Landlord's Rejection-Damage Claims: Lawyering Using Graphic And Mathematical Expressions

A familiar feature of the Bankruptcy Code is the ability under § 365(d)(4) for the trustee or the chapter 11 debtor in possession (DIP) to assume (or assume and assign) or to reject an unexpired nonresidential real property lease. To assume, the trustee or DIP tenant must cure all defaults and provide adequate assurance of future performance1 as the price for continued occupancy of the premises.

Upon rejection, the trustee or DIP surrenders the property and is absolved from further obligations, while the landlord is authorized to file an unsecured proof of claim for damages suffered on account of termination of the lease.2 So the determination of the proper amount of those damages—the allowed amount of the landlord's claim—is a matter of gravity, for the estate and for the lessor.3

Here the Code does additional service for the debtor tenant's estate: It provides a "cap" on the allowable amount of the landlord's rejection-damage claim. Section 502(b)(6) provides that upon objection to such proof of claim, the court shall disallow the claim to the extent

(6)...such claim exceeds—

(A) the rent reserved by such lease, without acceleration, for the greater of one year, or 15 percent, not to exceed three years, of the remaining term of such lease, following the earlier of—

(i) the date of the filing of the petition; and

(ii) the date on which such lessor repossessed, or the lessee surrendered, the leased property; plus

(B) any unpaid rent due under such lease, without acceleration, on the earlier of such dates.4

Those provisions have occasioned numerous decisions in the books; precedents vary from district to district; and numerous claim-allowance points remain contestible. This article explores four means—additional to the normal task of drafting cogent prose for a proof of claim or a claim objection—for lawyering the client's desired claim amount in the allowance process, whether the client is the landlord or trustee or DIP tenant.

The term "lawyering" has skyrocketed into the vocabulary of lawyers, judges and scholars over the past 50 years. The author's definition is instrumental: "Lawyering" is the work of a lawyer who "invokes and manipulates, or advises about, the dispute-resolving or transaction-effectuating proc-esses of the legal system for the purpose of solving a problem or causing a desired change in, or preserving, the status quo" for a client.5

The essence of "lawyering" is, in short, finding a way to accomplish the desired result...