Section 365(d)(3) are sufficiently unambiguous on their face and indicate that obligations must be paid in full when the governing lease indicates the obligor is required to pay.
Given the recent line of authority refusing to adopt the proration approach, and the language and purpose of Section 365(d)(3), it is concluded that the Bankruptcy Court erred in its decision to deny Urban's motion to compel immediate payment of the Debtor's $1,000,000 obligation. As the Honorable Sonia Sotomayor held in this District's case of R.H. Macy, 1994 WL 482948, at *12, and as the Third Circuit recently concluded in Montgomery Ward, 268 F.3d at 209, the language of Section 365(d)(3) imposes a duty to comply with all lease obligations arising after the order for relief. The Third Circuit reasoned:
the clear and express intent of section 365(d)(3) is to require the trustee [or debtor in possession] to perform the lease in accordance with its terms. To be consistent with this intent, any interpretation must look to the terms of the lease to determine both the nature of the obligation" and when it "arises." If one accepts this premise, it is difficult to find a textual basis for the proration approach. On the other hand, an approach which calls for the trustee to perform obligations as they become due under the terms of the lease fits comfortably with the statutory text.Id. This reasoning is consistent not only with a natural reading of the statute, but with the purpose for which Section 365(d)(3) was enacted. As recent decisions have stated, the purpose of Section 365(d)(3), as revealed by the legislative history, was to ensure that landlords receive immediate payment for lease obligations so that they are not left providing uncompensated services. See Montgomery Ward, 268 F.3d at 212-11; see also Cukierman, 265 F.3d at 851.
The approach of enforcing the timing provisions in the Lease is Particularly persuasive given the facts of the instant case. None of the cases cited above adopting proration dealt with a one-time capital expense reimbursement of the type described in the instant Lease. Rather, virtually all involved obligations that, by agreement, accrued over time, such as the obligations of tenants to pay real estate taxes, common area maintenance expenses, and other additional rent items. For instance, two of the cases from this District that Defendants cite in favor of proration, McCrory and Child World, involved the payment for real estate taxes that had become due postpetition at the time the debtor was in possession of the leased property. See McCrory, 210 B.R. at 935; Child World, 161 B.R. at 572. These obligations by their very terms accrued on a daily basis. They did not, as here, involve a one-time capital expense obligation to be paid at date contingent on the completion of construction and the opening of the tenant's operations. Thus, to the extent that a reading of Section 365(d)(3) within the context of a given lease might warrant proration, it would not apply in this case.
It should be noted that these cases were also decided prior to the most recent decisions, such as that by the Third Circuit, that have disfavored the proration approach. In McCrory, 210 B.R. at 937, Judge Chin found the proration cases to be the "majority view," and concluded that he would adopt the reasoning of the majority. In Child World, 161 B.R. at 576, Judge Goettel had found that a "substantial majority" of courts held that view. Even at the time the Bankruptcy Court decided the motion at issue in the instant appeal, only the Seventh and Sixth Circuits had squarely addressed the issue.
The Debtor also relies on In re Petire Retail, Inc., 233 B.R. 256 (S.D.N.Y. 1999). That case involved a landlord who sought to compel the debtor-tenant to pay percentage rent for sales above a breakpoint where the breakpoint was reached postpetition, but by its terms could only have been reached by considering the debtor-tenant's sales that had occurred prepetition as well as the debtor-tenant's postpetition sales. Given that the breakpoint structure had to consider prepetition sales, the debtor-tenant sought to have the percentage rent arising from postpetition sales allocated over the lease year, arguing that equity required allocation. The landlord argued that Section 365(d)(3) requires that the strict billing date should control, or alternatively that the court should focus on when the obligation arose (i.e. when the sales breakpoint was reached and triggered the percentage rent to accrue on subsequent sales). The court ultimately adopted this latter "sales breakpoint approach" and remanded the case with instructions for the bankruptcy court to prorate the debtor-tenant's percentage rent if the breakpoint were reached postpetition. The court reasoned:
The only construction of section 365(d)(3) consistent with both the section's language and purpose is the sales breakpoint approach. As required by the statute's text, this approach clearly identifies the point at which the obligation to pay percentage rent arises, which under this approach is the date on which the tenant's sales exceeded the annual breakpoint. At that point, the tenant is clearly obligated to pay percentage rent on all sales made in the remainder of the lease year. Where the tenant surpasses the breakpoint after the petition date, the percentage rent will be calculated as a percentage only of the sales made post-petition, and thus the entire percentage rent may be properly characterized as an obligation arising from the debtor's post-petition business activities. . . . This approach advances the Bankruptcy Code's policy of giving priority to those obligations incurred as a result of the debtor's continuation of its business activities after the petition date, because the percentage rent will be recoverable under section 365(d)(3) only where the debtor continues its retail operations from the leased premises subsequent to the petition date.Id. at 260-61.
