Lease Amendment Not Severable From Underlying Agreement

Section 365 of 11 U.S.C. provides a debtor with a valuable tool for reorganizing its business by permitting a debtor to assume or reject executory contracts or leases. However, Section 365 has its limits. A debtor must assume or reject a contract or lease in its entirety and may not cherry-pick among its various provisions, as in In re Fleming, 499 F.3d 300, 308 (3d Cir. 2007). An exception arises if the provisions are "severable," as in In re Buffets Holdings, 387 B.R. 115, 120 (Bankr. D. Del. 2008). In In re Contract Research Solutions, (Del. Bankr. May 1, 2013), a debtor argued that a lease amendment that added a new leasehold to the underlying lease was severable. U.S. Bankruptcy Judge Kevin J. Carey of the District of Delaware disagreed.

In Contract Research, the debtor had entered into a lease and two subsequent amendments, all of which related to a single leasehold. The debtor then entered into a third amendment relating to a new leasehold, which was in the same building complex as the original leasehold. The debtor filed a motion to sever and reject the third amendment. The issue before Carey was whether the third amendment represented an agreement separate and independent from the original lease and the two prior amendments or whether the third amendment was a single, integrated contract.