Heller Ehrman LLP

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1The identical issue was presented in Debtor’s objection to
the claim of another landlord, and at a hearing on June 18, 2010,
the court sustained Debtor’s objection. 	Counsel for Columbia
participated in that hearing. 	At the June 25 status conference,
the parties stipulated that the argument, discussion and ruling on
the record at the June 18 hearing would apply to the present
dispute between Debtor and Columbia.
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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	) Bankruptcy Case
) No. 08-32514DM
HELLER EHRMAN LLP, fka Heller, 	)
Ehrman, White & McAuliffe, LLP, 	) Chapter 11
)
Debtor. 	)
___________________________________)
MEMORANDUM DECISION REGARDING ABATED RENT
(OBJECTION TO CLAIM OF COLUMBIA CENTER PROPERTY LLC)
Columbia Center Property, LLC (“Columbia”) filed a proof of
claim in the amount of “at least $9,369,453.51.” 	Heller Ehrman
LLP (“Debtor”) filed an objection to the claim. 	The objection
presented two questions of law and several questions of fact. 	At
a status conference on June 25, the court set the factual matters
for further evidentiary hearing and reconfirmed its ruling on one
of the issues of law (regarding how to calculate the statutory cap
on a landlord’s claim under 11 U.S.C. § 502(b)(6)). 1 	The court
took under submission an issue involving the interpretation of a
rent abatement clause contained in an amendment to the governing
Signed and Filed: July 01, 2010
________________________________________
DENNIS MONTALI
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
July 02, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 08-32514 Doc# 1296 Filed: 07/01/10 Entered: 07/02/10 10:36:54 Page 1 of
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2Debtor conceded in its reply that the interpretation of the
rent abatement clause “presented a question of law” and the Ninth
Circuit has held that “[c]ontract interpretation is a question of
law[.]” 	Doe 1 v. Wal-Mart Stores, Inc., 572 F.3d 677, 681 (9th
Cir. 2009). 	While interpretation of an ambiguous contract term
may involve questions of fact regarding the parties’ intent, the
contract term at issue here is unambiguous, and the court can
resolve the dispute without an evidentiary hearing. 	See B.L.R.
3007-1(b).
3Recital A of the Fourth Amendment defines “Lease” as the
Original Lease, together with amendments dated April 18, 2002,
December 20, 2003. 	Section 18.02 provides that “[e]xcept as
herein modified or amended, the provisions, conditions and terms
of the Lease shall remain unchanged and in full force and effect.”
Section 1 of the Fourth Amendment extends the Lease by 120 months
and Section 2 sets forth a schedule for the payment of the base
rent, with installments due in advance on the first day of each
calendar month during the extended term. 	Section 32(a) of the
Original Lease states that the failure to pay rent when due
constitutes an event of default, if the failure to pay continues
for ten days after notice of default is given.
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lease. 2 	For the reasons set forth below, the court will overrule
Debtor’s objection to Columbia’s claim for abated rent in the
approximate amount of $2.1 million.
On December 18, 2001, Columbia’s predecessor-in-interest and
Debtor entered into an amended and restated lease agreement
(“Original Lease”) for office space in Seattle, Washington (the
“Premises”). 	The Original Lease was amended several times; for
purposes of this Memorandum Decision, the relevant amendment is
the Fourth Amendment entered on October 9, 2006.
The Fourth Amendment extended the expiration term of the
Original Lease (as amended) from August 31, 2008, to August 2018.