Contrary to the Debtors' contention, requiring the full $1,000,000 to be paid immediately would not contradict the holding or reasoning ofPetrie Retail. That court relied heavily on the text of Section 365(d) (3), giving special attention to when the obligation "arose" within the meaning of the statute. Accordingly, it distinguished, as this Court has, those cases involving obligations that mature upon the execution of the lease, accruing thereafter on a daily basis, and those that do not:
Unlike percentage rent, the tenant's obligation to pay taxes ordinarily will not be contingent upon a certain future event, such as meeting a sales breakpoint. Rather, both the obligation to pay taxes and the amount of those taxes will usually be certain from the first day of the lease year, so that the tenant's obligation to pay those taxes can be said to have arisen incrementally over each day of the lease year.Id. at 260. Here, Debtor's obligation is not an obligation that matured upon the execution of the Lease, accrued thereafter on a daily basis, and therefore might lend itself to proration. Rather, the Debtor's obligation was specifically bargained for to be contingent upon a future event, i.e., the completion of the theater complex construction and subsequent opening for business. As these triggering events would not have been reached had the Debtor ceased operations postpetition, the Debtor's obligation is directly related to its postpetition operations.
Finally, the Debtor claims that requiring immediate payment of the $1,000,000 would be inequitable and result in a windfall to the Landlord. See, e.g., McCrory, 210 B.R. at 940 (adopting proration after looking to legislative purpose and concluding that relying strictly on the billing date would result in a windfall either to the landlord or to the debtor-tenant). However, no inequities arise by adopting the approach taken in this case. As explained above, it is undisputed that at the time Debtor filed its voluntary Chapter 11 petition on February is, 2001, the additional auditoria contemplated by the Lease were under construction. During the initial 60-day period to assume or reject the Lease, the Debtor did nothing to reject the Lease or otherwise relieve the Landlord of its obligation to construct the auditoria. Rather, Debtor continued its operations at the shopping center and waited for the Landlord to finish its work in constructing the new auditoria. Since May 25, 2001, when the new theater complex opened for business and the obligation arose, the Debtor has been open and operating in the location generating revenue for the estate. Given that the Debtor chose to continue operating at the shopping center postpetition, and the amount owed represents but a fraction of the costs incurred by Urban in the construction, it cannot be said that reversing the Bankruptcy Court's decision leads to inequitable results contrary to the purposes of Section 365(d)(3).
III. Urban is Entitled to Attorneys Fees and Interest
The final issue before this Court is whether Urban is entitled to recover interest and attorneys' fees. The Bankruptcy Court did not reach this issue given that it denied Urban's motion for immediate payment.
Section 22.01 of the Lease provides:
If Landlord makes any expenditure or incurs any obligation in connection with the default of the Tenant [in the observation or performance of any of the terms, covenants or conditions upon its part to be observed or performed under this Lease], then the amount thereof shall be paid by Tenant to Landlord within fifteen (15) days after Tenant's receipt of any bill or statement therefor or may be added by Landlord to the next or any succeeding installment of rent payable under the Lease. . . . The term "expenditure" or "obligation" as used in this Section shall include reasonable attorney's fees and interest at the rate of one (1%) percent above the so-called "base rate" (the "Base Rate"), as established by Citibank, N.A. in New York on any monies advanced for or on account of the defaulting party.
Recovery of attorneys fees and interest under Section 365 is appropriate where the lease at issue provides for such recovery as an obligation of the Debtor. See, e.g., In re Westview 74th Street Drug Corp., 59 B.R. 747, 756-57 (Bankr. S.D.N.Y. 1986). Here, because the Lease provides for recovery of attorneys' fees and interest, their receipt deserves the same priority under Section 365(d)(3) as any of the Debtor's other obligations that arise postpetition and therefore should be awarded.
The Debtor claims that, notwithstanding the Lease provision, attorneys' fees should not be awarded where they were expended in connection with the resolution of issues unique to the bankruptcy law. However, the fact that Urban has resorted to bankruptcy procedure to enforce its right to receive the $1,000,000 payment does not make the issue "unique" to bankruptcy law. Rather, the issues are based on the Landlord's right to collect amounts due under its bargained-for Lease. By contrast, the cases cited by the Debtor, where attorneys' fees were not awarded, did not involve enforcement of the terms of a lease. See e.g., In re Best Prods. Co., 148 B.R. 413, 414 (S.D.N.Y. 1992) (fees not recoverable because they were not incurred in efforts to collect any delinquencies under the lease, but rather in seeking to deny rights under the Bankruptcy Code);In re Child World, 161 B.R. 349, 354 (Bankr. S.D.N.Y. 1993) (denying fees to collect damages based on an ipso facto clause not enforceable in bankruptcy cases, but allowing fees for efforts to enforce "the timely payment of rental tax, and common area maintenance charges under the lease" for the postpetition period); In re Fobian, 951 F.2d 1149, 1153 (9th Cir. 1991) (denying fees in Landlord's effort to deny debtor the rights afforded it by the Bankruptcy Code by objecting to the confirmation of a Chapter 12 plan); In re Ryan's Subs, Inc., 165 B.R. 465, 468-69 (Bankr. W.D. Mo. 1994) (denying attorneys' fees where incurred to determine whether Section 365(a) of the Bankruptcy Code applied to property and whether Section 362's automatic stay should be lifted).
Accordingly, Urban is entitled to immediate payment of reasonable interest and attorneys' fees.
Conclusion
For the reasons set forth above, the Bankruptcy Court's denial of Urban's motion to compel Debtor to perform its Section 2.17(b) obligation under 11 U.S.C. § 365(d)(3) is reversed. Urban is entitled to immediate payment as set forth in the Lease, as well as reasonable interest and attorneys' fees associated with the obligation. The matter is remanded to the Bankruptcy Court for proceedings consistent with this opinion.
It is so ordered.