DECISION ON APPEAL Sears (f/k/a Sears, Roebuck and Co., collectively with Sears Holdings Corporation and its affiliated debtors, the “Debtors”), the iconic American retailer, is once again bankrupt. The instant appeal is taken from an order issued by The Hon. Robert Drain, U.S.B.J., approving the assignment and assumption of Sears’ lease at the equally iconic (if considerably newer) Minneapolis shopping mall cum amusement and entertainment venue known as the Mall of America. The approved assignor is not a business establishment — not a retail store, not a restaurant, not a hotel, not an amusement venue, not a waterpark (reputed to be the latest addition to the Mall of America’s ever-lengthening list of very un-shopping-mall-like tenants). Rather, it is an entity known as Transform Leaseco LLC (“Transform Leaseco”), an affiliate and wholly owned subsidiary of Transform Holdco LLC (collectively, “Transform”). Transform was formed and is headed by Sears’ final CEO, Eddie Lampert, and several other former Sears executives. Transform’s goal is to gain control of substantially all of Sears’ assets, including Sears’ many real estate holdings, through Sears’ bankruptcy proceedings. In this it has been largely successful; Transform provisionally acquired 660 Sears leases in a sale order entered by the Bankruptcy Court, 659 of which the court has approved for assignment to Transform. Transform plans to continue to operate approximately 400 of these 660 leases (i.e., Transform will continue to operate Sears stores at those locations) and to market the remaining 260 in order to find new tenants to occupy those premises. Mall of America is not interested in seeing Sears’ three-story building leased out by Transform. Mall of America’s owner, MOAC Mall Holdings LLC (“MOAC”), wants the lease to revert to it, the landlord, so that it can control who gets to occupy that very prestigious space. MOAC insists that, under certain provisions in the Bankruptcy Code that were passed to protect the owners and tenants of “shopping centers,” the lease may not be assigned to Transform and must revert to the landlord. The learned bankruptcy judge disagreed with MOAC’s argument that 11 U.S.C. §§365(b)(3)(A) and/or (b)(3)(D) prohibited the assignment of the Mall of America lease (the “Lease”) to Transform. He approved the assignment and assumption as proposed by Sears. But Judge Drain admitted that, at least insofar as his ruling addressed §365(b)(3)(A), his ruling was one of first impression. MOAC has appealed from the Bankruptcy Court’s order. I agree with the bankruptcy judge that nothing in §365(b)(3)(D) of the Code prohibits the transfer of the Lease to Transform. However, I am constrained to disagree with his conclusion that §365(b)(3)(A) does not bar the proposed assignment. In §365(b)(3)(A), Congress provided a rigorous standard that an assignee of a bankrupt’s shopping center lease must meet in order to give the landlord adequate assurance that the new tenant will not shortly end up in bankruptcy. In this case, the Bankruptcy Court found that the tenant did not meet that standard. The judge’s decision that an alternative provision in Sears’ Lease could be substituted for the statutory standard effectively read the congressionally-mandated standard out of the Bankruptcy Code. I do not believe that result can be justified. The proposed assignment is, therefore, disallowed. Statement of Relevant Facts Although Judge Drain held a hearing at which evidence was presented and witnesses were cross-examined, the facts salient to this appeal do not appear to be in dispute. Relevant Terms of the Lease Sears was one of the original anchor tenants at Mall of America. Its Lease — which, with extensions, runs for 100 years, or until 20911 — contains many terms that are most unusual, especially in a shopping center lease. Equally unusual are many of the terms of the Amended and Restated Reciprocal Easement and Operating Agreement (“REA”) between Sears, MOAC, and the other two original anchor retail tenants at the mall, Macy’s and Nordstrom, which are incorporated into and made a part of the Lease. The terms are highly favorable to Sears; the reasons for that, I am advised, are that (1) Sears constructed the demised premises at its own expense, while (2) MOAC bent over backward to get Sears into the shopping center as an anchor tenant. Under the Lease, Sears owes only $10 per year in rent, which it prepaid through 2021 at the time the Lease was signed. (APX2231).2 However, with taxes, common area payments, and insurance, Sears’ annual financial obligation to the mall amounted to approximately $1.1 million. (Transcript of August 23, 2019 Hearing (“Tr.”) at 53:21-25, 54:1-5, APX2048-49).3 Unlike most tenants at shopping centers and malls, Sears is not responsible for paying any “percentage rent,” which is an extraordinarily tenant-favorable term in any commercial lease. The REA, as incorporated into the Lease, required Sears to operate as a retail department store in its space for a term of 15 years, or until 2007. That 15-year term, the Major Operating Period of Sears (“Major Operating