Section 3 of the Fourth Amendment provides that “so long as Tenant
[Debtor] is not in default under the Lease[ 3] beyond any
applicable notice and cure or grace period,” Debtor would be
entitled to an abatement of base rent and storage space rent
Case: 08-32514 Doc# 1296 Filed: 07/01/10 Entered: 07/02/10 10:36:54 Page 2 of
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4Section 3 of the Fourth Amendment provides:
Abated Base Rent. 	Notwithstanding anything in the Lease to
the contrary, so long as Tenant is not in default under the
Lease beyond any applicable notice and cure or grace period,
Tenant shall be entitled to an abatement of Base Rent
applicable to the Premises and Storage Space Base Rent during
the period beginning (retroactively) on July 1, 2006, and
ending on December 31, 2006 (the “Base Rent Abatement
Period”) in the amount of $350,460.83 per month for the
period beginning July 1, 2006 and ending August 31, 2006, and
$359,741.67 per month for the period beginning September 1,
2006, and ending December 31, 2006. 	The total amount of Base
Rent abated in accordance with the foregoing shall equal
$2,139,888.33 (the “Abated Base Rent”). 	During the Base Rent
Abatement Period, only Base Rent for the Premises and Storage
Space shall be abated, and all Additional Rent and other
costs and charges specified in the Lease shall remain as due
and payment pursuant to the provisions of the Lease.
If, due to the retroactive abatement of Base Rent set forth
in the preceding paragraph, Tenant has overpaid Base Rent for
the Premises and the Storage Space, Landlord shall refund the
same to Tenant within 30 days following the date of full
execution and delivery of this Amendment. 	Notwithstanding
the foregoing, Landlord shall have no obligation to refund
such sum during any period in which Tenant is in default
under the Lease beyond any applicable notice and cure or
grace period, but such obligation shall resume at such time
as Tenant is no longer in default.
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“during the period beginning (retroactively) on July 1, 2006, and
ending on December 31, 2006.” 4 	Debtor concedes that it stopped
paying rent under the Lease on October 1, 2008 (see paragraph 4 of
Debtor’s objection to Columbia’s claim), that Columbia filed a
state court action in November 2008 based on Debtor’s default on
the Lease, and that the state court entered a prepetition order
directing Debtor to restore possession of the Premises to
Columbia.
Debtor construes Section 3 of the Fourth Amendment as
providing that as long as it did not default in its performance of
its obligations under the Lease between July 1 and December 31,
Case: 08-32514 Doc# 1296 Filed: 07/01/10 Entered: 07/02/10 10:36:54 Page 3 of
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2006, it was entitled to a cancellation of any base rent and
storage rent that accrued during that time period. 	Columbia,
however, contends that Debtor was entitled to an abatement of the
rent accruing during that time period (equaling $2,139,888.33)
only if Debtor did not default in its performance of the Lease as
extended.
The court agrees with Columbia’s interpretation. 	Section 3
unambiguously entitles Debtor to an abatement of rent so long as
Debtor was not in default under the Lease. 	Debtor admittedly
defaulted in its performance of the Lease in October 2008.
Section 3 of the Lease does not state or provide that the default
must occur between July 1, 2006 and December 31, 2006. 	The
reference to those dates describes what base and storage rent was
abated; it does not modify the term “default” in the prior clause.
Debtor’s interpretation is inconsistent with the language and
construction of the contract.
Moreover, Debtor’s interpretation is not reasonable, as it
renders the default provision in the first sentence of Section 3
meaningless. 	Debtor was not obligated to pay base rent or storage
rent during the abatement period, and Debtor was given retroactive
credit for three months (July-October 2006). 	Thus, an
interpretation that grants an abatement of rent if the Debtor
performs during the abatement period is essentially a cancellation
of rent altogether. 	But Section 3 does not provide for such a
cancellation, and conditions the abatement on Debtor’s non-default
under the Lease.
Following resolution of the factual issues (currently set for
hearing on October 18, 2010), the court will enter an order
Case: 08-32514 Doc# 1296 Filed: 07/01/10 Entered: 07/02/10 10:36:54 Page 4 of
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finally disposing of both legal issues already decided and the
presently unresolved factual issues.
**END OF MEMORANDUM DECISION**
Case: 08-32514 Doc# 1296 Filed: 07/01/10 Entered: 07/02/10 10:36:54 Page 5 of
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