Securities Investor Protection Corporation v. MF Global Inc.

UNITED STATES BANKRUPTCY COURT 	NOT FOR PUBLICATION
SOUTHERN DISTRICT OF NEW YORK
In re:
MF GLOBAL INC.,
Debtor.
Case No. 11-2790 (MG) SIPA
MEMORANDUM OPINION AND ORDER GRANTING TRUSTEE’S MOTION TO
ASSUME AND ASSIGN AN UNEXPIRED LEASE OF REAL PROPERTY
A P P E A R A N C E S:
HUGHES HUBBARD & REED LLP
Counsel for James W. Giddens, Trustee for the SIPA Liquidation of MF Global Inc.
One Battery Park Plaza
New York, New York 10004
By: 	Anson Frelinghuysen, Esq.
James B. Kobak, Jr., Esq.
Christopher K. Kiplok, Esq.
Jeffrey S. Margolin, Esq.
MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE
James W. Giddens (“Giddens” or the “Trustee”), the liquidation trustee of MF Global
Inc. (“MFGI”), has filed the Trustee’s Motion Pursuant to SIPA Section 78fff(a)(4), Section 365
of the Bankruptcy Code, as Made Applicable by SIPA Sections 78fff(b) and 78fff-1(a), and the
MFGI Liquidation Order, for Entry of an Order Assuming and Assigning an Unexpired Lease of
Real Property (ECF Doc. #644) (the “Motion”). 	No opposition has been filed. For the reasons
stated below, the Court GRANTS the Motion.
BACKGROUND
On October 31, 2011 (the “Filing Date”), the Honorable Paul A. Englemayer, United
States District Court for the Southern District of New York, entered the Order Commencing
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Liquidation of MFGI (the “MFGI Liquidation Order”), pursuant to the provisions of the
Securities Investor Protection Act (“SIPA”) in the case captioned Securities Investor Protection
Corp. v. MF Global Inc., No. 11-CIV-7750.
The MFGI Liquidation Order (i) appointed the Trustee for the liquidation of the business
of MFGI pursuant to section 78eee(b)(3) of SIPA and (ii) removed the case to this Court as
required for SIPA cases by section 78eee(b)(4) of SIPA (the “SIPA Proceedings”).
On November 28, 2011, the Court entered the Order Pursuant to SIPA § 78fff(a)(4),
Sections 105, 365, and 554(a) of the Bankruptcy Code, as Made Applicable by SIPA §§ 78fff(b)
and 78fff-1(a), and the MFGI Liquidation Order, To Establish Procedures for the Rejection of
Executory Contracts and Unexpired Leases of Personal and Non-Residential Real Property and
Abandonment of Related Personal Property (the “Rejection Procedures Order”) (ECF Doc.
#467). Among other things, the Rejection Procedures Order provides procedures for the
rejection of executory contracts and unexpired leases during the sixty (60) day period, until
December 30, 2011, after the Filing Date. In a separate Application also heard today, the Trustee
requested that the Court extend the Trustee’s time to assume or reject executory contracts and
unexpired lease by four months (120 days), to and including April 30, 2012. The Court granted
that Application.
DISCUSSION
A. Trustee’s Motion To Assume and Assign Unexpired Lease of Real Property
On September 13, 2002, The Foundry Georgetown LLC and Charles Schwab & Co.
(“Charles Schwab”) entered into a lease agreement (subsequently amended on October 29, 2004)
(the “Washington, D.C. Lease”), for premises including the fourth floor of The Foundry Building
at 1055 Thomas Jefferson Street, N.W., Washington, D.C. (the “Premises”). Charles Schwab
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subsequently subleased the Premises to Concept Capital (the “Washington, D.C. Sublease”). On
November 2, 2010, Concept Capital assigned all of its right, title, and interest in the Washington,
D.C. Sublease to MFGI under an Asset Purchase Agreement dated October 26, 2010.
Initially, on November 11, 2011, the Trustee moved to reject the Washington, D.C.
Sublease, but after filing the motion, Guggenheim Securities LLC (“Guggenheim”) contacted the
Trustee regarding the Washington, D.C. Sublease. The Trustee now moves to assume and assign
the sublease to Guggenheim. Guggenheim has hired some former MFGI employees who were
working at that location. The terms of the proposed assignment provide that Guggenheim will
pay the MFGI estate (i) $250,000, the current security deposit held by Charles Schwab under the
Washington, D.C. Sublease, less any post-Filing Date amounts due under the Sublease (including
cure of November 2011 rent totaling $38,356.14); and (ii) $20,000 (net of any sales tax) for the
furniture and fixtures located within the Premises.
The Trustee states that “Guggenheim is currently conducting operations as a going
concern. Given Guggenheim’s financial health as compared to that of MFGI, the Trustee
submits that Charles Schwab and Concept Capital, to the extent required, have received
‘adequate assurance of future performance’ within the meaning of section 365(f) of the
Bankruptcy Code.” Motion ¶ 18. Both Charles Schwab and Concept Capital were served with
copies of the motion seeking to assume and assign the sublease, and no objections have been
filed.
A trustee, “subject to the court’s approval, may assume or reject any executory contract
or unexpired lease.” 11 U.S.C. § 365(a). However,
[i]f there has been a default in an executor contract or unexpired
lease of the debtor, the trustee may not assume such contract or
lease unless, at the time of assumption of such contract or lease,
the trustee—
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(A) 	cures, or provides adequate assurance that the trustee will
promptly cure, such default. . .
(B) 	compensates, 	or 	provides 	adequate 	assurance 	that 	the
trustee will promptly compensate, a party other than the debtor to
such contract or lease, for any actual pecuniary loss to such party
resulting from such default; and
(C) 	provides adequate assurance of future performance under
such contract or lease.
11 U.S.C. § 365(b)(1).
Additionally,
[t]he trustee may assign an executory contract or unexpired lease
of the debtor only if—
(A) 	the trustee assumes such contract or lease in accordance
with the provisions of this section; and
(B) 	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.
Id. § 365(f)(2).
The assumption or rejection of an executory contract may be approved if such action
would benefit the debtor’s estate and is an exercise of sound business judgment. See Orion
Pictures Corp. v. Showtime Networks, Inc. (In re Orion Pictures Corp.), 4 F.3d 1095, 1098 (2d
Cir. 1993); In re Gucci, 193 B.R. 411, 415 (S.D.N.Y. 1996) (“A bankruptcy court reviewing a
trustee’s decision to assume or reject an executory contract should apply its ‘business judgment’
to determine if it would be beneficial or burdensome to the estate to assume [or reject] it.”). The
Trustee has appropriately exercised business judgment in deciding to assume and assign the
Washington, D.C. Sublease on the stated terms.
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CONCLUSION
For the reasons explained above, the Trustee’s Motion to assume and assign the
Washington, D.C. Sublease to Guggenheim is GRANTED.
IT IS SO ORDERED.
Dated: December 20, 2011
New York, New York.
_____/s/Martin Glenn_______
MARTIN GLENN
United States Bankruptcy Judge
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