A&F Enters., Inc. II v. IHOP Franchising, LLC

Alforookh manages and operates restaurants under franchise agreements with IHOP. He created companies to hold the franchises, including A&F. Alforookh and A&F are in Chapter 11 bankruptcy proceedings. Their primary assets are 17 IHOP franchise agreements and corresponding building and equipment leases. Generally, Chapter 11 debtors may assume or reject executory contracts any time before confirmation of a plan, 11 U.S.C. 365(d)(2). Unexpired leases of nonresidential real property, however, must be assumed within 120 days, subject to a 90-day extension. A&F did not assume the building leases within 120 days or seek an extension, so IHOP claims that those leases were rejected and that the franchise agreements and equipment leases expired. A&F argued that because the building leases are just one part of the larger franchise arrangement, section 365(d)(2)’s more generous time limit applies to the whole arrangement, including the building leases. The bankruptcy judge deemed the building leases rejected and the franchise agreements and equipment leases expired. A&F’s request for a stay pending appeal was rejected by the bankruptcy and district courts. The Seventh Circuit granted an emergency motion and issued a stay order freezing the status quo during the pendency of the appeal and subsequently held that a continued stay was warranted. View "A&F Enters., Inc. II v. IHOP Franchising, LLC" on Justia Law