Period”), expired over a decade ago. In another unusual provision, per the REA, once the Major Operating Period expired, Sears had the right — without needing the approval of MOAC or the other parties to the REA — to vacate all or any part of the building, or to lease or sublease all or any portion of the building, or to assign the REA. (APX2438). In most shopping center leases, the landlord retains veto power over the assignment of tenant leases. See Retail Lease: Key Provisions, Practical Law Practice Note 4-507- 0793 (Westlaw 2020) (“Retail leases usually contain explicit restrictions on a tenant’s ability to assign its lease or sublease its premises to third parties. These provisions typically provide that the landlord’s consent is required before an assignment or sublease.”) The only constraint on Sears in this regard was found in Article XXII of the REA, the relevant portion of which — Article XXII(c)(1), which is applicable only to Sears and not to Macy’s or Nordstrom — provides that any Sears sublessee or assignee, for the remainder of the term of the Lease, was forbidden to use the leased premises, “for any use or purpose other than retail purposes customarily found in an enclosed mall shopping center and non-retail activities customarily incidental thereto or such other uses and purposes that are compatible and consistent with (and are not detrimental, injurious or inimical to) the operation of a first-class regional shopping center.” (APX2420-21) (emphasis added). Thus, Sears and its successors and assigns were not limited to running a retail establishment in the demised premises from and after 2007. No one — not MOAC and not any of its other tenants, even co-anchor tenants Macy’s and Nordstrom — could possibly have entertained any justifiable expectation that the Sears space would be used for retail purposes beyond the Major Operating Period. Rather, Sears could use the space for retail activities, or for non-retail activities that one might find in a mall, or even for non-retail activities that were “compatible…with [] and…not detrimental…to” a first-class mall — which Mall of America considers itself to be.4 The very broad “use restriction” applicable to Sears in Article XXII of the REA is, of course, virtually meaningless at Mall of America, since the phrase “compatible with and not detrimental to” a mall at that location includes practically any legal and non-industrial operation that might bring people into Mall of America, for any purpose. The “mall” currently houses hotels, a miniature golf course, an amusement park, a comedy club, an aquarium, a 2,500-square-foot Amazing Mirror Maze, and something called the “Crayola Experience,” which occupies an area larger than an NFL football field and boasts 25 hands-on attractions. Most recently, the Bloomington City Council approved the development of a waterpark that will be fully integrated into Mall of America. (See Ghermezian Decl. 3, APX1837). None of these establishments would have been thought “compatible” with a “shopping mall” when enclosed malls containing multiple retail shops and restaurants or fast food establishments were first invented. But all of them are by definition “compatible with and not detrimental to” this particular mall in Minneapolis, and to its tenants. Indeed, aside from a house of prostitution or other criminal enterprise, this court has had great difficulty imaging any nonindustrial use that would not be “compatible with and not detrimental to” the multi-faceted operations at Mall of America. This includes use for commercial offices. Contrary to an assertion in MOAC’s brief on appeal (Appellant’s Br. at 7, Dkt. No. 16), use of a portion of the Sears Building for “office and service establishments” is not only not forbidden, it is expressly permitted. The only restriction is that, as long as any of the anchor tenants is operating a department store at Mall of America, “office use” in Mall of America may not include “a Building used primarily for general office purposes.” (APX2350) (emphasis added). Use of the word “primarily” would appear to permit as much as 49 percent of the Sears Building to be rented out for general office purposes; and the employees who worked in those offices would undoubtedly provide considerable custom to the stores and restaurants in the mall. Neither the Sears Lease nor the REA contains any sort of “tenant mix” restriction with respect to the Sears space following the expiration of the Major Operating Period.5 According to the testimony of Raphael Ghermezian, the CEO of MOAC and a Senior Executive Vice-President of MOAC’s parent company, certain tenants in the mall have in their leases “co-tenancy” or “anchor” provisions that allow them to break their leases if there are fewer than three “department stores” in Mall of America. (See Ghermezian Decl. 9, APX1840; Tr. at 77:18-25, 80:1-3, APX2072, 2075). However, none of those leases has been made part of the record. Moreover, had Sears not gone bankrupt, it could have “gone dark” or leased out its premises for a variety of nonretail uses — thereby depriving Mall of America of one of its “department stores” — and MOAC could not have stopped it from doing so, regardless of what was in some other tenant’s lease. But while Sears was able to obtain a virtually unfettered right to use the premises for myriad purposes after 2007 — or not to use it at all, but to keep it dark — a few provisions were added to the Lease to protect MOAC’s interests. Per Article 6.3(a) of the Lease, from and after the end of the Major Operating Period in 2007 and until the expiration of the Lease, if Sears decided to cease operating a store in the building, or to transfer its interest in the leased premises, it was required to give MOAC the right to match any bona fide offer for the space — or, if there were no such offer, to give MOAC the right the buy out the leasehold estate at fair market value. (APX2218). Also, per Article 4.4 of the Lease, after 2007 if Sears ceased to operate at least 20,000 square feet on the third floor, an MOAC affiliate, Minntertainment Company, had the exclusive and irrevocable first right and option to lease the third floor, subject to the terms of an option agreement. (APX2214). Finally, per Article XXV(D)(4)(a) of the REA, if, after 2007, Sears ceased operating, subleased its premises, or assigned the REA, Sears would nonetheless remain liable under the REA “unless its assignee has a net worth or shareholder equity, determined in accordance with generally accepted accounting principles, of at least $50,000,000.00 and executes a written undertaking in recordable form, stating at least that it is made for the benefit of Developer in which said assignee expressly assumes and covenants…to perform and be bound by…this REA…(including the provisions of this Article XXII…), which Sears shall deliver to Developer.” (APX2438). The Proposed Assignment The Debtors filed for chapter 11 bankruptcy in October of 2018. Transform purchased substantially all of the Debtors’ assets through a §363 sale, including the right to designate certain leases for assignment if approved for assumption and assignment by the Bankruptcy Court. The sale order approved Transform’s purchase of approximately 660 leases the Debtors would assume and then assign to Transform or its designee. Of the 660 leases assigned to Transform or its designee, the Mall of America Lease is the only lease still embroiled in litigation. Sears wishes to assign the Lease, and have the Lease assumed by, a newly-formed entity, Transform Leaseco. As might be inferred from its name, Transform Leaseco plans to market the Sears space to as yet unidentified subtenants who are willing to pay the highest price in order to maximize the value of the real estate. The Bankruptcy Code, specifically 11 U.S.C. §365(f)(2)(B), permits such assignment “only if…adequate assurance of future performance by the assignee of such contract or lease is provided, whether or not there has been a default in such contract or lease.” Were Mall of America not a “shopping center,”6 the proposed assignment would be in every way favorable under §365(f)(2)(B), which deals with the assignment of leases in bankruptcy. As the Bankruptcy Court found (and no one disputes), the proposed assignment to Transform meets that statutory standard: (1) Transform has agreed to put one year’s rent and consideration due under the Lease ($1.1 million) into escrow; (2) its senior management has extensive experience in marketing and selling Sears’ vacated retail property; (3) Transform has obtained substantial financing with respect to its operating portfolio and real estate portfolio, and “likely” has the equity of at least $50 million required by Article XXV(D)(4)(a) of the REA (more on that later); (4) Transform committed to lease portions of the property within two years (provided MOAC does not interfere with its marketing efforts); and (5) most important, Transform agreed to be bound by all relevant provisions of the Lease and the REA — including specifically the modest “use restriction” in Article XXII and the “right of first refusal/buyout” provisions of Article 6.3(a) — which means that MOAC retains the right to buy out the lease or match any “unsuitable” tenant’s offer for the space. However, the Bankruptcy Code imposes additional restrictions on the assignment of a “shopping center” lease in bankruptcy. In particular, §365(b)(3) adds gloss to §365(f)(2)(B) by explaining exactly what is needed in order to give a shopping center landlord “adequate assurance of future performance by the assignee of such contract or lease.” That term, in the shopping center context, is deemed to include four elements, two of which are relevant for purposes of this appeal: (A) The financial condition and operating performance of the proposed assignee and its guarantors, if any, shall be similar to the financial condition and operating performance of the debtor and its guarantors, if any, as of the time the debtor became the lessee under the lease (which is our case is 1991); and (D) That assumption or assignment of such lease will not disrupt any tenant mix or balance in such shopping center. This court reads the word “include” to mean, at a minimum,7 that