1101 Connecticut Avenue Deli, LLC

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
1101 CONNECTICUT AVENUE
DELI, LLC,
Debtor.
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Case No. 06-00467
(Chapter 11)
PRELIMINARY DECISION REGARDING
MOTION TO RECONSIDER ORDER GRANTING MOTION
TO ASSUME LEASE, OR, IN THE ALTERNATIVE, MOTION TO DETERMINE
EXTENT OF CURE OR COMPENSATION REQUIRED BY DEBTOR TO ASSUME LEASE
The debtor’s landlord, Penzance 1101 Connecticut, LLC
(“Penzance”), has filed a motion after this court entered an
order authorizing the debtor’s assumption of its lease with
Penzance.
I
The motion first seeks reconsideration of the court’s order
granting the debtor’s motion to assume its lease with Penzance.
The debtor appears to be correct that Penzance is attempting to
raise an issue regarding the amount of attorney’s fees owed
Penzance under the lease that Penzance could have raised at the
hearing on the motion to assume, and that, accordingly, is not
the proper subject of a motion for reconsideration. 	Moreover,
The Preliminary Decision below is hereby signed.
Dated: February 26, 2007.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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2
Penzance does not even contend that the fees owed constitute a
bar to assumption of the lease. 	Nothing in the statute governing
assumption provides that the existence of fees owed to a landlord
bar the assumption of a lease. 	Instead, § 365(b)(1)(A) and (B)
impose as conditions to assumption of an unexpired lease the
requirement that the trustee (here, the debtor-in-possession
exercising a trustee’s powers) cure, or provide adequate
assurance of a prompt cure, of a default that is a monetary
breach, and that the trustee compensate or provide adequate
assurance that the trustee will promptly compensate a landlord
for any actual pecuniary loss to the landlord resulting from such
default. 	Penzance’s motion does not even allege that the debtor
is unable to pay or give adequate assurance that it will pay any
attorney’s fee obligation that was in default when the motion was
heard or that constitutes an actual pecuniary loss arising from
other breaches. 	Accordingly, unless Penzance persuades me to the
contrary at the hearing, the request for reconsideration should
be denied without the necessity of hearing evidence.
II
Penzance’s alternative request seeks an order fixing the
amount of attorney’s fees arising from alleged defaults that the
debtor owes Penzance.
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3
A.
That Penzance is not entitled to reconsideration of the
order authorizing assumption of the lease does not mean (as the
debtor appears to contend) that Penzance is not entitled to
recover such fees. 	Furthermore, the debtor has not articulated a
legal basis upon which Penzance’s statements at the hearing
should bar it from pursuing the attorney’s fees. 	The debtor
alleges that Penzance stated at the hearing that the debtor was
current on its monetary obligations under the lease, and that
only non-monetary defaults existed under the lease, but that does
not suffice to bar the pursuit of attorney’s fees. 	As of the
hearing date, the landlord had not yet fixed the amount of
attorney’s fees it was owed and had not yet requested their
payment, so it is difficult to see how the debtor could have been
not current with respect to its obligation to pay attorney’s
fees.
B.
The debtor contends that all defaults were cured before the
hearing on the motion commenced. 	If that is the case, and
Penzance was aware of the cures, no fees should be owed for the
hearing on the motion. 	Penzance ought not have expended
attorney’s fees for pursuing a nonexistent default beyond the
point of learning that the default had been cured. 	The debtor
contends that the fees should be limited to only those efforts by
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1 Penzance’s motion to remand and its motion for relief from
the automatic stay, and its motion in the alternative for
dismissal were largely premised on the allegation that the lease
had been terminated, an erroneous argument. 	The motion for
relief from the automatic stay was also based on an alleged lack
of equity in the lease, which had nothing to do with existing
defaults. 	Finally, the motion to dismiss was premised on bad
faith which, again, was unsuccessful and whose outcome was not
dependent on whether defaults existed. 	Penzance has not pointed
to a lease provision authorizing recovery of fees for such work.
4	O:\Judge Temp Docs\1101 Connecticut Avenue Prelimiary Decsn re Penzance Mtn to Reconsider or Determine Cure Amount.wpd
counsel to notice the alleged defaults, the letters of October 25
and November 7, 2006. 	The debtor, however, has failed to state
when the defaults were cured and when Penzance learned of the
cures. 	On the other hand, much of Penzance’s efforts were
directed to an unsuccessful attempt to convince the court that
the lease had been terminated. 	Attorney’s fees incurred in that
effort ought not be compensable. 1
The parties should confer before the hearing to attempt to
come to an agreement regarding the amount of the fees to which
the landlord is entitled.
[Signed and dated above.]
Copies to: Debtor; Nicholas M. Beizer, Esq.; Michael E. Brand,
Esq.; Office of United States Trustee; Leon Koutsouftikis, Esq.;
and William J. Virgulak, Jr., Esq., Martell, Donnelly, Grimaldi &
Gallagher, P.C., 10201 Lee Highway, Suite 490, Fairfax, VA 22030-
2222.
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