A sea-change from decades of precedent, the Honorable Michael E. Wiles, U.S. Bankruptcy Judge for the Southern District of New York has ruled in favor of the Plan Administrator of Cortlandt Liquidating LLC (f/k/a Century 21 Department Stores LLC) and its former debtor affiliates, represented by Lowenstein Sandler’s Bankruptcy & Restructuring Department, finding that the Section 502(B)(6) cap with respect to landlords’ rejection damages claims should be calculated in accordance with the “time” approach rather than the commonly-adopted “rent” approach.
Saying he did “not lightly depart from prior precedent in this District,” Judge Wiles said he was “convinced that the Time Approach represents the correct view.” The Court, relying upon legislative intent and the plain language of the statute, agreed with the Plan Administrator’s argument that the law imposes a “cap” equal to the rent that is reserved under the relevant lease for a specified time period (the “time” approach). The claimants had argued that the “rent” approach applied, contending that the “cap” equals to 15 percent of the total dollar amount of the rent that would be payable for the entire remaining term of the lease.
This ruling will boost the recoveries for holders of allowed claims in this case, as well as set the tone for future decisions on rent rejection damages in the Southern District of New York.
The Lowenstein team includes Jeffrey Cohen, Keara Waldron, Brent Weisenberg, and Lindsay H. Sklar. The Plan Administrator is Alan D. Halperin of Halperin Battaglia Benzija, LLP.
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