these provisions (as well as the other two subsections of §365(b)(3), which are not at issue in this case) must be satisfied in order for a shopping center landlord to have “adequate assurance of future performance” of the terms of a lease. MOAC argues that the assignment to Transform would contravene both of these statutory provisions.8 The Bankruptcy Judge’s Opinion The Bankruptcy Court (Drain, B.J.) conducted a hearing on MOAC’s objections on August 23, 2019. The parties agreed to a set of stipulated facts and to the admission of a number of exhibits into evidence. Each side also provided declarations in support of its position, which constituted the declarant’s direct testimony; the declarants were available for cross-examination at the hearing. In an oral opinion delivered at the conclusion of the hearing on August 23, 2019, Judge Drain determined that MOAC’s objections should be denied, and approved Sears’ assumption of the Lease and its assignment to Transform. (Tr. at 134:12-20, APX 2129). The Bankruptcy Court first found that Transform had provided adequate assurance of future performance of the Lease as required by §365(f)(2)(B). (Tr. at 115:15-18, APX2110). But of course, where a shopping center is concerned, that section is simply a starting point. As Congress made clear in the legislative history of the of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), “section 365(f) does not override any part of section 365(b).” H.R. Rep. 109-31(I), 87, 2005 U.S.C.C.A.N. 88, 153. The requirements set out in §365(b)(3) give specific meaning to, and are more onerous than, what is meant by “adequate assurance” under §365(f)(2)(B). So the Bankruptcy Court turned to the requirements of §365(b)(3). Insofar as is relevant to this appeal, Judge Drain found that Transform had satisfied the requirements of subsections (A) and (D) of that provision of the Code. With regard to §365(b)(3)(D): Judge Drain concluded that, because the Lease (including the REA incorporated therein) included no “tenant mix” requirement — and, indeed, neither required Sears to operate a retail store in its building nor substantially limited the type of entity to which Sears could sublease following the expiration of the Major Operating Period in 2007 — the assignment to Transform would not violate §365(b)(3)(D)’s requirement that the “tenant mix” of the shopping center be preserved. (Tr. at 130:5-18, APX2125). Judge Drain reasoned that §365(b)(3)(D) had to be read in conformity with the Lease — the contract whose performance was being “adequately assured” — so as not to confer on MOAC more rights than it enjoyed under the Lease. Because the Lease neither contains any restriction on the tenant mix of the shopping mall nor guarantees that the Sears space will be operated as a retail department store — and, indeed, barely restricts the use of the Sears Building in any way (aside from proscribing nuisances, too much noise, industrial uses, or “primarily” as an office building) — Judge Drain found that the tenant mix would not be disrupted as long as Transform agreed to abide by the restrictions in Article XXII(c) of the REA — which it did. Judge Drain rested this decision on the decision of Bankruptcy Judge Buschman in In re Ames Department Stores, Inc., 127 B.R. 744 (Bankr. S.D.N.Y. 1991) [hereinafter, "Thatcher Woods"]. The In re Ames (Thatcher Woods) opinion draws heavily from a prior opinion — also by Bankruptcy Judge Buschman and also involving the Ames bankruptcy — In re Ames Department Stores, Inc., 121 B.R. 160, 162 (Bankr. S.D.N.Y. 1990) [hereinafter, "Westmont"]. Thatcher Woods has been cited with approval a number of times subsequently.9 With regard to §365(b)(3)(A): Transform contended that its current financial condition and operating performance could be “derived from inspection of a confidential letter, dated April 26, 2019 (the “Transform Financials”) (12-MOAC), and from the Buyer’s reply (the “Buyer’s Reply”) (16-MOAC).” (APX1783). It argued that the Transform Financials revealed that the proposed assignee had $250 million in equity. But MOAC’s counsel cast doubt on the Transform Financials in at least two ways. (See generally Tr. at 17-35 (cross-examination of Michael Jerbich), APX2012-30). First, the balance sheet on which Transform relied was marked as a “draft” and indicated that it was subject to adjustment. (Tr. at 26:9-25, APX2021; 12-MOAC at 10, APX4245). Second, an “Adequate Insurance Information” table in the same document expressly notes that the document “is not intended to provide the basis for any decision on any transaction.” (Tr. at 31:10-16, APX2026; 12-MOAC at 7, APX4242). As a result, the bankruptcy judge found himself unable to conclude that Appellee had in excess of $250 million in of equity, as Transform contended. Specifically he refused to accept the dollar amounts in the declaration of Roger Puerto, one of Transform’s witnesses and the Head of Real Estate Transactions at Transform, “as the value of the portfolio, but simply as evidence that Transform believes that it has a valuable portfolio and that it’s seeking to realize it.” (Tr. at 45:7- 