Circuit split · bankruptcy law
Whether 11 U.S.C. § 365(c)(1) should be applied literally (the 'hypothetical test'), barring a debtor in possession from assuming an executory contract whenever applicable law would excuse the counterparty from accepting performance from a third party, or interpreted pragmatically (the 'actual test').
1 federal appellate case on this question, each acknowledging the disagreement in its own words.
- RCI Technology Corp. v. Sunterra Corp.361 F3D 257
Fourth Circuit Court of Appeals · March 18, 2004
“In explaining its ruling, the court recognized the existence of a circuit split on the issue of whether the Statute should be applied literally.” — Acknowledges a circuit split
Empirical analysis of this case →
The provision at issue
11 U.S.C. § 365 — Executory contracts and unexpired leases
“(a) Except as provided in sections 765 and 766 of this title and in subsections (b), (c), and (d) of this section, the trustee, subject to the court's approval, may assume or reject any executory contract or unexpired lease of the debtor. (b)(1) If there has been a default in an executory 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— (A) cures, or provides adequate assurance that the trustee will promptly cure, such default …”Read the full section →
The other side of the split
Decisions the acknowledging court(s) named as the opposing or joined side, quoted in the acknowledging opinion's own words.
- Joined by · 3d Cir.In re West Elecs., Inc.852 F.2d 79
“8 See In re West Elecs., Inc., 852 F.2d 79 , 83 (3d Cir.1988) (characterizing § 365(c)(1)(A) as posing “a hypothetical question”); In re Catapult Entm’t, Inc., 165 F.3d 747 , 750 (9th Cir.1999) (same); In re James Cable Partners, 27 F.3d 534 , 537 (11th Cir.1994) (same); In re Catron, 158 B.R.” — RCI Technology Corp. v. Sunterra Corp., acknowledging the split
- Joined by · 9th Cir.In re Catapult Entm't, Inc.165 F.3d 747
“8 See In re West Elecs., Inc., 852 F.2d 79 , 83 (3d Cir.1988) (characterizing § 365(c)(1)(A) as posing “a hypothetical question”); In re Catapult Entm’t, Inc., 165 F.3d 747 , 750 (9th Cir.1999) (same); In re James Cable Partners, 27 F.3d 534 , 537 (11th Cir.1994) (same); In re Catron, 158 B.R.” — RCI Technology Corp. v. Sunterra Corp., acknowledging the split
- Joined by · 11th Cir.In re James Cable Partners27 F.3d 534
“8 See In re West Elecs., Inc., 852 F.2d 79 , 83 (3d Cir.1988) (characterizing § 365(c)(1)(A) as posing “a hypothetical question”); In re Catapult Entm’t, Inc., 165 F.3d 747 , 750 (9th Cir.1999) (same); In re James Cable Partners, 27 F.3d 534 , 537 (11th Cir.1994) (same); In re Catron, 158 B.R.” — RCI Technology Corp. v. Sunterra Corp., acknowledging the split
- Joined by · E.D.Va.In re Catron158 B.R. 629
“8 See In re West Elecs., Inc., 852 F.2d 79 , 83 (3d Cir.1988) (characterizing § 365(c)(1)(A) as posing “a hypothetical question”); In re Catapult Entm’t, Inc., 165 F.3d 747 , 750 (9th Cir.1999) (same); In re James Cable Partners, 27 F.3d 534 , 537 (11th Cir.1994) (same); In re Catron, 158 B.R.” — RCI Technology Corp. v. Sunterra Corp., acknowledging the split
- Declined to follow · 1st Cir.Institut Pasteur v. Cambridge Biotech Corp.104 F.3d 489
“Cambridge Biotech Corp., 104 F.3d 489 , 493 (1st Cir.1997) (rejecting the literal test in favor of the actual test); see also In re Catapult, 165 F.3d at 749 n.” — RCI Technology Corp. v. Sunterra Corp., acknowledging the split
- Discussed · 4th Cir.Richmond Metal Finishers, Inc.756 F.2d 1043
“Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir.1985), and held, in a bench ruling, that the Statute did not prohibit Sunterra, as debtor in possession, from assuming the Agreement.” — RCI Technology Corp. v. Sunterra Corp., acknowledging the split
What the split turns on
- Statutes:
- 11 U.S.C. § 365(c)(1)
- Doctrines & tests:
- hypothetical test ·
- actual test ·
- literal test
Cases are grouped by the legal question they announce a split on, classified from the court's own acknowledgment sentence. Verified acknowledgments only. Counter-side decisions are extracted from the acknowledging opinions' own text and linked only when the citation resolves in this corpus. See all circuit splits.