In 1994, Congress amended the Bankruptcy Code to add section 1123(d), which provides that, if a chapter 11 plan proposes to "cure" a default under a contract, the cure amount must be determined in accordance with the underlying agreement and applicable nonbankruptcy law. Since then, a substantial majority of courts, including the U.S. Court of Appeals for the Eleventh Circuit, have held that such a cure amount must include any default-rate interest required under either the contract or applicable nonbankruptcy law.

In 1994, Congress amended the Bankruptcy Code to add section 1123(d), which provides that, if a chapter 11 plan proposes to "cure" a default under a contract, the cure amount must be determined in accordance with the underlying agreement and applicable nonbankruptcy law. Since then, a substantial majority of courts, including the U.S. Court of Appeals for the Eleventh Circuit, have held that such a cure amount must include any default-rate interest required under either the contract or applicable nonbankruptcy law. See, e.g., JPMCC 2006-LDP7 Miami Beach Lodging, LLC v.

In 1994, Congress amended the Bankruptcy Code to, among other things, add section 1123(d), which provides that, if a chapter 11 plan proposes to “cure” a default under a contract, the cure amount must be determined in accordance with the underlying agreement and applicable nonbankruptcy law. Since then, a majority of courts have held that such a cure amount must include any default-rate interest required under either the contract or applicable nonbankruptcy law. A ruling recently handed down by the U.S. Court of Appeals for the Eleventh Circuit endorses this view.

Recent technological innovations and advancements in drilling and completion techniques have led to an unprecedented expansion of natural gas production by large and midsize exploration and production companies. This expansion created competition for wild cat acreage as well as producing properties, putting lessors and co-owners (the “non-operators”) at a distinct advantage in negotiating the terms of leases, farmout agreements and joint operating agreements (“JOAs”).

Rejection of a contract in bankruptcy may not always accomplish a debtor’s goal to shed ongoing contractual obligations and liabilities, especially when dealing with employee benefit plans. On October 13, 2011, the Fifth Circuit Court of Appeals highlighted this issue in its opinion in Evans v. Sterling Chemicals, Inc.¹ regarding the treatment of a pre-bankruptcy asset purchase agreement which contained a provision addressing the debtor-acquiror’s post-closing ERISA retiree benefit plan obligations to its new employees resulting from the transaction.