11, APX2040). Judge Drain concluded that Transform hoped that its portfolio would turn out to be worth $250 million — a proposition that had yet to be tested in the marketplace. (Tr. at 117:24-25, 118:1-3, APX2112-13). That said, the Bankruptcy Court found that “it’s highly likely that that [Transform's] equity exceeds $50 million.” (Tr. at 118:4-5, APX2113). He focused on that number because, if Sears were to have assigned the Lease outside of bankruptcy to an entity with at least $50 million in net worth or shareholder equity, it would be relieved of liability under the Lease. (See REA, Article XXV(D)(4)(a)).10 The bankruptcy judge reached his factual finding, not on the basis of Transform’s financial statements, but because, “I cannot believe that third-party lenders would provide the level of financing that they have to Transform without at least that level of solvency.” (Tr. at 118:5-8, APX2113). No testimony from the third party lenders appears in the record. Having found it “highly likely” that Transform satisfied the $50 million standard, the bankruptcy judge then decided that assignment to an entity that had at least $50 million in equity/net worth was sufficient under §365(b)(3)(A) — even though that provision as drafted requires that the assignee of a shopping center lease have “financial condition and operating performance” that was “similar” to that of Sears back when the Lease was signed. The bankruptcy judge concluded that §365(b)(3)(A), like §365(b)(3)(D), had to be read in conformity with anything in the lease to be assigned that guaranteed future performance under the lease. Noting that there were not many cases interpreting §365(b)(3)(A) (he found only three), he observed that each of those three case “makes it clear that [§365(b)(3)(A)] is to be construed not in a mechanical way, but rather consistent with the underlying charge as set forth in the preface to it, the general language in Section 365(b)(3), which again refers to adequate assurance of future performance of the lease itself.” (Tr. at 121:12-17, APX2116). He determined that §365(b)(3)(A), like §365(b)(3)(D), “. . . requires reference back to the part[ies]‘ actual agreement, and that Congress did not create independent requirements that would not go to actual assurance of future performance, but rather wanted to focus the Court on, obviously still subject to Section 365(e), taking into account the landlord’s rights under the lease, as implicated by these four subsections.” (Tr. at 125:10-17, APX2120). Judge Drain noted that Sears and MOAC had bargained for the level of financial security that it would take before MOAC would release Sears from its lease obligations in the event of an assignment (which was something that MOAC could not veto). MOAC agreed to relieve Sears from liability as long as it assigned the Lease to a tenant with at least $50 million in equity/net worth. It did not require Sears to replace itself with a tenant whose financial standing was comparable to that of Sears in 1991 in order to be relieved of liability for performance of the Lease. Applying the reasoning of In re Ames to §365(b)(3)(A), Judge Drain concluded that Transform had provided MOAC with all the assurance required by that provision of the Bankruptcy Code. (See Tr. at 129:9-15, APX2124). That said, the learned bankruptcy judge recognized that he was plowing new ground. He thus made a second pronouncement: “[I]f that legal determination is incorrect, and that the case law [I] cited and follow on the grounds of stare decisis is incorrect, then the financial condition and operating performance of Transform is not similar to Sears in 1991. Transform has not carried its burden to show, for example, that the ratio as far as its financial health, is the same, notwithstanding that it has shown that it’s sufficiently financially healthy, when coupled with the favorable nature of the lease and deposit of an amount equal to the annual projected monetary payment under the lease, that it is sufficiently healthy.” (Tr. at 129:16-25, 130:1-2, APX2124-25) (emphasis added).11 In other words, the Bankruptcy Court concluded that, if Article XXV(D)(4)(a)’s $50- million-in-equity provision for relieving Sears of liability did not supersede the similar-to-Searsin- 1991 statutory standard in §365(b)(3)(A), the assignment could not be approved, because Transform failed to carry its burden of demonstrating financial similarity. The Order Appealed From After delivering his oral opinion, Judge Drain entered a final order authorizing, inter alia12 the assumption and assignment of the Lease to Transform, from which MOAC appeals. (“A&A Order,” APX1947). This order provides that MOAC’s rights under Article 6.3 of the Lease shall remain fully enforceable against Transform and any assignee, Transform will operate in compliance with the Lease, including the “Uses” section of the Lease and the REA, and Transform must initially sublet a portion of the premises within two years, “on the condition that the counterparty to the [Lease] does not improperly interfere with the Buyer’s attempt to sublet the premises….” (Id. at
